Financial thoughts

The stock market is ending a tumultuous year right where it started.

The Standard & Poor’s 500 index closed 2011 a fraction of a point below where it started the year. The S&P closed at 1,257.60, up 5.42 points or 0.4 percent. It ended 2010 at nearly the exact same level, at 1,257.64. Its loss for the year is 0.04 point.

The Dow Jones industrial average lost 69 points, or 0.6 percent, at 12,218. The Dow is up 5.5 percent for the year. The Nasdaq composite index fell 9 points, or 0.3 percent, to 2,605. It lost 1.8 percent for the year.

McDonald’s Corp. was the biggest winner in the Dow this year with a gain of 31 percent. Bank of America Corp. was the worst, down 58 percent.

The conventional wisdom is the more risk, the greater the potential rewards. But the opposite is proving true this year: Investors playing it safe have gained the most.

The most dull and conservative of stocks _ utilities _ gained 15 percent, the largest gain of the ten industry sectors in the S&P 500 index. Other winning groups are consumer staples and health care companies, up 11 percent and 10 percent in 2011 respectively.

In Europe, many of the biggest markets ended down for the year. Britain’s FTSE 100 lost 5.6 percent, Germany’s DAX 14.7 percent.

Trading has been quiet this week with many investors away on vacation. Volume on the New York Stock Exchange has been about half of its daily average pay day loans. Markets will be closed Monday in observance of New Year’s Day.

Better news on the job market and home sales lifted stocks Thursday, pushing the Dow up 135 points. On Friday Ford reported that its sales topped 2 million this year for the first time since 2007. Ford fell 0.1 percent.

Rising and falling stocks were about even on the New York Stock Exchange. Volume was just 2.2 billion shares, about half of the recent daily average.

In other corporate news:

_ Sears Holdings Corp. fell 3 percent to $31.78 after Fitch Ratings downgraded the company’s credit rating to “junk.” Sears has plunged 30 percent this week after disclosing that it would close more than 100 Sears and Kmart stores because of weak holiday sales.

_ Diamond Foods Inc. jumped 2.4 percent to $32.27. Rumors have been circulating that the hedge fund manager David Einhorn has acquired a stake in the food company that makes Emerald Nuts.

_ AMR Corp., the parent company of American Airlines, fell 17 cents to 35 cents. The company filed for bankruptcy protection last month. Late Thursday the company said its stock would be delisted from the New York Stock Exchange next week.

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India’s industrial production slid 5.1 percent in October, the first fall in over two years and one more sign of a reversal of fortunes for Asia’s third largest economy.

The decline from a year earlier was driven by mining and manufacturing, as well as waning consumer demand and lackluster investment, according to government figures released Monday.

Industrial output hasn’t fallen in India since June 2009.

Despite global headwinds, many economists say India’s troubles are largely homegrown, as the effects of 13 consecutive interest rate hikes begin to ripple through the economy. Political paralysis has also made it difficult to kickstart growth and investment in the face of a plunging rupee and two years of near double-digit inflation.

“This slowdown is clearly continuing and it may be intensifying,” HSBC chief economist for India, Leif Eskesen, said from Singapore. “What’s driving it is the lagged effect of monetary tightening and the high level of inflation that are causing uncertainty about the macroeconomic outlook. That hurts incentives to invest and spend.”

He said policy paralysis was also contributing to India’s woes.

With little scope for stimulus spending, India needs to enact difficult but crucial reforms to kickstart the economy and reassure investors, who are jittery from the dark global economic outlook, economists and businesspeople say.

The government’s humiliating U-turn on its decision to allow greater foreign investment in retail, however, suggests that the ruling Congress Party _ fractured by internal divisions and facing a revolt by opposition parties and coalition allies _ no longer has the leverage to push its reformist agenda.

Parliament has yet to address a slew of issues, which could help spur investment and kickstart growth, which slipped to 6.9 percent in the September quarter, the lowest in over two years.

On the table are a land acquisition bill, which advocates say would ease contentious land transfer policies and speed investment, as well as tax reform, new mining regulations and measures to allow greater foreign investment in defense and aviation.

Last October, industrial production grew by over 11 percent.

The fall was much sharper than expected and puts pressure on the central bank to arrest or start reversing a series of interest rate hikes when it meets this week.

A CNBC-TV18 poll of economists had forecast industrial production to contract 1.6 percent.

Mining activity shrank by 7.2 percent in October, constrained by bureaucratic bottlenecks. Manufacturing slid by 6.0 percent.

Consumer goods production dropped 0.8 percent, while capital goods output plunged 25.5 percent _ a sign of waning investment.

Headline inflation has averaged 9.6 percent since January 2010.

India’s benchmark Sensex index is down over 22 percent this calendar year, making it one of the worst performing in the region. The rupee is down about 14 percent this year and recently hit a lifetime low.

The Ministry of Finance last week trimmed its growth projection for the fiscal year through March to around 7.5 percent, down from an earlier forecast of 9 percent.

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They were lined up 300 deep before the store opened at 8 a.m.

Fans of Maple Leaf Gardens and Loblaws came to see how Canada

Fresh clashes between security forces and Egyptian protesters demanding the military step down broke out Saturday in front of the Cabinet building, leaving one man dead, as violence threatened to overshadow next week’s parliamentary elections.

Meanwhile, Field Marshal Hussein Tantawi, the head of the ruling military council that took power after Hosni Mubarak was ousted in February, met separately with opposition leader and Nobel Peace laureate Mohamed ElBaradei and presidential hopeful Amr Moussa, who was the former head of the Arab League. Egyptian state TV reported the meetings but gave no details.

The new prime minister, whose appointment by the military on Friday touched off a wave of anger among protesters accusing the army of trying to perpetuate the old regime, also held a series of meetings trying to sway youth groups to his side.

State TV said Prime Minister Kamal el-Ganzouri, who is unpopular in part because he served under Mubarak, offered Cabinet positions and is pondering the formation of an advisory council to be composed of leading democracy advocates and presidential hopefuls.

The suggestion however failed to disperse the protesters, with nearly 10,000 packing into Cairo’s central Tahrir Square as organizers called for another mass rally on Sunday.

Twenty-four protest groups, including two political parties, have announced they are creating their own “national salvation” government to be headed by ElBaradei with deputies from across the political spectrum to which they demanded the military hand over power.

ElBaradei said in a statement that he would be willing to form a such a government to manage the country’s transition, and that if he were officially asked to put a government together, he would give up the idea of running for president in order to focus on the current phase of transition.

Outside the Cabinet building, hundreds of protesters set up camp, spending the night in blankets and tents to prevent the 78-year-old el-Ganzouri from entering to take up his new post. Early Saturday, they clashed with security forces who allegedly tried to disperse them.

An Associated Press cameraman saw three police troop carriers and an armored vehicle firing tear gas as they were being chased from the site by rock-throwing protesters.

The man who was killed was run over by one of the vehicles, but there were conflicting accounts about the circumstances surrounding the death.

The Interior Ministry expressed regret for the death of the protester, identified as Ahmed Serour, and said it was an accident. Police didn’t intend to storm the sit-in but were merely heading to the Interior Ministry headquarters, located behind the Cabinet building, when they came under attack by angry protesters throwing firebombs, it said in a statement. The ministry claimed security forces were injured and the driver of one of the vehicles panicked and ran over the protester.

One of the demonstrators, Mohammed Zaghloul, 21, said he saw six security vehicles heading to their site.

“It became very tense, rock throwing started and the police cars were driving like crazy,” he said. “Police threw one tear gas canister and all of a sudden we saw our people carrying the body of a man who was bleeding really badly.”

Officials say more than 40 people have been killed across the country since Nov. 19, when the unrest began after a small sit-in by protesters injured during the 18-day uprising that ousted Mubarak was violently broken up by security forces. That sparked days of clashes, which ended with a truce on Thursday. It wasn’t clear whether the melee on Saturday was an isolated incident or part of fresh violence by security forces trying to clear the way for the new prime minister, and protesters frustrated by what they believe are the military’s efforts to perpetuate the old regime.

“El-Ganzouri was pulled out of his grave. He was a dead man,” said a 39-year-old employee Ahmad Anas as chants against the head of the military council filled the air outside the Cabinet building: “Tantawi and el-Ganzouri are choking me.” A banner hanging over the building gates read: “closed until execution of field marshal.”

El-Ganzouri served as prime minister under Mubarak between 1996 and 1999. His name has been associated with failed mega projects including Toshka, an ambitious and expensive scheme to divert Nile water at the southern tip of Egypt to create a second Nile Valley. The project has cost billions and barely gotten off the ground.

The military’s appointment of el-Ganzouri, along with its apology for the death of protesters and a series of partial concessions in the past two days suggest that the generals are struggling to overcome the most serious challenge to their nine-month rule, with fewer options now available to them.

Hala al-Kousy, a 37-year-protester, vowed that protesters will not leave the square until the Supreme Council of the Armed Forces, the formal name of the military’s ruling council, gives up power.

“They are willing to wait and so are we,” al-Kousy said.

Egypt’s first parliamentary elections since Mubarak was replaced by the military council are slated to begin Monday. The vote, which the generals say will be held on schedule despite the unrest, is now seen by many activists and protesters to be serving the military’s efforts to project an image of itself as the nation’s saviors and true democrats.

However, boycotting elections is a hard choice for many youth groups who rose up against Mubarak’s autocratic regime in hopes of ushering in democracy, fair and free elections. Others have been engaged in awareness campaigns or are fielding candidates. Many said that even if they vote, they will continue their sit-in.

Mohammed el-Qassas, one of the founders of The Egyptian Current party, which was born out of the revolution, described the general atmosphere, as “saddening,” but said he will vote just to “put my voice in the ballot.”

A member of another youth group, Injy Hamdi, 27, said “we will all go to the ballot boxes, vote and then come back to the square.”

Mohammed Abdel-Moneim, 38, said the protesters would not allow any election tampering, allegedly widespread during the past regime.

“We protect the ballot boxes with our bodies and lives if we have to. We fought hard for this right to vote,” he said.

The next parliament is expected to be dominated by the country’s most organized political force, the Muslim Brotherhood. The group decided to boycott the ongoing protests to keep from doing anything that could derail the election. However, the outcome of the vote is likely to be seen as flawed given the growing unrest and the suspension by many candidates of their campaigns in solidarity with the protesters.

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Anti-Wall Street protesters exulted Friday after beating back a plan to clear them from the park they have occupied for the past month, saying the victory will embolden the movement across the U.S. and beyond.

“We are going to piggy-back off the success of today, and it’s going to be bigger than we ever imagined,” said protester Daniel Zetah.

The showdown in New York came as tensions were rising in several U.S. cities over the spreading protests.

The owners of Zuccotti Park in lower Manhattan had announced plans to temporarily evict the hundreds of protesters at 7 a.m. Friday so that the grounds could be power-washed. But the protesters feared it was a pretext to break up the demonstration, and they vowed to stand their ground, raising the prospect of clashes with police.

Just minutes before the appointed hour, the word came down that the park’s owners, Brookfield Office Properties, had postponed the cleanup. A boisterous cheer went up among the demonstrators, whose numbers had swelled to about 2,000 before daybreak in response to a call for help in fending off the police.

In a statement, Brookfield said it decided to delay the cleaning “for a short period of time” at the request of “a number of local political leaders.” It gave no details.

Brookfield said it would negotiate with protesters about how the park should be used. But it was unclear when those discussions would occur.

Over the past month, the protest against corporate greed and economic inequality has spread to cities across the U.S. and around the world. Several demonstrations are planned this weekend in the U.S., Canada and Europe, as well as in Asia and Africa.

In Denver, police in riot gear herded hundreds of protesters away from the Colorado state Capitol early Friday, arresting about two dozen people and dismantling their encampment. In Trenton, N.J., protesters were ordered to remove tents near a war memorial.

Organizers in Des Moines, Iowa, warned of a possible “big conflict” Friday night after the state denied their permit to continue overnight protests at the Capitol. Demonstrators in San Diego formed a human chain around a tent in a downtown plaza and ignored police orders to take it down.

In New York City, police arrested 15 people, including protesters who obstructed traffic by standing or sitting in the street, and others who turned over trash baskets, knocked over a police scooter and hurled bottles. A deputy inspector was sprayed in the face with an unknown liquid.

In one case, a defense attorney marching with the group refused to move off the street for police and his foot was run over by an officer’s scooter. He fell to the ground screaming and writhing and kicked over the scooter to free his foot before police flipped him over and arrested him.

Though the park is privately owned, it is required to be open to the public 24 hours per day.

Brookfield, a publicly traded real estate firm, had announced plans to power-wash the plaza section by section over 12 hours and then allow the protesters to return. But it said it would begin enforcing the park’s rules against tents, tarps and sleeping bags, complaining the grounds had become unsanitary and unsafe.

The New York Police Department had said it would make arrests if Brookfield requested it and laws were broken.

As the morning deadline drew near, some protesters rushed to scrub and sweep the park and pick up trash in hopes of preventing a crackdown.

Mayor Michael Bloomberg, whose girlfriend is on Brookfield’s board of directors, said his staff was under strict orders not to pressure the company one way or the other. He noted that Brookfield can still go ahead with the cleanup at some point.

“My understanding is that Brookfield got lots of calls from many elected officials threatening them and saying, … `We’re going to make your life more difficult,’” he said on his weekly radio show.

In Philadelphia, protester Matt Monk, a freelance writer, was cheered by the news out of New York.

“That means at the very least, the powers-that-be, wherever they are, know that they have to contend with us in a less heavy-handed way,” he said.

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Forecasters say Tropical Storm Ophelia has weakened further and its strongest winds are expected to remain offshore as it races toward the Avalon Peninsula of Newfoundland, Canada.

The National Hurricane Center in Miami said early Monday that Ophelia’s top sustained winds weakened to about 60 mph (95 kph). The storm was moving northeast at 35 mph (56 kph).

Ophelia was centered about 65 miles (100 kilometers) west-northwest of Cape Race, Newfoundland, and a tropical storm watch was in effect for Newfoundland’s Avalon Peninsula easy payday loans. The center says Ophelia is expected to continue to weaken, but still pack powerful winds.

Meanwhile, Tropical Storm Philippe was moving over the central Atlantic and is not expected to affect land.

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Last week, the government tabled Bill C-11, the latest attempt to reform Canadian copyright law. The bill mirrors its previous copyright bill and is expected to sail through the House of Commons with committee hearings that will pick up where they left off in March.

When Bill C-32 was introduced in June 2010, many noted that there was a lot to like in the bill, but that the digital lock provisions, which give locks on DVDs, CDs, and electronic books enhanced legal protections, constituted a glaring problem that undermined much of the attempt to strike a balance.

The effect of the rules is that consumer rights found in the bill are lost when the copyright owner installs a digital lock that can restrict access.

Consumers purchasing DVDs from foreign countries may find they will not play on Canadian DVD players and students may be restricted from copying portions of their electronic books for class assignments.

In trying to understand the government

The headline on this section says it all: 61,000.

Of all the numbers generated by the economic downturn, this one puts the enormity of the employment crisis for St. Louisans in context.

Neither percentage, forecast nor trend, it’s a simple head count of the toll exacted on our friends, neighbors and loved ones.

And they should be counted one at a time.

In the nearly three years I’ve spent covering employment, I’ve been able get to only about 500 area residents displaced by a recession that allegedly ended 27 months ago.

One by one, they’ve shared their stories.

Sixty-one thousand people could overflow Busch Stadium by half, fill the Scottrade Center three times over and nearly fill the 70,000-seat Edward Jones Dome. One, by one, by one, each of them bears the scars of a job crisis the likes of which we last endured during the Great Depression.

When all this started, we never expected we’d have to count so high.

As the economy headed down, my editors assigned me to cover an emerging and important story the experts predicted would dominate the economic conversation for maybe the next year.

That was three years ago; the story shows no signs of fading any time soon.

The mere fact that I have a full-time job covering jobs - even as the newspaper business has shed thousands of its own workers - underscores the degree to which job security has become the central focus of our lives. I used to cover education, a beat that spawned hundreds of stories on the benefits of a college degree. Now even an education doesn’t guarantee you a job.

My only comparable reference point to what I’ve encountered on this beat are the years I spent as a young police reporter, interviewing shocked relatives reeling from the homicides and accidents that stole the lives of loved ones.

George Batten, a laid-off area executive out of work three years, put it in perspective last week: “A lot of carnage comes with losing a career,” he said. “It carries into your family. It attacks your life.”

That was never more clear than on the morning a year or so ago that I wandered into a salon for job-hunters at the moment the facilitator was conducting a word association exercise.

“First word that pops into your head when I say,

Mortgage rates have reached their lowest levels in six decades, making this the best time in most Americans’ lives to buy or refinance a home. For people who qualify, today’s rates could save thousands of dollars a year.

Yet most people can’t take advantage. Half of would-be buyers say they’ll never save enough for the 20 percent down payment now usually required. And shrunken home values have erased much of the equity people need to refinance.

“Low rates are great, but the real issue is that the pool of people who can get a loan or refinance is small,” said Greg McBride, Bankrate.com’s senior financial analyst.

This week, the average rate on a 30-year fixed mortgage fell to 4.12 percent. It’s the lowest for a 30-year fixed loan since mortgage buyer Freddie Mac began tracking rates in 1971. The last time rates were cheaper was in 1951, when most long-term home loans lasted just 20 or 25 years.

The average on the 15-year fixed loan, a popular refinancing option, dropped to 3.33 percent this week. That’s also an all-time low, according to most economists.

Record-low rates have done little to energize depressed home sales. The average rate on the 30-year fixed loan has been below 5 percent for all but two weeks this year. Yet sales of previously occupied homes are on pace for their weakest year since 1997.

Too many would-be buyers can’t come up with a down payment, don’t have a job, lack enough income or are burdened by large debt loads.

Mortgage rates are low largely because investors are worried about the U.S. economy. As a result, they’re moving their money out of stocks and into U.S. Treasurys. Mortgage rates tend to track the yield on the 10-year Treasury note, which touched an all-time low this week.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate on a 30-year fixed loan being offered in January 2010. Refinancing the loan at 4.12 percent could save him or her roughly $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced in the past year. The average rate on the 30-year fixed loan fell to 4.17 percent last November, and to 4.15 percent last month. Both were previous lows.

Homeowners typically pay a few thousand dollars in closing costs when they refinance. To refinance again, most experts say rates would need to fall an additional 1 percentage point to make it worthwhile.

Still, plenty of people could benefit from the low rates. More than 75 percent of homeowners with a government-backed mortgage are paying rates above 5 percent.

But most can’t qualify. Mike Anderson, a mortgage broker in Baton Rouge, La., said he’s turning away roughly 40 percent of customers seeking home loans and refinancing.

“I’ve never had to turn down so many loans upfront,” Anderson said.

Banks are insisting that applicants have higher credit scores and make 20 percent down payments if they are a first-time buyer.

Roughly 40 percent of U.S. households have the necessary credit scores above 700 to get a prime mortgage rate, according to an Associated Press analysis of Fair Isaac Corp., or FICO, data.

But just half of potentially buyers say they can save enough for a down payment, particularly one as high as 20 percent, according to a survey by the National Foundation for Credit Counseling.

Another problem is that nearly a third of homeowners either have less than 5 percent equity in their home or are “underwater” _ that is, they owe more on their mortgage than their home is worth _ according to the real estate research firm CoreLogic.

As a result, they can’t afford a down payment on a bigger home and can’t refinance because of lender-imposed limits and the cost of extra fees. The low rates now being offered don’t include such fees, which many borrowers must pay to get the rates. Those fees, known as points, make a mortgage rate, in effect, higher than it’s advertised.

One point is equal to 1 percent of the loan amount. The average such fee for the 30-year loan held steady this week at 0.7 point. For the 15-year fixed loan and for five- and one-year adjustable-rate loans, the average fee was 0.6 point.

Lack of equity is what’s keeping Don Meadows from refinancing. He owes $247,000 on a house in Orlando, Fla., and is paying 7 percent on a 30-year fixed loan. His monthly payment is $1,840.

If Meadows, 40, a sales manager, could refinance at today’s rates, he could save more than $400 a month.

But he has no equity in his home. He bought it two years ago for $274,000. It’s now worth $170,000.

“I couldn’t (refinance) even if I wanted to,” Meadows said. “Now, we just have to ride it out.”

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The stock market went back into a lull Friday as investors waited for the next signals on the economy _ and whether it’s headed for another recession.

The major indexes were fluctuating in a narrow range after Thursday’s 419-point plunge in the Dow Jones industrial average. There was little news to help investors determine their next moves _ and market analysts said many were taking the day off.

Thursday’s plunge followed a stream of disappointing economic news that added to investor concerns that the economy is stalling. The most notable economic news Friday came from JPMorgan Chase & Co. The bank joined other financial firms and cut its forecast for economic growth during the fourth quarter. It’s now predicting growth of 1 percent, down from an earlier forecast of 2.5 percent.

The Dow fell 51 points, or 0.4 percent, to 10,939 in early afternoon trading. The Standard & Poor’s 500 index fell 2, or 0.2 percent, to 1,138. The Nasdaq composite index less than a point to 2,381.

The Dow’s drop was largely due to Hewlett-Packard Co., which plunged 21 percent. The company said Thursday that it will close its mobile business, sell or spin off its PC business and pay $10 billion for a business software company.

Investors weren’t, for the moment, seeking the safety of U.S. Treasurys. The yield on the benchmark 10-year Treasury note rose to 2.10 percent from late Thursday’s 2.06 percent. It fell below 2 percent Thursday for the first time as heavy demand sent its price sharply higher.

Earlier this week, the market took a pause after the wild swings of the previous week. Economic and corporate news then was more encouraging, including a batch of merger announcements on Monday. Friday’s pause seemed to be the result of exhaustion.

“People decided to throw their hands up and go to the beach,” said Kim Caughey Forrest, senior equity analyst with Fort Pitt Capital Group in Pittsburgh.

Overseas stock markets had larger drops than in the U.S. European banking stocks fell near two-and-a-half-year lows, dragged down by rumors about banks’ potential losses on bonds issued by heavily-indebted governments. The selling in the U.S. has come in part because of fears that U.S. banks would be hurt if European countries default on their debt. Another concern: weakening European economies will hurt growth in the U installment payday loans.S.

Earlier Friday, Asian shares fell sharply, with major indexes in China and Japan losing more than 2.5 percent. However, some of those losses reflected selling in response to the drop in the U.S. Thursday.

As the selling continued overseas, gold rose as high as $1,881 an ounce. Oil prices fell as traders feared a global slowdown that would cut demand for crude.

A possible recession remains the focus of the markets. A recession is traditionally thought of as two consecutive quarters of negative economic growth, measured by a country’s gross domestic product. But with expectations of growth in the U.S. already low, investors worry that the economy can’t withstand another unexpected event like the earthquake in Japan or the string of bad weather that ravaged the South earlier this year.

JPMorgan analyst Michael Feroli said Friday that business sentiment, household wealth and global growth all look worse than just a few weeks earlier. That will keep economic growth nearly flat in the first quarter of 2012, he said.

On Thursday, economists with Morgan Stanley said that the U.S. and Europe are “dangerously close to recession,” adding, “it won’t take much in the form of additional shocks to tip the balance.”

Stocks also fell Thursday on news of another drop in home sales, weaker manufacturing in the mid-Atlantic states and a jump in inflation at the consumer level to its highest level since March. There also was bad news on the job market: an increase in the number of people who applied for unemployment benefits.

Thursday’s numbers joined a series of reports pointing to a slowing economy. The government reported on July 29 that growth in the first half was much weaker than expected _ and that the economy barely grew in the first quarter. Since then, the combination of disappointing numbers in the U.S. and worries about Europe’s debt problems have set off waves of selling.

The Dow is down 13.6 percent since stocks began falling on July 21. That has drained billions from American’s retirement savings and other investment accounts. And the stock market’s drop can itself help move the country toward recession.

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