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BUSINESS THURSDAY The Portland Press Herald
Thursday, March 24, 2011
Japanese stocks lure investors in droves
SECTION C
New-home sales at 48-year low The price drop for existing homes has cooled demand for new ones, weakening builders and the recovery. The Associated Press
The rash of buying signals the belief that rebuilding after the disaster will lead to economic growth. The New York Times
NEW YORK — Investors are flocking to Japanese stocks in the wake of the costliest natural disaster in history. Exchange-traded funds that hold Japanese stocks brought in a record $1.2 billion the week after a devastating earthquake and tsunami hit Japan and caused the worst nuclear crisis since the Chernobyl disaster, according to TrimTabs Investment Research. The inflow to Japanese funds represented a jump of nearly a fifth of total assets. The rash of buying is a signal that investors believe that the disaster, which claimed thousands of lives, will lead to economic growth as the world’s third-largest economy rebuilds much of the infrastructure along its northeastern coast. “Natural disasters often have dramatic effects on the markets, but very often they are only short-term ones,” said David Kelly, the chief market strategist for JP Morgan Funds. JP Morgan analysts anticipate that Japan’s gross domestic product, the broadest measure of an economy’s health, will start to grow in the second half of the year from reconstruction and reach a rate of 4 percent during the last three months of the year. Any economic growth over 2 percent is large for Japan, which has an aging population and has battled deflation since its stock market burst in the early 1990s. The rash of buying of stocks came after the country’s benchmark Nikkei 225 index fell 16 percent over two days in panicdriven selling, reaching its lowest level since the 2008 financial crisis. The index bounced back nearly as quickly, jumping 5.6 percent on March 16 and 4.3 percent on March 22. The index is now down 7.8 percent since the quake. Japanese stocks were among the cheapest in the world even before the disaster. Though Japan is the world’s third-largest economy, its national debt amounts to 200 percent of its GDP, the largest of any industrialized nation.
The Associated Press
No homes are being built yet in the fenced-off Sonterra subdivision in Queen Creek, Ariz., which contains 18 lots. The government says new homes have accounted for just 5 percent of all sales so far this year, keeping construction companies on the sidelines.
WASHINGTON — Home construction in the United States is all but coming to a halt. Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago. Sales are now just half the pace of 1963, even though there are 120 million more people in the United States now. The sliding sales show just how far the housing market has fallen since the bubble burst four years ago. And they’re a blow to the economic recovery as it draws strength from other places. Diminished sales have driven the median price of a new home down to about $202,000, the lowest since 2003. If the sluggish sales continue, analysts say, small companies that build homes will fold, meaning less competition as the market improves and higher prices later.
Bank of America dealt dividend-increase blow The Associated Press
NEW YORK — It was one more blow for Bank of America: The Federal Reserve didn’t allow the nation’s largest bank to increase its dividends. The decision by the Fed makes Bank of America Corp. the only one of the four largest U.S. banks that wasn’t able to raise its dividend, something shareholders have demanding. The Fed’s decision, which BofA disclosed in a regulatory filing Wednesday, also raised questions over whether the bank is strong enough to withstand another economic downturn. For CEO Brian Moynihan, the Fed’s rejection was another setback in his 14-month tenure, which has been marked by a sharp increase in lawsuits, mounting losses
from credit cards and decreased income from checking accounts. As recently as March 8, Moynihan promised shareholders they would likely see a dividend increase in the second half of the year. “We have the capital. We have the brand, and now we’ve been building the balance sheet,” Moynihan said at a conference for investors. Problem is, the Fed didn’t agree. Bank of America, along with the 19 largest banks in the country, was subject to a “stress test” in the first quarter. The Fed tested the banks’ balance sheet and other measures to see if they were strong enough to withstand another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has now asked the Charlotte, N.C., bank to submit a revised plan, and it is unclear if it will be allowed to increase its dividend in the second half of the year.
“This is a reality check for Bank of America,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $3.2 billion in assets. “They have a lot of work in front of them.” Bank of America shares fell 1.7 percent to $13.65. Spokesman Scott Silvestri said in a statement that the bank would resubmit its plan in the summer for a modest dividend increase in the second half of this year. Moynihan will have to convince investors and the Fed that the bank is strong enough to weather another recession. At a time when the bank’s revenue is shrinking because of new regulations, it’s not going to be an easy task. Last week, the Fed cleared the way for several banks – including JPMorgan Chase & Co, Wells Fargo & Co, and Citigroup Inc. – to increase their dividends.
The pay channel will soon offer old seasons of series still making new episodes to Comcast subscribers. The Associated Press
The Associated Press
Bank of America, headquartered in Charlotte, N.C., could submit a revised plan seeking a dividend hike.
Briefcase Snack sales, success abroad rev up General Mills quarter General Mills Inc.’s net income rose 18 percent in the fiscal third quarter, driven by the sale of more snacks and strength abroad. The maker of Nature Valley snack bars and Cheerios cereal has started to raise prices for some of its products over the past few months to cope with rising ingredient costs. It expects price increases will accelerate during the current fiscal fourth quarter. Chairman and CEO Ken Powell anticipates that quarter will include the “highest earnings growth of the year.” That expectation led the food company to maintain its 2011 earnings and revenue outlooks Wednesday.
Car hauler told to protect 1,700 ‘hostage’ GM cars A car-hauling company accused of keeping 1,700 General Motors vehicles as hostages has been ordered not to damage, destroy or conceal them. GM is suing Atlanta-based Allied Systems, claiming cars and pickup trucks are being illegally stored, mostly in Dearborn, Mich. GM says Allied had been in a labor dispute with drivers and wants the automaker to pay more for its services.
Federal Judge Marianne Battani on Tuesday ordered Allied to protect the vehicles. She scheduled a hearing for March 29. A message seeking comment Wednesday was left with Allied Systems President Mark Gendregske. GM says the vehicles are worth $47 million and some already have been purchased.
Income drops, stock rises for Micron Technology Micron Technology Inc., which makes computer memory chips, posted a big decline in quarterly net income as it struggled with falling prices for its chips, a perpetual problem for its industry, but the results were still stronger than Wall Street expected. Its stock rose in extended trading following the release of the earnings report. The company said it expects improved pricing through the remainder of its fiscal year.
FedEx, pilots union reach deal with 3% pay raise FedEx and the Air Line Pilots Association say they approved a labor agreement that includes a 3 percent pay raise. The association approved the agreement in balloting that ended early Wednesday. The pilots also reportedly receive lump sum payments, new safety programs and expanded foreign duty assignment rules.
Caterpillar affirms outlook, sees good times ahead Caterpillar is affirming its 2011 profit outlook and offering a rosy forecast for the years ahead because growth in the world’s population and expansion of its cities will create demand for its mining and construction equipment. Company officials sounded optimistic Wednesday as they met with
The Associated Press
Starbucks CEO Howard Schultz begins the 2011 shareholders meeting Wednesday in Seattle, Wash. Starbucks Corp. is expanding the products and places it sells to customers and adding extras – like free online access to Marvel Comics in its cafes and single-serve coffee machines in other stores. The cafes took a hit during the recession but have since rebounded. “We are now playing from a position of strength,” said Chief Financial Officer Troy Alstead. analysts at the ConExpo-ConAgg trade show for the construction industry in Las Vegas.
Shareholders re-elect Jobs to Walt Disney Co. board Walt Disney Co. shareholders returned Apple Inc. Chief Executive Steve Jobs to the entertainment company’s board of directors,
Edition: PD Sec/Page: C7 Rundate: Thursday, March 24, 2011
despite questions raised about whether his health would hamper his ability to serve. Jobs was re-elected, along with 12 other directors. The shareholders also rejected a proposal that would have ended the practice of allowing Disney’s board to administer a retest to determine whether senior executives qualify to receive stock bonuses.
ROP-PPH-Biz-5Thur-Color Modified 5/06/09 InDesign*
Please see HOMES, Page C8
Showtime originals to end run on Netflix
FED’S ‘STRESS TEST’ A DO-OVER?
The CEO thought an increase likely, but the Fed wants further proof of the bank’s strength.
“The longer it goes on, the more builders will drift away from the industry altogether,” said Paul Ashworth, chief U.S. economist of Capital Economics. Ashworth noted that a surge in foreclosures is forcing down prices for previously occupied homes even faster than they’re falling for new homes. As a result, new homes are less attractive to buyers. “That’s not going to change for at least another year or two,” Ashworth said. “Under these conditions, you can’t really see home builders willing to ramp up, and that’s bad for buyers.” Sales of new homes plunged in February to an annual rate of 250,000, the Commerce Department said Wednesday. It was the third straight monthly drop. That’s far below the pace economists say is healthy, about 700,000 a year. Last year, 323,000 new homes were sold, the worst year on record and the fifth straight year of declines. Economists don’t expect this year to be any better, and say it could take two years
Vote favors selling AirTran to Southwest for $1.4 billion AirTran Airways shareholders voted Wednesday to sell the discount airline to bigger rival Southwest for $1.4 billion. The deal would give Southwest Airlines Co. a foothold in Atlanta – the largest U.S. city it doesn’t already serve – and routes to Mexico and the Caribbean. AirTran Holdings Inc. said more than 98.6 percent of votes cast and 77.5 percent of all shares were voted for the sale. Southwest still needs approval from federal antitrust regulators before it can close the deal, which it expects to do in the next three months. – From news service reports
LOS ANGELES — Amid an emerging rivalry between traditional pay TV operators and rising star Netflix Inc., CBS Corp.’s Showtime pay TV service confirmed Wednesday that back seasons of current original series like “Dexter” and “Californication” will not be available on Netflix’s streaming service as of this summer. Instead, CBS will offer them to subscribers who pay for Showtime through Comcast Corp. on Comcast’s Xfinity TV platform. The deal has been in place since February, but news of the details broke this week after Netflix announced it was buying the right to debut the series “House of Cards” from executive producer David Fincher. Debuting an original series on its service makes Netflix even more of a direct rival to pay TV channels like Showtime and HBO. Netflix had 20.2 million subscribers in the U.S. at the end of December, compared with 20 million for Showtime and HBO’s estimated 28 million. Showtime originals that have stopped airing on TV, including “The Tudors” and “Sleeper Cell,” will continue to be available for streaming on Netflix. CBS and Netflix announced a two-year deal last month that allows older shows that are not generating new original episodes to be run on Netflix’s streaming service, including “Medium,” “Frasier” and “Cheers.” The deal followed a 10-year pact that CBS cut with Comcast in August that allowed for CBS and Showtime shows to be played on Comcast’s Xfinity TV platform, which can be accessed on computers and iPad tablets. CBS is seeking to maximize the money it can receive from Netflix from older content, while encouraging consumers to pay separately for new original shows on Showtime. Goldman Sachs analyst Ingrid Chung said the impact of CBS pulling some shows from Netflix would not materially affect Netflix, but it could signal that it will have to pay more for the right to stream shows in the future. CBS shares closed up 21 cents Wednesday at $24.87. Netflix shares finished the regular session up $7.67, at $229.06.
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