Aisa Remains Largely to The Upside While AA Sends Europe and Ausralia to the Downside

Miners take it on the chin in Europe

March 17 (Bloomberg) — European stocks fell for the first time in six days, led by commodity producers as Alcoa Inc. cut its dividend and Royal Dutch Shell Plc failed to match all of last year’s oil and gas production with new discoveries. U.S. index futures fluctuated, while Asian shares advanced.

Alcoa tumbled 10 percent in Germany on plans to sell stock and convertible notes as the largest U.S. aluminum maker braces for a quarterly loss. Shell, Europe’s biggest oil company by market value, declined 2.4 percent. Zodiac SA sank 12 percent after Europe’s biggest maker of aircraft seats said operating profit may trail its target.

The Dow Jones Stoxx 600 Index dropped 0.6 percent at 11:13 a.m. in London. Europe’s regional gauge had posted a five-day, 9.6 percent surge after Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said they made money during the first two months of 2009. The Stoxx 600 has still lost 13 percent since Dec. 31.

“It’s too early to say there are tangible signs of improvement that would call for recovery,” said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which oversees $2 billion. “There isn’t a reason to believe in a durable recovery. The economic environment remains difficult.”

The Stoxx 600 pared some of its decline after German investor confidence unexpectedly rose to the highest level in almost two years.

The MSCI Asia Pacific Index rose for a third day, climbing 1.8 percent after Australia said it may lower interest rates. Wesfarmers Ltd., the country’s second-biggest retailer, led the advance. The Bank of Japan said after that close of trading in Tokyo that it will buy subordinated debt from banks in an effort to spur lending and ease the nation’s recession.

U.S. Futures

Futures on the Standard & Poor’s 500 Index added less than 0.1 percent after earlier falling 0.3 percent. U.S. builders probably broke ground in February on the fewest houses on record as the worst real-estate slump in 70 years deepened, economists said before a government report at 8:30 a.m. in Washington.

The U.S. risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, Jim Rogers said in a Bloomberg Television interview today.

“The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers, chairman of Singapore- based Rogers Holdings and the author of books including “Investment Biker.” “That’s bad economics.”

U.S. stocks fell for the first time in five days yesterday as American Express said 5.3 percent of its credit-card loans were at least 30 days late at the end of February, up from 4.7 percent in December and 5.1 percent in January.

Shell, Alcoa

Shell lost 2.4 percent to 1,601 pence. Shell’s reserve replacement ratio, including oil sands, fell to 95 percent in 2008 from 124 percent the previous year, the company said today in a strategy update. That excludes acquisitions, divestments and year-end price effects.

Alcoa dropped 10 percent to $5.49 in Germany. The company’s quarterly dividend will be reduced to 3 cents a share from 17 cents, New York-based Alcoa said in a statement yesterday. Capital spending in 2010 will be $850 million, about half of this year’s total.

Zodiac sank 12 percent to 21.80 euros. The company said that 2008-2009 operating profit may be 5 percent below its target after a slowdown in the airbag market.

Lindt & Spruengli AG tumbled 8.4 percent to 19,825 francs. The Swiss chocolate maker known for its golden foil-wrapped Easter bunnies said 2009 profit may fall as much as 28 percent as the company closes U.S. shops and consumers cut spending.

Europe’s Priciest Market

The Swiss Market Index declined for the first time in six days, losing 0.2 percent. Switzerland is the most expensive market in Europe, with the SMI Index valued at 27 times the profits of its 20 companies, twice that of the MSCI World Index, after almost $42 billion of credit losses and writedowns at UBS AG and Credit Suisse Group AG last year.

Wesfarmers climbed 3.5 percent to A$18.40 in Sydney. Woolworths Ltd., Australia’s biggest retailer, rose 2.6 percent to A$25.34.

The central bank’s decision to leave its key interest rate unchanged earlier this month “would leave adequate flexibility for policy at future meetings,” according to minutes of a March 3 meeting released in Sydney today.

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Even shovel ready projects are getting delayed

North Middleton Township, Pa. — On a warm afternoon last month, a week before the stimulus bill became law, Vice President Joseph Biden strolled out onto a narrow, 79-year-old bridge over the Conodoguinet Creek. He poked his shoe through a hole in a rotting girder, tore off a piece of rusty metal, and examined a crack in the concrete deck.

“Is this a shovel-ready project?” Mr. Biden asked Scott Christie, the state transportation official charged with deploying economic-stimulus money.

“It’s ready to go,” Mr. Christie answered. “I literally have the plans in the car right now.”

It turns out, though, that shovel-readiness is in the eye of the beholder. Soon after his visit, Mr. Biden found out that his model stimulus project wouldn’t see a shovel for almost four more months, possibly longer, knowing how such timetables slip. In North Middleton, a White House eager for action had run up against locals eager to avoid disruption. The locals won.

States are quickly assembling their construction wish lists. But it takes time to advertise for contractors, collect bids, check the numbers, pick a winner and get work underway. A typical paving project — easy roadwork — takes close to three months from the time the money is approved to the arrival of work boots on the ground, according to the American Association of State Highway & Transportation Officials. “It is not an instant process,” says a spokesman.

President Barack Obama and Mr. Biden know their unprecedented $787 billion emergency spending package has to put hard hats on America’s streets soon — or their administration risks losing credibility. On March 3, the president announced the release of the first $28 billion for road and bridge projects. A New Dealish logo to identify construction financed with stimulus money is ready.

Last month, even before the bill became law, Mr. Biden turned to Pennsylvania Gov. Ed Rendell to find the perfect illustration of just how fast the money could produce results.

Mr. Rendell was happy to oblige. Every two weeks he receives a confidential report from Pennsylvania’s Department of Labor listing factory start-ups and jobs created, alongside plant closings and layoffs. One of the latest reports lists 2,941 positions lost, and 1,143 created. “I’m almost scared to open them,” Gov. Rendell says.

To help Mr. Biden, the governor asked his Department of Transportation to come up with a list of projects. Mr. Christie had some paving in mind. But the Route 34 bridge, which had been on the state’s to-do list for more than a decade, had infrastructural sex appeal. Road resurfacing just isn’t “as glamorous as seeing a hole in a bridge,” says Mr. Christie.

North Middleton, with a population of less than 12,000, is a bedroom community for Harrisburg and Carlisle. The bridge is a key corridor for commuters and an important access way for the North Middleton Volunteer Fire Co., whose main station is about 1,000 feet from the bridge.

Mr. Biden flew to Pennsylvania on Feb. 11. Security agents closed the bridge to traffic before his motorcade arrived.

“What are you going to show me that we’re going to be using the stimulus money for?” Mr. Biden asked Mr. Christie that day.

Link for chart

“I’ve got a great example of a bad bridge,” Mr. Christie responded.

The state lists the bridge as “fracture critical,” meaning that if one of the two metal support girders broke, the entire structure would collapse. The green-painted girders are perforated with rust, the deck buckled with cracks. Putting up a new bridge would cost about $1.8 million and generate 50 to 60 jobs, according to state estimates.

On the bridge, Messrs. Christie and Rendell told Mr. Biden that they expected to start demolition in April.

From their yellow ranch home — the first house on the north side of the bridge — Creedin Cornman, 84 years old, and his wife, Reba, 77, noticed the commotion. Mr. Cornman remembers a rainy night in the 1960s, when he fish-tailed his International Scout and hit one of the girders. The door flew open and his poodle escaped. “I left my mark on that bridge,” Mr. Cornman recalls with a hint of pride. (The poodle was fine).

The stimulus package “sounds good,” says Mr. Cornman. “You have to start somewhere.”

Mrs. Cornman isn’t so sure. “I don’t know — it’s a lot of money,” she says.

On the day of Mr. Biden’s visit, Chester “Chet” Schlusser, 76, watched from the bed of his pickup truck while a Secret Service agent kept watch on his yard. The day before, the state had written Mr. Schlusser a letter offering him $8,200 for a sliver of his property to make room for the new bridge. The government included a blue brochure titled, “When Your Land is Needed for Transportation Purposes.” Mr. Schlusser says he’s inclined to sell the parcel.

He worked in bridge construction for 10 years, and, stimulus or not, doubts the project will get going quickly. “People aren’t geared up to start on a moment’s notice,” he says.

On Feb. 18, the day after Mr. Obama signed the stimulus bill into law, a Biden aide called the state’s Department of Transportation to see when the ground-breaking would take place.

But April wasn’t looking likely. Unbeknownst to the officials gathered on the bridge, at a public meeting on the project the previous summer, the head of school transportation had requested that construction not overlap with more than one school year. Two bus routes for the local high school crossed the bridge, and the school district wanted to minimize the disruption that a long detour would cause. The only way to make that work was to begin construction after school let out on June 10.

The state agreed to add language to the construction contract pushing back the start date. It plans to seek bids early next month, open them on April 30, review them for a few weeks and issue a “notice to proceed” by early to mid-June. Work could then commence on the site and be completed by year’s end.

“To do it much sooner would be to go against what we’ve been trying to do all along, which is hold it to a single school season,” says Timothy Bolden, of Gibson-Thomas Engineering Co., the new bridge’s designer.

News that construction would have to wait for months came as a shock to the White House.

“The vice president was impatient,” says a senior White House official. “He wanted it done.”

At a White House event on Feb. 23, Mr. Biden brought up the delay with Mr. Rendell. The governor, unaware of the school issue, reassured the vice president that the project was on track.

“America didn’t get in this mess overnight, and the cannot turn it all around overnight,” says Annie Tomasini, a Biden spokeswoman. “But we are moving forward with unprecedented speed.”

On Feb. 27, Messrs. Biden and Rendell met again on the sidelines of an event in Philadelphia. This time, Mr. Rendell confirmed that construction wouldn’t begin until late June.

“If we want to be smackers and make sure stimulus rolls over everything, we could have started it in April,” says Mr. Rendell. “We acceded to the request of the school district.”

Still, he says, “I wish it hadn’t been the bridge the vice president walked on.”

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China likely to be stronger after crisis

GUANGZHOU, China: The global economic downturn, and efforts to reverse it, will probably make China an even stronger economic competitor than it was before the crisis.

China, the world’s third-largest economy behind the United States and Japan, had already become more assertive; now it is exploiting its unusual position as a country with piles of cash and a strong banking system, at a time when many countries have neither, to acquire natural resources and make new friends.

Last week, China’s prime minister, Wen Jiabao, even reminded Washington that as one of the United States’ biggest creditors, China expects Washington to safeguard its investment.

China’s leaders are turning economic crisis to competitive advantage, said economic analysts.

The country is using its nearly $600 billion economic stimulus package to make its companies better able to compete in markets at home and abroad, to retrain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Construction has already begun on new highways and rail lines that are likely to permanently reduce transportation costs.

And while American leaders struggle to revive lending — in the latest effort with a $15 billion program to help small businesses — Chinese banks lent more in the last three months than in the preceding 12 months.

“The recent tweaks to the stimulus package indicate a sharper focus on the long-term competitiveness of Chinese industry,” said Eswar S. Prasad, a former China division chief at the International Monetary Fund. “Higher expenditures on education and research and development, along with amounts already committed to infrastructure investment, will boost the economy’s productivity.”

The international economic slowdown is also doing some things that Chinese authorities had tried and failed to do for four years: slow inflation, reverse what had been an ever-growing dependence on exports and pop a real estate bubble before it could grow even bigger.

The recession in most of the large economies in the world is inflicting real pain here — causing a record plunge in Chinese exports, putting 20 million migrant workers out of their jobs and raising the potential for increased and sustained social unrest. But as President Hu Jintao told the National People’s Congress last week, “Challenge and opportunity always come together — under certain conditions, one could be transformed into the other.”

To that end, Chinese companies are shopping for foreign businesses to acquire. The commerce ministry is leading a delegation of corporate executives to Europe this week for the ministry’s first mergers and acquisitions trip; the executives are looking at companies in the automotive, textiles, food, energy, machinery, electronics and environmental protection sectors.

The government initiatives coincide with some immediate benefits of the slowdown for China. For instance, air freight and ocean shipping costs have plunged by as much as two-thirds since last summer as demand has fallen.

Blue-collar wages, which had doubled in four years in some coastal cities, have fallen for many workers this winter, reviving China’s advantage in labor costs.

Unemployment has pushed down the piece rates that factories pay for each garment sewn or toy assembled. Overtime has practically disappeared.

Lao Shu-jen, a migrant worker from Jiangxi province who works at a blue jeans factory here, said that he earned $350 a month late last year but would be lucky to earn $220 a month this spring.

“There are a lot of blue jeans” piling up in the back of the factory with no sign of buyers, he said.

College graduates and highly qualified middle managers, in acutely short supply a year ago, are now widely available because of layoffs. They are likely to stay that way as universities expand — although white-collar unemployment could pose a threat of social unrest: limited job opportunities for students contributed to the Tiananmen Square protests 20 years ago.

Today some jobs are still available. Four days after a shoe factory closed here for lack of orders, laying off several hundred workers, there were four ads on the factory’s front gate from other shoe factories seeking to hire skilled workers.

Unskilled laborers face the greatest difficulty finding jobs. But with subsidies from Beijing, provincial governments have embarked on large-scale vocational training programs of the sort that the United States has discussed but not actually tried.

Guangdong province alone, here in southeastern China, is quadrupling its vocational training program this year to teach four million workers engaged in three-month or six-month programs.

The main comparable program in the United States, under the Workforce Investment Act, has been training fewer than 250,000 a year, although President Obama’s stimulus program provides funding that could more than double the number of American workers in training programs.
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Grassley of Iowa is mad

This is the ultimate way to end AIG’s rough day.

First they got chastised by the media. Then the President went after them. Then Andrew Cuomo did. Then a Congressmen proposed a special marginal tax rate just for AIG bonus takers.

And now, reports Fox News, Sen. Charles Grassley of Iowa says AIG execs should follow “the Japanese example” by publicly apologizing and “do one of two things: resign or commit suicide.”

We wonder, Mr. Grassley, would you say that the people in finance who have committed suicide after their businesses collapsed did the honorable thing?

Maybe it’s time everyone just took a deep breath on this story.

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Can we really bailout everyone?

House Speaker Nancy Pelosi, worried about the fate of The Chronicle and other financially struggling newspapers, urged the Justice Department Monday to consider giving Bay Area papers more leeway to merge or consolidate business operations to stay afloat.

In a letter to Attorney General Eric Holder, released by Pelosi’s office late Monday, the San Francisco Democrat asked the department to weigh the public benefit of saving The Chronicle and other papers from closure against the agency’s antitrust mission to guard against anti-competitive behavior.

“We must ensure that our policies enable our news organizations to survive and to engage in the news gathering and analysis that the American people expect,” Pelosi wrote.

The speaker said the issue of newspapers’ survival and antitrust law will be the subject of a hearing soon before the House Judiciary Subcommittee on Courts and Competition Policy, chaired by Rep. Hank Johnson, D-Ga.

Pelosi’s spokesman, Brendan Daly, said the speaker was moved by the recent announcement by the Hearst Corp., the parent company of The Chronicle, that it would be forced to sell or close the paper if it could not achieve major cost-savings quickly. Hearst has said the paper lost $50 million last year and that this year’s losses will likely be worse.

The Chronicle’s largest union, representing nearly 500 employees, ratified a contract Saturday that will clear the way for at least 150 job cuts while also eliminating certain rights and benefits. Another Hearst paper, the Seattle Post-Intelligencer, will cease publication Tuesday and become a web-only news outlet, Hearst said Monday.

“She’s been a big fan of newspapers her whole life,” Daly said. “She wants to ensure their survival, but is also very concerned about anti-trust laws. We have to make sure we follow the well-established guidelines of the Justice Department.”

Pelosi released the two-page letter after meeting in her Capitol office last week with Chronicle at-large editor Phil Bronstein and Hearst general counsel Eve Burton, where they discussed the future of the paper and federal media shield legislation.

In the carefully worded letter, Pelosi urged the Justice Department to take a broader view of media competition in the Bay Area. Rather than seeing The Chronicle’s main competitors as other newspapers, she urged the department to consider television and Internet media sources and online advertising outlets as competitors as part of any future antitrust review.

A more expansive view of competition could smooth the way for future discussions of a merger or a consolidation of advertising, distribution and other business operations between The Chronicle and the Bay Area News Group, which owns the San Jose Mercury News, the Contra Costa Times and the Oakland Tribune. Hearst has a nearly one-third stake in the non-Bay Area papers of MediaNews, the Denver chain that owns the Bay Area News Group.

“I am confident that the Antitrust Division, in assessing any concerns that any proposed mergers or other arrangements in the San Francisco area might reduce competition, will take into appropriate account, as relevant, not only the number of daily and weekly newspapers in the Bay Area, but also the other sources of news and advertising outlets available in the electronic and digital age, so that the conclusions reached reflect current market realities,” Pelosi wrote.

“This is consistent with antitrust enforcement in recent years under both Republican and Democratic administrations. And the result will be to allow free market forces to preserve as many news sources, as many viewpoints, and as many jobs as possible.”

Justice Department spokeswoman Gina Talamona said Monday night that the department had received the letter, but would not comment further. “We will respond as appropriate,” she said.

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White House funnels $ to entrepreneurs

Republicans were gaining traction with their charge that President Barack Obama’s proposed tax hikes would hurt small businesses. So no surprise when the White House threw an event on Monday’s schedule to extol the administration’s plans to funnel stimulus funds to entrepreneurs.

By the time the event took place, however, Obama’s efforts to respond to this blaze were taken over by a much bigger fire: Public and lawmaker outrage over lavish bonuses for bailed-out American International Group.

At many turns, Obama these days finds himself in what for him is a relatively unfamiliar place—on defense.

Part of the Obama mystique—one his own aides work hard to promote—is that he and his team are sublimely calm and collected, too cool to care about Washington chatter, too disciplined to be thrown off message by the uproar du jour.

The reality is that the Obama team can be every bit as reactive and improvisational as any other political operation. And recent weeks have revealed some of the Obama operation’s signature tricks for fighting back when Washington storylines throw the president on defense:

Get ahead of the story

The White House knew last weekend that word was about to break on AIG’s mega-million-dollar bonuses to top executives – some of the very same execs that made the risky bets that brought the company down, and almost dragged the world’s economy down with it.

So the Obama administration put out word for the Sunday newspapers that Treasury Secretary Timothy Geithner had told the company CEO earlier in the week that the payments were unacceptable and had to be negotiated.

It was a way to try to blunt a bad story, with a few paragraphs up high about how Obama’s team tried to head off the problem at the start. Fed Chairman Ben Bernanke, who doesn’t work for Obama, still helped capture some of that Washington vs. Wall Street anger when he told “60 Minutes” the AIG situation made him angry, so much so that he slammed down the phone a few times.

Rebut critics, without really engaging them.

Obama aides mock the Washington hand-wringers and are loathe to ever concede a move was borne out of fretting from the capital’s chattering class. But they sure do know how to respond – on their terms.

Beleaguered Republicans on Capitol Hill see political potential in tying Obama to the unsavory business of earmarking?

The president takes to the cameras to roll out his own (modest) earmark reform plan, thereby deflecting attention from his signing a pork-laden spending bill that same day – in private.

The explanation from press secretary Robert Gibbs drew knowing laughter from the White House press corps: “Some things are signed in public, and some aren’t.”

Those same Republicans think they can get traction against Obama’s budget by framing the tax increases as small-business killers?

That’s what prompted Obama to schedule the a small business event at the White House and surround the president with small business owners who, by the way, were available to talk the media afterward about the new proposals Obama is touting.

And that butt of jokes from late-night comics and source of much fretting from Wall Street to K Street, Tim Geithner?

Quietly let cameras into the Oval Office one day for a routine economic briefing so the president can be seen standing by his man, a picture suitable for framing on the front-page of the influential Financial Times last week.

Hit the history books

At times, the White House does directly respond to criticism. When they do, they’re quick to note that the facts are on their side.

Facing questions about the pace in which they’re staffing up key agencies after numerous appointees fell by the wayside, administration officials turned to history. They quickly distributed to reporters a graph showing how many nominations and appointments the past three presidents had made in their first three months and noted that they were on track or even ahead of precedent (with March not even over yet!)

Never mind that it’s not exactly apples-to-apples, as presidents Bush and Clinton weren’t trying to battle a global economic meltdown as they put together their Treasury teams.

It was also history that Obama cited when, at the start of an education speech, he offered an unmistakable rejoinder to those nervous he may be taking on too much too fast.

“I know there’s some who believe we can only handle one challenge at a time,” he said, before noting the weighty tasks juggled by Lincoln, FDR and JFK.

Work the Bully Pulpit

After his stimulus package hit some bumps along the way, Obama pivoted sharply away from bipartisan bonhomie and toward a more campaign-style approach. He still courted moderate Republicans – winning over three of them in the Senate – but the president’s primary focus became convincing the public of the recovery package’s urgency.

He did this directly, taking to the road in hard-hit states and earning wall-to-wall media attention talking to real Americans while also using a primetime news conference to make his case.

Aides credit this decision for the quick pace in which House and Senate negotiators came to a final agreement, getting the bill to the president’s desk by President’s Day.

More to the point, it also elevated the legislation – putting it on a more serious plane than it had been defined to date in an often unsightly nitty-gritty over extraneous and small provisions.

Asked what they would do if an issue like health care should gets bogged down in the congressional back and forth, a senior White House official pointed to their response on the stimulus.

When it slowed down, Obama stepped up.

It was a defensive move, executed due to the stagnating Beltway debate of the bill, but it got him back on offense.

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