Financial life in a big town

Ferrari will unveil its fastest street car ever at next month’s Geneva Motor Show.

The Ferrari F12berlinetta is intended to replace the 599, which is currently the automaker’s top-of-the-line production car. The 599 has a starting price of about $310,000. Pricing for the F12berlinetta has not yet been announced.

The new car will be powered by a 730-horsepower, 6.3-liter V12 engine. It will be capable of going from zero to 60 miles an hour in about three seconds — the fastest zero-to-60 time for any Ferrari — with a top speed of 211 miles per hour.

In addition to being faster, Ferrari said the F12berlinetta also more fuel-efficient. The new car uses 30% less fuel than the 599, which would put its combined city and highway fuel economy at about 17 miles per gallon.

Gallery: Consumer Reports’ Top car picks

The F12berlinetta is a mid-front-engined coupe, Ferrari said. The engine is mounted as far back under the hood and as low as possible to optimize the car’s balance and center of gravity. Ferrari also promises "exceptional in-car space and comfort" despite an overall smaller size.

Last year, Ferrari had record sales and profits. It sold a total of 7,200 cars worldwide while earning a profit of $280 million. Almost 2,000 of the cars were sold in the United States, which was also a record for the brand.

Ferrari is almost wholly owned by Italy’s Fiat, which is partnered with Chrysler Group in the United States. 

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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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A drop in the paper value of the financial instruments known as derivatives hurt profits at Berkshire Hathaway Inc., the conglomerate run by billionaire investor Warren Buffett.

Some of its subsidiaries performed well enough to offset some of the losses. Buffett detailed the company’s 2011 performance Saturday in his annual letter to shareholders.

Berkshire reported fourth-quarter net income of $3.05 billion, or $1,846 per Class A share. That was down from $4.4 billion net income, or $2,656 per share, a year ago.

Berkshire’s profit fell short of the $1,875 per share expected by the four analysts surveyed by FactSet, a provider of financial data. Quarterly revenue grew 5 percent to $37.96 billion from last year’s $36.17 billion.

The biggest difference in the quarter was the change in estimated value of Berkshire’s investments and derivative contracts. That fell to $382 million this year from last year’s $1.4 billion.

Derivatives are complex investments that have been blamed in part for the 2008 financial crisis and the recession. Berkshire’s derivatives are designed to operate like insurance policies, with some covering the risk of bond defaults by certain companies and some covering whether certain stock market indexes will be lower 15 or 20 years in the future.

Buffett reiterated Saturday that he believes Berkshire’s derivative contracts will ultimately prove profitable, but he said the company doesn’t plan to write any more major derivative contracts. Buffett said he does not want Berkshire to deal with new requirements for how much collateral companies must post when they hold derivatives payday lenders.

For 2011, Berkshire generated $10.3 billion in net income, or $6,215 per Class A share, down from nearly $13 billion, or $7,928 per share, in 2010.

Strength in the Burlington Northern Santa Fe railroad, MidAmerican Energy, and the Marmon Group helped offset insurance underwriting losses related to catastrophes like the Japan tsunami. Newly acquired chemical maker Lubrizol added $1.7 billion in revenues to Berkshire since September.

Stockbroker Andy Kilpatrick, who wrote “Of Permanent Value: The Story of Warren Buffett,” said Buffett managed to outperform the overall market in a tough year for Berkshire’s insurance and housing-related subsidiaries.

“It was not a great year, but he still beat the S&P. It’s still an incredible moneymaking machine,” Kilpatrick said.

Buffett’s preferred measure of Berkshire’s performance is the growth in its book value, which is a calculation of the company’s assets minus its liabilities. Buffett said Berkshire’s book value grew 4.6 percent to $99,860 per share in 2011. The S&P 500, which Berkshire is part of, gained 2.1 percent last year when dividends were factored in.

Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry companies, but its insurance and utility businesses typically account for more than half the company’s net income. It also has major investments in such companies as Coca-Cola, IBM and Wells Fargo.

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Chinese Internet giant Alibaba, which has been in the headlines lately for its tussles with stakeholder Yahoo, wants to take its publicly traded Web portal private.

Alibaba Group said Tuesday that it made an offer to Alibaba.com’s board of directors.

Alibaba Group owns about 73.5% of e-commerce leader Alibaba.com, which is the company’s only publicly traded subsidiary. Under the terms of the deal, Alibaba Group would buy the other 26.5% of the company for 13.50 Hong Kong dollars ($1.74 U.S.) per share in cash.

That’s a 55.3% premium above Alibaba.com’s average closing price over the last 10 days — but it’s the exact same price the company fetched in its initial public offering in November 2007.

Taking the web portal private "will allow our company to make long-term decisions that are in the best interest of our customers and that are also free from the pressures that come from having a publicly listed company," Alibaba Group CEO Jack Ma said in a prepared statement.

Alibaba has been in the news frequently over the past year for its contentious relationship with Yahoo (, Fortune 500).

Yahoo owns about a 40% stake in Alibaba, which is considered one of its most valuable assets. But Ma and former Yahoo CEO Carol Bartz had a public dispute over ownership of Alipay, an online payment unit similar to eBay (, Fortune 500)-owned PayPal.

The companies reached an agreement in July 2011, but tensions continued. Ma said at a conference in late September that Alibaba would be "interested" in buying all of Yahoo — a purchase that would essentially allow Ma to buy back control of that 40% Alibaba stake.

According to media reports, Yahoo had been in advanced talks with Alibaba and Japan-based Softbank to discuss selling its stakes in Alibaba and Yahoo Japan. But those talks reportedly collapsed earlier this month. 

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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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It doesn’t compute: Medicare’s bill for artificial feet has jumped by more than half, although foot and leg amputations due to diabetes continue to decline dramatically.

Medicare paid $94 million for artificial feet in 2010, according to research conducted for The Associated Press. That was nearly $35 million more than in 2005, even though in 2010, Medicare covered about 1,900 fewer such prostheses.

It works out to a 58 percent cost increase over five years.

Artificial feet represent a tiny slice of the $550 billion Medicare spends on health care for 49 million older and disabled people. But the cost spike highlights basic questions about affordability, technology and appropriate care that confront lawmakers looking for a way out of Medicare’s financial troubles.

Program officials say they’re concerned. Medicare “is aware of and shares the concerns this research raises about lower limb prosthetics,” said spokesman Brian Cook.

Industry says there’s nothing wrong. Patients are benefiting from new technology in artificial limbs used for wounded troops returning from the Iraq and Afghanistan wars.

Others dispute that conclusion, saying there’s no body of scientific evidence to back it up.

A doctor who works with amputees questioned whether a high-tech foot designed for an active person is appropriate for an elderly patient with diabetes, a major cause of lower-limb amputations. Losing a foot means the patient is at an advanced stage of the disease and probably dealing with other problems that limit physical activity.

“A lot of our patients are just trying to transfer from the wheelchair to the toilet,” said Dr. Howard Gilmer of National Rehabilitation Hospital in Washington.

A report last year by the Health and Human Services inspector general found widespread questionable billing for lower-limb prostheses, a category that includes artificial feet.

In 2009, Medicare inappropriately paid $43 million for lower-limb prostheses that did not meet certain basic standards for accurate claims, investigators said. They found an additional $61 million in questionable billing in cases where it wasn’t clear that the Medicare beneficiary had seen the referring doctor in the previous five years, raising questions about whether the prosthesis was medically necessary.

Industry officials say they are committed to battling fraud and the AP’s statistics simply show the march of progress.

“We have had a huge improvement in the quality of devices that we can provide, thanks to all the knowledge that has flowed from providing care to soldiers,” said Thomas Fise, executive director of the American Orthotic & Prosthetic Association, a trade group. “That technology has now become available, and patients believe they should be entitled to it, and who is going to tell those Medicare beneficiaries they are not entitled?”

“What the government got for their money was value-added,” said Tom DiBello, president of the group, which represents professionals who fit artificial limbs as well as manufacturers.

The AP’s analysis was done by Avalere Health, a data-crunching firm serving private and government health care clients. It looked at Medicare spending on 13 codes for different types of artificial feet that the program covers, many with multiple manufacturers. The analysis suggests the sharp rise in spending is mainly due to a shift in the types of prosthetics being given to Medicare beneficiaries, from ones that cost several hundred dollars to more sophisticated types that run in the low thousands.

Medicare has started covering a computer-controlled ankle/foot that costs $15,000, about as much as a compact car. Some major private insurers still consider it experimental and do not routinely cover it.

Several doctors were surprised by the findings.

“The data are surprising because of the large increase over a short period of time,” said Dr. David Armstrong, a professor of surgery at the University of Arizona and diabetes expert who directs the Southern Arizona Limb Salvage Alliance.

Armstrong wonders if the dazzle of technology is the issue for some practitioners. “They can lose the forest for the trees and focus more on a high-end device because it’s high-end, rather than specifically on function for the patient,” he said

The AP’s data analysis showed a nearly threefold increase in Medicare coverage for one model of foot prosthesis that features a shock absorber and costs about $6,500.

That seemed puzzling to Gilmer. His clinic had recently fitted a patient with that same kind of foot. But the patient is in his 20s and rides ATVs, plays basketball and works on cars.

“Most of our Medicare patients are not going out playing hoops every day,” said Gilmer. Fitting a patient is an individualized process that takes into account many factors, not only physical activity.

Avalere senior vice president Nora Hoban said the data raise questions that need to be answered by further research.

Medicare spokesman Cook said the government is cracking down on fraud involving artificial limbs, saving taxpayers $867,000 in the past year.

But Medicare was unable to provide the AP the ages of beneficiaries who received the different types of artificial feet or the states where they live. Those two pieces of information could help start to find answers to the puzzle.

Officials acknowledge widespread deficiencies in documentation of medical necessity for all kinds of equipment, but they are concerned that tightening requirements could restrict access for seniors.

“We are committed to reducing improper payments and fraud, while ensuring that Medicare beneficiaries have access to the care and services that they need,” said Cook.

The inspector general’s report recommended that Medicare revise a scale of functional activity levels that clinicians use to help determine what kind of artificial limb is appropriate for a particular patient, based on that individual’s lifestyle. It said definitions of the patient’s potential for rehabilitation should be clarified.

“These changes would help ensure that prostheses are matched to beneficiaries’ needs and that (Medicare billing contractors) can assess the medical necessity of these devices,” the report said.

Meanwhile, the rate of diabetes-related foot and leg amputations continues to fall, due to better patient care. Among the Medicare population, it declined 66 percent from 1996-2008, according to the Centers for Disease Control and Prevention.

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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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Australian home-loan approvals jumped in December by the most in seven months and exceeded economists

Iran will soon unveil “big new” nuclear achievements, President Mahmoud Ahmadinejad said Saturday while reiterating Tehran’s readiness to revive talks with the West over the country’s controversial nuclear program.

Ahmadinejad spoke at a rally in Tehran as tens of thousands of Iranians marked the 33rd anniversary of the Islamic Revolution that toppled the pro-Western monarchy and brought Islamic clerics to power.

Ahmadinejad did not elaborate on the upcoming announcement but insisted Iran would never give up its uranium enrichment, a process that makes material for reactors as well as weapons.

The West suspects Iran’s nuclear program is aimed at producing atomic weapons, a charge Tehran denies, insisting it’s geared for peaceful purposes only, such as energy production.

Four rounds of U.N. sanctions and recent tough financial penalties by the U.S. and the European Union have failed to get Iran to halt aspects of its atomic work that could provide a possible pathway to weapons production.

“Within the next few days the world will witness the inauguration of several big new achievements in the nuclear field,” Ahmadinejad told the crowd in Tehran’s famous Azadi, or Freedom, square.

Iran has said it is forced to manufacture nuclear fuel rods, which provide fuel for reactors, on its own since international sanctions ban it from buying them on foreign markets. In January, Iran said it had produced its first such fuel rod.

Apart from progress on the rods, the upcoming announcement could pertain to Iran’s underground enrichment facility at Fordo or upgraded centrifuges, which are expected to be installed at the facility in the central town of Natanz. Iran has also said it would inaugurate the Russian-built nuclear power plant in the southern port of Bushehr in 2012.

Iran’s unchecked pursuit of the nuclear program scuttled negotiations a year ago but Iranian officials last month proposed a return to the talks with the five permanent U.N. Security Council members plus Germany.

“Iran is ready for talks within the framework of equality and justice,” Ahmadinejad repeated on said Saturday but warned that Tehran “will never enter talks if enemies behave arrogantly.”

In the past, Iran has angered Western officials by appearing to buy time through opening talks and weighing proposals even while pressing ahead with the nuclear program.

Washington recently levied new penalties aimed at limiting Iran’s ability to sell oil, which accounts for 80 percent of its foreign revenue, while the European Union adopted its own toughest measures yet on Iran, including an oil embargo and freeze of the country’s central bank assets.

Israel is worried Iran could be on the brink of an atomic bomb and many Israeli officials believe sanctions only give Tehran time to move its nuclear program underground, out of reach of Israeli military strikes. The U.S. and its allies argue that Israel should hold off on any military strike on Iranian nuclear facilities to allow more time for sanctions to work.

Before Ahmadinejad spoke Saturday, visiting Hamas prime minister from Gaza, Ismail Haniyeh, also addressed the crowd, congratulating Iranians on the 1979 anniversary and vowing that his militant Palestinian group would never recognize Iran’s and Hamas’ archenemy, Israel.

Also at the Tehran rally, Iran displayed a real-size model of the U.S. drone RQ-170 Sentinel, captured by Iran in December near the border with Afghanistan. Iran has touted the drone’s capture as one of its successes against the West.

The state TV called the drone is a “symbol of power” of the Iranian armed forces “against the global arrogance” of the U.S.

The report broadcast footage of other rallies around Iran, saying millions participated in the anniversary celebrations, many under heavy snowfall.

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Orders to U.S. factories rose in December, supported by a rebound in business investment in capital goods such as heavy machinery.

The results cap off another strong year for U.S. manufacturing. Combined with strong figures released Thursday on job growth in January, they signal the economic recovery is gathering strength.

Factory orders rose 1.1 percent following a 2.2 percent gain in November, the Commerce Department reported Friday. For the year, total orders were up 12.1 percent following a gain of 12.9 percent in 2010. Orders had plunged 22.1 percent in the 2009, the year the deep recession ended.

For December, orders for so-called core capital goods, which are viewed as a good measure of business investment plans, rose 3.1 percent to an all-time high. That gain was driven in part by a rush by businesses to take advantage of expiring tax breaks.

The advances in 2011 pushed orders for the year up to $5.36 trillion, still slightly below the peak of $5.44 trillion set in 2008.

For December, orders for durable goods, items expected to last at least three years, rose 3 percent, a figure that was unchanged from a preliminary report last week. Orders for nondurable goods slipped 0.4 percent, reflecting declines in petroleum products.

The orders category that signals business investment plans, non-defense capital goods excluding aircraft, climbed to an all-time high of $68.9 billion in December.

While some of that surge likely reflected a rush to make orders before investment tax breaks expired at the end of last year, many economists believe the boom in spending on new equipment will continue even with the tax breaks gone because there is a large amount of pent-up demand on the part of businesses to modernize their operations.

Companies are hiring more, factories are making more goods and more people are buying cars. Those positive signs for the economy have to be balanced against the threat that Europe’s prolonged debt crisis is acting as a drag on global growth. That would hurt sales of U.S. exports.

In December, orders for commercial aircraft were up 18.9 percent, orders for autos increased 1.7 percent and demand for heavy machinery rose 6.7 percent, reflecting strong demand for oil field equipment and construction machinery.

Manufacturing has been a bright spot in the recovery, although there was a slowdown in the middle of last year as factories dealt with supply shortages caused by the Japanese natural disasters that occurred in March.

The Institute of Supply Management reported this week that its gauge of manufacturing activity expanded in January at the fastest pace in seven months. The index rose to 54.1, up from 53.1 in December. Readings above 50 indicate expansion and the index has been in expansion territory for 30 straight months.

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