Financial thoughts

WASHINGTON

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President Barack Obama said Tuesday the choice facing voters this November will be as stark as in the milestone 1964 contest between Lyndon Johnson and Barry Goldwater _ one that ended up with one of the biggest Democratic landslides in history.

The president made his comments during a fundraising blitz in Florida, and right before his general election foe was essentially decided. Republican Rick Santorum dropped out of the presidential contest, making it clear that Obama would face off against Mitt Romney, the former Massachusetts governor.

Obama used a daylong trip to Florida to call again for Congress to raise taxes on millionaires, a populist pitch on an issue that he hopes will help define the differences with nominee-to-be Romney.

“This election will probably have the biggest contrast that we’ve seen maybe since the Johnson-Goldwater election, maybe before that,” Obama told donors at the first of three campaign events in this battleground state. The events were expected to raise at least $1.7 million.

In his 1964 race against Goldwater, Johnson carried 44 of 50 states and won 61 percent of the popular vote, the largest share of any candidate since 1820.

Running on a record that included the Great Society, Johnson portrayed Goldwater as a dangerous extremist. He was aided by Goldwater’s GOP convention speech, in which the candidate proclaimed, “Extremism in the defense of liberty is no vice.”

Republicans said Obama’s tax proposal was aimed at dividing Americans along class lines and gave him an excuse to raise more money for his re-election campaign.

“He can’t run on his record so he is coming down here to raise money using taxpayers’ funds to do so,” said Rep cash advance loans. Mario Diaz-Balart, R-Fla.

In a reception at a gated community in Palm Beach Gardens, Obama said Democrats would ensure the rich pay their fair share, while focusing on investments in education, science and research and caring for the most vulnerable.

By contrast, he said, Republicans would dismantle education and clean energy programs so they can give still more tax breaks to the rich.

Obama did not mention Romney by name, but the economic fairness message was the theme of his day _ and aimed squarely at the wealthy former Massachusetts governor.

Obama later outlined his support for the so-called Buffett rule at a speech at Florida Atlantic University in Boca Raton, Fla., arguing that wealthy investors should not pay taxes at a lower rate than middle-class wage earners.

The push for the Buffett rule, named after billionaire investor Warren Buffett, comes ahead of a Senate vote next week and as millions of Americans prepare to file their income tax returns. The plan has little chance of passing Congress, but Senate Democrats say the issue underscores the need for economic fairness.

Obama was capping his day at a large rally-style event in Hollywood, Fla., that was to include a musical performance by singer John Legend, and a fundraising dinner in nearby Golden Beach, Fla.

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Myanmar next week holds the most inclusive elections since the military rejected an opposition victory in 1990, as the potential for economic ties with western nations encourages the leadership to relax control.

By-elections for 43 of the national legislature

Greece edged closer to fending off bankruptcy Monday, but U.S. markets were mostly underwhelmed.

Stocks struggled for direction after Greece announced it had persuaded its private investors to take deep losses on their bond holdings, which should help Greece avoid default in the short term but could also crimp the country’s ability to borrow money in the future.

The Dow Jones industrial average stayed above its previous close for most of the day, and was up 45 points to 12,967 in the early afternoon. The Standard & Poor’s 500 and the Nasdaq composite index, on the other hand, spent most of the day lower. Trading was even choppier in the early afternoon, with the S&P virtually unchanged at 1,371 and the Nasdaq down 4 points to 2,984.

“The market is going to continue to feel very schizophrenic,” said Carol Pepper, CEO of founder of Pepper International, a money management firm in New York. “Some days it’s depressed, some days it’s excited, some days it’s terrified.”

Monday’s news out of Europe appeared to only add to the fogginess of predictions on where the market is heading. Greece’s new deal with its investors should help the country avoid bankruptcy later this month by lightening its crushing debt load. But the country remains in a serious recession even as the country moves toward making spending cuts being demanded by its lenders.

Jeff Sica, president and chief investment officer of SICA Wealth Management in Morristown, N.J., said Greece is only a distraction from other deep-rooted problems throughout Europe, including brewing debt burdens in Portugal and Italy. Presidential elections in France add another layer of uncertainty because a new leader could backpedal on fiscal commitments made by President Nicolas Sarkozy.

The struggling European countries also can’t cut spending, which they’ll likely need to do to avoid bankruptcy, without angering their citizens. On Sunday, hundreds of thousands of people in Spain took to the streets in dozens of cities to protest cuts in government spending.

Greece has “become a touchstone for people to say, `Okay, things are getting better,’” Sica said. “But they had to force private investors to take losses, the European Central Bank has swelled their balance sheet, it’s going to be impossible to impose austerity on these countries. They haven’t really accomplished a single thing except buying time.”

News about the U.S. economy has also been opaque, with every sign of economic recovery met with another sign of economic slowdown. While the unemployment rate falls, some analysts raise questions about the quality of the new jobs being created, and others worry that the high price of gas will prevent people from the spending needed to fuel the economy. The average price for a gallon of gasoline jumped nearly a nickel over the weekend, to $3.80. China, the superpower that has pushed the world economy forward even as other countries flagged since 2008, announced that its growth slowed at the end of last year.

The knee-jerk nature of the market has been on display in the past two weeks. The Dow powered higher on positive news headlines when it closed over 13,000 on Feb. 28, a milestone it hadn’t reached since May 2008. But it’s failed to close above that line again. On one day last week, it plummeted more than 200 points over concerns about Greece, more than double its second-biggest loss so far this year.

“Everybody is stepping back and assessing whether the ride is over,” Sica said. “It’s almost as if investors get to a point where they scratch their head and say, `Does the market deserve to be here?’”

The 10 industry groups in the S&P 500 also failed to provide a clear direction, evenly split between gainers and losers in the afternoon. Utilities, which tend to attract nervous investors because of their relatively stability and generous dividends, rose the most. Markets in Europe were also divided. Germany did better than others, rising 0.3 percent. Greece fell 2.5 percent.

Companies making big moves included:

_ Defibrillator maker Zoll Medical Corp. jumped 24 percent to $92.76 after its board agreed to a buyout offer of $93 per share from Japan’s Asahi Kasei Corp.

_ Mattress maker Sealy Corp. climbed 6 percent after its second-largest shareholder, an investment firm called H Partners Management, asked the company to shuffle its board and blamed the company’s problems on the largest shareholder, private equity firm KKR & Co.

_Harley-Davidson Inc. climbed 2.5 percent after Citigroup analyst Greg Badishkanian raised his price target on the stock $4 to $50, saying he expects higher sales in the first quarter.

_Luxury retailer Michael Kors fell 4 percent to $47.75. The company, purveyor of $950 high heels, announced late Friday that some of its major shareholders would be selling their shares earlier than expected.

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A second, euro130 billion ($172 billion) bailout and a deep debt write-off for financially stricken Greece will ward off a financial disaster in Europe.

Economists, however, only give the deal a slim chance of putting the country on the path to economic recovery _ and steadying its place in Europe’s currency union.

Agreement on the bailout, reached early Tuesday after an all-night summit of finance ministers seven months after it was first proposed, will give Greece euro130 billion in loans through 2014 from other eurozone governments and the International Monetary Fund. It’s the country’s second bailout, following a euro110 billion rescue secured in 2010 that didn’t return the country to solvency.

The agreement also assumes that banks and investors owed money by Greece will take new bonds that reduce their holdings by more than half.

In return for the second bailout, Greece has agreed to painful and humiliating measures imposed by its mistrustful partners which also use the euro, annoyed after two years of what they say are broken promises to reform. Athens agreed to cut spending and wages, and to permit outsiders to supervise its finances through the presence of European Union and International Monetary Fund officials permanently stationed in Greece. The rescuers also demanded a separate account for the aid money and legal guarantees that creditors get paid before teachers, doctors and police do.

The finance ministers from Greece and the other 16 countries that use the euro wrangled until the early morning over the details of the rescue, squeezing last-minute concessions out of private holders of Greek debt who agreed to lose 53.5 percent of the face value of their investment to avoid even more severe losses expected if Greece fails to pay euro14.5 billion in debt coming due March 20.

The fear is that an uncontrolled bankruptcy could unleash market panic across the rest of the continent, further unsettling other struggling other debt-stricken countries such as Ireland, Portugal or the much bigger Italy or Spain.

Serious risks of failure include the chance that Greece’s economy remains in a deep recession _ where it’s been for four straight years _ instead of returning to growth in 2013 as the deal assumes. That would undermine chances of paying even the reduced debt load, estimated at a still-high 120 percent of annual economic output in 2020, down from 160 percent now.

Additionally, political outrage over the cutbacks could lead Greece politicians to balk at the tough conditions. That could push rescuer countries _ led by Germany _ to cut off further funding.

Elections in Greece are expected in April. The leaders of the two main parties have committed to the cuts and reform program, but anti-bailout parties have been gaining in the polls.

Growth is the key. But Greece’s economy shrank 7 percent in the fourth quarter of last year and unemployment is 19 percent, a consequence of cuts in public wages and increased taxes inflicted during a downturn.

If that keeps up, even the rescuers acknowledge the reduction goal of 120 percent of GDP is long gone.

Success “really depends on the assumptions you make in terms of growth and interest rates,” said Diego Iscaro, an economist at IHS Global Insight. “The risks are clearly on the downside. The main risk comes from the economic situation, the economic dire straits.”

“By austerity alone, Greece will not solve the problems it has at the moment. We don’t know when the economy will return to growth and how it will grow.”

Unless something breaks the cycle of austerity and contraction “something will have to give.”

Even if it later balks at the conditions for the bailout, Greece would have difficulty writing down the new debt it issued to private bondholders, who demanded stronger legal protections. Official creditors _ the IMF, the eurozone countries and the European Central Bank _ would also have difficulty accepting more writedowns. Inability to pay _ or unwillingness to accept the harsh conditions _ could lead to a non-negotiated “hard” default that could end in Greece leaving the euro.

The eurozone and the International Monetary Fund hope the new program will eventually put Greece back into a position where it can survive without external support. Both private and official creditors went beyond what they had said was possible in the past. On top of the new rescue loans, Athens will also ask banks and other investment funds to forgive it some euro107 billion ($142 billion) in debt, while the European Central Bank and national central banks in the eurozone will forgo profits on their holdings.

The deal “closes the door to an uncontrolled default that would be chaos for Greece and Greek people,” said European Commission President Jose Manuel Barroso.

But despite those unprecedented efforts, it was clear that Greece was at the very best starting on a long and painful road to recovery. It is being pushed to make its economy more business-friendly and productive by opening access to closed trades and professions; halting rampant tax evasion; allowing more flexibility in wage bargaining between companies and unions; simplifying starting a business; and cutting its bureaucracy.

But those measures will take years to work _ if Greece’s politicians are willing or able to push them through.

“It’s not an easy (program), it’s an ambitious one,” said Christine Lagarde, the head of the IMF, adding that there were significant risks that Greece’s economy could not grow as much as hoped.

Including Greece’s first bailout worth euro110 billion ($146 billion), the new deal means every Greek man, woman and child will owe the eurozone and the IMF about euro22,000 ($29,000).

In Athens, the reaction to the news was a mixture of relief the country has avoided financial catastrophe and fear of a dark future.

“I don’t see it with any joy because again we’re being burdened with loans, loans, loans, with no end in sight,” architect Valia Rokou said in the Greek capital.

Greek politicians nevertheless greeted the package as a turning point for their battered country.

“It’s no exaggeration to say that today is a historic day for the Greek economy,” said Greek Premier Lucas Papademos, who had rushed to the finance ministers’ meeting to lend weight to his country’s pleas for help.

For those who Greece owes money, the bond swap will lop euro107 billion off Greece’s euro352 billion load. On top of that, investors will be asked to give Athens 30 years to repay them, compared with just under 7 years.

Average interest rates would fall to 3.65 percent from around 4.8 percent.

Overall losses for private bondholders would be above 70 percent when accounting for the new bonds’ longer repayment period and lower interest rate.

Private investors weren’t the only ones having to give ground. The eurozone countries will reduce the interest that Greece has to pay for its first package of bailout loans to 1.5 percentage points over market rates from between 2 percentage points to 3 percentage points currently.

At the same time, the European Central Bank and the national central banks in the countries that use the euro will forgo profits on their Greek debt holdings, again reducing the costs for Greece.

But several hurdles remain before Greece will see any of the money or other benefits of the new program.

Apart from the implementation of more than 30 different savings and reform measures by Greece, the new bailout has to be debated by parliaments in several member states, including Germany, the Netherlands and Finland.

The IMF also still has to decide how much of the euro130 billion bill it is willing to stump up. Going into the meeting, the Washington-based fund had indicated its contribution will be lower than the one-third of the total it has provided in previous bailouts.

IMF chief Lagarde said the fund’s board would decide on its contribution in the second week of March.

“In doing so it will have in mind the overall program, but also additional matters such as the proper setting up of a decent firewall,” Lagarde said with reference to Europe’s current and future bailout funds.

At the moment, the overall ceiling for eurozone rescue loans has been set at euro500 billion ($663 billion), much of which has already been committed to Ireland, Portugal and now Greece. Euro leaders will decide at their summit in early March whether that ceiling should be increased.

On top of that, it will also take some time to see how many private creditors will participate in the debt relief and how many will have to be forced to sign up through new legal clauses. The representatives of the private bondholders said they were confident that investors would find the deal attractive, but some analysts fear that imposing losses on even some bondholders may destabilize markets.

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A Johnson & Johnson consumer health unit plagued by product recalls says it is pulling some versions of infant Tylenol off store shelves due to problems with a device that helps measure doses.

McNeil Consumer Healthcare says it is recalling about 574,000 bottles of a grape-flavored version of the liquid medicine, which was distributed nationally.

The medicine bottle comes with a syringe and has a protective cover, or flow restrictor, at the top to help measure the right dose pay day loan lenders. McNeil says that restrictor has been pushed into the bottle in some cases when the syringe is inserted.

McNeil is one of three business segments for J&J, which is based in New Brunswick, N.J. The consumer division has issued about two dozen recalls in more than two years.

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International Monetary Fund Managing Director Christine Lagarde joined world financial and trade organization chiefs in warning policy makers gathering in Davos, Switzerland next week against fiscal cuts that jeopardize growth.

The Federal Reserve on Tuesday drew fire from conservatives for its recent policy proposals on the downtrodden housing sector that the critics argued represented an overreach by the central bank.

Two Republican senators lashed out at the Fed’s “white paper” on housing, which suggested other officials should consider giving failed mortgage finance giants Fannie Mae (FNMA.OB: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FMCC.OB: Quote, Profile, Research, Stock Buzz) a bigger role in turning the market around.

The protests mark a rekindling of anti-central bank sentiment that reached fever pitch when the Fed launched its second round of bond buying in late 2010. At that time, conservatives accused the central bank of sowing the seeds for future inflation, though recent trends show price pressures ebbing.

The Fed’s detractors are now reacting to what they see as central bankers chiming in on fiscal policy matters that are not the appropriate realm for monetary authorities.

“I believe that it is important to the interests of the Federal Reserve, including the independence of monetary policy, that the Fed refrain from providing any hint of activism regarding what are clearly fiscal policy choices,” said Orrin Hatch, the top Republican on the Senate Finance Committee.

“I am sure that the Fed would not appreciate a white paper from Congress outlining how to think about and execute monetary policy,” he said.

Sen. Bob Corker, a member of the Banking Committee, directed his criticism at William Dudley, the influential president of the New York Federal Reserve Bank, for his suggestion that principal write-downs be considered for distressed borrowers.

Such criticisms have some resonance among a minority of inflation hawks at the Fed one hour payday loan. Philadelphia Federal Reserve Bank President Charles Plosser and Richmond Fed chief Jeffrey Lacker have both expressed distaste over an earlier effort by the Fed to drive down mortgage costs by buying mortgage-related debt.

At the other end of the spectrum, Dudley and Eric Rosengren of the Boston Fed have said the central bank should consider further purchases of mortgage-backed securities.

An editorial in the Wall Street Journal on Tuesday was even more scathing, accusing the central bank of “rank electioneering” for issuing the housing proposal.

Fed officials have argued that, given their broad mandate to achieve solid economic growth, it would be irresponsible for them to ignore housing, which continues to be a major drag on the economic recovery.

Recent indicators have been mixed, pointing to some strength in construction but also a continued decline in home prices that bodes ill for a sustained housing rebound.

When Ben Bernanke first took over as chairman at the central bank in 2006, he vowed to steer clear of the type of fiscal debates that got his predecessor, Alan Greenspan, into trouble.

Greenspan had widely been criticized for giving intellectual cover to tax cuts during President George Bush’s administration.

In a letter to leading lawmakers that accompanied the “white paper” last Wednesday, Bernanke said the Fed had received questions and requests for input and that the policy proposals were being made in the “interest of a continuing dialogue.”

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Home prices fell for a fourth straight month in November as distressed sales continued to weigh on prices, data analysis firm CoreLogic said on Monday.

CoreLogic’s (CLGX.N: Quote, Profile, Research, Stock Buzz) home price index fell 1.4 percent in November from the previous month. Compared with November of last year, prices were down 4.3 percent, steeper than the 3.7 percent year-over-year decline seen in October.

Excluding distressed sales, prices were off just 0.6 percent in November on a yearly basis. Homeowners in danger of foreclosure, or in “distress,” often sell their homes at a significantly reduced price Payday Loan for Bad Credit.

“Distressed sales continue to put downward pressure on prices and is a factor that must be addressed in 2012 for a housing recovery to become a reality,” Mark Fleming, chief economist at CoreLogic, said in a statement.

Of the top 100 statistical areas measured by population, 77 showed year-over-year declines, down from 80 in October.

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The Walt Disney Co. said Wednesday that it reached a long-term agreement with the nation’s largest TV signal provider, Comcast Corp., that extends their partnership into the next decade.

The deal covers major pay channels ESPN, Disney Channel and ABC Family and the retransmission of free ABC broadcast network programs through seven ABC TV stations. It allows Comcast subscribers to gain greater access to shows on demand over the Internet on multiple devices.

Terms were not disclosed.

The deal comes as TV distributors and content owners continue to spar over fees to carry programming.

In the New York area, a dispute between Time Warner Cable and The Madison Square Garden Co. has left some cable subscribers without access to Knicks basketball or Rangers hockey games since early in the new year.

Disney and Comcast agreed on the package covering 70 channels or services even though only a few agreements covering ABC Family, Disney Channel and Disney XD had expired at the end of 2011. The companies agreed that a long-term comprehensive deal was in both their interests.

Comcast and Disney called the scope and range of the deal “unprecedented cheap business cards.”

“It reinforces the value of the multichannel subscription and takes full advantage of new technologies, which serve all of our viewers,” said ESPN executive chairman George Bodenheimer in a statement.

The deal incorporates Comcast’s Xfinity TV online suite of programs and gives its 22.4 million video subscribers online access to services such as ESPN3, which offers live feeds of games that are sometimes not on the television network. Comcast subscribers will also be able to watch ABC shows such as “Castle” and “Grey’s Anatomy” on demand, but they won’t have the option of fast-forwarding through commercials.

Comcast also agreed to carry the pay TV channel Disney Junior, a rebranded network focused on children up to age 7 that will replace the SOAPnet channel in February.

Disney shares rose 49 cents to $38.80 in afternoon trading. Comcast shares rose 10 cents to $24.59.

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