Financial thoughts

A little more than a year after the Phoenix Business Journal reported that DeVry University was looking to open a campus in the West Valley, the school has chosen a spot in Glendale’s Westgate City Center.

DeVry will begin offering classes in July in about 18,000 square feet at 6751 N. Sunset Blvd., Glendale. This will be DeVry’s 95th location in 26 states and Canada, and its fourth in Arizona.

Plans call for offering undergraduate degree programs through its colleges of Business & Management and Engineering & Information Sciences.

DeVry’s Keller Graduate School of Management also will offer a number of master’s degree programs in business and technology in Glendale.

DeVry is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools.

Jeff Blake, who served most recently as dean of Keller’s Phoenix campus and dean of graduate studies for the Phoenix metropolitan area, has been named dean of the Glendale campus. Before joining DeVry in January 2003, he was director of organizational development for Schwab University in Phoenix.

For more: www.devry.edu.

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American taxpayers, if you believe in stereotypes, are scurrying around this time of year, rummaging shoeboxes for receipts and other paperwork to support itemized tax-deduction claims.

In reality, most taxpayers, including me, don’t bother itemizing deductions, which must be reported on a tax form called "Schedule A" and require proof in case of an audit. We don’t bother because the basic standard deduction, which is free for the taking, is higher than all the itemized deductions most of us can legitimately claim. The basic standard deduction requires no documentation and is entered on the main 1040 tax form.

For 2009 returns, thanks to what Congress enacted as temporary measures, the standard deduction will be even higher for many Americans who meet qualifications. The higher the standard deduction is, the lower the taxable income and tax bill are.

The downside is increased complexity, including a new tax form to fill out called Schedule L.

"The standard deduction isn’t so standard anymore," said Mark Luscombe, principal federal tax analyst for tax publisher CCH, a Wolters Kluwer business. "For some people, filling out this schedule will probably entail as much figuring as taking a few itemized deductions on Schedule A."

For a little bit of work, though, the tax savings can be significant.

For the 2009 tax year, the basic standard deduction is $5,700 for singles and $11,400 for joint filers. Blind people and those 65 years old or older as of Jan. 1, 2010, can claim an additional $1,100 standard deduction for 2009. (Therefore, a couple filing jointly, both 65 or older and blind, would take an additional $4,400 deduction). Higher deductions for seniors and the blind have been part of the tax code for years and are not likely to be discontinued, Luscombe said.

In addition, in what are supposed to be temporary measures to boost housing and the economy:

— Non-itemizers can claim an additional standard deduction for state and local property taxes paid in 2009, up to $500 for single taxpayers and $1,000 for joint filers.

This extra deduction, first available for 2008 returns and later extended for 2009, was part of a legislative package aimed at boosting a sagging real estate market. "Much of the package rewarded people for buying homes," Luscombe said, and the extra deduction benefits people who have no mortgage (like me) or don’t pay enough interest on it to be able to itemize. The deduction expired at the end of 2009 but is likely to be extended to 2010, Luscombe believes.

— Another provision effective since 2008 allows taxpayers who have experienced casualty losses in areas the U.S. president has declared disaster areas to take those losses as an additional standard deduction.

"This is especially valuable to people who may experience a few thousand dollars in losses that they can ill afford, but whose losses are not large enough" to itemize (because the basic standard deduction would be larger), Luscombe said.

This deduction is not available to taxpayers in the Midwest Disaster Area of 2008, for whom different rules apply.

— Subject to income limits, non-itemizers who bought a new car in 2009 on or after Feb. 17 can add to their standard deduction the state and local sales and excise taxes they paid for the vehicle. Eligibility for this tax break phases out for single filers with modified adjusted gross income between $125,000 and $135,000 (joint filers, $250,000 to $260,000), and the deduction is limited to taxes paid on up to $49,500 of the purchase price.

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Driven by growth in insurance services, outpatient medical care and physician services, operating income rose 13 percent or $130 million for the University of Pittsburgh Medical Center for the six-month period ending December 31, the hospital network announced on Friday.

During the same period, operating revenue rose $216 million to $4.062 billion for a 5.6 percent increase, while the operating margin for the health insurance and medical giant improved to 3.2 percent from 3 percent.

The system’s earnings before interest, depreciation and amortization were $326 million for the first half of the fiscal year, up from $292 million for the same period a year ago and on target to exceed $600 million for fiscal 2010.

The results were released during a difficult period for health care providers and as UPMC’s cost of providing free care and contributions to the community rise, said CFO Robert DeMichiei. UPMC’s cost of charity care rose 16 percent to $518 million from 2007 to 2008, the most recent period data were available.

Key metrics for the six-month period include insurance services, up 8 percent to more than 1.4 million members; outpatient revenue, up 5 percent; and physician services, up 11 percent. During the same period, UPMC’s $3 billion investment portfolio gained $228 million, for a return of 11.8 percent, said Treasurer C. Talbot Heppenstall. UPMC reported a loss of $786 million for the same period a year ago.

Separately, UPMC’s pending $1.175 billion bond refinancing will be used to substitute fixed for variable rate debt and lower interest costs, Heppenstall said. Allegheny County Councilman Charles McCullough has been in court seeking to stop the refinancing because of UPMC’s decision to close Braddock Hospital Jan. 31, but Heppenstall predicted the litigation would not be a factor.

The biggest challenges may be ahead for UPMC and other hospitals, according to Moody’s Investors Service.

In a report released last month, Moody’s maintained its negative outlook for the nonprofit health care industry overall. The outlook was revised to negative from stable in Nov. 2008 based on credit market problems.

“Over the next 12 to 18 months, we believe the relative abilities of different not-for-profit hospital management and governance teams will become more apparent as they face one of the toughest environments in decades,” the report stated.

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Starting Thursday, investors will be able to bet on famed investor Warren Buffett’s company without breaking the bank.

Shareholders of Buffett’s Berkshire Hathaway (BRKA, Fortune 500) met Wednesday to approve a stock split covering one class of Berkshire shares. Effective Thursday morning, the split will cut the price of these shares to around $66 each, from a recent $3,300.

The move, which was approved last year by Berkshire’s board, could attract some new investors by eliminating the sticker shock long associated with Berkshire shares.

It could also, some observers have suggested, pave the way for Berkshire to join the S&P 500 since it would increase the amount of shares outstanding. The people in charge of maintaining the S&P 500 have typically been wary of adding stocks with low levels of liquidity.

Berkshire has two classes of stock: Class A shares that recently traded for around $101,700 each, and the Class B (BRKB) shares that are to be split 50-for-1. The Class A shares won’t be affected by Wednesday’s vote.

Berkshire asked shareholders to approve the split so it could offer Berkshire shares to all investors in Burlington Northern (BNI, Fortune 500), the railway company Berkshire agreed in November to acquire in a deal valued at $34 billion in cash and stock. The deal is scheduled to close early this year.

Splitting the Class B shares will make it cheaper for investors to take Buffett’s side in the Burlington bet, which he called an "all-in wager on the economic future of the United States."

The split would mark the second time in the company’s 45 years under Buffett that it has made some of its shares more affordable.

In 1996, Berkshire sold the cheaper Class B shares to the public for the first time fast cash. The company said it made the move in response to the plans of some investment companies to sell products that would let investors invest in Berkshire without paying the full price of a Class A share, then around $35,000.

At the time, the value of the Class B shares was fixed at 1/30th of a Class A share. That will change to 1/1,500th with Wednesday’s vote. Class B shares also carry reduced voting rights and can’t be converted into Class A shares.

Buffett warned in his 1996 letter to shareholders that the proposed "Berkshire look-alikes" from other investment firms would have tried to "entice naive small investors and would have charged these innocents high fees and commissions."

Buffett said that the 1996 offering, which raised $565 million for Berkshire, was "generally successful" in drawing in shareholders who would hold the stock for the long term. He said it added about 40,000 shareholders to Berkshire’s rolls.

Trading in the Class B shares was light initially, with daily volume rarely rising above a few thousand shares through 1997 — a fraction of the trading in the more expensive Class A shares.

But as Berkshire began using the Class B shares for acquisitions in the late 1990s, trading picked up. Average daily trading volume in the Class B stock has exceeded a million shares in every month since December 2005. Trading in the pricier Class A shares, by contrast, has only rarely exceeded 300,000 shares. 

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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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Social gaming leader Zynga Inc. has taken $180 million in capital from various investors, with the largest portion coming from the Russian firm Digital Sky Technologies, which this year also made a $300 million investment in Facebook Inc.

Others in the round included new investors Andreessen Horowitz and Tiger Global and existing investor Institutional Ventures Partners. Previous investors include Kleiner Perkins Caulfield & Byers, Union Square Ventures, Foundry Group and Avalon Ventures.

A portion of the new capital will be used to fuel Zynga’s growth and the rest will provide liquidity for employees and investors, Zynga said in a press release saving account payday loan.

Founded in 2007, San Francisco-based Zynga has grown at a spectacular rate with games including FarmVille, Café World, Zynga Poker, Mafia Wars, YoVille, FishVille and the new PetVille, currently the fastest growing social game online.

Zynga’s games are available on social networks such as Facebook, MySpace, Bebo, Friendster and Tagged, as well as on Yahoo and the iPhone.

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Greek Finance Minister George Papaconstantinou promised to speed up fiscal and budget reforms to overhaul the economy, saying the country has no time to spare after investor concerns sent bonds and stocks tumbling.

“The biggest gamble the government has is how to regain credibility,” Papaconstantinou said in a speech in Athens today. “The initiatives will be faster and more dynamic. We don’t have the luxury to wait. We will speed up everything, we owe it to the citizens of Greece.”

Greek bonds plunged to their lowest in seven months on Dec. 9 and stocks slumped after Fitch Ratings cut Greece one step to BBB+, saying Prime Minister George Papandreou’s two-month-old Pasok government isn’t doing enough to tame a deficit of 12.7 percent of output, the highest in the European Union. A day earlier, Standard & Poor’s put its A- rating on watch for downgrade.

European Central Bank Vice President Lucas Papademos today characterized Greece’s fiscal situation as “extremely serious,” in comments to reporters in Berlin.

“Greece should take decisive action and in a timely manner,” Papademos said.

Papaconstantinou said the government will begin talks next week on crafting a new tax system that will be fairer and more effective. An audit of government spending will begin next year with the assistance of international companies, he said Online payday loans.

Debt

The year will close with 300 billion euros ($438.5 billion) in debt and “we must stop the rising dynamic of it,” Papaconstantinou said. The stability plan the government will submit in January needs to include a plan for the “gradual reduction” of Greece’s debt, he said.

Nobel laureate Robert Mundell said in an interview with Bloomberg Television in Berlin today that a debt default by Greeece “would send shockwaves through the system.” He predicted the country would “handle the problem by itself,” although neighboring economies may eventually provide resources.

“This is a good occasion to set up a fund which is available for bailout, a kind of security fund,” he said. “Even if it won’t be used, there might be other occasions to come up at some point in the future.”

ECB President Jean-Claude Trichet said yesterday that “courageous” action is needed to close the budget gap. Greece’s 2010 budget projects the deficit will be reduced to 9.1 percent of gross domestic product.

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The United Arab Emirates’ central bank set up a facility on Sunday to support liquidity in the banking system Dubai’s government sought to delay debt payments from two of its flagship firms, sending global markets lower.

Dubai rocked the financial world on November 25 when it said it would ask creditors of Dubai World DBWLD.UL, the conglomerate behind its rapid expansion, and Nakheel NAKHD.UL, builder of its palm-shaped islands, to agree to a standstill on billions of dollars of debt as a first step to restructuring. “(The) central bank has issued a notice to UAE banks and branches of foreign banks operating in the UAE, making available to them a special additional liquidity facility linked to their current accounts at the central bank, at the rate of 50 basis points above the 3 months EIBOR (Emirates interbank offered rate),” it said in a statement.

The bank did not give more details, only saying that it stood behind UAE banks and branches of foreign banks operating in the UAE, adding the Gulf Arab country’s banking system was more sound and liquid than a year ago.

“It is important because the main concern is that there might be some panic behavior by depositors in Dubai and by bankers who want to take deposits out of the banking system,” said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.

“This will support the liquidity and the overall soundness of the banking system in the UAE and especially in Dubai. The central bank is sending a strong message to everyone that they are providing ample liquidity and the guarantee to banks in the UAE,” he said.

State-run Dubai World had $59 billion of liabilities as of August, a large proportion of Dubai’s total debt of $80 billion and repayment of Nakheel’s $3.5 billion worth of Islamic bonds, which were originally due to mature on December 14, was widely expected by the market to be met.

Last year, the UAE finance ministry poured $6.8 billion into bank deposits, the first tranche of a $19.1 billion rescue facility it set up to help lenders weather the onslaught of the global credit crisis.

It deposited another $6.8 billion into banks in November 2008, but has not made any statements since regarding the remainder of those funds. This came after the central bank set up a $13.6 billion emergency bank lending facility to combat the crisis.

(Reporting by Martin Dokoupil and Raissa Kasolowsky; editing by John Irish)

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OTTAWA – After hunkering down throughout most of the recession, Canadian businesses began lining up with consumers at the bankruptcy office in September, according to government data released Friday.

The Office of the Superintendent of Bankruptcy reported that 489 businesses had filed for insolvency during the month, a 31.6 per cent increase from August.

The increase from September 2008 was only 1.6 per cent, but Scotiabank economist Derek Holt said the jump between August and September of this year was worrying.

"What concerns me is that it cut across so many different sectors of the economy,“ Holt said.

"Part of it was the elevated Canadian dollar and what it’s doing to export competitiveness, but the other part is just the catch-up from weak domestic fundamentals."

The export-oriented manufacturing sector saw a 71-per-cent increase in bankruptcies from August, but retail business insolvencies were up 69 per cent, and insolvencies in the high-tech sector increased 119 per cent.

Still, Holt said Canadian businesses did better than households.

The September story for consumers built on a weakening trend that began with the recession last fall, with personal bankruptcies spiking to 15,465 in September, an increase of 45.5 per cent from last year.

On a monthly basis, household bankruptcies and proposals for settlement with lenders were 28.4-per-cent higher than in August.

The bankruptcy office suggested seasonal variations may have accounted for a portion of the increase, noting there were more insolvencies in September than in August in seven of the last 10 years.

Regionally, consumer bankruptcies rose highest in the western provinces, although Ontario and Quebec were not far behind.

While bankruptcies are considered a lagging indicator that reflects weak labour markets, the continued hard times by Canadian households bodes ill for retailers during the holiday shopping season.

As well, the bankruptcy numbers also provide more evidence that the economy is not rebounding strongly from the recession.

Bank of Canada governor Mark Carney warned Thursday night after a speech in New York that he now expects the quarter – the July-September period – to fall short of his forecast of a two-per-cent bounce.

"Recent indicators suggest somewhat softer growth relative to that two-per-cent projection but the expectation is that the overall profile of the growth in that projection – so accelerating growth in the fourth quarter and into 2010 for Canada – remains valid," he told reporters.

Some economists have warned that the third quarter could be negative, meaning that the recession hadn’t ended as of September. Although most agree with Carney that last three months of 2009 will see improvement.

BMO economist Robert Kavcic said while the odds favour positive growth in the third quarter, it will be weak at less than one per cent.

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Microsoft Corp co-founder Paul Allen has been diagnosed with non-Hodgkin’s lymphoma and has begun treatment, a spokesman for his investment company said on Monday.

Employees of Vulcan Inc, which Allen formed in 1986 to manage his business dealings and philanthropic activity, were informed of Allen’s illness in a company e-mail on Monday.

“He’s feeling pretty good, he’s remaining very active at Vulcan and his other holdings and interests and he has no plans to cut back on any of that,” said Vulcan spokesman David Postman.

Postman said Allen’s diagnosis was recent and that treatment has already begun.

Allen, the 32nd richest person in the world according to Forbes magazine, co-founded Microsoft in 1975 with Bill Gates and resigned as an executive in 1983. He was diagnosed with Hodgkin’s disease in 1983 but his cancer was successfully treated.

Non-Hodgkin’s lymphoma is a type of cancer that originates in the lymphatic system, which is the body’s disease-fighting network no credit check payday loans. It is a far more common disease than the related but distinct Hodgkin’s.

In 2009 there were nearly 66,000 new cases of non-Hodgkin’s lymphoma and 19,500 deaths, according to the National Cancer Institute.

Through Vulcan, Allen has been a high-profile investor in his home town of Seattle.

He owns the Seattle Seahawks American football team and is a minority owner of the Seattle Sounders soccer team. He created the Experience Music Project pop museum in the city and is leading the development of a run-down area near Seattle’s Lake Union into a center for biotech research.

Allen is also chairman of cable company Charter Communications Inc.

(Reporting by Gabriel Madway and Bill Rigby; Editing Bernard Orr)

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