Financial thoughts

Dutch brewer Heineken NV said Monday that it will buy the beer-making operations of Mexico’s Femsa in an all-share deal that values the maker of Dos Equis, Tecate and Sol beers at $5.5 billion, excluding debt.

The buy increases Heineken’s presence in growth markets and cements its position as the world’s second-largest brewer by sales. It also continues a decadelong trend toward concentration among the biggest players in the global beer market. Heineken is based in Amsterdam, Netherlands.

Femsa Cerveza brands have a 43 percent market share in Mexico and a 9 percent share in Brazil — two of the world’s top four most profitable beer markets, and both still fast-growing. Femsa’s Tecate and Dos Equis brands are also significant players in the U.S. imported beer market, where Heineken vies with Grupo Modelo’s Corona.

"This is a really good deal for Heineken, for our position in the Americas," Heineken Chief Executive Jean-Francois van Boxmeer said on a conference call. "As a worldwide brewer, this was a (region) where we perhaps were weaker."

Femsa Cerveza had sales of $3.8 billion in 2008, Heineken said. Including debt that Heineken will assume, the deal is worth $7.6 billion (euro5.3 billion).

Analysts welcomed the buy as a pleasant surprise, given that many had expected SABMiller PLC — now the world’s third-largest brewer by sales behind Anheuser-Busch InBev SA and Heineken — to win the race for Femsa.

Analyst Kris Kippers of Petercam Bank praised the deal as a "a great acquisition for Heineken" because Femsa was one of the few remaining large independent brewers in growth markets — and Heineken didn’t overpay. Heineken now has 40 percent of its operations in developing markets, up from 32 percent.

Femsa, or Fomento Economico Mexicano S.A.B. de CV, is based in Monterrey, Mexico. It is one of Mexico’s largest conglomerates, bottling Coca Cola and operating the Oxxo convenience store chain throughout much of Latin America, among other activities.

"In the context of the reconfiguration of the global brewing landscape, scale and geographic diversification are more important than ever," said Femsa CEO Jose Antonio Fernandez Carbajal on Monday.

"This transaction responds to that imperative."

Heineken said it expects the deal to close in the second quarter, pending approval from regulators and shareholders.

Heineken’s unusual holding structure allows descendants of the Heineken family to control Heineken NV, and the company said Monday they have agreed to the deal. A trust holding 39 percent of Femsa shares has also agreed, Heineken said.

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U.S. auto sales edged higher in November, led by an outsized gain for Hyundai Motor Co and mixed results for rivals in a trend automakers said pointed to a grudging recovery in the U.S. economy.

Hyundai posted a 46 percent gain in sales for November and said it was on track to take a 4 percent share of the U.S. auto market this year, up by a third at a time when the rest of the industry has been reeling. The Korean carmaker benefited from a recent marketing push and lineup of fuel-efficient cars.

Toyota Motor Corp, the world’s largest automaker and the best-selling brand in the U.S. market, saw a rise of nearly 3 percent in November sales.

Nissan Motor Co Ltd, the No. 6 automaker in the United States, reported a nearly 21 percent increase in sales. Honda Motor Co Ltd sales were off nearly 3 percent.

As a group, U.S. automakers lost share during the month, with Ford Motor Co distancing itself again from domestic rivals General Motors Co and Chrysler.

Ford posted flat sales while Chrysler, now under management control of Italy’s Fiat SpA, said sales fell 25 percent from the same month a year earlier. GM’s sales fell 2 percent.

Ford, the only U.S. automaker to have avoided a taxpayer-funded restructuring in bankruptcy, set a sharply higher target for North American production in the first quarter. It expects production to rise 58 percent from the previous year when it had cut back output as the auto market slid toward its weakest level since the early 1980s.

“It appears that the economy and the auto sales have stabilized and that the worst is behind us,” Ford U.S. sales chief Ken Czubay told a conference call.

Separately, GM’s CEO, Fritz Henderson, will leave the automaker, a source familiar with the matter said on Tuesday. The planned departure comes after a meeting of GM’s 13-member board of directors in Detroit.

SALES QUAGMIRE

U.S. auto sales results were pushed lower by a quirk in the calendar. November had only 23 selling days for dealerships — two fewer than the same month a year earlier.

On the adjusted and annualized basis tracked by industry planners and analysts, the U.S. auto market came just short of a sales rate of 11 million units in November. That is up from 10.4 million a year ago and in line with analyst estimates.

Results confirmed the industry is on the mend after a deep four-year downturn, analysts said, but they cautioned that sales are coming back from historically low levels. Sluggish consumer confidence and rising unemployment could make any recovery slow and uneven.

“You are comparing terrible numbers to terrible numbers, so it doesn’t look that bad,” said Dennis Virag, an analyst with Automotive Consulting Group.

“There still is a very dismal state within the auto industry and it will probably be another year or so until we start pulling out of the quagmire we are in,” Virag said. 

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WaterStone Bank said it has agreed to a consent order with federal and state banking regulators to maintain minimum capital ratios that are higher than regulators typically require as a safeguard to cover the bank’s problem real estate loans.

Wauwatosa-based WaterStone (NASDAQ: WSBF) said Friday that on Wednesday it agreed to the consent order with the Federal Deposit Insurance Corporation and the Wisconsin Department of Financial Institutions. WaterStone said it also signed a stipulation and consent to a cease-and-desist order for its holding company, WaterStone Financial Inc., with the federal Office of Thrift Supervision.

WaterStone said the orders formalize a prior informal agreement the bank, its holding company and the FDIC entered in 2008. The bank and regulators have been working for the past two years to minimize the effects that the economic recession is having on the bank and its borrowers, WaterStone said.

The orders require, among other things, that the bank maintain minimum Tier 1 capital of 8 easy payday loans.5 percent of total average assets and minimum total risk-based capital of 12 percent of risk-weighted assets.

As of Sept. 30, WaterStone exceeded those levels with a Tier 1 capital ratio of 12.64 percent compared with 10.76 percent a year earlier, and a total risk-based capital ratio of 13.86 percent, compared with 12.01 percent a year ago.

Through the first nine months of 2009, WaterStone recorded a net loss of $6.24 million compared with a net loss of $27.3 million for the same period of 2008. The bank’s level of noncurrent loans to total loans increased to 6.24 percent as of Sept. 30 compared with 5.78 percent a year earlier.

WaterStone stock was down 1 cent, to $1.86, on Friday.

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In closing arguments in the trial of the first high-profile Wall Streeters on fraud charges stemming from the financial crisis, a U.S. prosecutor said two hedge fund managers told “black and white lies,” but a defense lawyer attacked the government for “misleading” the jury.

U.S. prosecutor Ilene Jaroslaw said on Thursday former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin lied to investors in the early months of 2007 about the health of their funds even though they were seeing some of the worst market conditions ever.

“This case is not about hedge fund strategy or what happened in the market in 2007,” Jaroslaw told a Brooklyn, New York, federal court jury.

“What it is about, is the two defendants lied to their investors. It’s not about the future … but a case of black and white lies,” she told the jury, which is expected to begin deliberations on Monday, nearly a month after the trial began on October 13.

Cioffi, 53 and Tannin, 48, have denied charges of securities fraud, wire fraud and conspiracy in a June 2008 indictment that made them the first high-profile Wall Streeters to be criminally charged in a case stemming from subprime mortgage-backed securities that fueled the market meltdown.

When Cioffi’s main lawyer, Dane Butswinkas, took his turn summarizing the evidence to the jury, he said prosecutors had given jurors a “misimpression” and “misleading sound bites” from emails and had implied conspiracy where there was none.

“If you look at some of the tactics I just showed you, do they make you pause?” Butswinkas asked the jury. “If they would, then that’s reasonable doubt.”

The 12 jurors were selected after answering written and oral questions about whether they could be fair and impartial in an era of lost jobs, government bailouts of banks, controversial executive bonuses and Wall Street in crisis payday loans online.

Butswinkas also urged the jury to question whether the New York City borough of Brooklyn was the correct place under the law for the government to bring the case because the alleged offenses took place in the borough of Manhattan.

During the trial, prosecutors called about 20 witnesses and presented about 150 documentary exhibits to the jury. Prosecutors said the two funds, the High Grade Fund and the Enhanced Leveraged Fund, had $1.6 billion leveraged to $20 billion of assets, primarily collateralized debt obligations, securities backed by a pool of debt such as mortgages.

The defense called only three witnesses, including Robert Glenn Hubbard, the Dean of the graduate school of business at Columbia University in New York.

On Thursday, Butswinkas cited his testimony that the strategies for the two Bear Stearns funds did not play out because lenders stopped extending credit.

Hubbard told the court on Tuesday that had the funds’ hedging strategy worked, they “would have returned very large amounts of money to investors, about $700 million to the High Grade Fund, $650 million to the leveraged fund.”

PRISON TERMS POSSIBLE

The two men could be imprisoned for up to 20 years if convicted by the jury. One of Tannin’s lawyers is expected to offer a summation on Friday followed by a government rebuttal. 

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The Nasdaq slumped and the Dow managed a slim gain Tuesday, as investors weighed a selloff in tech, a rally in energy and a surprise drop in consumer confidence.

A better-than-expected housing market report and a strong response to the government’s latest debt auction were also in the mix.

The Dow Jones industrial average (INDU) gained 14 points, or 0.1%. The S&P 500 (SPX) index rose 3 points, or 0.3%. But the Nasdaq composite (COMP) lost 26 points, or 1.2%.

Since peaking at rally highs a week ago, the Dow has lost 2.3%, the S&P 500 has lost 3.4% and the Nasdaq has lost 3.4% through Tuesday’s close.

"In the last few days, the market hasn’t been looking very friendly, but the overall picture hasn’t changed much," said Will Hepburn, president at Hepburn Capital Management. "The upward momentum is still significant."

Hepburn said that there’s still plenty of fuel to keep the advance going. He cited the improving economic and corporate news, the massive amounts of government stimulus and the trillions sitting in money-market funds in cash or low-yielding bonds.

He noted that although the S&P 500 is up 57% from the March bottom, when it hit a 12-year low, the broad average is still down 32% from its all-time high of October 2007.

Tuesday’s market: Weakness in banks, techs, retailers and transportation stocks dragged down the Nasdaq and limited the rest of the market from moving much. Cisco (CSCO, Fortune 500), Dell (DELL, Fortune 500), Amazon.com (AMZN, Fortune 500) and Yahoo (YHOO, Fortune 500) were among the Nasdaq’s biggest decliners.

A rally in heavily weighted Dow components Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), DuPont (DD, Fortune 500) and American Express (AXP, Fortune 500) kept the blue-chip measure afloat.

Stocks tumbled Monday, with the Dow dropping 100 points for the second day in the row. A spiking dollar dragged on commodity shares and other stocks that benefit from a weak U.S. currency.

The dollar and commodity prices remained in focus Tuesday. But investors also looked to the economic news ahead of Thursday’s highly anticipated gross domestic product report.

Energy: Energy was the strongest sector on the day, as investors reacted to a smattering of financial reports and the impact of the U.S. dollar.

European oil behemoth BP (BP) reported weaker quarterly earnings and revenue due to lower oil prices, but the results topped analysts’ estimates. BP’s U.S.-traded shares rose 4%.

Valero Energy (VLO, Fortune 500), the largest U.S. oil refiner, reported a bigger-than-expected quarterly loss Tuesday, with fuel demand suffering amid the sluggish economy. Shares fell 4.3%.

Nonetheless, a variety of energy stocks rallied, including Dow components Chevron and Exxon Mobil.

Raw commodity prices were higher as well, despite a mixed dollar payday advance lender. Typically a weak dollar boosts dollar-traded commodity prices and a strong dollar pressures prices.

Confidence: Consumer sentiment took a plunge in October, according to a Conference Board report released after the start of trading. The Consumer Confidence index fell to 47.7 in October from a revised 53.4 in September, reflecting the impact of rising joblessness and shrinking household wealth. Economists surveyed by Briefing.com thought the index would rise to 53.5.

The part of the index that measures how consumers rate the present economic situation fell to 20.7 in October from 23 in September. It was the lowest level since February 1983, when it stood at 17.5.

Housing: Home prices rose for the fourth month in a row in August, according to the S&P Case-Shiller Home Price index of the 20 largest metropolitan areas. Prices also showed the smallest year-over-year declines in nearly 2 years.

Prices rose 1.2% in August after climbing 1.6% in July. Versus a year ago, prices were down 11.3%, but that was shy of the 11.9% drop economists were expecting.

Financial results: With 230 companies, or 46%, of the S&P 500 having already reported results, profits are on track to have fallen 18.1% from a year ago, according to the latest from Thomson Reuters.

Results have largely topped forecasts, with 80% of companies beating earnings’ estimates, 6% meeting expectations and 13% missing forecasts.

Currency and commodities: The dollar gained versus the euro, after falling to a 14-month low last week. But the greenback fell versus the yen.

U.S. light crude oil for December delivery rose 87 cents to settle at $79.55 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $7.40 to settle at $1,035.40 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.

World markets: Global markets were mixed. In Europe, London’s FTSE 100 added 0.2%, France’s CAC 40 was barely changed and Germany’s DAX lost 0.1%. Asian markets ended lower.

Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.47% from 3.55% late Monday. Treasury prices and yields move in opposite directions.

Gains accelerated after the government saw strong demand for its sale of $44 billion in 2-year notes.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost two to one on volume of 1.39 billion shares. On the Nasdaq, decliners topped advancers by over two to one on volume of 2.42 billion shares. 

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Is anybody out there hiring? Seriously. I’m not looking for a job but I’d like to know if any major corporations are actually looking to boost their headcount anytime soon. Do I hear crickets?

Investors are continuing to celebrate healthy third-quarter earnings reports in what’s turning out to be a far less scary October than usual for stocks. But a lot of the better-than-expected profits are coming thanks to job cuts.

And there still doesn’t appear to be much evidence of an improvement in the labor markets coming anytime soon.

Sun Microsystems (JAVA, Fortune 500) announced Tuesday evening that it was planning to cut 3,000 jobs — about 10% of its total workforce — while it waits for regulators to approve its sale to software giant Oracle (ORCL, Fortune 500).

The New York Times (NYT) said Monday it was going to get rid of 100 jobs in its newsroom. That works out to an 8% reduction in the editorial staff at the Gray Lady.

Earlier this month, struggling PC maker Dell (DELL, Fortune 500) said it was closing a plant in North Carolina, resulting in the loss of more than 900 jobs. And medical equipment manufacturer St. Jude Medical (STJ) said a few weeks ago that it was cutting more jobs than it had originally planned back in the second quarter.

These are just a few examples of the continued bloodletting in Corporate America.

I hate to beat a dead horse here. Heck, I think this horse has already made a trip to the glue factory. But how can Wall Street remain in such a celebratory mood this earnings season when all signs point to more job losses and rising unemployment as far as the eye can see?

Yes, there are several things to be encouraged about these days. Banks appear to have taken a step back from the brink. The housing market looks as if it is stabilizing.

And even though rising energy costs could be a bit painful to consumers, the recent surge in the price of oil (not to mention other commodities) also seems to be a confirmation of what investors in stocks are saying: the global recession may really be over.

Finally, I’d be remiss if I didn’t point out that many of the companies still announcing big job cuts are, to put it mildly, troubled firms.

For example, Sun Microsystems has continued to lose money and would be in more serious financial dire straits if not for the lifeline Oracle has thrown it. It’s no secret that the newspaper business is mired in a horrific slump.

So it may be the case that future job cuts are only going to be coming from weak companies and that healthier firms could actually start hiring again as their profits improve.

"If we don’t have job growth, we can’t have a strong, or even sustained economic recovery," said Stuart Hoffman, chief economist with PNC Financial Services. "But it’s not unusual for profits to head up before employment does, particularly when you have strong productivity growth."

That’s all well and good. But as long as people are still losing their jobs, worried about losing their jobs or having difficulty finding a new job, it’s hard to fathom how the recovery can be anything more than tepid.

"At this point, we’re still losing jobs. For those who say the economy has already turned, I’m dubious about that," said Dan Seiver, a finance professor at San Diego State University. "We’re in the process of bottoming but we can’t call it a recovery until we’re creating net new jobs."

Consumers are not going to spend as much if unemployment continues to rise. The jobless rate was 9.8% nationwide in September.

And according to figures released by the Labor Department Wednesday, 15 states had an unemployment rate above 10% last month. What’s more, the unemployment rate was higher in 23 states in September than in August.

The moribund state of the job market is one reason why Allen Sinai, chief global economist and strategist with Decision Economics, wrote in a report earlier this month that we may be on the verge of "the mother of all jobless recoveries."

"Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," Sinai wrote. "The number of job seekers is way, way up and the number of job openings is way, way down."

This all sounds incredibly depressing. But here’s some good news.

Seiver said that because people who are not actively looking for jobs are not counted by the government as technically being unemployed, it’s possible for the jobless rate to keep climbing even though the job market may really be improving.

"As the economy starts to turn, more people may start looking for jobs and for every job that gets filled, there may be more people looking for work again. That’s part of the problem with the unemployment number," he said.

Hoffman added that he thinks the nascent rebound in profits will eventually allow businesses to become confident enough to start hiring again. He said that there should be modest job growth beginning in the first quarter of next year and that the pace should pick up heading into 2011.

Of course, that’s a long way off for people looking for work now. And Hoffman said that people shouldn’t expect too much of a rebound in the job market at first.

"Job growth won’t be rapid. Employment gains won’t be up as fast as the losses were on the way down," he said.

That’s why Hoffman thinks it is best for consumers and investors to temper their expectations and prepare for a gradual climb out of the recession, not an explosive rebound. He’s referring to 2010 and 2011 as a "half-speed recovery."

Talkback: Are you worried about losing your job or finding a new one if you are currently unemployed? Is Wall Street underestimating how serious the problems in the labor market are? Share your comments below. 

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Stocks rallied Monday, with the Dow, S&P 500 and Nasdaq all gaining at least 1%, as investors used a two-week selloff as an opportunity to jump back into the market.

A better-than-expected reading on the services sector of the economy and strong demand for Treasury’s first bond auction of the week bolstered the broad-based gains.

The Dow Jones industrial average (INDU) rose 112 points, or 1.2%. The S&P 500 (SPX) index gained 15 points, or 1.5% and the Nasdaq composite (COMP) rose 20 points, or 1%.

Bank stocks led the advance, with Bank of America (BAC, Fortune 500) up 3.8%, JPMorgan Chase (JPM, Fortune 500) up 4.6% and Wells Fargo (WFC, Fortune 500) up 6.9%. The KBW Banking (BKX) index added 3.2%.

A roughly seven-month-long rally hit a roadblock at the end of September, with stocks falling for two straight weeks, and the major gauges losing around 5%. The declines were driven by a series of weaker-than-expected economic reports on housing, manufacturing, consumer confidence and employment.

The weak batch of reports marked a reversal after a period of steadily improving economic news. That raised more worries that the rally has gotten ahead of the recovery. Still, the declines over the last two weeks were pretty minimal, considering the runup that preceded them.

"I think the underlying trend of the market is still positive, despite the last two weeks," said Ted Weisberg, NYSE Floor Trader at Seaport Securities. "You’re seeing that start to reassert itself today."

He said that the last two weeks of the old quarter and first two of the new one are typically something of a Never Never Land for the market, as investors await results and focus 100% on economic news. He said that this was true in the month surrounding the end of the second quarter and start of the third in July and it appears to be true again now.

"The risk, as we’ve seen over the last few weeks, is that the news can be less than terrific, making markets vulnerable," he said. "That’s particularly the case after the kind of rally we’ve seen."

Since bottoming at a 12-year low March 9, the S&P 500 has gained 51.2%, and the Dow has gained 45% as of Monday’s close. After hitting a six-year low, the Nasdaq has gained nearly 61%.

In the third quarter alone, the S&P 500 index and the Dow both jumped 15%, the best quarterly performance in a decade. The Nasdaq jumped 15.7%, its best quarterly performance since 2003.

Results on tap: The wave of third-quarter earnings reports due in the week ahead will determine whether the selloff continues or proves to be an entry point for more buyers. Alcoa unofficially begins the third-quarter reporting period Wednesday, as it usually does. The Dow aluminum maker is due to report a quarterly loss versus a profit a year ago, reflecting a weak materials sector.

Overall, S&P 500 profits are expected to have dropped almost 25% from the third quarter of 2008.

On the move: In addition to financials, the Dow’s other big gainers included Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), 3M (MMM, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500). Of the 30 Dow components, 25 gained.

Among stock movers, Brocade Communications (BRCD) rallied 18.8% in unusually active trading on reports that it has put itself up for sale. Both Hewlett-Packard and Oracle (ORCL, Fortune 500) were cited as potential buyers, according to the Wall Street Journal.

Economy: The Institute for Supply Management’s services sector index rose to 50.9 in September from 48.4 in August. Economists surveyed by Briefing.com thought it would rise to 50.0.

World markets: Global markets were mixed. In Europe, London’s FTSE 100, France’s CAC 40 and Germany’s DAX all gained around 0.7%. Asian markets were mixed, with the Hong Kong Hang Seng higher and the Japanese Nikkei lower.

Currency and commodities: The dollar tumbled versus the euro and the yen, resuming its recent plunge against a basket of currencies.

U.S. light crude oil for October delivery rose 46 cents to $70.41 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $13.50 to settle at $1,017.80 an ounce. Gold closed at a record high of $1,020.20 two weeks ago.

Bonds: Treasury prices fell late Monday, with the yield on the 10-year note sticking at 3.22%. Treasury prices and yields move in opposite directions. The government’s sale of $7 billion in 10-year Treasury Inflation Protected Securities (TIPS) saw strong demand, a good sign at the start of a week that brings $78 billion in debt auctions.

Market breadth was positive. On the New York Stock Exchange, winners beat losers five to one on volume of 1.12 billion shares. On the Nasdaq, decliners topped advancers by over two to one on volume of 2.21 billion shares. 

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Parents have gotten a lot smarter in 2009.

Well, at least they’ve gotten smarter when it comes to telling their children about money, saving and investing. In the past, they rarely told them much of anything constructive about those topics.

Financial experts say the financial crisis has provided a unique teaching opportunity that many parents have seized upon. Adults want their kids better prepared to avoid the mistakes they’ve made.

"For a long time, the answer to a youngster’s question, ‘Can I get this?’ was, ‘No, we don’t have enough money’ or ‘Yes, we have enough money’," said Evelyn Zohlen, president of Inspired Financial LLC, Huntington Beach, Calif. "Now parents, as a result of the recession and economy of the past 12 months, are using this as an opportunity to expand their answers."
For example, parents are explaining that they don’t want to charge more on a credit card because they consider it important to pay off their credit card bill every month, Zohlen said. She considers this a "subtle refining" of the prior common response, providing a lesson on how the overall financial process works.

"It is ironic to me that adults have been forced to relearn financial lessons themselves," she said. "They’re sharing those lessons with their children now."

The tried-and-true approach of giving an allowance for chores done around the house remains valid, said Zohlen. It’s an easy learning opportunity to tell the child how much he’ll receive each week. The next step is planning what to do with money earned, such as how much will be saved or whether the child would want to donate a portion to an animal shelter or some other cause, she said.

Savings goes into a cash equivalent such as a money-market fund or bank account, she said, but when the child gets a bit older you must begin the conversation about investing.

Ask the youngster to name his favorite companies, with Walt Disney Co., McDonald’s Corp. or Coca-Cola Co. the typical types of responses you’ll hear, she said. Next, find some mutual funds for the child that own those shares, she said.

"Parents don’t have to teach their kids about modern portfolio theory, but they can begin to talk about what a mutual fund is and explain that it owns lots of different companies," Zohlen said.

Just don’t drop the weight of the entire global meltdown on your child’s small shoulders.

"It’s a terrific time to be talking to kids about saving and investing, given what’s gone on in the market," said Christine Benz, director of personal finance for Morningstar Inc. in Chicago. "But it’s a fine line, because if you’re nervous or worried, you want to be careful about communicating those feelings, since you really don’t want to scare your child payday loans."

A common mistake is not stressing to children the importance of starting to save and invest early in life so that it becomes a lifelong habit, Benz said. Studies show the dramatic difference a few years’ head start can make as far as the amount accumulated later in life.

"The bottom line is that you want to get kids interested in investing early because it can absolutely change their lives," asserted Charles Carlson, editor of the DRIP Investor newsletter.

An all-too-common parental error Carlson has observed is applying the parents’ time horizon and risk parameters to their kids, saying "stocks are bad" or some other investment directive that doesn’t take into account the child’s far longer time horizon.

"You can start with a company-specific approach, telling the child that it is possible to buy shares in the company that makes the jeans bought for him that day," suggested Carlson. "Or if he likes a video game, you can explain it is possible to buy shares of GameStop Corp., the store where the game was purchased."

Educate the child about savings but also get him interested in the process of investing, said Carlson. Both are easier if the child has some sort of connection with the company being discussed.

For youngsters Carlson prefers dividend reinvestment plans offered by companies, most with minimum initial investments of $250 or less, that make it easy for the parent or grandparent to make an initial investment. Then the youngster can kick in small amounts of money to build the investment gradually.

"To me, a mutual fund is a harder sell for kids," believes Carlson. "But if they like baseball you can talk to them about stock in Nike Inc., or if they’re into computers, you can talk about Microsoft Corp."

Weigh the possibilities, but whatever type of investment is chosen, it is important to get started.

"If you have a child who’s showing some interest in investing and the stock market, there’s probably nothing like investing in individual stocks to teach the child how to navigate that environment," said Benz. "But if the goal is to teach savings and the importance of investing, a mutual fund is the way to go."

Benz recommends these funds with $1,000 minimum initial investments as excellent launching pads for young people: Oakmark Equity and Income Fund; Ariel Fund; Artisan International Fund; and Vanguard STAR Fund.

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The economy appears to have stabilized and may not need all the stimulus the central bank had planned to offer, Richmond Federal Reserve Bank President Jeffrey Lacker said Thursday.

"The economy appears to have leveled out and I believe we can look forward to better times ahead," Lacker told a business group.

Even as he cautioned that "conditions remain distressed in many industries and localities," Lacker, a voting member of the Federal Reserve’s policy-setting panel this year, said the central bank would have to calibrate its purchases of long-term securities carefully to avoid providing too much economic stimulus.

Lacker said the Fed’s commitment to buy up to $200 billion in debt of government-sponsored mortgage agencies and up to $1.25 trillion in mortgage-backed securities issued by those agencies has supplied reserves to banks that reduce their need to borrow from the Fed. At a certain point, the banking system would no longer need to borrow to obtain the desired level of reserve balances, he said.

"I will be carefully evaluating whether we need or want the additional stimulus that purchasing the full amount … would provide," he added.

Lacker’s remarks suggest pressure is already building within the Fed to pull back some of its unusual measures to boost the economy as signs of recovery mount.

The Richmond Fed president said inflation is currently "right on target," but a further large decline would be unwelcome.

However, measures of inflation expectations, while imperfect, suggest consumer price pressure is more likely to rise than fall, he said.

He said the central bank’s decision to hold rates low in 2003-2004 over deflation worries will factor into his thinking about when to raise rates as the economy recovers from a painful recession.

"Looking back… some economists have made the case that we waited too long," he said. "I’m taking that on board … as we time our exit going forward."

In an interview with the Danville Register & Bee newspaper, Lacker said the housing market had picked up about five months ago and would no longer be a drag on economic growth.

Exports may be picking up and the rate of job loss is slowing, he told the paper. Lacker added that banks no longer appeared to be tightening credit and that credit conditions will ease as the job market rebounds.

"It’s a time of opportunity, even for people experiencing hard times because of the labor market," Lacker said. 

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HAZELWOOD — Seventy years ago this summer, James S. McDonnell opened his new company, McDonnell Aircraft Corp., at Lambert Field.

McDonnell wasn’t from here but his choice came down to St. Louis and Memphis, Tenn. McDonnell chose St. Louis and moved his family here from Baltimore. And the rest, one might say, is aviation history.

Top executives of the Boeing Co. on Thursday marked those first 70 years of Boeing and its predecessors — McDonnell Aircraft and McDonnell Douglas Corp. — in St. Louis. The celebration was attended by hundreds of employees, local political leaders and organized labor.

Boeing’s defense arm is the second-largest employer in the St. Louis region with about 16,000 workers.

While celebrants focused mostly on the local history of military aircraft and weapon manufacturing, elected officials made a familiar plea for continued funding of the C-17 Globemaster III transport plane and the F/A-18 Super Hornet. The two Boeing-built aircraft are threatened by a shift in Pentagon spending priorities.

Secretary Robert Gates proposed capping U.S. orders for the C-17 at the 205 already in use or in production and a scaled-down purchase of F/A-18s in next year’s budget.

But Congress provided funding for eight more C-17s in this year’s emergency war spending bill.

Last week, Sen. Christopher S. "Kit" Bond, R-Mo, co-authored a letter seeking funding for a dozen more of the Boeing-built transporters in next year’s defense appropriations bill.

"We’re fighting hard," said Bond. "I would hope we could get 15 C-17s. With a tight budget, that may be much. I would like to see a multiyear (purchase) for the F/A-18s. We can make it more efficient for Boeing … if we give them a plan for buying over several years. And that makes it cheaper for the taxpayers."

Bond added that there is a "minimum amount of high enthusiasm" for such a deal in the Pentagon.

Sen. Claire McCaskill, D-Mo., said she has heard military members speak in glowing terms about the capabilities of the F/A-18s and C-17s.

"Pound for pound, dollar for dollar, capability, reliability, you have built a tremendous fighter jet," McCaskill said of the Super Hornet.

George Roman, St. Louis regional executive of Boeing Integrated Defense Systems, and John Van Gels, St. Louis senior site executive, said the fate of federal spending on the aircraft will become clear this fall.

"It’s a long fight still," Roman said.

Boeing shares rose $4 to $51.82 a share on Thursday amid news that its long-delayed 787 Dreamliner passenger jet should be ready for its first flight by the end of this year.

"While there is no question that the execution of this program has had its challenges, … the 787 … remains on track to be a game changer for our airline customers," Boeing President and CEO Jim McNerney said in a conference call on Thursday.

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