Financial life in a big town

Moody’s Corp (MCO.N: Quote, Profile, Research, Stock Buzz), the parent of Moody’s Investors Service, said quarterly profit fell 48 percent, as the global credit crisis caused demand to shrink for mortgage bonds and collateralized debt obligations.

Though results topped forecasts, Moody’s shares gave up some early gains after Connecticut Attorney General Richard Blumenthal said he plans to sue Moody’s and its main rivals, McGraw-Hill Cos (MHP.N: Quote, Profile, Research, Stock Buzz) Standard & Poor’s, and Fimalac SA’s (LBCP.PA: Quote, Profile, Research, Stock Buzz) Fitch Ratings, for alleged “deceptive and unfair practices costing taxpayers millions of dollars.”

Second-quarter net income for New York-based Moody’s, whose largest investor is Warren Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz), fell to $135.2 million, or 54 cents per share, from $261.9 million, or 95 cents, a year earlier.

Moody’s said profit excluding items was 51 cents per share cash till payday. On that basis, analysts on average expected 47 cents per share, according to Reuters Estimates. Revenue fell 25 percent to $487.6 million, topping the average $465.7 million forecast.

“They beat the numbers in pretty much all categories,” said Edward Atorino, an analyst at Benchmark Co in New York. “I think we’re bouncing along the bottom. The third quarter is starting pretty slow, but we’re at the bottom of a trough.”

Results were weakened by a 56 percent plunge in revenue from CDOs and other structured products, including such asset classes as residential mortgage-backed securities, commercial real estate finance and credit derivatives. In the United States alone, structured finance revenue fell 67 percent.

Expenses declined 10 percent as Moody’s cut jobs and reduced incentives and stock-based compensation.

CRITICISM 

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Plane maker Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) has seen a string of order deferrals in the United States this year as the airline industry battles challenges such as high fuel costs, a senior executive said on Wednesday.

Randy Tinseth, Boeing Commercial Airplanes Vice President for Marketing, said the delays also featured one total cancellation, but the issue was limited to the U.S market — which accounts for 10-11 percent of its sales.

“We have seen deferrals in the U.S. market as the airlines look to make significant capacity reductions, but we are pleased to have regional diversity .. We have not seen deferrals in other regions,” he told reporters.

Boeing shares were up 0.5 percent at $66.45 at 12:08 p.m. EDT.

Airline fuel costs have soared this year alongside record oil prices above $140 a barrel, forcing several airlines to cut capacity and hike fuel charges protect margins.

But Tinseth said Boeing did not expect the tough climate to last — predicting the value of the new plane market to grow in the long term.

Bowing said the group now valued the market for new commercial planes at $3.2 trillion to 2027 cash advance. That is up from a $2.8 trillion 20-year forecast provided last year.

“The forecast takes into account the industry’s near term challenges, including a slowing worldwide economy (and) surging fuel prices .. This year’s forecast is rooted in today’s realities, but also recognizes the nature of a long term outlook,” Tinseth said. 

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Hewlett-Packard, the world’s biggest computer maker, launched a new generation of touchscreen PCs designed to lift user-friendly computing out of its expensive niche and bring it to a wider market.

The TouchSmart All-in-One allows users to work with photos, music, video, the Internet and television by tapping or swiping the screen, and will be priced at $1,299, HP said at the launch in Berlin on Tuesday.

HP’s Personal Systems group of PCs, notebooks, workstations and handheld devices has transformed itself over the past few years from a largely commoditized volume business to a far more successful one that emphasizes product design.

The group’s executive vice president, Todd Bradley, told Reuters he aimed to set a trend and create a new market.

“We don’t think about this as a niche no fax payday loans. We think about it as a global product that will inspire demand and drive desirability,” Bradley said in a telephone interview.

“Our ability to lead is very important,” he added, declining to speculate on what size the market for such PCs might reach.

HP’s announcement came a day after Apple announced a new version of its ground-breaking iPhone, the original version of which brought touchscreens to public attention and sparked a host of imitators.

Bradley denied that HP was following Apple, pointing out that HP had been developing touch technology for some time. But analyst Crawford del Prete of research firm IDC said: “I don’t think Apple’s impact can be underestimated.” 

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The country’s highest court has agreed to weigh in on the $52 billion privatization of phone giant BCE Inc., a transaction that appeared close to imploding after a lower court effectively ruled the phone company’s bondholders had been treated unfairly.

In a victory yesterday for BCE and its buyers, the Supreme Court of Canada said it has agreed to review last month’s unanimous decision by the Quebec Court of Appeal, a ruling that several observers said could have far-reaching implications for future corporate takeovers in Canada.

BCE, which owns Bell Canada, now has one last chance to complete what is being billed as the biggest leveraged buyout ever.

At issue is whether BCE’s board erred in its duties by failing to consider the interests of BCE bondholders when directors accepted a $42.75 per share takeover offer.

The bid was made by the Ontario Teachers’ Pension Plan and United States private-equity firms Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity.

The current legal thinking on Bay Street has held that a board’s duty is to maximize shareholder value. The appeal court, however, said that the interests of other stakeholders must also be considered in such a transaction.

The bondholders have complained that a leveraged buyout of BCE would load up the telephone company’s balance sheet with too much debt.

That would probably make the investments of the bondholders less valuable.

Both BCE and lawyers representing the bondholders declined to comment on yesterday’s decision, which was released after the markets closed.

"We’re pleased that the Supreme Court granted leave and will hear the case on June 17," said Deborah Allan, a Teachers’ spokesperson.

The court had already decided to fast track the process if permission to appeal was granted payday loan.

The timing is important.

BCE investors have been speculating for months that the banks backing the deal – and possibly the buyout consortium itself – are eager to find an excuse to walk away from their commitments, and are therefore unlikely to agree to an extension.

The purchasers have until June 30 to conclude the purchase, which can be delayed only with approval from both sides.

The ongoing credit crunch has raised the cost of borrowing money.

That has made the price of completing the transaction significantly higher than when the deal was inked last June.

Shares of BCE closed at $34.65, down 40 cents, on the Toronto Stock Exchange yesterday, before the court’s decision was made public.

BCE had argued in its submissions to the Supreme Court that a failure to hear the case threatened to destroy billions of dollars of value for the company and its shareholders.

Bondholders, on the other hand, had urged the court not to be swayed by the deal’s size when making a decision on whether to grant a leave to appeal.

With files from The Canadian Press

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OTTAWA–The federal government recorded a $1.2-billion budgetary deficit in March, likely trimming its surplus for the just-completed fiscal year to $10.2 billion.

The Finance Department says the deficit last March was half what the government experienced in March 2007, when it spent $2.4 billion more than it earned.

The department also says preliminary accounting points to a $10.2-billion surplus for the 2007-08 financial year that ended March 31, the exact amount forecast in Finance Minister Jim Flaherty's budget in February.

The federal government's revenues were up $1 billion, or 5.2 per cent, in March, largely as a result of higher receipts in taxes from individuals cheap payday loans. Program expenses were flat.

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Canada’s slowing economy is starting to take a toll on homeowners.

"Defaults are rising in certain parts of the country," said Peter Vukanovich, president of Genworth Financial Canada, which insures mortgages against default.

Which parts of the country?

"Here in Ontario and in Quebec," he replied.

The Canadian real estate market is healthier than in the United States, where prices are falling and many homeowners are facing foreclosure.

Still, there’s a concern that some homeowners in Canada may not keep up their mortgage payments if they lose their jobs.

"We’re monitoring losses and making sure the lending is responsible," Vukanovich said.

Homebuyers are required to buy mortgage insurance if their down payment is less than 20 per cent of the purchase price.

Mortgage insurance protects lenders when borrowers fall behind and properties have to be sold at a loss.

Canada Mortgage and Housing Corp., a federally owned Crown corporation, is the largest provider.

Genworth, owned by General Electric Co., is the largest private-sector mortgage insurer.

In its 2006 budget, the federal government opened the mortgage insurance market to more competition.

With competition came innovation. Mortgage insurance providers started underwriting loans with no down payments and with amortizations of up to 40 years.

"The longer amortizations and the 100 per cent loan-to-value products have been relatively popular," Vukanovich said.

But what if Canada’s economy flattens out? How will this affect highly leveraged buyers?

It’s not only CMHC, Genworth and other mortgage insurers on the hook if there’s a rash of defaults.

Taxpayers will also be liable for losses.

Few people know that Ottawa guarantees 100 per cent of CMHC-insured mortgages and 90 per cent of privately insured mortgages (up to $200 billion).

Because of the federal guarantee, mortgage insurers don’t have to carry capital on their books to match their potential risks.

In recent months, the finance department has been holding secret talks with mortgage industry players pay day loan.

"We consult on a regular basis on a wide variety of issues," said a finance spokesperson.

While Ottawa won’t confirm the discussions, mortgage lenders know they’re going on.

"The degree of risk that’s involved with 40-year mortgages and no down payments is certainly of some concern to the finance department," said Don Drummond, chief economist with TD Bank Financial Group.

"It definitely creates a riskier environment."

Here’s how the risk could play out.

Suppose you bought a home in the Toronto area last year, borrowing the whole purchase price and opting for a 40-year payback. Your mortgage insurance premium added another 3.5 per cent to the loan amount.

Suddenly, you lose your job or have your hours cut back. Or this happens to your spouse.

Within a few months, you can no longer cover mortgage payments.

You think about selling. But you can’t make money because you have no equity and 99.9 per cent of your payments are interest, not mortgage principal.

So, you wait for the lender to take over your house under a power of sale.

Our mortgage lenders are strict about checking credit scores and making sure borrowers don’t take on too much debt.

But there’s a sky-high bill to shoulder if a slowing economy results in mortgage defaults.

It’s time for Ottawa to talk openly about cutting back its mortgage insurance guarantee to adapt to a climate of looser lending.

Ellen Roseman’s column appears Wednesday, Saturday and Sunday.

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So, you want to open a discount brokerage account and manage your own investments.

Which discount broker do you choose? How do you compare them all?

Luckily, you can find a wealth of Canadian information online.

You can start your virtual tour with Surviscor, a consulting firm that regularly reviews and ranks the discount brokerages.

Its winter 2008 survey, posted at www.surviscor.com, compares 16 online brokers operating in Canada.

As well as overall rankings, there are separate rankings for investors and traders. This recognizes they have different needs.

Credential Direct, owned by Canada’s credit unions, gets the top score for catering to investors (7.59 out of 10).

It’s followed by BMO InvestorLine (6.85), Qtrade (6.56), National Bank Direct Brokerage (6.42) and TD Waterhouse (6.37).

Your next stop is the Stingy Investor website. (Go to www.ndir.com and search for Canadian discount brokers). It’s run by Norm Rothery, chief investment strategist at Dan Hallett & Associates Inc.

Here you can find up-to-date comparisons of the fees and commissions charged by 15 Canadian online brokerages (as well as phone numbers and email addresses).

What you pay usually depends on how many trades you make per quarter or year, how many shares you buy at a time and how many dollars you have in assets at the firm.

In the past year, most discount brokers have introduced lower fees for active traders. That’s the good news.

But many brokers also charge penalties – called maintenance fees – for inactive traders, especially those with smaller accounts. So, watch out and ask questions.

The Stingy Investor doesn’t rank discount brokers. But when you read its listings, one firm stands out for simplicity and low fees.

Questrade charges one cent a share, $4.95 minimum to $9.95 maximum, and calls this "democratic pricing."

Maybe you want to hear about other investors’ online trading experiences paydayloan.

You want to eavesdrop on their conversations.

Thanks to a proliferation of Canadian personal finance blogs, you can have access to other people’s experiences and opinions. But you do need to exercise judgment.

Start with CanadianCapitalist.com, one of the longest-running and active personal finance blogs. Scroll down the right hand side to Categories, then find Investing and Discount Brokers.

You’ll find out why this blogger went to Questrade for rock-bottom trading commissions and then returned to TD Waterhouse to consolidate all his accounts with one broker.

Another blog worth an investment of your time is Million Dollar Journey, which has a chart comparing eight Canadian discount brokers (www.milliondollarjourney.com).

Besides fees and commissions, he looks at such factors as: What is the margin rate? Can you get real-time quotes free? What is the minimum required to open an account? Is there a maintenance cost? How much interest is paid on cash? Can you use a dividend reinvestment plan? What is the foreign exchange fee or spread charged?

This blog also publishes reviews of individual brokers and critical comments from readers.

"It took a total of 5.5 weeks for my RRSP to get transferred from Tradefreedom to Questrade," says one investor. "I saw that my RRSP positions were incorrect. I’m pretty frustrated with the overall experience."

In case you think it’s all one-sided, you can find responses from Lynn Suderman, communications manager for Questrade, to some of this negative feedback.

Next week, we’ll look at how to put together a portfolio of exchange-traded funds that needs little oversight or supervision.

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Anyone who has tried to break a bad habit knows how hard it can be. Every New Year’s Day millions resolve to lose weight, quit smoking or get better organized. And every Jan. 2, those making the resolutions are resolved to try it again another day.

In his latest book, "Strategy and the Fat Smoker," author David Maister equates business achievement with the struggle a smoker has when trying to quit the habit. Many try, but not all will succeed.

With business, as it is with smoking, Maister surmises some essential questions of strategy are not being asked and answered despite a plethora of practical wisdom that is well disseminated, publicized and understood.

Smokers who want to quit know that doing so will benefit their health and their wallets. Executives know a well-designed business approach will add to their bottom line.
There are a million good reasons for doing both. But turning reason into reality means thinking differently about strategy. Without answering some tough questions, the smoker lights up again or the business fails because of the pursuit of the same old failed strategy in hopes of a better result.

Those who lead organizations, according to Maister, must think differently about strategy. First, they must learn what drives and motivates people, then take that information to the next level by using it to figure out how to change and improve their businesses. Second, they must be ready to rebound from mistakes. The ability to recover from mistakes is a strategy move in its own right.

Maister’s book has opened my eyes to two important ways of looking at strategy.

First, it has helped me realize that creating a single resolve in a group to take action is more important than merely creating insights into what should be done. Getting everyone on board and, as Maister says, "sticking to the diet" can be a leader’s biggest challenge. If done well, however, it can also be the most rewarding.

Second, is the importance of taking an action-oriented approach to strategy cash advance loan. Problems should be addressed now, before something serious happens in the future, leaving what needs to be fixed beyond repair. Being successful means moving forward and implementing something management and your organization cannot ignore.

Maister also reveals his finding that success cannot be achieved if you rely on only doing things "well most of the time." For him, the pursuit of short-term goals is inherently anti-strategic and self-defeating. The time necessary to make noteworthy advancements cannot be undervalued.

He reminds us that anything worth putting an effort into, whether it is breaking a bad habit or building a better business strategy, will take time to bear fruit. You must forgo some of today to reach a better tomorrow.

Maister says strategies in business are applied more efficiently when presented as matters of principle and not just convenience. In establishing those strategies, business leaders must take into account that some people have an appetite for high-investment, future-oriented strategies they are willing to defer. Others, they will find, are reluctant to invest, even in their own future.

If you are willing to invest some of your time on a strategy book designed to make you a better manager, take a bite out of "Strategy and the Fat Smoker."

BENJAMIN OLA. AKANDE IS DEAN OF WEBSTER UNIVERSITY’S SCHOOL OF BUSINESS AND TECHNOLOGY. READERS ARE INVITED TO JOIN WEBSTER’S ONLINE BIZTALK BOOK CLUB. GO TO WWW.WEBSTER.EDU/SBT/BOOKCLUB TO JOIN AND PARTICIPATE IN THE BOOK CLUB CHAT FOR "STRATEGY AND THE FAT SMOKER" FROM NOON TO 1 P.M. TODAY. NEXT MONTH’S BIZTALK BOOK CLUB SELECTION IS "LIFE’S A CAMPAIGN: WHAT POLITICS HAS TAUGHT ME ABOUT FRIENDSHIP, RIVALRY, REPUTATION, AND SUCCESS," BY CHRIS MATTHEW.

‘Strategy and the Fat Smoker’ by David Maister The Spangle Press, $29.99

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WASHINGTON — The Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000 to 407,000 for the week ending March 29.

The increase left claims at their highest point since Sept. 17, 2005, after the blows of the devastating Gulf Coast hurricanes.

The latest snapshot of labor activity was worse than economists had anticipated. They had predicted claims would be much lower, around 365,000.

In other economic news, the Institute for Supply Management said the nation’s service sector — including retailers, hotels, insurance companies and other firms — contracted in March but not as much as the month before faxless payday advance. The institute’s index registered 49.6 last month, compared to 49.3 in February. A reading below 50 indicates contraction, while a reading above 50 indicates growth.

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In a recent performance review, my sister was rated "below expectations." Her boss said she took too long to complete a project. However, this really wasn’t her fault.

During that time, she had a lot of computer problems. Also, management changes created some confusion and her co-workers weren’t very cooperative. But she still got a bad review.

Now she’s on three-month probation with a warning that her current project must be completed on time. It’s not clear what will happen if she doesn’t meet the deadline.

I don’t think this is fair, because many things are out of her control. And the rules seem to be different for her. For example, her boss has positioned her monitor so that he can see what she’s doing.
My sister tries hard, despite getting little cooperation from others. I feel that "below expectations" should be for people who goof off all day. What do you think?

I think you only have one side of the story. When someone receives a reprimand, the automatic response is to point out other reasons for the problem. That’s just human nature.

But here’s the catch: people who never see their own flaws continue to repeat the same ineffective behaviors. So your sister needs to take a long, hard look in the mirror.

Your sister received a low rating because her project was late. Other factors may have contributed, but her boss believes she was responsible. She needs to stop fretting about "fairness" and concentrate on self-improvement.

To get off probation, she must focus like a laser on her upcoming project deadline cash advance flexible payments. If unavoidable obstacles arise, she needs to tell her boss immediately. And nothing but work should appear on her computer monitor.

If you continue to encourage your sister’s search for scapegoats, you will only perpetuate the problem. Instead of collaborating in her denial, try to help her save her job.

I am 24 years old with a job that bores me to death. Now that I’m in graduate school, I’ve realized that I truly hate this field. However, I am clueless about what I might prefer.

My parents say I should stick with this profession because the pay and benefits are good. What’s your opinion?

Somewhere along the line, you wandered down an inappropriate career path. But that doesn’t mean you have to stay there.

If you do, a lack of interest and commitment will limit your success. And no salary or benefit package is worth a lifetime of unhappiness and boredom.

Although your Mom and Dad undoubtedly have your best interests at heart, parents often make lousy career counselors. You need to seek out professional advice.

As a graduate student, you should have access to career counseling through your school’s placement office. Explore different occupations until you find one that energizes and excites you.

Marie G. McIntyre is a workplace coach. Send questions and get tips at www.yourofficecoach.com.

2008, McClatchy-Tribune Information Services

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