Financial life in a big town

Official data show that Germany’s unemployment rate edged up to 7.4 percent in February, due to a spell of bitterly cold weather.

The Federal Labor Agency said Wednesday the unadjusted jobless rate was up from 7.3 percent in January. The number of people registered as unemployed was 3.11 million _ that’s 26,000 more than in January but 203,000 fewer than a year ago.

Germany’s job market is nonetheless remains in a good condition after two years of strong economic growth.

Its strength contrasts with high unemployment in economically weaker countries that have been hit hard by the eurozone debt crisis. Spain and Greece have jobless rates above 20 percent.

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OTTAWA

Egypt’s finance minister says Cairo expects to sign a loan agreement with the International Monetary Fund for $3.2 billion next month.

The state-run al-Ahram daily of Sunday quoted Mumtaz al-Said as saying that sum would be disbursed in three stages: the first upon the deal’s signing, and the second and third three and six months later, respectively.

Egypt formally requested the loan in January, after rejecting an offer made last year. The IMF could not immediately be reached for comment.

Egypt’s economy has been badly battered by more than a year of unrest since an 18-day uprising pushed President Hosni Mubarak from power on Feb. 11, 2011.

The report said Egypt is also negotiating a second loan for $1 billion with the World Bank.

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The Dow has edged teasingly close to 13,000, a marker it hasn’t reached since before the financial crisis brought the U.S. economy to its knees.

The Dow Jones industrial average rose 46 points to 12,950, its highest close for the year so far. That followed a 123-point surge the day before.

The Standard & Poor’s 500 also popped, rising 3 points to 1,361, also securing its highest close for the year. The Nasdaq composite fell 8 points to 2,952.

Among the biggest movers were Campbell Soup and ketchup maker H.J. Heinz, both of which beat analysts’ expectations for quarterly results.

The yield on the benchmark 10-year Treasury note rose to 2.01 percent from 1.99 percent, a sign that investors are becoming more comfortable with riskier stock investments.

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President Obama unveiled a $3.8 trillion budget request Monday that hikes taxes on the rich, spends new money on infrastructure and education, but does little to reform the entitlement programs that pose the biggest long-term threat to the federal budget.

"We built this budget around the idea that our country has always done best when everyone gets a fair shot, everyone does their fair share and everyone plays by the same rules," Obama said in his budget message.

But the budget forecasts a deficit for fiscal year 2012 that will top $1.3 trillion, before falling in 2013 to $901 billion, or 5.5% of gross domestic product.

The deficit projections, which have hovered near $1 trillion for each year of the Obama presidency, mean that Obama will not satisfy his 2009 promise to halve the deficit by the end of his first term.

White House officials described the budget as a continuation of two major speeches given recently by the president — one in Kansas where he promised Americans a "fair shot," and last month’s State of the Union.

The budget also offers fresh insight into how the White House plans to comply with last year’s Budget Control Act, which allowed Congress to raise the debt ceiling in exchange for caps on discretionary spending accounts.

Many of the high profile recommendations made in the budget were first floated by the administration last year as part of a deficit reduction plan rolled out in September.

Spending: The administration is proposing a series of investments focused on infrastructure, education and domestic manufacturing, including old favorites like $30 billion to modernize schools and an additional $30 billion to retain and hire teachers and first responders.

One key element of that plan is a six-year proposal to spend $476 billion on surface transportation, a big increase from current levels, and much more than other proposals lawmakers are considering.

At the same time, the White House had to comply with the spending caps enshrined in the Budget Control Act, which total in the neighborhood of $1 trillion in discretionary spending over a decade.

That means many programs will see their funding cut.

"Every department will feel the impact of these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth," Obama wrote.

Discretionary spending is projected to fall from 8.7% of GDP in 2011 to 5.0% in 2022.

The budget details 210 places where programs will be cut or eliminated, for savings of $24 billion in 2013 and $520 billion over a decade.

For example, the budget eliminates an Air Force satellite system that is "no longer needed to meet mission requirements."

And the budget proposes consolidating the Bureau of Public Debt and the Treasury’s Financial Management Service.

The president would also like to cut some mandatory spending, including select farm subsidies and federal employee retirement and health benefits, for savings of $217 billion over a decade.

Military spending will be reduced. The Pentagon plans to spend $487 billion less over 10 years, a course that Secretary of Defense Leon Panetta has already laid out in some detail.

But even with some cuts, annual deficits are still projected to be more than $500 billion every year for the next decade, and the budget would add $7 trillion to the debt held by the public between 2013 and 2022.

Taxes: The budget proposes a tax hike of $1.5 trillion, which includes a provision that will allow the Bush tax cuts to expire for high-income earners, a long-held Obama position 100% free credit score.

Obama would like carried interest to be taxed as ordinary income, which means money managers would pay more than double the rate they currently pay on a portion of their compensation.

‘Dirty Harry’ weighs in on deficit

The budget also incorporates the Buffett Rule, a guideline to ensure that the wealthiest do not pay a lower overall tax rate than those who earn substantially less money.

Specifically, no household making more than $1 million will be a allowed to pay less than 30% of its income in taxes.

It also calls for a year-long extension of the payroll tax cut and unemployment insurance.

In addition, the White House wants to reform the individual tax code in a way that "eliminates inefficient and unfair tax breaks for millionaires while making all tax breaks at least as good for the middle class as for the wealthy."

On corporate taxes, details are scarce, but administration officials said that the president will unveil a plan to reform the corporate tax code later this month.

Entitlements: Because the president’s budget does little to address how to curb the growth in entitlement spending, it’s unlikely to stabilize deficits beyond the next 10 years.

National debt: The five-minute primer

The budget would cut more than $360 billion from Medicare, Medicaid and other health programs over a decade. But that’s a drop in the bucket when compared to the rapid expansion of costs expected for entitlement programs.

"While [Obama’s] budget stabilizes debt over the next decade, the real problem arrives thereafter, as entitlement costs spiral out of control and revenues are inadequate to deal with a wave of retiring baby boomers," Pete Domenici and Alice Rivlin, who led their own debt task force, said in a joint statement.

Of course, proposing significant cuts to Medicare and Social Security during an election year is a politically risky move, but by not saying much on the issue, the White House opened itself to criticism.

House Appropriations Committee Chairman Hal Rogers took Obama to task on Monday, saying the proposal "falls exceptionally short" on entitlement spending reform.

"It is imperative that both the President and Congress put greater focus on addressing the exploding costs of these programs," Rogers said. "Without meaningful action in this area, the nation’s debt and deficit crisis will continue, increasing the risk to our nation’s financial and economic future."

What’s next: Obama’s budget request is essentially a blueprint of his fiscal priorities — the programs he would like to fund or cut, the new investments he would make and how he would pay for it all.

But the request is just that — a request. And it’s one that Congress can accept, reject or modify.

Even if Obama’s budget is adopted — which it won’t be — the estimates for deficit reduction may or may not pan out depending on how close to reality the administration’s forecasts for unemployment, interest rates and economic growth prove to be.

In any case, Obama’s 2013 budget is only the first step in a convoluted process that involves no less than 40 congressional committees, 24 subcommittees, countless hearings and a number of floor votes in the House and Senate.

If all goes well, a formal federal budget for government agencies will be in place by Oct. 1, the start of the 2013 fiscal year. 

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South Africa is planning a

It was just last summer that the Dow Jones industrial average shed 2,000 points in three terrifying weeks. Investors had a host of things to worry about, including the possibility of another recession.

Now the Dow is within reach of the rarefied 13,000 mark _ a level it hasn’t seen since May 2008, four months before the financial system almost came apart.

A strong one-day rally _ caused by a deal on bailout money for Greece, perhaps, or an unexpectedly positive economic report _ could put it over the top.

What’s more, the average is just a 10 percent rally from an all-time high. And 10 percent rallies can happen fast these days.

The stomach-turning summer is a bad memory. Europe appears to be getting its act together, last summer’s downgrade of the U.S.’ credit rating was quickly forgotten, Washington is mostly behaving, and recession fears are gone.

“There are signs that the economy is getting back on its feet and the market is reacting to that,” says John Prestbo, executive director of Dow Jones Indexes. “The mood is just better in this country than it has been for a while.”

On Wall Street, too. The Dow traded Tuesday at 12,878, a 21 percent rally from Oct. 3, its low point for last year. In January, the average rose more or less in a straight line and added 3.4 percent, its best start to a year since 1997.

From here, the record is tantalizingly close _ 14,164.53, reached Oct. 9, 2007, when the investment houses Bear Stearns and Lehman Brothers still existed and the unemployment rate was 4.7 percent.

A 10 percent surge may seem like a lot, but it’s really not. The Dow has gained almost 15 percent since Nov. 25, just 10 weeks ago.

Though there’s a long way to go to get the country back to economic health, there are pockets of encouragement. Unemployment is still 8.3 percent, but it’s the lowest since February 2009. Economic output grew every quarter last year.

Corporate earnings growth has slowed, but analysts think it will pick up again later this year. Investors, always wary of uncertainty, may even be encouraged by some clarity in the Republican presidential nominating race.

Investors are no longer just trying to stem their losses, says Mark Lehmann, president of JMP Securities in San Francisco: “They’re playing a little offense. Six months ago, they were playing defense.”

There’s evidence that the rally has room to run. In a popular measure of how expensive stocks are, the 30 companies that make up the Dow are trading at an average of about 13 times their annual earnings per share.

The last time the Dow was at 13,000, in May 2008, stocks were trading for about 15 times earnings. Stock-market research firm Birinyi Associates estimates Dow stocks have traded at an average of 16 times earnings over the past two decades.

The fire-sale discounts have already come and gone, though. Those were back in early 2009, when the Dow bottomed at 6,547.05, its Great Recession low _ a little more than half the level now. Back then, Dow stocks traded at nine times earnings quick payday loans.

Not everyone believes the rally will last. Joe Gordon, managing partner at Gordon Asset Management in North Carolina, is dubious. He cites the unresolved European debt crisis, the U.S.’ historically high national debt and the millions of people who have given up looking for work, part of the so-called underemployed.

“This is like drinking a lot of coffee in the afternoon,” says Gordon. “It perks you up, then once it fades 45 minutes later you’re even more tired.”

Another wrinkle is that the Dow tracks just 30 companies, so it doesn’t take the full pulse of the market. The Standard & Poor’s 500, with its much larger roster, is still 16 percent away from its all-time high.

“It’s 30 stocks,” says Rob Leiphart, an analyst at Birinyi. “It doesn’t give you a representation of anything.”

But despite its size, the Dow is the market gauge that penetrates the public consciousness, generating headlines and water cooler buzz more than the less publicized S&P.

That’s important because the stock market, even if it has no direct bearing on the fundamentals of the economy, is a psychological motivator of spending because of something known as the wealth effect.

Even people with no stock investments will let their decisions be influenced by swings in the Dow. When it’s up, we tend to feel richer and spend more. When it’s down _ think back to the 500-point daily declines of 2008 _ we tend to feel poorer and spend less.

There’s good reason the Dow has pull over the financial mood of the country. Its 30 stocks account for 25 to 30 percent of the market value of all U.S. public companies, and about 40 percent of the dividends, Dow Jones Indexes estimates.

“Nothing of substance can happen in this economy without these companies feeling it,” Prestbo says.

A handful of companies have an outsized impact on the index. The Dow is a price-weighted average, which means companies with more expensive stocks have more power to drive the average higher or lower.

If you invest $30 in a mutual fund tracking the Dow, you don’t have a dollar riding on each company. Four times as much of your money would end up on Home Depot, which is trading around $45, than Alcoa, trading around $11.

IBM, the highest-priced stock in the Dow, had a giant influence last year. The Dow rose 5.5 percent in 2011, but without IBM it would have risen only 3.4 percent, according to Leiphart’s calculations.

If you were to cut out the next three stocks on the list, McDonald’s, Chevron and ExxonMobil, then the Dow would have finished down 0.25 percent for the year.

The flip side is that stocks like Chevron, Exxon Mobil, Microsoft and Intel trade well below the 13 times earnings for the full Dow. If they catch up, it could be enough to power the average to a record.

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The U.N. nuclear agency is including two senior weapons experts on its next mission to Tehran in an unusually clear statement on the team’s prime focus _ wresting information from Iranian officials about suspicions the country has secretly worked on atomic arms.

Iran has flatly refused to discuss such allegations for more than three years, saying they were based on phony intelligence from the U.S. and others seeking to harm the Islamic Republic.

But diplomats on Friday told The Associated Press that the weapons experts were part of the U.N team and that Iran had accepted their inclusion after some initial resistance. That suggested that the Islamic Republic was being more conciliatory on the issue of secret weapons work than usual as the International Atomic Energy Agency mission prepares to fly from Vienna to Tehran Saturday.

All six diplomats interviewed said Tehran had not committed to discussing the issue. But three of them added that Iranian officials indicated openness to talking about all topics during the IAEA mission that ends early next week _ a departure from standard reluctance by Tehran to exclude give-and-take on the arms allegations.

None of the diplomats expressed confidence of a breakthrough. But the Iranian stance at least allows the mission to have some home of making a dent into Iran’s wall of silence about its alleged clandestine nuclear weapons work.

Any progress on the issue would be significant.

Tehran has blocked IAEA attempts for more than three years to follow up on U.S. and other intelligence alleging covert Iranian work on nuclear arms, dismissing the charges as baseless and insisting all its nuclear activities were peaceful and under IAEA purview.

Faced with Iranian stonewalling, the IAEA summarized its body of information in November, in a 13-page document drawing on 1,000 pages of intelligence. It stated then for the first time that some of the alleged experiments can have no other purpose than developing nuclear weapons.

Iran continues to deny the charges and no change in its position is expected during the Tehran talks with IAEA officials. But even a decision to enter a discussion over the allegations would be a major departure from outright refusal to talk about them.

The diplomats said that the IAEA team was looking for permission to talk to key Iranian scientists suspected of weapons work, inspect documents relating to such suspected work and get commitments for future visits to sites linked to such allegations.

As most often the case, the IAEA team is headed by Herman Nackaerts, the chief agency official in charge of the Iran file _ but the makeup of the rest of the team reflects the importance attached by the agency to the trip.

Two diplomats said Friday that nuclear weapons experts Jack Baute of France and Neville Whiting of Britain would accompany Nackaerts.

While both fulfill IAEA functions not directly related to nuclear arms research, they were connected to their nation’s weapons programs before they came to the agency.

One of the diplomats _ who is familiar with the thinking that went into setting up the mission _ said their inclusion was meant to send a clear signal to the Iranians. He, like the five other diplomats, asked for anonymity in exchange for discussing privileged information,

Also on the team is Rafael Grossi, IAEA chief Yukiya Amano’s right hand _ another indication of the importance the agency has attached to the trip.

The three-day visit comes as anxiety grows daily about Iran’s nuclear capacities _ and what it plans to do with them.

Since the discovery in 2002 that Iran was secretly working on uranium enrichment, the nation has expanded that operation to the point where it has thousands of centrifuges churning out enriched material _ the potential source of both nuclear fuel and fissile warhead material.

Iran says it is enriching only to generate energy. But it has also started producing uranium at a higher level than its main stockpile _ a move that would jump start the creation of highly enriched, weapons grade uranium, should it chose to go that route. And it is moving its higher-enriched operation into an underground bunker that it says is safe from attack.

Israel in particular is concerned by Iran’s expanding enrichment capacities _ and increasing evidence of secret nuclear weapons work.

Israeli Defense Minister Ehud Barak said Friday the world must quickly stop Iran from reaching the point where even a “surgical” military strike could not block it from obtaining nuclear weapons.

Amid fears that Israel is nearing a decision to attack Iran’s nuclear program, Barak said tougher international sanctions are needed against Tehran’s oil and banks so that “we all will know early enough whether the Iranians are ready to give up their nuclear weapons program.”

The United Nations has imposed four rounds of sanctions against Iran, but veto-wielding Russia and China say they see no need for additional punitive measures. That has left the U.S. and the European Union to try to pressure other countries to follow their lead and impose even tougher sanctions.

“We are determined to prevent Iran from turning nuclear,” Barak told reporters during the annual meeting of the World Economic Forum.

“It seems to us to be urgent, because the Iranians are deliberately drifting into what we call an immunity zone where practically no surgical operation could block them,” he said, alluding to increased Iranian efforts to move their enrichment work deep underground.

Separately at Davos, U.N. Secretary General Ban Ki-Moon urged a resumption of dialogue between Western powers and Iran on the nuclear issue. He said Friday that Tehran must comply with Security Council resolutions and prove conclusively that its nuclear program is not directed at making arms.

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George Jahn can be reached at http://twitter.com/georgejahn

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European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are

Listen up, beer lovers — you may soon be able to get your suds in grande form. At Starbucks.

Starbucks said Monday that it would begin offering beer and wine at select locations in Atlanta and Southern California by the end of this year, to go along with several locations in the Chicago area that have previously been announced.

Starbucks (, Fortune 500) began the initiative in the Pacific Northwest in late 2010.

"As our customers transition from work to home, many are looking for a warm and inviting place to unwind and connect with the people they care about," Clarice Turner, Starbucks’ senior vice president for U.S. operations, said in a statement payday loan lenders.

"We’re pleased with the response of our customers to the introduction of wine, beer and premium food at several of our stores in the Pacific Northwest, and we’re excited to see how the idea translates to other markets."

The "enhanced menu" at these locations will also include savory snacks, small plates, and hot flatbreads, Starbucks said. The wines and beers on offer "will be hand-selected to reflect local customer tastes and preferences," the company added. 

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