Financial thoughts

The crash of a new, Russian-made jetliner into a jagged, Indonesian volcano during a flight to impress potential buyers threw doubt on dozens of plane sales Thursday just as Moscow seeks a comeback in foreign markets. All 45 people aboard were feared dead.

Search and rescue teams trudged and climbed through the mist-shrouded, jungly terrain for nearly 20 hours to reach the site where the plane roared in at nearly 480 mph (800 kph) on Wednesday, blowing apart and raining debris down a nearly vertical slope.

When the weather clears, all recovered bodies will have to be hoisted by nets and ropes onto hovering choppers, said Gagah Prakoso, a spokesman for the national search and rescue agency.

“We’re still searching for survivors,” he said. “But it doesn’t look good.”

The Sukhoi Superjet-100 _ Russia’s first new model of passenger jet since the fall of the Soviet Union two decades ago _ was supposed to kick-start the nation’s efforts to modernize its fleet and resurrect its neglected aerospace industry.

Indonesia, the fourth stop of a six-nation “Welcome Asia!” tour, was one of Sukhoi’s brightest hopes, accounting for a big chunk of the 170 orders taken globally so far.

Kartika Airlines, Sky Aviation and Queen Air _ among dozens of airlines to have popped up in the nation of 240 million to meet the growing demand for cheap air travel in the last decade _ together were aiming to buy 48.

“Our plan is to order 30 planes, gradually until 2014, to strengthen our fleet,” said Arifin Seman, one of the top executives at Kartika. “But we will wait for the result of the investigation before making any further decisions.”

Others, too, were being cautious.

“It’s too early to say,” said Krisman Tarigan, president director of Sky, which has placed orders for 12. “But we wouldn’t rule out cancellation … if it turned out the crash occurred because the plane was not airworthy.”

The ill-fated Superjet was carrying dozens of representatives from local airlines and journalists on what was supposed to be a quick, 50-minute demonstration flight Wednesday. Some excited passengers snapped pictures of themselves smiling and waving in front of the twin-engine jet before lifting off, then quickly posting them as profile pictures on Facebook and Twitter.

Just 21 minutes after takeoff from a Jakarta airfield, however, the Russian pilot and co-pilot asked for permission to drop from 10,000 feet to 6,000 feet (3,000 meters to 1,800 meters), said Daryatmo, chief of the national search and rescue agency free business cards.

They gave no explanation, disappearing from the radar immediately afterward.

It was not clear why the crew asked to shift course, especially since they were so close to the 7,000-foot (2,200-meter) volcano, or whether they got an OK, Daryatmo said.

Communication tapes will be reviewed as part of the investigation. It’s unlikely they will be released to the public any time soon.

The plane, with a relatively low price tag of around $35 million, seats from 70 to 98 people and has an operating range of around 2,800 miles (4,500 kilometers).

It is seen as a potential challenger to similar-sized aircraft from Canada’s Bombardier Inc. and Brazil’s Embraer SA.

Future buyers will scrutinize the crash investigation for signs of flaws in the aircraft, said Tom Ballantyne, a Sydney-based aviation expert.

“If it’s a technical fault … then obviously that will be very serious for them,” he said. “But if it’s pilot error or the fault of air traffic control, it won’t be quite so bad because they’ll be able to say, ‘Well, it’s not the airplane.’”

The Superjet made its inaugural commercial flight in April last year.

Fitch Ratings agency said in a statement Thursday that it expects the crash to “negatively affect” Sukhoi orders for the short term.

“The accident represents a further setback to the ambitious Russian civilian aerospace industry,” it said, adding that the success of the Superjet “is especially important as it is the first of many new commercial aircraft to be launched.”

“Instead, it has suffered from a three-year development delay, poor initial market reception and minor operational difficulties” since its entry into commercial service, the agency said.

All but 10 of the 45 people on board the plane Wednesday were potential buyers and journalists, said Sunaryo from PT Trimarga Rekatama, the company that helped organize the event.

The others were Russians, all from Sukhoi companies, an American consultant with a local airline and a Frenchman with aircraft engine-maker Snecma.

Source

European finance ministers are unlikely to reach an agreement Wednesday over how the region’s banks should shore up their defenses against future financial shocks, Germany’s finance chief said.

The European Union is in the process to writing an international agreement on capital buffers for banks into European law. This would determine the level of risk Europe’s banks can take and what regulators can do to ensure that financial crises like the one that brought down U.S. investment bank Lehman Brothers in 2008 do not happen again.

The so-called Basel III deal would force banks gradually to increase their highest-quality capital _ such as equity and reserves _ from 2 percent to 7 percent of risky assets they hold by 2019. An additional 2.5 percent would have to be built up during good times.

Basel III was agreed by the world’s leading economies after the 2008 financial crisis demonstrated that many banks did not have enough of a capital cushion to absorb sudden losses on loans and other risky activities. Once agreed, the new rules would apply to more than 8,300 banks in Europe, forcing them to build up billions in extra capital by selling shares or assets or reining in bonuses and dividends.

The 2008 financial panic brought on by the Lehmans collapse hit Europe hard. Between 2008 and 2010, governments across the 27-country-bloc spent (EURO)4.6 trillion ($6.1 trillion) propping up struggling banks.

What complicated efforts even more was that the open borders in the EU allow banks to operate freely across the bloc, but when lenders ran into trouble it was national governments _ and taxpayers _ who had to foot the bill. While the EU is now striving for a single set of banking rules, there is no pan-European bank resolution fund that could relieve national governments.

The U.K., which had to save three major banks, has seen its debt load almost double since 2007, while much smaller Ireland had to seek an international bailout to help stem the losses of its domestic lenders. And many economists fear that the economic recession in Spain may soon reveal massive bank losses there guaranteed payday loans.

Now, the U.K. is leading a group of countries that want to be able to force their own banks to have bigger cushions than the ones prescribed by the pan-European rules without first getting approval from the European Commission in Brussels.

“We should make it clear that the crisis did not originate exclusively from weak fiscal policy. It originated also from insufficiently strong banks,” said Polish Finance Minister Jacek Rostowski. “So therefore a group of countries including Poland, the Czech Republic, Sweden and the United Kingdom are very determined to see that banking systems in the future should be as healthy as we expect the fiscal side, the budgetary side, to be kept.”

That demand is opposed by France and the Commission, which fear that jacking up capital requirements in one country could force banks based there to cut down lending by their foreign subsidiaries. That, they argue, could hurt small states that don’t have a big domestic banking system.

To bridge the divide between the two camps, Denmark, which currently holds the EU presidency, has proposed a compromise that would allow national regulators to require an extra capital buffer of 3 percent. Anything beyond that would have to be approved by the Commission in Brussels, which would examine not only the level of risk in the home state but also the potential impact in neighboring countries.

Getting full approval for that compromise, however, may not be possible on Wednesday, officials said, partly because France is unlikely to budge from its position ahead of the second round of presidential elections this Sunday.

But German Finance Minister Wolfgang Schaeuble said that he expects an agreement before the end of June.

__

Don Melvin contributed to this story.

Source

I have planned my daughters’ weddings for them. As the father of the bride, I claim that prerogative. I get stuck with the bill.

Here’s how we’ll do it, girls. We’ll drop the bride and groom by the church for a quick “I do.” No flowers, crooners or organist. Just get hitched and get out.

The reception will be in our back yard. You’ll recognize the daughter who’s not getting married. She’ll be grilling the hot dogs. My wife will be the DJ (I hope they like the Beatles). I’ll tend bar.

There will be an open bar at my daughters’ weddings – I’m no cheapskate! – all the Pabst you can drink until the mini-keg runs dry.

When the crowd drifts away,  I’ll sit down and, with a tear in my eye, write the happy couple a check for $25,000.  I’ll be getting off cheap.

The average cost of a wedding today is actually $27,800, according to a survey by the wedding website Theknot.com.

Think of that. $27,800 is the down payment on a nice house. It’s a fancy new car. It’s a year at Mizzou for a grand kid.

Are we going to blow that on a one-day shindig, shiny rocks on a ring and a dress the bride will wear once? Daughter dear, wouldn’t you rather have cash than a bash?

That will be my pitch, anyway. I suspect I’ll get some push back. Girls start dreaming of their weddings when still in middle school, and they keep dreaming until the big day. If my daughters push hard enough, we’ll go to plan B: a nice wedding on a sane budget.

Since I know diddly about this, I asked help from a wedding planner, Ellen Gutierrez, and a very thrifty person, Barbara Ann Hughes.

Hughes is the queen of used. She teaches a course at St. Louis Community College titled “You can’t have enough stuff; the art of going to garage sales, estate sales and flea markets.” She furnished her whole house in Town and Country second hand.

Her advice to parents; Give the young lovers a set amount for the wedding and say, “Anything you don’t spend you can keep.” That encourages thrift.

That gets us to cheap dresses. Back in 1975, my wife bought her wedding dress used, then sold it for a profit. These days, eBay lists used wedding dresses as cheap as $49. What could possibly go wrong?

If you want to actually try on the dress before you buy it, go to the Scholar Shops in Clayton and Webster Groves. Profits go to loans to needy college students. Goodwill thrift stores, another good charity, often have used wedding dresses in stock.

Scholar Shop sells used wedding dresses for $75 to $250, says Kim Abel, director of the Scholarship Foundation, which runs the shops. Some donated dresses still have tags on them; evidence that love can go awry.

Think barter. Abel knows a parent in video production who bartered with a friend in the travel business. One couple got a free wedding video, and the other a cut-rate honeymoon.

Think do-it-yourself. When Hughes was married, she did all the decorating. She put two fish bowls stuffed with silk flowers on the altar. “The pastor said, ‘Those look really pretty. Can we leave them up for tomorrow’s service.’ I said sure,” said Hughes.

Wedding planner Gutierrez, of Brides Vision in Kirkwood, disagrees with the DIY solution.

“I try to keep my brides and moms as calm as possible,” she says. Running around with flowers in fishbowls doesn’t create serenity. “I try to allow them to be a guest at their own wedding,” she says.

Gutierrez’ top recommendation for saving money: Limit the crowd you wine and dine. “Ask yourself, ‘Does this person have meaning in your life in the long run?’”

Consider a lunch instead of a dinner, she says. It’s cheaper.

If you’re planning to celebrate somewhere other than your back yard, prepare to pay through the wazoo. But there are tactics for keeping the cost down.

Consider odd locations. At the St. Louis Zoo, for instance, one couple is planning a wedding witnessed by hippopotami in front of the hippo enclosure. “They love hippos,” says Kathy Lunders, director of group sales, who also planned dizzy weddings on the zoo merry-go-round. (Disclosure: My wife works at the zoo.)

“You can get married at the Four Seasons or at the VFW hall and every place in between,” says Gutierrez. Wedding in the off-season, say January instead of June, might save you a little on a hall rental but not much, she says.

You can cheap out by using a fake wedding cake rented from a bakery, Hughes says. Only the top tier is real, so the bride and groom can cut it. Then it’s wheeled back into the kitchen. The guests eat sheet cake.

Nancy Slade, editor of St. Louis Bride magazine, says brides should set their top priorities up front. “For one bride it may be the photography. She wants pictures she can remember for the rest of her life. For another, it may be the flowers,” Slade says.

Spend your money where it will have the most meaning, she says.

Source

The city of St. Louis is giving a $4.7 million property tax break to the owner of one of downtown’s tallest office towers, One AT&T Center.

The local holding company, affiliated with one of the nation’s largest real estate trusts, convinced the city assessor that the building is worth far less than its purchase price in 2006 because AT&T, its lone tenant, now fills only half its office space.

MB St. Louis LLC is the owner of record for the property, which was acquired for $204.9 million by Minto Holdings Inc., of Florida and Inland American Real Estate Trust, of Oak Brook, Ill.

Inland American, according to its most recent annual report, posted annual revenues last year of $1.3 billion and holds interests in nearly 1,000 properties, including hotels, office towers and retail complexes across the country. Inland reported last month that a subsidiary paid $22.6 million for the Hilton hotel at 400 Olive Street in downtown St. Louis as part of a $393.1 million deal for five hotels in Atlanta, San Francisco, Austin, and Lexington, Ky.

Inland’s affiliate, MB St. Louis, convinced St. Louis assessor Ed Bushmeyer that the AT&T tower is now worth just $135 million – about $70 million less than what it sold for in 2006.

Jerome Wallach, an attorney for MB St. Louis, argues that the building’s value plummeted because AT&T has slashed the size of its workforce there, and low occupancy cuts the building’s market value. The owner would have difficulty selling the half-full building for an attractive price when AT&T’s lease expires in 2017, he added.

But the building is not for sale now, Wallach acknowledged, nor has MB St. Louis given AT&T any rent breaks on the property because of its diminished presence. Wallach argues the rent shouldn’t factor into assessed value, which should be based on what it might sell for now in its half-full state.

Bushmeyer initially contended that occupancy levels have no effect on the structure’s value — because AT&T leases the entire 1.2 million-square-foot building, regardless of the space filled. But Bushmeyer ultimately bought the landlord’s argument that the relatively short period left on the lease, along with potential renovations needed to accommodate multiple tenants, justified the lower assessment.

The matter was resolved in a settlement approved by the State Tax Commission on March 27. The owner first appealed the assessor’s valuation to the city’s Board of Equalization, which lowered the building’s 2010 assessment to match its December 2006 purchase price, $204.9 million. MB St. Louis then appealed that ruling to the State Tax Commission on line pay day loans.

Before the state commission could issue a decision, the owner and the city assessor reached an agreement that dropped the building’s 2010 value to $155 million. The agreement also lowers the 2011 and 2012 values to $135 million from the city’s original assessment of $191.5 million.

The result is three years of tax cuts, totaling $4.7 million.

Since 2007, the annual property tax bill has been about $5.5 million, city records show. The portion of taxes MB St. Louis paid under protest in previous years will be refunded from an escrow account, Bushmeyer said.

Completed in 1986, the 44-story tower is downtown’s third-tallest structure, trailing only the 630-foot Arch and — by five feet — the 593-foot Metropolitan Square building on Broadway.

An AT&T spokesman said employment at the company’s three-building downtown complex, including the tower, is slightly less than 4,500. As recently as 2009, the complex had nearly 5,700 workers.

Another factor in the building’s lowered value is its design as a single-tenant headquarters, the owner argued. Most downtown office towers were built for multiple tenants. A new owner of the AT&T tower would likely face an expensive and time-consuming renovation to accommodate multiple tenants.

“The assessor’s office relied on sales and rental transactions involving multi-tenant buildings downtown, such as Met Square,” in its initial property assessment, Wallach said. “AT&T is used as a single-tenant building. It was, in my opinion, an apples and oranges comparison.”

The tower’s lowered assessment will mean that city public schools and other tax-supported entities will take a slight hit, Bushmeyer acknowledged. But he noted that while citywide reassessments in 2009 and 2011 produced generally lower property values — and lower tax bills — state law allows some taxing districts to raise rates to make up lost revenue.

The AT&T case illustrates the nationwide decline of real estate values during the recession, Bushmeyer said.

“I expect that, as the economy improves, we will see valuations increase,” he said.

Jim Mosby, senior managing director in St. Louis of Cassidy Turley, said Thursday that challenges to assessed valuations have been widespread over the past four years because of general declines in the value of commercial real estate.

“At some time, the market takes over, no matter what you have in your building,” he said.

Source

Employment will improve more this year than economists previously estimated, helping the world

Two months after filing for personal bankruptcy, former SynCare LLC chief Stephanie DeKemper on Tuesday asked that the corporation itself be granted Chapter 7 protection.

SynCare listed assets of $125,854 and debts over $5.6 million in papers filed with the Indianapolis federal bankruptcy court.

Nearly $2 million of that debt is owed to Clayton-based Centene, the corporation that provided seed money DeKemper used to purchase SynCare in early 2010.

SynCare proceeded to secure a Missouri Department of Health and Senior Services contract to oversee services for the state’s 50,000 homebound Medicaid patients.

The state terminated the pact last September, barely four months after it went into effect, following a public outcry over SynCare’s failure to deliver the services outlined in the agreement.

With one exception, this week’s corporate petition mirrors the personal bankruptcy papers filed on behalf of DeKemper the last week of December.

The personal bankruptcy names nearly 150 SynCare employees from Missouri seeking back wages and and reimbursement for business-related expenses.

The corporate Chapter 7, conversely, lists compensation owed to 13 people once employed at SynCare’s Indianapolis headquarters.

Fifth Third Bank, holding outstanding loans totaling $850,000 joins Centene as the corporation’s largest creditor.

The papers show Bank of America being owed $676,964 for a letter of credit secured by Centene.

Source

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.

Source

Regulatory hurdles regarding the marketing of its prenatal drug, Makena, contributed to KV Pharmaceutical Co.’s continuing losses for the third quarter of fiscal year 2012, which ended Dec. 31. The Bridgeton-based drug maker reported a net loss of $37.8 million for the quarter, or a loss of 63 cents a share, compared to a loss of $47.8 million, or loss of 96 cents a share, a year ago. Net revenues rose 46 percent to $5.1 million. “There is substantial doubt about the company’s ability to continue as a going concern,” KV said in a filing lodged at the Securities and Exchange Commission.  

Source

European leaders maintained pressure on Greece to accept terms demanded by international lenders during a weekend of talks to avert a financial collapse.

Interim Greek Prime Minister Lucas Papademos struck a tentative deal with party leaders to boost economic competitiveness and extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro ($170 billion) aid package wasn

The U.S. Federal Reserve on Wednesday said it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.

Without making major shifts to its outlook for the economy, the central bank described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices.

It depicted business investment as having slowed, dowgrading its assessment from the December meeting.

Economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the central bank said in a statement.

Richmond Fed President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He preferred to omit the description of the time period for ultra-low rates.

As part of an effort to provide more insight on its thinking to financial markets and the public, the Fed later on Wednesday will begin publishing individual policymakers’ projections for the appropriate path of the benchmark federal funds rate. That release is scheduled for 2 p.m. (1900 GMT)

If the Fed can convince financial markets it will be on hold longer than they had anticipated, long-term interest rates could drop as investors price in the new information.

“A significant contingent of the committee views this exercise not so much as a process improvement but more as an opportunity to ease again via the forward rate communications channel,” Stephen Stanley, an economist at Pierpoint Securities, said ahead of the Fed’s announcement.

There is also the possibility that officials will announce an explicit inflation target, perhaps a hard marker of 2 percent or a range of 2 percent or a bit below guaranteed online personal loans. The Fed has been debating a statement on its long-run goals, but whether one will be released on Wednesday is unclear.

While forecasters expect the U.S. economy grew at a 3 percent annual rate in the last three months of 2011, they look for growth of just around 2 percent this year.

Fed officials appear likely to bide their time in determining whether more monetary stimulus is needed. Many economists expect they will eventually decide on another spurt of Fed bond buying - probably one focused on mortgage debt.

In response to the deepest recession in generations, the Fed slashed the overnight federal funds rate to near zero in December 2008. It has also more than tripled the size of its balance sheet to around $2.9 trillion through two separate bond purchase programs.

The policy is credited with having prevented an even more devastating downturn, but it has been insufficient to bring unemployment down to levels considered normal during good economic times.

In December, the U.S. jobless rate stood at 8.5 percent, and some 13 million Americans were still actively looking for work but could not find it.

Analysts said the Fed’s shift in communications will put an even greater emphasis on a post-meeting news conference by Fed Chairman Ben Bernanke set for 2:15 p.m. (1915 GMT).

“The chairman is likely to remain non-committal to any additional policy easing, but he is likely to reinforce the Fed’s commitment to ‘review the size and composition of its securities holdings’ and be ‘prepared to adjust those holdings as appropriate,’” said Millan Mulraine, senior macro strategist at TD Securities.

Read more