Financial life in a big town

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. 

Source

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). 

Read more

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. 

Read more

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. 

Source

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.

Source

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 

Read more

A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.

The case began like hundreds of others filed since the U.S. housing boom spawned a rise in sales of adjustable rate loans. Susan and Bryan Andrews of Cedarburg, Wisconsin, claimed that lender Chevy Chase Bank FSB (CCX_pc.N: Quote, Profile, Research, Stock Buzz) had hidden the true terms of what they believed was a good deal on a low-interest loan.

In their 2005 lawsuit, the couple said the loan’s interest rate had more than doubled by their second monthly payment from the 1.95 percent rate they thought was locked in for five years. The interest rate rose well above the 5.75 percent fixed-rate loan they had refinanced to pay their children’s college tuition.

The Andrews filed the case seeking class action status; and in early 2007, U.S. District Judge Lynn Adelman ruled that the bank had violated the Truth in Lending Act, or TILA, and that thousands of other Chevy Chase borrowers could join them as plaintiffs.

The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S free credit report and score. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.

The idea of canceling tainted loans to stem a tide of foreclosures has caught hold in other quarters; a lawsuit filed last week by the Illinois attorney general asks a court to rescind or reform Countrywide Financial Corp (CFC.N: Quote, Profile, Research, Stock Buzz) mortgages originated under “unfair or deceptive practices.”

‘MASSIVE CLASS SUITS’

The mortgage banking industry already faces pressure from state and federal regulators, who have accused banks of lowering underwriting standards and forcing some borrowers, through fraud, into costly adjustable loans that the banks later bundled and sold as high-interest investment vehicles. 

Read more

Polish central bank monetary policy makers accused Governor Slawomir Skrzypek of involving the rate- setting body in his dispute with the government, a move that may dent their credibility as members of an independent panel.

Skrzypek called on the government to overhaul public finances, cooperate with the central bank in fighting inflation and prepare a program to adopt the euro during a press conference on June 25. The comments were not agreed to by the council beforehand, policy maker Dariusz Filar said in a phone interview in Warsaw today.

“I was totally surprised as I found out about the governor's address from the media,'' he said. “It was a blunder as it happened during a press conference to explain the council's rate decision. These two things should not have been combined as they involve policy makers in a political conflict.''

The central bank chief and the Cabinet blame each other for accelerating inflation that has led to higher borrowing costs and concerns that faster wage growth and employment will boost price growth even more. The inflation rate, at 4.4 percent in May, will remain above 3.5 percent upper limit of the central bank's target until 2010, the institution said yesterday.

Prime Minister Donald Tusk said on June 22 that the Monetary Policy Council waited too long before raising interest rates as inflation accelerated. That assessment was echoed by Finance Minister Jacek Rostowski.

Rate Increases

Policy makers raised borrowing costs four times this year to curb demand that has been derived from wage growth and employment pay day loans.

“The governor has defended the Monetary Policy Council, but the views of its members vary so it should have been earlier agreed to with us,'' Filar added.

Fellow policy maker Halina Wasilewska-Trenkner agreed.

“The cooperation with the government would be needed, and appealing for that through the media is inappropriate,'' she said in a phone interview. “The escalation of a conflict with the government won't help this issue. As long as there is no consensus between two parties, it should not be publicized.''

She added that even though the substance of Skrzypek's appeal is justified, it's not the way to resolve the problem.

The clash marks a fresh conflict between policy makers and the governor. The nine rate setters earlier this year criticized changes in the central bank's structure, prompting Deputy Governor Jerzy Pruski to quit. Policy makers asked the parliament's top official and the Constitutional Tribune to clear up the issue.

“Mutual relations now require serious discussion with Governor Skrzypek to clarify some things,'' said Filar. “It's a pity that we have to talk about it'' after the fact and not before.

Source

CALGARY–Fertilizer producer Agrium Inc. says it is looking forward to record profits as "unprecedented demand for crop inputs."

The Calgary-based company said it expects second-quarter earnings of US$2.80 to $3 per share, up from previous guidance of $1.92 to $2.22, "due to very strong results from both our retail and wholesale operations."

Agrium's results are "particularly impressive given that the North American spring application season has been hampered by excessively cold and wet weather this year," president and CEO Mike Wilson said in a release.

"Continued strong global crop prices have created unprecedented demand for crop inputs and we foresee an extended demand-driven cycle."

The company said its forecast assumes there is no unfavourable financial impact from its Egyptian nitrogen facility EAgrium, at which construction was halted in April“due to permitting and other delays created by the Egyptian government."

A syndicate of banks providing financing for the project has requested the suspension of future draws on a credit facility and says the loan is in default no qualifying payday advance.

Agrium said it expects government approval but has "concerns these issues may not be resolved in the near term, in which event EAgrium's shareholders would be exposed to the loss of their total equity commitment."

Agrium has $165 million invested in the project with a total equity commitment of $280 million.

Source

General Motors Corp (GM.N: Quote, Profile, Research) expects the recovery in the U.S. auto market will be “a long haul” that only begins in the second half of the year, a senior executive at the No. 1 U.S. automaker said on Wednesday.

The market comments by Mark LaNeve, vice president for sales for GM North America, were the first by a top GM executive since Ford Motor Co (F.N: Quote, Profile, Research) cut its outlook for U.S. sales last week, citing rising gas prices and sharply lower demand for its trucks and SUVs.

“I think it’s going to be a long haul,” LaNeve said at an industry conference in Los Angeles, when asked when he expected U.S. auto sales to recover. “We think it starts to get better in the back half of the year.”

But LaNeve said the battered U.S. housing market and consumer confidence would have to both improve to support a rebound for auto sales.

“We don’t look for it to come roaring back instant payday loan. We think it will be a slow ramp up,” LaNeve said at the event in Los Angeles sponsored by Automotive News.

U.S. sales for GM are down almost 17 percent for the first four months of the year, compared with a decline of about 8 percent for industrywide sales.

Most analysts now see U.S. sales of cars and light trucks dropping to near 15 million units in 2008, down from about 16.15 million in 2007 and the lowest annual tally for the industry since 1994.

GM said in late April when it announced a $3 billion first-quarter loss that it would face a slower recovery in its home market than it had first forecast and a faster shift out of higher margin trucks and SUVs in response to higher gas prices. 

Read more