Financial life in a big town

VIENNA–Oil prices slipped below $59 a barrel Wednesday as investors grappled with the prospect that global growth next year will slow more than originally feared, cutting demand for gasoline and other crude products.

Expectations that a snapshot of the U.S. inventories will also show reduced consumption of oil and derivatives also acted as a drag on the market.

Light, sweet crude for December delivery was down 58 cents to $58.75 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The contract overnight fell $3.08 to settle at $59.33, the lowest closing price since March 2007.

Oil prices have fallen about 60 percent in four months, plunging from a record $147.27 in mid-July.

"We have a pretty good idea that global growth is going to be pretty awful next year and probably not much better in 2010," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "There was clearly a bubble scenario in all commodities and that bubble has burst.''

Investors are pricing in slowing crude demand growth from China, whose economy, the world's fourth largest, was once thought to be a counterweight to weakening demand from the U.S. and Europe.

U.S. bank Morgan Stanley earlier this week cut its 2009 forecast for Chinese economic growth to 7.5 per cent from 8.2 per cent. The bank expects Asia outside of Japan to grow 5.5 per cent next year, the U.S. economy to shrink 1.3 per cent and Europe to contract 0.6 per cent.

"China is now seen as less of a backstop to falling demand in developed countries," Pervan said. "With definitive slowing in China, the market is even more sensitive to negative economic news out of the U.S. and Europe.''

The World Bank said Tuesday it expects developing countries to grow 4.5 per cent next year, down from its previous forecast of 6.4 per cent growth. Developed countries will likely contract 0.1 per cent in 2009, the Bank said.

Trader and analyst Stephen Schork noted that the reaction to Beijing's planned economic stimulus package earlier this week – and the subsequent oil price fluctuations – were symptomatic of the jittery state the market finds itself in short term cash loan.

"It is important to remember that price is a function of the crowd's emotional input to a given fundamental event." he said in a research note. "Thus, those traders who thought it was a good idea to pay $65 Sunday night were probably the same traders who had to sell (at) $59 yesterday afternoon.''

Investors have brushed off two recent production cuts by the Organization of Petroleum Exporting Countries, and prices have continued to fall amid talk of a third quota output reduction next month.

Qatar's prime minister, Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, said Tuesday that "fair" oil prices of between $70 to $90 per barrel would ensure that expensive oil exploration could continue and help to avert price spikes in the future.

"The market has become so demand focused that obvious support mechanisms, like OPEC cutting supply, don't have the same impact,'' said Pervan, who expects prices to fall to $45 a barrel during the first quarter of next year.

Investors will be watching for signs of slowing U.S. demand in the weekly oil inventories report to be released by the U.S. Energy Department's Energy Information Administration. The petroleum supply report was expected to show that oil stocks rose 1.1 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The Platts survey also showed that analysts projected gasoline inventories rose 850,000 million barrels and distillates increased 1 million barrels last week.

In other Nymex trading, heating oil futures slipped by nearly 3 cents to $1.90 a gallon, while gasoline lost more than a penny to fetch $1.29 a gallon. Natural gas for December delivery fell nearly 4 cents to $6.74 per 1,000 cubic feet.

In London, December Brent crude fell 42 cents to $55.29 a barrel on the ICE Futures exchange.

Source

Ford Motor reported a $3 billion quarterly operating loss on Friday and said it would reduce staff and capital spending in order to preserve its dwindling cash.

Ford said it would cut salaried employment costs by 10% - reducing compensation of its white collar workers by eliminating merit pay, bonuses and the company’s matching contributions to their retirement accounts.

But even with those savings, the company said it’s likely to lay off more salaried staffers. It also said hourly staff - mostly factory workers covered by union contracts - would be reduced by an additional 2,600 through a voluntary buyout package.

The company, which earlier this year sold brands such as Jaguar and Land Rover, said it would continue to look to sell assets.

Ford Chief Executive Alan Mulally warned that while the company is confident that it is taking the right steps to respond to the downturn, it does not see a quick turnaround in demand for autos in either North America or Europe.

"We believe the downturn in industry volume will be broader, deeper and longer than previously expected," he said during a conference call. Sales volume isn’t expected to improve until 2010, he said.

Ford’s loss came to $1.31 a share, excluding special items, far worse than the penny a share loss it reported on that basis a year earlier. Analysts surveyed by earnings tracker Thomson Reuters had forecast a loss of 93 cents a share.

The company had a one-time gain of $2.2 billion, related to the accounting of its retiree health care expenses. With that gain, it reported a net loss of $129 million, or 6 cents a share, an improvement from the $380 million, or 19 cents a share, it lost on that basis a year earlier.

While the company did not give any specific guidance on results going forward, Chief Financial Officer Lewis Booth said the current quarter could see a larger increase in losses than seen in the third quarter.

But the operating losses continued to burn through the company’s cash position, leaving with its auto operations with only $18.9 billion in cash on hand at the end of the quarter, down $6.3 billion from the start of the quarter.

Concern has been growing that the nation’s automakers could run out of cash as soon as next year due to rising losses and high borrowing costs faced by the companies. Ford had been considered to be in the best cash position of the three U.S.-based automakers.

Ford, which saw the volume of its U.S. vehicle sales plunge 25% in the quarter, reported that overall revenue tumbled by $9 billion in the quarter to $32.1 billion. High gasoline prices at the start of the quarter, followed by tight credit, increased job losses and record lows for consumer confidence late in the quarter combined to keep potential auto buyers on the sidelines.

The company disclosed that its fourth-quarter vehicle production would be cut by an additional 40,000 from previous plans. That will leave its quarterly production target at 430,000, down roughly a third from year-ago levels.

Ford said it will move ahead with product development plans for most vehicles, especially for smaller, more fuel efficient vehicles cash advance loans. But it plans to reduce spending on the development of large vehicles and will delay other unspecified vehicles "that will be deferred until industry volumes recover."

Ford also announced it would seek to raise additional cash by using equity-for-debt swaps. But the company’s stock has already lost about three-quarters of its value in the last 12 months. Automotive investor Kirk Kerkorian, who invested just over $1 billion in Ford shares earlier this year, has started selling that stake at a large loss and has said he may get out of the company’s stock altogether.

Ford (F, Fortune 500) is not the only automaker seeing trouble. Rival General Motors (GM, Fortune 500) is forecast to report a jump in losses in the quarter later in the day Friday. On Thursday, Japanese rival Toyota Motor (TM), which is poised to see its first annual decline in U.S. auto sales, slashed its earnings outlook for its current fiscal year.

The chief executives of GM, Ford and privately-held Chrysler LLC, as well as the president of the United Auto Workers union, met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Thursday to seek support for a wide-ranging bailout package for the industry. Both leaders voiced support for additional help for the sector following their meetings.

Mulally said he was encouraged by the discussions with members of Congress, but added that Ford isn’t counting on additional federal help because it can’t be sure of what will be approved. He also disclosed that Ford is also talking to governments in other countries where it has operations as well.

Ford would be willing to discuss granting stock or stock warrants to the U.S. government in return for getting help, Mulally said. No details of such an equity stake in the automaker had been discussed, he added.

Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers’ balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation’s banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.

The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.

Ford shares were up 1% in mid-morning trading Friday following the report. 

Source

Anheuser-Busch Cos. shareholders will meet on Nov. 12 to decide whether to approve InBev NV’s $52-billion takeover of the St. Louis-based brewer, Anheuser-Busch announced today.

The special shareholders meeting will take place noon at the Crowne Plaza Hotel Hotel & Exhibition Center Meadowlands in Secaucus, N.J.

Two weeks ago, Anheuser-Busch announced that it had set Oct. 3 to be the record date that establishes which shareholders can vote on the proposal. Investors must have owned A-B shares on Friday to be able to vote on the deal, which will create the world’s largest brewer (fast cash loan). If approved, shareholders will get $70 for each A-B share.

On Sept. 29, InBev shareholders approved the proposed acquisition as well as changing the new company’s name to Anheuser-Busch InBev. They also approved the appointment of Anheuser-Busch chief executive August Busch IV as a director in the new company.

Sourse

WASHINGTON–The New Deal it is not. The United States government’s biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by bad bets on the housing market.

Put simply, the hastily crafted plan lawmakers agreed to in principle yesterday is intended to revive jittery and fragile banks on Wall Street and Main Street with enough money – by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets – so that lending, the lifeblood of the U.S. economy, flows freely again.

If it is working, signs will emerge almost immediately in the interest rates on U.S. bonds and in an array of obscure – but crucial – financial benchmarks. Loans – particularly those made from one bank to another – would be more available and less expensive in a matter of weeks, if not days.

And as the government gobbles the banks’ toxic assets, the industry would gain the confidence and strength needed to make it easier and cheaper for families to borrow for homes, cars and college – and for firms to secure ample debt to pay for plants, gear and workers.

Still, rising unemployment, high energy prices and falling real estate values will not disappear overnight — and there is no guarantee a recession will be avoided. "At first, there will be some sort of sigh of relief, which I’m afraid would be misplaced, because when you get through the shorter-term terror, you’re left with an economic landscape that will be very fragile," said Michael Farr, president of Farr, Miller & Washington, which manages investment portfolios for people and businesses.

Were the clogged credit markets of the past year – and more crucially, the past few weeks – left to fester without a massive government intervention, the U.S. faced a financial calamity that could have plunged the economy into a deep recession, putting the livelihoods and investments of millions of ordinary Americans at risk, President George W. Bush and Federal Reserve chair Ben Bernanke warned.

Once the liquidity floodgates have been opened – the government will have as much as $700 billion (U.S.) at its disposal to buy banks’ bad mortgages and other rotten assets – the benefits of the bailout proposed by Treasury Secretary Henry Paulson and modified by Congress are expected to trickle down through the rest of the economy. But Americans should be braced to feel economic pain well into next year.

More people will lose their jobs, foreclosures will go up, paycheques will be strained and home values – people’s single biggest asset – will keep falling, experts predict.

Even if the plan is successful, many predict the economy will probably shrink in the final quarter of this year and in the first quarter of next year, meeting the classic definition of a recession faxless payday advance. The jobless rate – now at a five-year high of 6.1 per cent – is expected to hit 7 or 7.5 per cent by late 2009. That would be the highest jobless rate since after the 1990-91 recession.

So, how exactly will we know if the credit clog is breaking up?

Some of the banking industry’s first responses won’t be immediately visible to most Americans, but they are critical to the proper functioning of the financial system.

For instance, a drop in a crucial short-term lending rate called the London Interbank Offered Rate, or Libor, would be a telltale sign that banks are less anxious about extending credit to each other – and the rest of us.

Libor is the rate many banks pay for the short-term loans essential to their daily operations. It’s also the base rate for an enormous amount of commercial lending and many adjustable-rate mortgages.

Another sign of growing confidence in financial markets would be lower rates on "commercial paper," a crucial short-term borrowing mechanism that many companies rely on for financing day-to-day operations, including payrolls and other expenses.

Economists said a properly designed bailout should also cause interest rates on Treasury securities to rise relatively quickly.

If that happens, it would signal that investors – who have been flocking to Treasurys because of their perceived safety relative to other investments – are more willing to bet on riskier types of debt and securities.

"The recovery process is going to come in stages, not in one fell swoop," said Terry Connelly, dean of Golden Gate University’s Ageno School of Business.

"The credit markets had a stroke. We are in intensive care now. We will have to learn how to walk and talk again.”

Assuming these more obscure corners of the financial markets are on solid footing again, consumers should eventually begin to have an easier time taking out loans for homes, cars, furniture and college.

Over time, a healthier financial system should help the value of the dollar rise versus other currencies, reflecting renewed confidence in the U.S. economy and blunting inflationary pressures that have made Americans feel less wealthy.

But it is only after a wide range of industries feel confident that the economic and financial conditions have fully recovered that they will start to ramp up hiring, perhaps by 2010. House prices should stop falling in the summer of 2009 and may start rising in 2010, economists said.

Source

For some who toil in the murky world of financial derivatives, Satyajit Das is nothing more than a turncoat.

A former industry whiz, the Australian author and risk consultant could be considered the financial world’s Dr. Frankenstein.

After making a handsome sum engineering exotic credit derivatives during his 25-year career, Das has spent the better part of the past decade preaching on their dangers.

Those convoluted debt instruments, particularly toxic credit default swaps, helped trigger the demise some of America’s most storied financial institutions.

With the financial crisis tightening its chokehold on global banks, Das’ forewarnings – outlined in his 2006 book Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – are looking rather timely. Still, some in the industry initially scoffed at his warnings.

"They thought that I had somehow found religion in my old age," Das said in an interview at a downtown hotel. "There were two views. I was a crackpot now … The second was a deep sense of betrayal. Some people felt deeply betrayed. How could one of their own do this?"

Now the industry is paying for his advice. Toronto’s investment community is no exception. Working as a consultant for Jory Capital Inc., Das is bending the ears of all who will listen. "I haven’t had much sleep in 10 days. I’ve been trying to work out for several people what exactly is their exposure," he said.

Much more work lies ahead. Das estimates there is US$600 trillion of derivatives outstanding in the world. It is a whopping sum that reflects the total amount of leverage in the global financial system.

At its core, derivatives are about taking a bunch of risk, cutting up in smaller chunks and selling it off to investors. The idea is to spread the risks through the system.

The problem is that the theory was never tested – until now. "Financial markets are only sophisticated in upswings. In down swings, we get down to really basic things of human fear and fear of loss," Das said.

Global banks have already absorbed more than $500 billion in losses related to the collapse of America’s subprime residential real-estate market, the original catalyst for last week’s historic shake-up on Wall Street. With the International Monetary Fund predicting the final tally could top $1 trillion, the American government has announced its own $700 billion bailout to shore up confidence in the industry.

Das, however, questions the long-term consequences of that move. The clean-up could take years and have profound consequences for the economy.

"The U.S. government has now put its balance sheet at risk, which now means it is at the mercy of foreign creditors," Das said. "… They have $9.5 trillion in debt quick payday loan. Roughly about a third of that is owned by foreigners."

Average Canadians may feel removed from the crisis, but Das warns they are not immune. As Canadian banks deal with ongoing financial fallout, consumers can expect to pick up at least some of that tab.

Domestic banks have an estimated $823 billion of "notional exposure" to the world’s troubled credit default swap market. The notional amount is the face value of the assets underlying the derivatives. Actual losses would likely be smaller, unless their entire value went toward zero.

At the same time, banks around the world are grappling with higher funding costs as they try to shrink the amount of debt on their balance sheets. Banks have been tightening their lending standards for the past year, making cheap credit a thing of the past.

John Aiken, a financial services analyst with Dundee Capital Markets, reiterated some of those concerns yesterday in a note to clients.

"Although the U.S. government may have avoided the complete failure of the financial system, we believe that we are far from out of the woods," Aiken said. " Liquidity will still be hard to come by – although inter-bank lending spreads eased on the announcement, we believe that distrust will remain amongst various lending institutions, creating higher funding costs and lower levels of credit available to be lent out and ease the pressure on the U.S. economy."

Das’ advice to consumers? Brace for even higher fees in the months ahead: "They are going to put up fees. They are going to make your loans more expensive. Ask anybody who has a line of a credit with the bank to go and try to draw it down. It will be cause for some interesting reactions."

Adrian Mastracci, a portfolio manager at KCM Wealth Management Inc., has suggested that Canadian banks could even begin clamping down on unsecured lines of credit to help deal with those higher funding costs.

Meanwhile, that "curtailment of credit" has yet to make its way into the real economy, Das said. Ontario, already hard hit by a slump in the manufacturing sector, could face more tumult in its financial services sector at a time when the provincial government is banking on that key industry to help prop up the economy. The fortunes of Western Canada, meanwhile, will be pinched by the slowing Asian demand for energy exports.

For his part, Das makes no apologies for his role in helping to create complex credit derivatives, suggesting that hindsight is always twenty-twenty. He also believes he has taken more than his fair share of flack for the current crisis. Said Das: "Somebody actually blames me for all of this. I said, `I didn’t invent everything.’"

Source

NEW YORK — Investment bank Morgan Stanley said Monday it signed a letter of intent to sell up to 20 percent of the company to Mitsubishi UFJ Financial Group Inc.

Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley’s book value after Japan’s largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding.

The framework for a deal comes just hours after Morgan Stanley, one of Wall Street’s biggest investment banks, received regulatory approval from the Federal Reserve to become a bank holding company — making it a commercial bank and allowing it to receive deposits. Morgan Stanley will also now be regulated by the Fed instead of the Securities and Exchange Commission.

The partnership would allow both banks to expand their global footprint and help Morgan Stanley transition to a commercial bank, John Mack, Morgan Stanley’s chairman and chief executive, said in a statement. The deal also provides further financial support to help Morgan Stanley shore up its capital base during the ongoing credit crisis fast payday loan no faxing.
Over the past week, as fellow investment banks Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp., reports centered on Morgan Stanley selling itself to Wachovia Corp. or another commercial bank.

The changes come as investors were worried that Morgan Stanley, like Lehman and Merrill, would face liquidity problems and need to find a new parent with access to deposits and steady funding, or face failure. The change in regulatory status and sale of a portion of the company could provide Morgan Stanley with the capital needed to avoid a similar fate.

Mitsubishi, which has $1.1 trillion in deposits, will be able to add one member to Morgan Stanley’s board of directors.

Shares of Morgan Stanley rose $2.79, or 10.3 percent, to $30 in morning trading. Shares have traded between $11.70 and $69.23 during the past year.

Source

Mining stocks took another beating today over concerns about falling demand combined with the financial woes on Wall Street, but the industry remained confident thoat a "long-term commodity bull market" will soon reassert itself.

"I think we can conclude that when everything goes up for sale, then nobody's immune to a market selloff, but the demand for commodities is still extremely robust," said Bradford Cooke, chairman and CEO of Vancouver-based Endeavour Silver Corp. (TSX: EDR).

"We're still firmly in a long-term commodity bull market, and the selloff of the commodities in general and the mining shares in particular is overdone," he added.

The diversified metals index on the Toronto Stock Exchange was down more than five per cent in trading today, after a retreat of more than seven per cent Monday.

Prices for commodities fell over investor concern that the financial crisis in the United States will spark a deep recession in that country and spill over to weaken European, Indian and Chinese economies.

India and China have been growing rapidly in recent years and have been at the heart of soaring demand for everything from oil, steel and coal to nickel, grain, chemicals and other commodities.

As well, traders worry that global market liquidation prompted by the ongoing financial crisis on Wall Street, is also prompting the selloff since many financial companies invested in soaring commodities contracts to cash in on rising prices.

Wall Street was rocked Monday by announcements that Lehman Brothers Holdings Inc., the fourth-largest investment bank in the U.S., had filed for bankruptcy protection.

Further jitters were caused by the US$50-billion takeover of struggling Merril Lynch by Bank of America and news that insurer American International Group Inc. could need billions of dollars to strengthen its balance sheet.

But investors tend to see commodities – particularly precious metals like gold and silver – as a safe bet in times of financial crisis, said Cooke.

"Gold and silver in particular having a historic role as hedges against financial crisis and monetary inflation, they lose that role only temporarily in a market selloff and they certainly should resume that role once the peak selloff is past," he said.

Haytham Hodaly, an analyst with Salman Partners Inc., added that the financial crisis will likely result in a weaker U.S free credit report.com. dollar, which will push investors to the "safe haven" of precious metals.

"I think what's going to happen is the issues that we're seeing in the United States will end up resulting in a weaker U.S. dollar, at least in the near term, which will shed some positive light on owning precious metals, particularly gold and silver as basically a safe haven in this time of economic turmoil," said Hodaly.

Monday's gold and silver prices seemed to confirm this. Gold for December delivery rose $22.50 to settle at $787 an ounce on the New York Mercantile Exchange, after earlier rising as high as $791.40, while December silver rose 34 cents to settle at $11.135 an ounce.

Commodity prices "took off" when the U.S. credit crisis began a year ago, but equities didn't follow, said Cooke.

"I've never seen commodity prices move so high so fast in my life … but the equities did not confirm that upward move," he said.

"So the equities, which never joined the commodity price party, have been nailed on the downside."

But Cooke said he's confident that "the bottom is near" and commodity stocks will respond favourably when it hits.

"I feel that if you look at both the fundamentals and the technical charts on these things, this selloff is way overdone. Gold and silver in particular do have a traditional role to play and they're going to resume it, soon," he said.

"It's not a time to panic, it's a time to reflect."

13:31ET 16-09-08

Source

At first glance, the losses on Wall Street look to be a bottomless pit. As the financial crisis enters its second year, there appears no end in sight, with total losses on soured investments now estimated by the International Monetary Fund at $1 trillion (U.S.), about the same as the tab for U.S. military operations in Iraq and Afghanistan.

Some good will come of the maelstrom that hit Wall Street over the weekend like a Category 5 hurricane. But for now, the Street’s denizens are numbed by how their world has abruptly changed. A crippled Merrill Lynch & Co., which pioneered Main Street investing, has been rushed into the arms of Bank of America Corp.

The venerable Lehman Brothers Holdings Inc., America’s fourth-largest brokerage, has filed for Chapter 11 bankruptcy protection. New York-based American International Group, among the world’s biggest insurers, has secured a $20 billion lifeline. Washington Mutual Inc., America’s largest thrift, or savings and loan, is hanging by a thread.

The current disaster is without precedent in the modern history of the markets. Previous crises such as the 1980s insolvency of brokerage Drexel Burnham Lambert and the 1998 rescue of Long-Term Capital Management were isolated events. Today’s damage is so widespread that the stock market value of the U.S.’s largest banks and brokerages – even the ones that appear most sound – has plummeted as much as 80 per cent.

It isn’t so much fear that grips the denizens of Lower Manhattan today as self-doubt and mourning. The masters of the universe, as Tom Wolfe called them, believed themselves to be geniuses as they promoted and profited enormously from the record U.S. housing boom of the mid-decade. These financial engineers are now clueless about how many subprime, effectively junk mortgages, are on their balance sheets.

The bonus-fuelled exuberance of these stewards of the financial system has culminated in their exposure as incompetents – and they know it absolutely free credit report. If it keeps up like this much longer the grief counsellors will have to be called in. Wall Street firms already have shed some 85,000 employees, even before the weekend’s traumatic events. And with this hollowing out of the Street’s greatest institutions, New York is in danger of losing its status as the world’s financial capital to London, which already leads Gotham by several measures.

All this, of course, after Washington’s $200 billion bailout just last weekend of the gigantic mortgage lenders Fannie Mae and Freddie Mac and the Feds’ forced merger earlier this year of brokerage Bear Stearns Cos. into J.P. Morgan Chase Co. with a guarantee that Uncle Sam will backstop $29 billion worth of Bear’s irrevocably lost "assets."

But here’s the real, hopeful story.

There were no bank runs by retail or institutional clients. A consortium of global banks has pledged $70 billion to a bailout fund for banks in trouble.

And, most important, with Lehman the Feds drew a line in the sand by letting it fail, signalling that from here out the survivors who authored this crisis will have to find their own way out of it or, like Lehman and its wiped-out shareholders, pay the ultimate price for failure.

Flushing the system of dubious assets and failed managers and practices that have caused the biggest U.S. financial crisis since the Great Depression is a necessary curative. The end-game will see the emergence of fewer but stronger financial players, more scrupulously monitored by regulators. That’s why capitalism, as Americans conduct it, is called "creative destruction."

Source

50

Percentage of teens who expressed an interest in learning more about managing money

14

Percentage of teens who have taken a personal finance class in school

69

Percentage who say what they know about managing money they learned from their parents

36

Percentage who did not have this discussion last year

Source: Capital One Financial Corp.

Source

NEW YORK — Many large companies, especially those in the financial services, utilities and telecommunications industries, have cut their technology budgets this year because of the economic slowdown.

In a report that was due to be released today, Forrester Research Inc. found that 43 percent of large U.S. and European businesses it surveyed have cut their overall spending on technology products and services in 2008.

Some companies, meanwhile, have put discretionary spending on hold and others are planning to negotiate lower rates for information-technology services.

The research firm did not change its annual technology spending forecast, but it is reviewing it.

In its most recent forecast, in February, Forrester had said it expects tech spending to grow 2.8 percent this year. That marked a significant downward revision from a December 2007 forecast of 4.6 percent growth.

Today’s report, said Forrester vice president and principal analyst John McCarthy, is "really just a snapshot" of companies’ spending sentiments.

In general, corporate technology buyers were less optimistic than they were in the last such survey, in October 2007, just before the credit market tightened and the housing market "really fell apart," McCarthy said.

Forrester’s survey found that the effects of the economic downturn varied by geography and by sector. U.S. companies were more likely to cut their budgets than those in Europe, for example. And while companies in finance, utilities and telecom are tightening their belts considerably, those in media and entertainment are spending more paydayloans. McCarthy noted that such companies are going through a "fundamental upheaval" that requires they spend on technology regardless of how the economy is doing.

In the survey, taken in late May and early June of nearly 950 IT managers at companies in North America and Europe, nearly half of the U.S. respondents said they have already cut their IT spending budgets, compared with 38 percent of those in Canada and 28 percent of companies in Germany. And 70 percent of respondents said they expect to negotiate lower rates with IT service suppliers.

"Clearly, we are entering a period of very judicious IT spending," McCarthy said. But, he added, this isn’t the "outright slash and burn" of technology budgets seen in 2002.

Last time around, the fallout was from the bust in the tech sector itself, while this time it’s the financial, real estate and auto industries that are leading the downturn.

"We see continued growth in service spending overall," McCarthy said.

In August, research firm Gartner Inc. said it expects worldwide IT spending to exceed $3.4 trillion in 2008, an 8 percent increase from 2007.

But much of this growth, analysts said, was based on the decline of the U.S. dollar. Otherwise, Gartner forecast IT spending to grow about 4.5 percent.

Source