Financial life in a big town

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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NEW YORK — The stock market posted its biggest plunge after a presidential election Wednesday as reports on jobs and service industries stoked concern the economy will worsen.

Citigroup Inc. tumbled 14 percent and Bank of America Corp. lost 11 percent as the Standard & Poor’s 500 index and Dow Jones industrial average sank more than 5 percent. Nucor Corp., the largest U.S.-based steel producer, slid 10 percent after bigger rival ArcelorMittal doubled production cuts amid slowing demand. Boeing Co. lost 6.9 percent after UBS AG forecast a 3 percent drop in global air traffic next year.

"We had an election; that doesn’t mean the problems go away," said Kevin Rendino, a Plainsboro, N.J.-based money manager at BlackRock Inc. who oversees $10 billion.

The S&P 500 tumbled 5.3 percent to 952.77, erasing Tuesday’s 4.1 percent rally. The Dow retreated 5.1 percent to 9,139.27. The Nasdaq composite index fell 98.48 to 1,681.64.

The slide halted an 18 percent rebound from the S&P 500’s five-year low on Oct. 27. The benchmark for U.S. equities has lost more than 35 percent this year.

A report by ADP Employer Services showed companies cut 157,000 jobs in October, the most since November 2002.

Citigroup lost $2.05 to $12.63, and Bank of America plunged $2.78 to $21.75. The S&P 500 financials index sank 8.8 percent.

Nucor sank $4.16 to $35.50.

Boeing fell $3.67 to $49.55. Its share price, which rose 28 percent from Oct. 10 through Tuesday, "is at least six to nine months from bottoming and beginning to mover higher again," David E. Strauss, a New York-based analyst at UBS, wrote.

Textron Inc. lost $1.71, or 9.2 percent, to $16.93. The world’s biggest business-jet maker reduced the number of Citation jets it plans to deliver next year default payday loan.

General Growth Properties Inc. tumbled almost 50 percent to $2.25 for the biggest drop in the S&P 500.

MBIA Inc. and Ambac Financial Group Inc. slumped after the bond insurers posted wider losses than analysts estimated. MBI fell 22 percent to $8.16. Ambac fell 41 percent to $2.01. Slumping credit markets forced the companies to increase reserves for claims.

Pioneer Natural Resources lost 15 percent to $24.79. The oil and natural-gas producer in North America and Africa reported third-quarter earnings that missed analyst estimates and said it will cut drilling activity.

Sara Lee Corp. slid 14 percent to $10.20. The maker of frozen cakes and Jimmy Dean sausages said full-year profit will be less than previously estimated.

Marsh & McLennan Cos. fell 12 percent to $26.06. The world’s second-biggest insurance broker said profit dropped 78 percent in the third quarter amid the slowing economy and price declines for commercial coverage and reinsurance.

Medco Health Solutions Inc. climbed 9.1 percent to $41.47 for the biggest of only 13 advances in the S&P 500. A surge in use of generic and mail-order prescription drugs fueled a 38 percent increase in third-quarter profit at the largest U.S. drug benefits manager.

Molson Coors Brewing Co. gained 8.3 percent to $41.78. The third-largest U.S. beer maker reported market-share gains in Canada and the U.K.

Chesapeake Energy Corp. climbed 8.2 percent to $24.83 on speculation it will be acquired by BP PLC.

General Motors Corp. slipped 16 cents, or 2.8 percent, to $5.56.

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SIOUX FALLS, S.D. — The United States added nearly 1,400 megawatts of new wind energy capacity during the second quarter of 2008, providing enough electricity to power more than 400,000 homes, according to an industry report released Wednesday.

The American Wind Energy Association said new wind turbines this year will generate some 7,500 megawatts of additional electricity, far surpassing the 5,249 megawatts installed in 2007.

Wind power accounted for more than one-third of the new electric generating capacity installed in the U.S. in 2007, and the industry is projected to grow at a 45 percent pace for the second straight year, said Randall Swisher, the association’s executive director.

"We’re past the point of wind being a marginal player," Swisher said.

A financial bailout package passed by Congress and signed by President George W. Bush earlier this month provided an eight-year extension of investment tax credits for the solar industry but gave just a one-year extension of production tax credits for the wind industry.

Swisher said wind advocates were disappointed they couldn’t secure a more long-term policy, but the industry will work with the next administration on a stable five-year tax credit extension and a federal renewable energy standard internet payday loans.

The government, utilities and financiers also will have to come together to build a nationwide network of high voltage lines that will provide a backbone so the country can fully access its wind potential.

"In 2009, energy will be front and center with the new Congress and the new administration," Swisher said. "Both McCain and Obama have made that clear."

Swisher said the credit crisis and overall economic downturn undoubtably will have some effect on the capital-intensive industry, but it’s too early to predict to what extent.

He said capital in the near-term clearly will cost more and be more difficult to get, but other factors provide a bit of a silver lining. Transportation costs are continuing to come down, and steel prices have dropped significantly in the last few months. A wind turbine, by weight, is 89 percent steel, Swisher said.

Industry growth also is occurring on the manufacturing side. Eight new wind turbine component manufacturing facilities opened in the U.S. this year, nine were expanded and 19 new facilities were announced, according to the trade group.

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CARACAS–Venezuela's economy minister expects OPEC to agree to cut oil supply at an emergency meeting next week to stem crashing world prices by bringing supply and demand into better balance.

The minister, Ali Rodriguez, who is a former OPEC president and a longtime advocate of Venezuela's hawkish stance to bolster prices, reinforced the emerging position among the organization's members that supply will be reduced Oct. 24.

"It is likely there will be a cut" at the meeting, he said in an interview broadcast on state television late Friday.

OPEC's president has said a cut is likely and Qatar's oil minister has said it could be about 1 million barrels a day from an organization that supplies the world with about a third of its oil supply no checking account payday advance.

Oil prices have plunged in recent weeks as a global credit crunch has spurred fears of recessions worldwide that would slash demand for oil. Prices lapped up at $150 a barrel in July but have fallen to less than half that this week.

Leftist Venezuelan President Hugo Chavez depends on oil revenue to sustain his high spending on the majority poor of his nation. If oil stays at its current levels for long, he likely will have to use other sources of income – such as loans or savings funds – to keep programs of food subsidies and free health clinics.

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

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

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

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

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General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) shares fell as much as 10 percent on Thursday, touching a new 5-1/2-year low, as its sale of $15 billion in new stock to investors including Warren Buffett failed to soothe Wall Street worries.

GE shares have tumbled about 40 percent this year as the global credit crunch has taken a heavy toll on its hefty finance arm and the company warned that 2008 profit could drop 12 percent.

The U.S. conglomerate sold $3 billion in preferred stock at $22.25 per share to Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz)(BRKb.N: Quote, Profile, Research, Stock Buzz) on Wednesday, and another 548 million common shares at the same price to other investors on Thursday.

GE said the new capital will help improve its liquidity and provide the option to make acquisitions at a time of market turmoil.

The U.S. Senate approved a $700 billion financial bailout package on Wednesday, and the U.S no checking account payday advance. House of Representatives is scheduled to vote on the plan on Friday.

The rescue plan is intended to reinvigorate credit markets and frozen interbank lending, stabilize battered risky assets, including stocks, and ease corporate lending.

Because of the breadth and depth of its operations, which stretch around the world and include jet engines to electricity-generating turbines to lending to the NBC television network, GE is regarded as an economic bellwether.

“The fact that GE needs to go out and sell shares at $22.25 is not particularly good news,” said Michael Church, financial analyst and portfolio manager at Church Capital Management, a Pennsylvania-based company that oversees $2 billion in investments and holds GE shares. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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MONTREAL–The Ontario Securities Commission moved Friday to restrict the short sale of 13 financial stocks that are also listed in the United States after regulators in that country and the United Kingdom suspended short selling of financial stocks.

"This order is being issued as a precautionary measure to prevent regulatory arbitrage with respect to short selling in Ontario of the securities of the financial sector issues and to promote fair and orderly markets in Ontario," the provincial regulator said.

The restriction, effective immediately, expires Oct. 3.

The stocks affected included the Big 5 Canadian banks (TSX:BMO, TSX:BNS, TSX:CM, TSX:RY, TSX:TD), Manulife Financial Corp. (TSX: MFC) and Sun Life Financial Inc. (TSX: SLF).

Ontario Finance Minister Dwight Duncan said the ban was consistent with recent steps taken in the United States and U.K.

"We are actively monitoring market developments and working with the OSC as it continues to work closely with other securities and financial market regulators in Canada and other countries as we go forward," Duncan said in a statement.

Short-selling is a form of trading that makes money for an investor when a stock's price goes down, rather than up. Market observers say it is not as widespread in Canada as on Wall Street.

The Canadian Securities Administrators said it supported the decision by the Ontario regulator.

"Other jurisdictions in the CSA will be taking similar action today, or in the coming days," Jean St-Gelais, chairman of the CSA and head of Quebec's securities regulator, said late Friday.

Earlier in the day, St-Gelais noted that some of short-selling techniques that have been occurring in the United States are banned in Canada.

"We are following this like everyone around the world. If we can have a united approach, so much the better," St-Gelais told reporters, adding Canadian regulators are "in the loop" of discussion by global regulators.

The U.S. Securities and Exchange Commission took the unusual move to temporarily ban short-selling of 799 financial stocks. The rule took effect immediately and extends through Oct. 2.

Short-selling is a complicated form of trading that sometimes unnerves even seasoned market professionals because of the potential for losses is potentially huge, while other money managers consider it a routine manoeuvre.

In essence, the trader borrows shares and then quickly sells them, knowing that the shares will have to be repurchased and returned to the lender.

The only way short sellers make money is if the stock price falls significantly before the shares must be repurchased and returned 1500 payday loans. The strategy can backfire and create losses for the trader if stock price goes up.

It is a legitimate method of trading, but there have been allegations of abuse, such as spreading false rumours or manipulating debt derivatives to drag down share prices artificially.

Christopher Cox, chairman of the U.S. Securities and Exchange Commission, said Friday that the SEC is "committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets."

"The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets," he said.

The move appeared to work, at least in the short term. North American stock markets rebounded strongly Friday, essentially reversing the losses experience throughout the week.

Chyanne Fyckes, chief investment manager at Stone Asset Management, noted, the situation in Canada is complicated by the presence of 13 provincial and territorial securities commissions – not one national regulator like the Securities and Exchange Commission in the United States.

"I think anybody at this point in time would tell you that the fact that we don't have a single securities regulator is a huge impediment," she said.

"It's completely nonsensical and it makes life very difficult."

Tom Caldwell, chairman of Toronto-based money manager Caldwell Securities Ltd., welcomed the SEC ban, but noted that Canadian markets have a so-called uptick rule which helps control short-selling.

The rule, introduced in the U.S. Securities Exchange Act of 1934 after the stock market crash but eliminated last year, aimed to prevent short-sellers from adding to downward price momentum.

The uptick rule prevents short-selling when the last bid is lower than the previous one, but the SEC scrapped it because it can be circumvented by new financial instruments.

-With files from Canadian Press reporter Kristine Owram in Toronto

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50

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

14

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

69

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

36

Percentage who did not have this discussion last year

Source: Capital One Financial Corp.

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WASHINGTON–U.S. wholesale inflation plunged in August by the largest amount in nearly two years, reflecting a steep drop in energy prices. The Labor Department reported yesterday that wholesale prices fell 0.9 per cent last month, nearly double the 0.5 per cent decline that economists had been expecting.

The price moderation followed three months in which wholesale costs had shot up at levels exceeding 1 per cent a month as energy costs had surged.

Core inflation, which excludes energy and food, was also well-behaved, edging up just 0.2 per cent in August, right in line with expectations, and well below the 0.7 per cent spike of the previous month.

The sharp retreat in wholesale prices will be welcome news at the Federal Reserve, which had been worried that it might have to start raising interest rates if inflation pressures did not start to moderate.

Fed officials are expected to keep rates unchanged when they meet next Tuesday.

With inflation retreating, they will likely hold rates steady for the rest of this year.

If the Fed had been forced to start raising interest rates it would have presented another problem for an economy facing a host of headwinds from rising unemployment, a prolonged housing recession, a severe credit crunch and a troubled financial system.

The 0.9 per cent drop in wholesale prices, the largest one-month decline since October 2006, could show up in lower prices for shoppers eventually first cash advance.

Even with the August decline, wholesale prices over the past 12 months are up by 9.6 per cent.

For August, gasoline prices at the wholesale level fell by 3.5 per cent, the price of natural gas fell by 5 per cent, home heating oil costs were down 13.6 per cent and the cost of liquefied petroleum gas fell by 19.5 per cent.

Food costs edged up 0.3 per cent in August, matching the July gain. The 0.2 per cent rise in prices excluding food and energy left core inflation rising by 3.6 per cent over the past 12 months, the highest since a 3.7 per cent increase for the 12 months ending in May.

Associated Press

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