Financial life in a big town

Facing firm demands from the European Union and financial markets to cut its deficit, Greece announced cost-cutting measures Wednesday that will save the debt-challenged country €4.8 billion, $6.53 billion, this year.

The Greek government plans to cut civil service workers’ entitlements by 12%. This includes a 30% decrease in holiday bonus payments, according to The Wall Street Journal’s online edition. Officials also said civil service pensions will be frozen for the year.

To increase revenue, the Greek government said it will raise the value-added tax to 21% from 19% on items including clothing and footwear. Sales tax on food and medicine will rise to 10% from 9% and the tax rate on printed products will increase to 5% from 4.5%.

The country will boost the tax on alcohol by 20% and raise the tax on tobacco to 65% from 63%. Taxes on gasoline prices will be hiked by €0.08 per liter.

Officials expect the measures will reduce Greece’s budget deficit to 8 free credit report.7% of the country’s gross domestic product this year from a level of 12.7% last year, according to the report. The European Union had given Greece until March 16 to show it is making progress in cutting its deficit from more than four times the allowed level.

Umbrella union for civil servants ADEDY is already speaking out against the measures and has called for a 24-hour general strike on March 16, said the Journal.

In a speech to parliament Tuesday, Greek prime minister George Papandreou said the country risks bankruptcy if it neglects to find lenders to cover its €300 billion, $409 billion, in debt, the Journal said.

Greece is preparing to raise between €3 billion and €5 billion, $4.1 billion and $6.8 billion, in a 10-year bond sale.  

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The Reserve Bank of India told lenders to set aside more deposits as reserves than economists predicted after raising its growth and inflation forecasts. Stocks and bonds fell.

Governor Duvvuri Subbarao increased the cash reserve ratio to 5.75 percent from 5 percent, exceeding the median forecast for a half-point move in a Bloomberg News survey, an RBI statement showed in Mumbai today. The bank kept benchmark interest rates unchanged.

The decision is India’s biggest step yet toward raising borrowing costs as inflation and asset-bubble concerns reverberate across Asia. China, Malaysia and the Philippines moved closer toward raising rates this month and Australia and Vietnam have already done so, spurring a sell-off in stocks and bolstering the outlook for currency gains in the region.

“The policy is indicating a sequential step towards monetary tightening in India,” said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai. “The bank may raise policy rates before the next scheduled meeting,” on April 20.

India’s benchmark stock index extended its drop, bond yields rose and the rupee weakened after the report. The Sensitive stock index fell 1.2 percent to 16,105.75, while the yield on 10-year government bonds increased to 7.59 percent from 7.55 percent at 11:20 p.m. in Mumbai. The rupee weakened to 46.39 against the dollar from 46.36 before the report.

Gaining Momentum

Governor Duvvuri Subbarao said India’s economic growth could “gain momentum” over the next year and “reinforce” inflationary pressures. The central bank raised its inflation forecast to 8.5 percent by March 31 from 6.5 percent.

“The message being sent across is that stern steps will be taken going forward to contain inflation,” said Killol Pandya, who oversees the equivalent of $152 million in Indian debt at Shinsei Asset Management India Pvt. in Mumbai. “There are indications the economy is turning around.”

In China, the central bank ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after loan growth surged.

Malaysia kept borrowing costs unchanged on Jan. 26, while warning that rates cannot be kept “too low” for too long because of the need to prevent a build-up of “financial imbalances.” The Philippines increased its so-called rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank, as it began unwinding stimulus measures.

Equities Retreat

Equities have retreated on concern that the withdrawal of stimulus measures will slow a rebound in corporate earnings. The MSCI Asia Pacific index has lost 7.3 percent in the past two weeks.

Analysts anticipate currency gains as strengthening economies force central banks to act. The rupee may gain almost 8 percent by year-end to 43 per dollar, according to the median forecast in Bloomberg survey. China’s yuan and Malaysia’s ringgit are estimated to advance 3.7 percent.

The Reserve Bank estimates India’s $1.2 trillion economy, Asia’s third largest, will expand 7.5 percent in the year ending March 31, more than its October forecast of 6 percent “with an upward bias,” Subbarao said in the statement today.

The bank left its benchmark reverse repurchase rate unchanged at 3.25 percent and the repurchase rate at 4.75 percent, today’s statement said. The increase in cash reserves will drain 360 billion rupees ($7.8 billion) from the banking system in two stages, on Feb. 13 and Feb. 27.

Exacerbate Inflation

“As growth accelerates and the output gap closes, excess liquidity, if allowed to persist, may exacerbate inflation expectations,” Subbarao said in the statement. “Though the inflationary pressures stem predominantly from the supply side, the consolidating recovery increases the risks of these spilling over into a wider inflationary process.”

India’s benchmark wholesale-price inflation accelerated to 7.3 percent in December, the fastest pace since November 2008. Food accounted for 80 percent of December’s inflation reading, government data showed, as deficient rains last year hurt output of rice, wheat and sugar.

Subbarao’s move is aimed at checking manufacturing inflation that surged to 5.2 percent in December from 1.6 percent in October. Industrial production rose 11.7 percent in November, the fastest pace in two years, as sales at companies including Hero Honda Motors Ltd. surged.

Hero Honda, the nation’s biggest motorcycle maker, reported a better-than-estimated 79 percent increase in third- quarter net income after sales climbed.

Food Inflation

“Tighter monetary policy will have no impact on inflation as it is largely a supply-side-driven phenomenon,” Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry in New Delhi, said before the report. “Interest rates should not be increased.”

Subbarao said there have been “some signs” of demand pressures on inflation and that he expects the current growth rate of 7.5 percent to continue in the next financial year starting April 1.

To ease supply constraints, the government on Jan. 13 announced plans to sell as much as 3 million metric tons of wheat and rice in the open market until March and permit duty- free imports of white sugar until Dec. 31 to increase supplies.

Prime Minister Manmohan Singh’s government is under pressure to tame inflation as opposition parties stepped up their criticism for failing to curb prices. Inflation is politically sensitive in India, where the World Bank estimates almost three-quarters of the nation’s 1.2 billion people live on less than $2 a day.

Subbarao said the withdrawal of monetary accommodation can’t be “effective” in controlling inflation unless the fiscal stimulus is also rolled-back in a coordinated manner. He said government borrowing must be cut to contain inflation and to meet credit demand of companies.

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The casual shoes in your closet were likely made in Asia.

But one new GTA footwear company, Oliberté, took a different path and became the first international footwear firm to pick Africa for its manufacturing centre.

Actually, Oliberté founder and CEO Tal Dehtiar chose the continent first and then chose the product.

The enterprise is the natural follow-up to his five years of running MBAs Without Borders, a charity that paired business volunteers with entrepreneurs in 25 developing countries.

He founded the non-profit entity after graduating from McMaster University’s MBA program, instead of heading for Bay St. like his classmates.

"I love business. I love helping people. I love developing countries," says Dehtiar, who speaks four languages. "I had to find a way to make it all work together."

Last year, MWB became a division of the Washington-based non-profit agency CDC Development Solutions and Dehtiar was free to search for another enterprise.

"I wanted something tangible. People said `If you really want to help, we need you to make a product in Africa that people are willing to buy,’" says Dehtiar. "I thought, what product has been around for years?"

The answer: Shoes.

With a thriving tannery industry in Ethiopia and extensive rubber production in Liberia, making shoes would be a good fit for Africa, he thought.

Working from his office and warehouse in Oakville, Dehtiar hopes his concept will make a difference, and the urban casual footwear will appeal to the fashion-conscious city dweller with a social conscience.

Born in Israel, with a Latvian mother and Ukrainian father, he grew up in Toronto after the family moved to Canada. His parents, both graduate engineers who run an upscale furniture showroom (Room Deco Furniture in Woodbridge), are good role models for Dehtiar’s brand of small business entrepreneurship.

"We’re not going to be in Ethiopia because it’s cheap," he says. "We’re going to make sure the factories are paying their workers properly."

He has also chosen factories that met international environmental standards.

If the company name sounds familiar, that’s because you may have seen Dehtiar pitching his idea on the Jan. 6 episode of Dragon’s Den, the CBC TV show that gives entrepreneurs a chance to convince the show’s venture capitalists to invest in fledgling companies. He was asking for $200,000. Unfortunately, the guest judge on the show, fashion personality Jeanne Beker, didn’t appreciate the casual shoes.

But viewers haven’t seen the whole story payday loans. Since the CBC segment was taped in May, Dehtiar’s enterprise has flourished. From a standing start (he sold 500 pairs of shoes in 2009), Oliberté is running now with orders for more than 10,000 pairs from stores in Europe, Australia – sales that will cover his costs without even adding in North America.

This year, he estimates about 20 per cent of his sales will be in Canada, while Europe and the U.S. will capture 40 per cent each. He has a couple of part-time warehouse staffers and a part-time designer as well as project managers in Africa.

Canada’s a tougher market, says Dehtiar.

"We’re a conservative society," he says.

Retailers told him that as they emerge from a recession they only want known brands for this year.

"They said we love what you’re doing. It has huge potential. Stick around," he says. "In the U.S. they are a little more risk taking."

The shoes are also available through the company’s website.

He has a few target markets for the goat-leather-lined shoes, which come in seven styles and retail for up to $129. He aimed at educated, higher-income customers, and then noticed a big following from the fashionable urbanites (U.S. footwear chain Underground Station carries his line). Then the evangelical community came on board, intrigued by the humanitarian values.

Despite the compelling story, starting a new company is plain hard work.

Dehtiar has invested about $100,000 so far, and he has investors interested, possibly including the Business Development Bank of Canada. Finding financing was tough at first since the banks he approached said running a charity for five years didn’t count as business experience and the 29-year-old was too young.

Getting the shoes to entertainers could be a marketing gambit that pays off. Actress Kristen Stewart from Twilight picked them up at the Toronto International Film Festival. Snoop Dogg has a couple of pairs. So does Somalia-born Canadian hip hop artist K’naan, whose song "Wavin" Flag was chosen as the soccer anthem for this year’s FIFA World Cup in South Africa.

Celebrities can pick up his shoes at the behind-the-scenes lounges at the upcoming Grammy Awards and the Black Entertainment Awards. All the Miss America pageant contestants will receive Oliberté shoes.

In demand as a speaker, Dehtiar is becoming a celebrity himself. This winter he will visit business classes at the University of Michigan, Pepperdine and Duke.

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European Central Bank council member Ewald Nowotny indicated he sees no need to raise interest rates in the first half of 2010 as inflation pressures stay muted.

“Our interest rate decisions are to be seen in connection with our price stability goal and in this context I do not see major threats for price stability in the near future,” Nowotny, 65, said in an interview in Vienna. The comment was in reply to a question whether economists were correct to assume no increases in the first half. There is no “strong need” to shift policy in the absence of inflation pressures, he said.

The Frankfurt-based central bank is starting to withdraw emergency measures designed to fight the financial crisis as the euro-region economy recovers from its worst recession since World War II. While President Jean-Claude Trichet says the ECB has no immediate plan to raise its benchmark rate from the current 1 percent, officials have given themselves room to do so next year if necessary.

The ECB on Dec. 3 tightened the terms of its final tender of 12-month funds to take account of any rate increase next year and Executive Board Member Juergen Stark said five days later that rates that are left too low for too long may fuel more bubbles.

‘Steady Hand’

At the same time, the aftershocks from the recession are keeping a lid on prices. The ECB projects inflation to average 1.3 percent next year and 1.4 percent in 2011, below its 2 percent ceiling.

“If there’s no infringement with regard to these goals then I wouldn’t see strong pressure or a strong need to change the policy that we have, that means a policy of steady hand,” said Nowotny, who joined the ECB in September 2008. He said the ECB never “precommits” to any specific policy.

Nowotny “validates expectations that it’ll take a bit more than six months for the ECB to change its monetary policy stance,” said Laurent Bilke, an economist at Nomura International in London. “I assume the ECB needs to see some further signs of consolidation of economic momentum before they act. We’ve really only seen one quarter of positive GDP growth.”

The ECB is pulling back some of the flagship policies introduced at the depth of the crisis to encourage banks to lend again. In addition to stopping the 12-month tender, it will discontinue its six-month loans after March and only guaranteed unlimited funding in its other refinancing operations until April 13.

Survey

The ECB will probably lend banks 75 billion euros ($122 billion) in the 12-month tender, according to the median of 23 forecasts in a Bloomberg News survey. That compares with a forecast of 150 billion euros in a survey conducted before the ECB announced that the rate would be indexed. The results will be announced at 9:30 a.m. in Frankfurt.

Nowotny, an economist and former chief executive officer of Vienna-based Bawag PSK Bank, said he expects no changes on terms of the three-month operation as “tenders that we didn’t mention will go on for the time being as they are now payday loan.”

When the first year-long operation expires next summer, the ECB “will take all measures necessary to prevent a liquidity shortage” by providing funds with a shorter maturity, he said.

“What the markets see — and I think this message has been taken very well — is that with the decisions that we took in December, the ECB is signaling a cautious policy of exiting,” Nowotny said. “Our intention clearly was not to send a signal on rates.”

Recovery

The economic recovery is giving the ECB room to embark on exit strategies. Europe’s economy resumed expansion in the third quarter as governments stepped up spending and exports rose. A slump in industrial output eased in October and manufacturing expanded for a second month in November.

The pace of the recovery may be restrained by the euro’s 16 percent appreciation against the dollar since mid-February. The current level of the euro “is bearable,” Nowotny said. “But it’s quite obvious that a prolonged and strong revaluation of the euro would have a negative effect on the export performance of the euro area.”

The euro was little changed at $1.4550 today after falling 0.8 percent yesterday.

The ECB this month raised its economic outlook, forecasting growth of 0.8 percent next year and 1.2 percent in 2011 after a 4 percent contraction this year. Nowotny said it’s a ‘positive outlook but a very cautious one,”

Collateral Rules

The central banker also said that the ECB won’t consider the situation of individual euro-region member countries when normalizing its collateral rules. Greek government bonds, which were cut to BBB+ by Fitch Ratings last week, may not be eligible as collateral if the ECB reverts to pre-crisis rules in 2011.

“The policy with regard to collateral is part of monetary policy and it is only monetary policy considerations that are relevant in this case,” Nowotny said. “We’re not looking at particular countries.”

The ECB currently accepts bonds rated BBB- as collateral for loans after relaxing its rules in response to the financial crisis last year. It may revert to the old rules at the end of 2010, under which A- is the minimum required rating.

Soaring government bond-yield spreads in countries with excessive deficits “can serve as a wake-up call,” Nowotny said. Rising deficits are “a matter of substantial concern both for the ECB and the European Union.”

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Did Cyber Monday outshine Black Friday this year?

Early reports suggest that Americans shopped more enthusiastically online for holiday bargains than they did in stores on Black Friday.

Cyber Monday sales rose 14% this year compared to 2008 and consumers also bought nearly 30% more items per order versus last year, according to research firm Coremetrics.

Also, the firm said shoppers bought 10% more items per order online than they did in stores on Black Friday.

"We are seeing good online buying momentum because people are looking for the very best deals, and are going online for the most convenient way to shop," John Squire, chief strategy officer, Coremetrics, said in a report Tuesday.

Clothing and jewelry e-tailers were the most popular shopping destinations on Cyber Monday. Although department stores saw a 33% increase in traffic to their Web sites, the average order volume actually fell 10% versus last year, the report said.

Kindle top seller at Amazon.com

Cyber Monday, which is the e-tailers version of Black Friday, is the day that e-tailers furiously push big discounts, free gift cards, free shipping and any other gimmick they can think of to entice consumers to spend even more of their holiday shopping dollars online.

Amazon.com (AMZN, Fortune 500) spokesman Craig Berman said its wireless Kindle e-reader was the "best-selling item across all of Amazon’s product categories on Monday."

"This November has become the biggest month for Kindle sales since we launched the product two years ago," Berman said. But he declined to disclose how many Kindle units have been sold over that period.

Also, Berman said the e-tailer sold out of its Cyber Monday deal of the day, which was an 8GB iPod Touch for $158.

Other hot sellers Monday included the hugely popular Zhu Zhu pet hamsters, which are sold on Amazon through third party vendors.

Although the retail price of each hamster is $9.99, Berman said some of the hamsters, such as Mr. Squiggles, were selling for as much as $63 each.

4.3 million shoppers a minute

An average of 4.3 million consumers per minute visited shopping Web sites throughout the day Monday in North America, according to Internet monitoring firm Akamai, which tracks traffic trends to more than 270 e-tailers.

The firm, which monitors North American visitors to sites such as American Eagle Outfitters, Overstock.com, QVC.com and eBags.com, said traffic peaked at about 9:30 p.m. ET, reaching 5.1 million visitors per minute.

Pedro Santos, chief strategist for e-commerce with Akamai, said he expects heavy online traffic to continue on subsequent Mondays leading up to the last shipping day before Christmas.

Here’s a sampling of what other sellers were serving up to customers.

Walmart.com is offering nearly 150 specials on such items as flat panel TVs, gaming systems and toys as well as 97-cent shipping on laptops, digital cameras and MP3 players.

Wal-Mart (WMT, Fortune 500) said in a statement the deals are being offered through Friday, but only while supplies last.

For book lovers, Barnesandnoble.com is chopping prices by 50% on all New York Times bestsellers and offering a $10 gift certificate for every $100 purchase.

Still, don’t expect any special deal on Barnes & Noble’s "Nook" eBook reader, which industry experts peg as one of the hottest products this holiday season.

A quick check on the book seller’s Web site showed that if you order the Nook Monday, it won’t be shipped until Jan. 4. And the "extra" incentive to Nook buyers is free shipping and a free gift certificate.

About 96.5 million Americans planned to shop online Monday, up from 85 million in 2008, according to the National Retail Federation.

Despite these expected traffic numbers and heavy discounts, Cyber Monday is still seen as more of a ceremonial start to online holiday shopping.

The busiest online shopping day tends to be later in December, and is the last day that gifts can be shipped to guarantee delivery by Christmas Day.  

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The U.S. job market will likely start to grow in early 2010, as signs of economic expansion should encourage companies to hire workers, said Macroeconomic Advisers LLC chairman Joel Prakken.

He cautioned the labor market will remain sluggish for a protracted period with full employment unlikely to be reached until 2014.

Prakken was speaking on a conference call with reporters after the release of the October ADP Employer Services report, jointly developed with Macroeconomic Advisers.

Earlier, the ADP National Employment Report showed U.S. private employers shed 203,000 jobs in October, fewer than a revised 227,000 jobs lost in September.

(Reporting by Richard Leong, Editing by Chizu Nomiyama)

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Microsoft Corp.’s stock soared early Friday after the software giant reported quarterly sales and profit that fell from year-ago results but easily beat Wall Street’s forecasts.

Shares of Microsoft (MSFT, Fortune 500) rose more than 10% in early trading. It surged as high as $29.35 at the open, hitting its highest level, on an intraday basis, since June 13, 2008.

The Redmond, Wash.-based software giant said its first-quarter net income fell 18% to $3.6 billion, or 40 cents per share, for the period ended Sept. 30. Analysts polled by Thomson Reuters were expecting earnings of 32 cents per share.

Sales fell 14% to $12.9 billion, topping analysts’ forecasts of $12.3 billion. It was the third consecutive quarter in which sales fell from year-ago levels. In April Microsoft reported that sales fell on a year-over-year basis for the first time in the company’s 23-year history as a public company.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," said Microsoft Chief Financial Officer Chris Liddell in a statement. "We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."

Some analysts said cost-cutting contributed to better-than-expected results, but it’s too soon to declare Microsoft’s recent struggles over.

"Microsoft did a little deck cleaning before the start of its fiscal year," said Carl Howe, analyst at Yankee group. "They may have beat expectations, but if I looked at this just to analyze the income statement, Microsoft still had a tough quarter."

Windows 7 expected to be a hit. The earnings announcement topped off a high-profile week for Microsoft, in which it unveiled its new operating system, Windows 7.

Microsoft has been hurt in recent quarters by slumping demand for PCs. But many signs point to a rebound in computer sales, including this week’s Windows 7 launch. Though analysts don’t expect the new operating system to boost PC sales significantly in 2009, a pickup in sales is anticipated for 2010.

Microsoft said PC sales were better than expected in the last quarter, as sales ticked up by between 0% and 2%. The company said businesses will slowly start to buy new computers starting next year and into 2011.

Sales of Windows fell 38.8% in the quarter and profits from the operating system division were sliced in half. That was mostly due to a deferral of $1.5 billion in revenue from Vista sales to provide customers with upgrade coupons for Windows 7.

The company said Windows sales set an all-time record in September — an encouraging sign for the company and for the success of Windows 7. Microsoft said it will realize $1.7 billion of Windows 7 revenue in the current quarter — $1.5 billion from last quarter and $200 million from the previous quarter.

"What they really did was ensure that in this [current] quarter, that division will have very nice looking results, since they are pulling in deferred results from last quarter," said Howe. "So the [current] quarter may look much better as a result."

Cost-cutting drives profits higher: Other divisions posted healthy profit increases, largely as a result of cost-cutting.

In January, Microsoft announced its first mass layoffs in its 34-year history in an effort to bolster its bottom line. The company slashed 5,000 positions, a move that is expected to be completed by mid-2010.

The company’s headcount was down 4% in the quarter from a year ago — the largest yearly staffing decline in the company’s history.

Revenue from its entertainment and devices division, which includes the Xbox 360 and the new Zune HD, was unchanged from last year, but profit nearly doubled. The company’s server unit also had flat revenue, but profits rose 23%.

The company still failed to turn a profit in its online services business though. That division, which includes MSN, lost $480 million in the quarter. Sales in the division were down 6% from the same quarter a year earlier. The company said search advertising revenue continued to decline, but the industry is showing signs of stabilization.

Microsoft unveiled Bing, its new search engine, in June and agreed to an advertising revenue-sharing partnership with Yahoo (YHOO, Fortune 500) that will begin in 2010. Bing’s launch has been considered a success so far, but the company still trails industry leader Google (GOOG, Fortune 500) in the online advertising market.  

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China’s super-rich have bounced back from the financial crisis with a vengeance, and China now has more known dollar billionaires than any other country bar the United States, according to a new report released on Tuesday.

The annual Hurun Report said China has 130 known dollar billionaires, up from 101 last year. The number in the United States is 359 while Russia has 32 and India 24, according to Forbes magazine.

China’s rich are getting richer, with the average wealth on the list $571 million, up almost one-third from last year, said compiler Rupert Hoogewerf.

“With the greatest wealth destruction in the west of the last 70 years, we’ve seen China buck the trend and the wealth seems to be still growing,” Hoogewerf told Reuters on the sidelines of an event to unveil the 2009 rich list.

“They’ve put the credit crunch behind them,” he said. “The key driver has been urbanization. You’ve got all these cities being built, and that requires property developers, iron and steel manufacturers. The latest thing is cars.”

Topping the list was Wang Chuanfu, chairman of electric car and battery maker BYD Co Ltd in which U.S. billionaire Warren Buffett holds a stake, with an estimated personal wealth of $5.1 billion. He was also the fastest riser from last year, up 102 places.

Second place went to Zhang Yin and family, owner of paper recycler Nine Dragons Paper, while in third place was Xu Rongmao and family, owner of Shimao Property Holdings Ltd

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Huang Guangyu, who founded GOME Electrical Appliances Holdings Ltd and owns unlisted property businesses, sank to 17th place from the top position he held last year. He is currently being probed for alleged financial irregularities.

Hoogewerf said the actual number of dollar billionaires could be higher than estimated.

“Either they are super-discreet, or perhaps they haven’t come to the surface,” he said. “Having said that, the transparency of wealth … is now very much in the open. There’s many more listed companies.”

Hoogewerf said people who probably should have been listed, but about whose wealth not enough in known, included Liu Chuanzhi, chairman of the world’s No. 4 PC maker Lenovo, and Chen Feng, founder of Hainan Airlines.

China’s ruling Communist Party once condemned entrepreneurs and private business people as capitalist exploiters, but now welcomes them since late reformist leader Deng Xiaoping began landmark economic reforms in the 1970s.

One third of the people on the 1,000-name rich list are estimated to be Party members, according to the report.

Still, one famous name fell off the list this year — NBA basketball player Yao Ming, who has struggled with a foot injury for the last few months.

(Editing by Sugita Katyal)

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WASHINGTON–Federal Reserve Chairman Ben Bernanke said Tuesday that the worst recession since the 1930s is probably over.

Bernanke said the economy likely is growing now, but it won’t be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 per cent, from rising.

"The recession is very likely over at this point," Bernanke said in responding to questions at the Brookings Institution.

The Fed boss also said he is confident that Congress will enact a revamp of the nation’s financial rule book to prevent a future crisis from happening.

"I feel quite confident that a comprehensive reform will be forthcoming," Bernanke said. It has been "too big a calamity” over the past year, with the near meltdown of the U.S. financial system, for Congress not to take action, he added.

President Barack Obama on Monday urged Congress to enact legislation this year.

Bernanke’s speech to at Brookings was identical to the one he delivered last month at a Fed conference in Wyoming. Analysts predict the economy is growing in the current quarter, which ends Sept. 30, at an annual rate of 3 to 4 per cent. It contracted at a 1 per cent pace in the second quarter.

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Hedge fund returns rose for the sixth straight month in August but underperformed the broader stock market, where hopes of a quick economic recovery fueled strong gains last month, according to data released on Tuesday.

The average hedge fund rose 1.85 percent last month while the Standard & Poor’s 500 index gained 3.36 percent, the Hennessee Group reported.

“Hedge funds continued to lag the surging equity markets as we would expect given their short portfolios and hedges,” Lee Hennessee, one of the consulting group’s managing principals, said in a statement.

August’s stronger returns — following on the heels of a 3.11 percent increase in July — signal that the $1.4 trillion hedge fund industry is recovering ground less than one year after suffering its worst-ever losses.

Still, investors remain skittish about leaving their money with hedge funds according to recent data showing that clients pulled nearly three times as much money away from funds in July than in June.

Hedge fund managers are not required to report their returns and so investors and industry analysts keep a close eye on reports from the Hennessee Group and others that track performance to keep tabs on how the industry is performing.

Performance and flows tracker Hedge Fund Research is expected to report its findings in a few hours.

Since January, the average hedge fund has gained 17 quick payday loans.30 percent, the Hennessee Group reported. During the same time the S&P 500 gained 12.99 percent.

Managers who bet on emerging markets and financial stocks plus media and telecommunications offerings last month scored the largest gains and helped boost the overall index.

So-called short sellers who bet exclusively that stock prices will fall lost 1.23 percent in August, leaving them as the industry’s biggest losers this year, with a year-to-date loss of 11.47 percent.

Despite strong returns this year, investors have continued to pull money out of the hedge funds after having removed a record $152 billion in the last quarter of 2008.

In July, the most recent month for which data is available, clients redeemed $20 billion from hedge funds, significantly more than the $6.9 billion they pulled out in June, according to data from TrimTabs Investment Research.

“That is a huge number,” research analyst Vincent Deluard said, explaining that investors may finally be getting back the money they asked for late last year when fund managers prohibited many clients from exiting.

(Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick and Matthew Lewis)

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