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Aug 23 2010

Monday Business Edition

Now That’s Rich

By PAUL KRUGMAN, The New York Times

Published: August 22, 2010

We need to pinch pennies these days. Don’t you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy.

But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.

What – you haven’t heard about this proposal? Actually, you have: I’m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent.

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. … And the average tax break for those lucky few – the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year – would be $3 million over the course of the next decade.

In Striking Shift, Small Investors Flee Stock Market

By GRAHAM BOWLEY, The New York Times

Published: August 21, 2010

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.

The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.

But then came a grim reassessment of America’s economic prospects as unemployment remained stubbornly high and private sector job growth refused to take off.

Investors’ nerves were also frayed by the “flash crash” on May 6, when the Dow Jones industrial index fell 600 points in a matter of minutes. The authorities still do not know why.

From Yahoo News Business

Special BP Blowout Disaster Coverage

1 Gulf claims chief says no-sue rule was his idea

By HARRY R. WEBER, Associated Press Writer

Sun Aug 22, 4:09 pm ET

NEW ORLEANS – The new administrator for damage claims from Gulf oil spill victims said Sunday it was his idea, not BP’s, to require that anyone who receives a final settlement from the $20 billion compensation fund give up the right to sue the oil giant.

But Ken Feinberg told reporters that he has not yet decided whether the no-sue requirement will extend to other companies that may be responsible for the worst offshore oil spill in U.S. history.

He insisted that payouts from the claims facility he will run will be more generous than those from any court. Feinberg also ran the government compensation fund created after the 9/11 attacks, and there was a similar no-sue provision.

2 For Gulf tourism, problem is perception – not oil

By NOAKI SCHWARTZ, Associated Press Writer

Sun Aug 22, 1:51 pm ET

BILOXI, Miss. – On the great yawning porch that once belonged to Confederate president Jefferson Davis, two women sit in rockers listening to the cicadas and looking out over Mississippi Sound as they wait for their tour to begin.

Before Hurricane Katrina, some 200 people came each day to visit the house – the only structure on the oak-shaded Beauvoir estate not destroyed by the storm. And that’s just what’s needed to break even. Tourism has dropped off 20 percent here, with just a few visitors on some days since BP PLC’s well blew out in the Gulf of Mexico.

The story here is mirrored across the Gulf Coast. Beaches have been cleaned of crude, the leak has been plugged and some cities never had oil wash ashore at all. Still, tourists stay away from what they fear are oil-coated coastlines – a perception officials say could take years to overcome and cost the region billions of dollars.

Outrageous?  We report…

3 HSBC in talks to buy majority Nedbank stake

by Roland Jackson, AFP

6 mins ago

LONDON (AFP) – HSBC revealed Monday that it is in “exclusive” talks with insurer Old Mutual over the purchase of a majority stake in South Africa’s Nedbank, as the lender seeks to expand further into emerging markets.

The announcement comes amid a recent flurry of merger and acquisitions activity that has helped spur the British stock market higher during the normally quiet month of August.

“HSBC Holdings plc has entered into exclusive discussions with Old Mutual plc about the possible acquisition of a majority stake in Nedbank Group Limited, South Africa’s fourth largest banking group by total assets,” Europe’s biggest bank said in a brief statement to the London Stock Exchange.

4 India’s Mahindra vows to become global SUV player

by Jung Ha-Won, AFP

Mon Aug 23, 3:11 am ET

SEOUL (AFP) – Indian carmaker Mahindra and Mahindra said Monday it would use its purchase of South Korea’s Ssangyong Motor to become a global player in the sport utility vehicle market.

Pawan Goenka, president of Mahindra’s automotive and farm sector, said the merger would help both companies expand in the global market.

“We believe that Ssangyong and Mahindra make powerful companies to create a global SUV brand,” he told reporters after the Indian company signed a preliminary agreement to buy a controlling stake in Ssangyong.

5 Germany’s rail masterplan exposes disagreements

by Simon Sturdee

Sat Aug 21, 4:57 am ET

STUTTGART, Germany (AFP) – With work barely begun, public ire over one of Europe’s biggest construction projects has exposed some hard truths about Germany, the continent’s top economy.

Protestors have come out in force against a seven-billion-euro (nine-billion-dollar) grand plan to turn Stuttgart and the surrounding region into a 21st-century continental rail hub.

The nine-year project aims to make the southwestern city part of one of the continent’s longest high-speed lines, the 1,500-kilometre (930-mile) “Magistrale for Europe” linking Paris, Strasbourg, Vienna and Bratislava.

6 Wall Street gloom set to stretch

by Ron Bousso, AFP

Sat Aug 21, 2:16 pm ET

NEW YORK (AFP) – Wall Street stocks ended mostly lower the past week despite positive company earnings and corporate activity as pessimism over the US economic recovery prevailed.

Sentiment could be further dampened the coming week with the government expected to significantly revise lower the economic growth chalked up in the second quarter period.

Shares were especially pulled down by government data Thursday showing new weekly jobless benefit claims jumping to the highest level in nine months, and slower regional manufacturing activity.

7 Asian markets make sluggish start

by Nick Coleman, AFP

2 hrs 42 mins ago

HONG KONG (AFP) – Asian stocks had a sluggish start to the week on Monday with Sydney treading water following inconclusive national elections and Japanese investors unsettled by the stubbornly strong yen.

Sydney’s S&P/ASX 200 index ended the day flat at 4,429.0 following an early plunge, while the Australian dollar recovered after hitting a low of 0.8842 US dollars from 0.8940 late Friday. It was at 0.8916 in the afternoon.

“No one is willing to do too much either way until it settles down,” Adrian Leppinus, client adviser with Cameron Securities, told AAP, after Prime Minister Julia Gillard failed to score an outright win in Saturday’s election.

8 Dollar recovers, all eyes on yen

AFP

Fri Aug 20, 2:48 pm ET

LONDON (AFP) – The dollar recovered against the euro and the yen on Friday, while all eyes were on the Japanese currency amid speculation that Tokyo may intervene to curb its rise.

In late London trade, the euro fell to 1.2687 dollars from 1.2821 dollars in New York late Thursday. Against the Japanese currency, the dollar rose to 85.63 yen from 85.38 yen on Thursday.

The dollar won back ground after falling against most leading currencies on Thursday as grim economic data dampened hopes for the US recovery.

9 ‘Bold plan’ for Mekong area rail link approved

by Ian Timberlake, AFP

Fri Aug 20, 8:22 am ET

HANOI (AFP) – A “bold” plan for a railway system connecting more than 300 million people who live around one of the world’s great rivers, the Mekong, was approved Friday, officials said.

Ministers from Cambodia, China, Laos, Myanmar, Thailand and Vietnam adopted the plan which they called “a significant first step toward the development of an integrated… railway system”.

The six nations’ national railway systems do not link up except for a line that connects China and Vietnam, and Laos has no rail network at all.

10 SABMiller, Asahi eye Foster’s beer unit: sources

By Michael Smith and David Jones, Reuters

2 mins ago

SYDNEY/LONDON (Reuters) – Brewing groups SABMiller (SAB.L) and Asahi Breweries (2502.T) are looking at Foster’s Group’s (FGL.AX) beer operations, valued at more than $10 billion, but have not yet made any formal offers, sources said.

Long-running interest in the Australian brewer’s beer business, know as Carlton & United Breweries, resurfaced on Monday after newspaper reports said SABMiller was considering buying Australia’s biggest brewer.

Foster’s said in May it would split the beer unit from its ailing wine business, putting its valuable beer operations with brands including Foster’s Lager, Victoria Bitter and Pure Blonde at the center of takeover talk in the brewing world.

11 HSBC in talks for 70 percent of S.Africa’s Nedbank

By David Dolan and Kelvin Soh, Reuters

2 hrs 9 mins ago

JOHANNESBURG/HONG KONG (Reuters) – HSBC is in talks to buy up to 70 percent of South Africa’s Nedbank, in a potential $6.8 billion deal that would give Europe’s biggest lender a broader gateway to the fast-growing African continent.

HSBC and Anglo-South African insurer Old Mutual, which owns a controlling stake in Nedbank, said in separate statements on Monday they were in exclusive talks about the deal.

Old Mutual said HSBC could purchase up to 70 percent of South Africa’s fourth-largest bank, an acquisition that could be worth about 49.9 billion rand ($6.8 billion), given Nedbank’s current market value.

12 BYD warns of slower H2, says dealer pullouts overstated

By Alison Leung and Fang Yan, Reuters

Mon Aug 23, 4:45 am ET

HONG KONG/BEIJING (Reuters) – China’s BYD Co Ltd (1211.HK), backed by U.S. billionaire Warren Buffett, warned on Monday of a slowdown in car sales during the second half of the year and said it will launch new models to lessen the impact.

Sluggish sales in the past few months and high inventory have seen several dealers in Beijing and other areas pulling out of BYD’s sales network, a setback for the high-flying carmaker, the China Business News reported on Monday.

BYD joins the ranks of its rivals in terms of expectations for a slowdown in the second half, largely as the result of Beijing applying the brakes to the economy’s breakneck expansion in 2009.

13 World stocks above one-month lows

By Natsuko Waki, Reuters

Mon Aug 23, 4:47 am ET

LONDON (Reuters) – World stocks stabilized just above last week’s one-month low on Monday as an encouraging euro zone business survey and positive corporate merger activity news helped ease concerns about a global economic slowdown.

Mining shares gained as financial markets bet Australia’s inconclusive weekend elections would lead to a change of government which would spell the end to a plan to impose tax on major iron ore and coal mines.

A Markit survey showed the euro zone’s economic recovery moderated slightly this month but companies are more optimistic about the coming months. HSBC (HSBA.L)’s plan to buy stakes in South Africa’s Nedbank (NEDJ.J) in a potential $6.8 billion deal also brightened investor sentiment.

14 Investors defensive with data in focus

By Chuck Mikolajczak, Reuters

Sun Aug 22, 10:44 am ET

NEW YORK (Reuters) – With Wall Street limping along through the summer doldrums, investors say they will remain on guard for more deterioration in what’s expected to be a light-volume week.

The S&P 500 suffered losses last week and is in danger of falling further due to worries about economic data.

“The market is moving into a defensive posture coming into next week,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

15 FDA commissioner says agency needs more authority

Associated Press

16 mins ago

WASHINGTON – The head of the Food and Drug Administration said Monday her agency is taking the massive egg recall “very, very seriously,” but needs more enforcement powers.

Appearing on morning news shows, Margaret Hamburg urged passage of legislation pending in Congress that would give her agency significantly more authority to intervene in the area of food safety.

Hamburg also said the FDA wants to shift its focus to “a preventive approach” to identify problems in the food supply before they cause disease outbreaks.

16 Corporate deals help lift European markets

By PAN PYLAS, AP Business Writer

1 hr 52 mins ago

LONDON – European stock markets rose modestly Monday as the recent pickup in corporate dealmaking helped offset the gloom from disappointing U.S. economic data.

Australian shares traded flat despite an uncertain general election result, as mining companies rallied on hopes that a government tax proposal will be ditched.

In Europe, the FTSE 100 index of leading British shares was up 26.05 points, or 0.5 percent, at 5,221.33 while Germany’s DAX rose 19.79 points, or 0.3 percent, at 6,024.95. The CAC-40 in France was 23.18 points, or 0.7 percent, higher at 3,549.74.

17 Stocks set to open the week with moderate gains

By STEPHEN BERNARD, AP Business Writer

22 mins ago

NEW YORK – Stock futures rose modestly Monday as investors tentatively move back into the market after a recent retreat because of worries about the economy.

There are no major economic reports due out Monday that could sway trading. So while investors are set to buy stocks, they are buying Treasury bonds as well. That has sent interest rates slightly lower.

European markets rose, which could be providing a lift to U.S. markets. They are getting a lift from a fresh round of merger and acquisition activity. HSBC Holdings PLC is in talks to buy a controlling stake in Nedbank Group Ltd. of South Africa from Old Mutual PLC for as much as $6.8 billion. Potash Corp. of Saskatchewan Inc. formally rejected BHP Billiton’s offer to acquire the fertilizer company.

18 Southern farmers say disaster aid plan failed them

By STEVE KARNOWSKI, Associated Press Writer

Mon Aug 23, 3:22 am ET

MINNEAPOLIS – The permanent disaster aid program in the 2008 Farm Bill was intended to spare Congress from having to scrape up extra money every time a drought, flood or hurricane struck farm country, but growers in the South claim the plan has failed them.

They argue the program needs changes, and as proof they point to the situation in Arkansas, where Sen. Blanche Lincoln has for months struggled to secure a special $1.5 billion package of disaster aid for Southern farmers hit by bad weather last year. After Lincoln failed to get the funding through Congress, the Obama administration agreed to provide the money administratively.

Southern farmers said they need the help because they didn’t buy crop insurance, a requirement to qualify for the permanent disaster aid plan. Crop insurance sign-up is high among Midwest corn, soybean and wheat farmers, but in the South, many rice and cotton farmers complain premiums are too high for the benefits they receive.

19 Bond bubble fear returns as investors flee stocks

By BERNARD CONDON, AP Business Writer

Sun Aug 22, 7:07 pm ET

NEW YORK – Maybe bonds aren’t so dull after all.

Bad economic news sent investors out of stocks and into U.S. Treasurys this past week, extending a rally that has defied some of Wall Street’s best minds, and, some say, logic. Treasury bonds maturing in 20 years or more have returned 2.1 percent so far this year. By contrast, stocks in the Dow Jones industrial average have lost 2 percent.

The question now: Is it too late to jump into the great government bond bonanza?

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