Financial life in a big town

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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St. Louis area casinos saw business climb 4.8 percent in August, according to figures released this week by Missouri and Illinois gaming regulators.

Local gamblers spent $91.3 million at the region’s six casinos, up from $87.2 million in the same month last year payday loans. As has been the case all year, much of the gain was driven by the new Lumi

Virgin America Inc. has signed a deal with the largest online travel-booking site in a bid to give the airline's fares wider exposure.

Virgin America's deal allows Expedia Inc. to list all of the low-fare carrier's flights and schedules on its consumer site, Expedia.com, and on its business travel arm, Egencia LLC.

The agreement also calls for discount travel site Hotwire.com, another Expedia business, to offer Virgin America fares.

Terms of the deal were not released.

Virgin America, which began service August 2007, flies to San Francisco, Los Angeles, San Diego, Seattle, Las Vegas, New York and Washington, D.C no fax payday advance. An application to begin service to Chicago is pending.

Burlingame-based Virgin America also has deals with other online travel booking sites including Travelocity, Orbitz and Priceline. The privately held airline is owned partly by British billionaire Richard Branson.

Expedia, based in Bellevue, Wash., allows travellers to buy airline tickets, hotel reservations, car rentals and vacation packages. It also has a luxury travel division called Classic Vacations.

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United Airlines travelers across the Atlantic can leave their money in their pockets when the food cart comes down the aisle.

The nation’s second-largest carrier on Tuesday backed off from a plan to begin charging for coach-class meals on its flights to Europe after some customer backlash. The carrier’s letter to customers on Tuesday began "Thank you for your direct, candid feedback."

"We heard loud and clear from our corporate and our Elite frequent fliers that they value our hot meal service," United (UAUA, Fortune 500) spokeswoman Robin Urbanski said.

Although many carriers have stopped serving free food on coach domestic flights, customers on long-haul flights have been able to count on being fed.

The letter said that with fuel prices so volatile, United would "continue to be proactive in testing new ideas."

United said that it will still begin serving cold sandwiches or snack boxes instead of hot meals to business-class customers on about 16 domestic flights a day on Oct 1 fast cash online. United said it would "evaluate the results and determine next steps by the end of the year." 

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Despite Bill Clinton’s powerful endorsement of Barack Obama Wednesday night, there’s still plenty of resentment inside Team Hillary over the fact that she’s not on the ticket and her strategists aren’t on the campaign. But when it comes to economic policy, the Democrats are jelling into one big happy family.

Obama’s inner sanctum now includes Clinton Treasury Secretaries Lawrence Summers and Robert Rubin, former White House chief economist Laura Tyson, and - most recently - Gene Sperling, former White House adviser and chief economic policy wonk for Hillary Clinton during the primary season.

"Everyone who was with Hillary Clinton is now with us," Jason Furman, Obama’s economic policy director, tells Fortune. "The campaign has deepened and broadened its economic bench in the general election."

That bench also includes poverty expert Jared Bernstein of the Economic Policy Institute; Austan Goolsbee, the University of Chicago economist who has been at Obama’s side since the start of the race; and Georgetown University law professor Daniel Tarullo. Investor Warren Buffett and former Fed Chairman Paul Volcker top off the list of regular advisers. A larger circle also includes CEOs Jamie Dimon of JPMorgan Chase (JPM, Fortune 500), Indra Nooyi of PepsiCo (PEP, Fortune 500), and Eric Schmidt of Google (GOOG, Fortune 500).

Managing this team of large and accomplished egos is the 38-year-old Furman, a child of Greenwich Village (and liberal parents) who was so intellectually precocious he had to trek uptown to Columbia University for math and physics because his high school didn’t offer sufficiently advanced courses. He later obtained his PhD in economics from Harvard. Despite his relative youth, Furman so far seems adept at meshing the two campaign cultures. "These are good friends of mine," he says of the Clinton folks. (He could have substituted "former bosses of mine;" Furman once reported to Sperling, and later to Rubin.) After the primary campaign was over, he notes, "I reached out to them and they reached out to me."

Furman’s job is made easier by the fact that Clinton and Obama ran on virtually identical economic agendas. The biggest difference was that Clinton’s healthcare plan mandated that individuals be covered, and Obama’s didn’t cashadvance.com. Since the primary campaign ended, Obama has borrowed one Clinton idea - a healthcare tax credit for small business.

Furman runs the Obama economics shop through regular conference calls with advisers - coupled with ad hoc meetings to respond to news events. On July 13, after the plunge in Fannie Mae and Freddie Mac share prices prompted the Federal Reserve and Treasury Department to consider intervention, Furman’s first call was to Summers. A conference call to a broader group followed. Then Furman reported the results to Obama. Within hours, the campaign issued a statement saying any government plan should "maintain a steady flow of capital to the housing market" and should protect taxpayers rather than bail out shareholders.

The politics of economics is hardly new territory for Furman. He was Kerry’s economic policy director in 2004 and worked on the Gore campaign in 2000. Before joining Obama in June, Furman was running the Hamilton Project, a centrist think tank founded by Rubin and former deputy Treasury Secretary Roger C. Altman.

Furman’s own reputation is as a centrist. When Obama tapped him there was a mini-uproar from the left wing of the party over his defense of Wal-Mart (WMT, Fortune 500) and free trade agreements. Furman reminded his critics of his work opposing efforts to privatize Social Security, and the storm settled.

"When Barack hired me," Furman says, "he told me my job was to be an honest broker and incorporate different points of view."

Now that he’s integrated Team Clinton into the campaign, that job is done. If Obama wins, Furman’s toughest (and potentially most influential) task comes when it’s time to advise the president on how to dole out all those prime government jobs - from Treasury Secretary on down. Those Clinton folks are no dummies on the workings of Washington: Being loyal and visible soldiers now means being front and center for the big titles later. 

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As proposed buyouts sweep through the drug sector, Pfizer’s failure in recent years to buy another big rival has surprised many investors, some of whom say its too late for a big acquisition to rescue the No. 1 drugmaker.

Investors had long expected Pfizer to acquire another large drugmaker or sizable biotechnology companies to gain rights to new medicines before it loses U.S. patent protection on its Lipitor cholesterol fighter in 2011.

“The hole created by generic forms of Lipitor will be so gapingly big that it’s hard to argue convincingly for an acquisition,” said Scott Richter, a portfolio manager with Fifth Third Asset Management. He noted that other Pfizer drugs will also lose patent protection soon after Lipitor.

The company, which rakes in $13 billion a year for Lipitor, also badly needs new products to offset sales declines for drugs already facing generic competition.

Pfizer, which became the industry leader by buying Pharmacia Corp and Warner-Lambert Corp over the past decade, is trading at 11-year-lows because its laboratories have failed to produce important drugs payday advance low fees. Pfizer edged up 1 cent to $19.85 on the New York Stock Exchange on Monday.

Richter said other drugmakers are facing similar problems, including a poor record of developing new drugs or getting them approved. “So Wall Street would be super-skeptical about the success of bringing two problem children together.”

Moreover, Richter said, Pfizer would probably need to repatriate many billions of dollars in overseas profits to finance a big deal. That would greatly raise its tax rate, he cautioned.

Pfizer’s inaction has been underscored in recent weeks by Roche Holding AG’s (ROG.VX: Quote, Profile, Research, Stock Buzz) $44 billion offer for all outstanding shares of its U.S. partner, Genentech Inc (DNA.N: Quote, Profile, Research, Stock Buzz), and Bristol-Myers Squibb Co’s (BMY.N: Quote, Profile, Research, Stock Buzz) $4.5 billion bid for cancer-drug partner ImClone Systems Inc (IMCL.O: Quote, Profile, Research, Stock Buzz). 

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McDonald’s Corp (MCD.N: Quote, Profile, Research, Stock Buzz) posted July sales that beat many analysts’ forecasts as its key U.S. market posted its largest gain in five months with offers like $1 beverages appealing to cash-strapped consumers.

Shares of the world’s largest restaurant chain rose to an all-time high on Friday after it reported an overall 8 percent increase in sales at stores open at least 13 months.

The United States, where McDonald’s derives about 45 percent of its sales, has been under pressure as consumers cut back on spending due to rising food and fuel costs.

But $1 beverage offers and marketing focused on the company’s Big Mac hamburger sandwich helped lift same-store sales in the United States to a 6.7 percent increase, the largest since an 8.3 percent rise in February when sales were helped by an additional day for the leap year, the company said.

Analysts had been expecting a July same-store sales increase of 4.5 percent to 6.4 percent globally and 4 percent to 4.5 percent in the United States, according to three analysts’ research notes.

The company has also benefited as U.S easy payday loans. consumers trade down from casual dining chains when they do eat outside the home. Casual dining has been particularly hard hit by the U.S. slowdown, as evidenced by the bankruptcy of Bennigan’s and other chains.

“There probably is some continuing trading down,” John Owens, restaurant analyst at Morningstar, said. “I think that they are also gaining share in the fast-food space as well.”

Owens noted that McDonald’s also appeals to consumers because of the ubiquity of the chain. 

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Personal income rose slightly in June after surging the previous month on the first wave of economic stimulus checks, the government reported Monday.

The Commerce Department said individual income increased by 0.1% in June after a revised 1.8% jump in May. Economists polled by Briefing.com were expecting a 0.1% decrease in June.

Personal spending in June increased by 0.6%, which was more than the 0.5% increase that economists polled expected.

However, the spending jump was driven by inflation. Individual spending, when adjusted for inflation, actually fell by 0.2% following a 0.3% increase in May, according to the report.

"Inflation is taking a pretty big bite out of the actual dollars," said Adam York, economic analyst at Wachovia. "It means that we are spending more dollars on gas, food, and things that are increasing in cost."

Another measure in the report that tracks prices that consumers pay on goods and services, excluding food and energy, rose by 0.3% over the previous month.

In addition, the core personal consumption expenditures index - a year-over-year inflation gauge that excludes food and energy - rose to 2.3% from 2.0% a year earlier. Core PCE was 2.2% in March, April and May. The Federal Reserve is widely believed to prefer that core PCE stay in a range of 1% to 2%.

While personal income rose in June, disposable income fell by 1.9%, after spiking up by 5.7% in May low fee cash advance. And in inflation adjusted dollars disposable income decreased by 2.6% after jumping 5.2% in May.

Disposable income is what consumers have left over after they pay taxes.

The drop-off in disposable income tracks a monthly decline in the amount of economic aid distributed by the federal government.

The Treasury Department sent out $48.1 billion in economic stimulus payments in May and $27.9 billion in June.

"The pattern of changes in income reflect the pattern of payments associated with the Economic Stimulus Act of 2008," according to the report.

Excluding stimulus rebate payments, disposable personal income actually increased by 0.3% in June after increasing by 0.4% in May.

"There is no way that the underlying trend increase could make up for the decline in the tax rebate payments," said York. 

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Malaysia's exports rose at the slowest pace in three months in June as shipments of electronics to the U.S. and European Union declined.

Overseas sales increased 18.4 percent from a year earlier to 58.2 billion ringgit ($17.8 billion), the Trade Ministry said in a statement in Kuala Lumpur today. That matched the median estimate of 14 economists in a Bloomberg News survey.

Slowing growth in the U.S., Asia's largest export market, is crimping demand for made-in-Malaysia Intel Corp. computer chips and other electronics. The pace of expansion in Malaysia's $151 billion economy may ease to about 5 percent this year from 6.3 percent in 2007, the central bank said last month.

“You've got an electronics slowdown,'' said Joseph Tan, a senior market strategist at Fortis Bank SA in Singapore. “Invariably there will be a slowdown from the growth that we had last year, because the U.S. is still a very major trading partner for Malaysia.''

Shipments to the U.S. fell 5.8 percent to 7.07 billion ringgit in June from a year earlier on lower exports of electrical and electronics products, the trade ministry said. Sales to the EU slipped 1.7 percent.

The U.S., No. 1 buyer of Malaysian products last year, has fallen behind Singapore in the first six months of 2008.

Economic growth may moderate in the next 12 months, Bank Negara Malaysia said last week. The central bank broke with its inflation-fighting Asian neighbors when it kept rates unchanged at 3.5 percent on July 25, saying its immediate concern was to “avoid a fundamental economic slowdown.'' Inflation jumped to a 26-year high of 7.7 percent in July.

Palm Oil

Overseas sales may weaken further in coming months as easing prices reduce the gains made by Malaysia's palm oil and energy exports so far this year low fees payday loan. Malaysia is Southeast Asia's second-largest oil and gas producer and the world's No. 2 palm oil seller.

“Signs are emerging that this commodity boom may soon come to an end as a slower world economy and sky-high prices damp global demand for commodities,'' said Azrul Azwar Ahmad Tajudin, an economist at Bank Islam Malaysia Bhd. in Kuala Lumpur.

Crude oil in New York has slipped more than 14 percent from a record $147.27 a barrel on July 11, and palm oil produced by Sime Darby Bhd. and other Malaysian planters closed below 3,000 ringgit a ton on July 29 for the first time since December.

Exports of palm oil jumped 82.8 percent in June from a year earlier, though they fell 4.2 percent from May. Sales of crude oil climbed 50.2 percent from a year ago, the slowest pace in six months. Shipments of liquefied natural gas rose 60.1 percent.

Sales of Unisem Bhd. semiconductors and other electrical and electronics goods rose 6.5 percent from a year earlier, the smallest gain in three months. Such goods accounted for 38.5 percent of total exports in June, down from 40.4 percent the previous month.

Imports expanded 12.1 percent in June, leaving a trade surplus of 12.97 billion ringgit.

Exports increased 15.5 percent in the first six months from a year earlier. Imports rose 8.3 percent in the same period, leaving a trade surplus of 67.59 billion ringgit.

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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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