DOJ Opens Preliminary Investigation Into The Telecom Industry
The Department of Justice has begun an initial review to determine whether large U.S. telecom companies such as AT&T Inc. and Verizon Communications Inc. have abused the market power they’ve amassed in recent years, according to people familiar with the matter.
The review of potential anti-competitive practices is in its very early stages, and it isn’t a formal investigation of any specific company at this point, the people said. It isn’t clear whether the agency intends to launch an official inquiry.
Among the areas the Justice Department could explore is whether wireless carriers are hurting smaller …
European Markets Take a 1% + Haircut Today
European stocks fell Monday, as economic fears weighed on sentiment in a quiet start to the week’s trading.
The pan-European Stoxx 600 Index was down 1.7% at 200.7. London’s FTSE 100 declined 1.2% to 4186.7, Frankfurt’s DAX was 1.6% lower at 4633.9 and Paris’s CAC-40 fell 1.5% to 3071.4.
“Continuing declines in key commodities are fuelling worries that the global economic recovery remains a distant prospect, prompting ongoing profit-taking on recent asset gains,” said Collins Stewart Wealth Management.
“Distinct recovery has melted away, and it feels as if we’ve been slightly misled,” added Owen Ireland, sales broker at ODL Securities.
Fundamentals were thin on the ground Monday, with little on the domestic economic or corporate calendars to offer direction in an uneventful market.
Basic resources stocks were among the key decliners. Base metal prices were lower following the drop in the price of crude which, in turn, was affected by bearish economic data last week. Even equity rating upgrades for a cluster of mining stocks by Deutsche Bank could not help lift spirits.
The crude-oil futures market looked weak, continuing the negative tone after Thursday’s weak U.S. payrolls release increased concern about an economic recovery by the world’s largest energy user. The front-month August crude contract on Globex was recently $2.77 lower at $63.96 per barrel….
World Bank Tells G-8 They ” Should Not Presume Economic Recovery Is Near “
By Laura MacInnis
GENEVA (Reuters) – The Group of Eight nations should not presume a global economic recovery is near, World Bank President Robert Zoellick said in a letter to G8 host Italian Prime Minister Silvio Berlusconi obtained by Reuters on Monday.
The letter, dated July 1 and copied to all G8 leaders, said interventions by central banks and governments appeared to have “broken the fall in the global economy” by stabilising financial markets and boosting demand.
“Yet 2009 remains a dangerous year. Recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain,” Zoellick wrote.
“I recognize that some developed countries are now considering a policy mix that assumes the recovery is at hand. But for the developing world, it is far too early to think of such measures.”
The G8 heads of government are expected to issue a statement on the situation of the world economy during their meeting in the central Italian city of L’Aquila, where financial regulation needs will be discussed alongside perspectives on the Middle East, Iran, North Korea and Somali piracy.
In his letter, Zoellick stressed the July 8-10 summit should also “focus on the plight of the poor in the developing world.”
The World Bank estimates that the gross domestic product of developing countries except for China and India will decline by 1.6 percent this year, “causing more job losses and throwing more poverty into poverty,” Zoellick said….
Judge Calls Bondholders of GM Dissidents As He Approves Sale of Assets To Uncle Sammy’s Motors
A federal judge approved the sale of General Motors Corp.’s assets to a new government-run company, removing a key hurdle to the auto maker’s plan to exit bankruptcy.
Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York issued an 87-page ruling late Sunday allowing the sale to go forward. He rejected pleas from dissident bondholders and product-liability claimants who objected to GM’s plans.
The judge said the only alternative to GM’s plans would be liquidation, “a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates. In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”
The ruling paves the way for GM’s government-brokered restructuring, in which the auto maker will move its “good” assets — including automotive brands Chevrolet, Cadillac, Buick and GMC — to a new company owned by the U.S. Treasury. The sale approval clears the way for GM to potentially exit bankruptcy in less than two months….
Oil Expected To Be Weak In This Weeks Trade Based On Rising Stock Piles
By Jenny Gross
July 3 (Bloomberg) — Crude oil may fall on speculation that U.S. fuel inventories will climb as the recession curbs demand in the world’s biggest energy-consuming country.
Eighteen of 37 analysts surveyed by Bloomberg News, or 49 percent, said futures will decline through July 10. Nine respondents, or 24 percent, said the market will be little changed and 10, or 27 percent, forecast that oil prices will rise. Last week, 55 percent of analysts said prices would drop.
U.S. gasoline stockpiles climbed 2.33 million barrels to 211.2 million last week, an Energy Department report on July 1 showed. Inventories of distillate fuel, a category that includes diesel and heating oil, climbed 2.9 million barrels to 155 million, the highest since 1987.
“Refiners continue to operate at healthy rates, product inventories are rising and the market will soon focus on distillate,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Total daily fuel demand averaged over the four weeks ended June 26 was down 5.8 percent from a year earlier, the Energy Department said. Distillate-fuel demand over the period fell 9.4 percent to 3.4 million barrels a day.
Crude oil for August delivery fell $2.43, or 3.5 percent, to $66.73 a barrel this week on the New York Mercantile Exchange. Prices are up 50 percent this year.
The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.
Unemployment Zaps Earnings Worldwide
By Jack Kaskey and Melita Marie Garza
July 6 (Bloomberg) — Earnings at such companies as Ford Motor Co. and ArcelorMittal may continue to decline in the next three months as the highest unemployment in a quarter-century keeps consumers from spending.
The year-over-year profit slide for Standard & Poor’s 500 Index members may narrow to 21 percent from July through September, after declines of an estimated 34 percent in the second quarter and about 60 percent in the year’s first three months, according to data compiled by S&P and Bloomberg. Earnings may rise by year-end based on comparisons to late 2008, which was roiled by the meltdown in financial markets.
Consumers in the U.S., the world’s largest economy, remain concerned about jobs after unemployment reached a 26-year high in June, analysts and investors said. Until Americans start spending again on cars, cell phones and clothes, most U.S., Asian and European companies may keep squeezing out costs.
“So long as unemployment keeps rising, the consumer will continue to be very conservative,” said Walter “Bucky” Hellwig, who helps manage $30 billion at Morgan Asset Management in Birmingham, Alabama. “Any improvement will come from cost cutting, and that’s not sustainable. If you have no anticipation of top-line growth — it will be a little tougher to generate that enthusiasm into the fourth quarter.”
Consumer Confidence…
AA Expected To Kick Off Another Gloomy Quarter
Alcoa, whose results are traditionally viewed as an indicator of the country’s economic health, is expected to post a third consecutive quarterly loss this week.
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But many on Wall Street no longer see the aluminum producer’s numbers as a bellwether portending either a deeper recession or an easing of the global downturn.
“It’s a large company in a major industry and it is the first to report, so it gets special recognition,” said Joseph Battipaglia, a market strategist at Stifel Nicolaus & Co in Yardley, Pennsylvania.
“But it’s only telling you about the health of the aluminum industry and that’s not very good right now.
“FedEx and UPS are better signs of a change in direction,” he added, referring to the two largest U.S. shipping or package-delivery companies. “I wouldn’t take what Alcoa says as a significant indication of how the American or global economy is faring.”
Battipaglia said that even if Alcoa — the first member of the Dow Jones industrial average to release earnings — reported an upsurge of orders Wednesday, it was no real sign of a turnaround. Most customers let their inventories go down in recent months, he noted, and were now restocking while aluminum prices are relatively low…..
Where Will States Get The Gravy As Property Taxes Are Expected To Be Fought Due To Falling Real Estate Values ?
Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets.
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Librado Romero/The New York Times
Peggy Tombro listed her New Jersey house for less than the assessed value, but her taxes are rising.
The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust.
“It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County, Calif., outside San Francisco. “These people are desperate. They know their home’s gone down in value. They’ve watched their neighborhoods being boarded up. They literally stand in there and say: ‘When can I have my refund check? I need to feed my family. I need to pay my electric bill.’ ”
The tax appeals and reassessments present a new budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large counties said that falling property tax revenue was significantly affecting their budgets, said Jacqueline Byers, the association’s research director.
Officials in some states say their property tax revenue is falling for the first time since World War II…..
Joe Biden Play’s The Spin Game
Joe Biden told “This Week” that the Obama administration “misread how bad the economy was.”
He also the administration made this mistake because they just looked at the consensus forecasts at the time…and they proved to be wrong.
If the latter is true, the administration deserves the crap it has been getting. In the months leading up to Obama’s inauguration, the economy fell off a cliff. The credit markets seized up. Several major investment banks went bust. The Fed and Treasury talked of an apocalypse. Everywhere you looked, you heard one analyst after another saying the country was plunging toward another Great Depression.
If anything, the economy since the inauguration has been better than many analysts feared. So this “we didn’t get it” sounds like revisionist history to us.
More likely, in our opinon, the administration concluded that it would never get its huge spending increases passed if its projections reflected the “most likely” scenario for the economy. And so it produced the economic forecasts (growth, stress tests, jobs, etc) that have begun to destroy Obama’s credibility on this critical issue.
Regardless of the thinking behind the over-optimism, Obama has made a serious error here. Recovering from financial disasters like this usually takes years–and it likely will this time, too, regardless of what Obama does …..
Mortgage Loan Losses Top 65%
It’s not just delinquencies, defaults and foreclosures that have blown apart any models for mortgage lending. So are the loan loss severity numbers. Gretchen Morgenson at the NY Times writes about the work of Alan M. White, an assistant professor at the Valparaiso University law school in Indiana. White analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo and found the average loss was 64.7 percent of the original loan balance.
“Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average,” Morgenson writes.
BofE Expected To Inject 25bn more Sterling Into Quantitative Easing
The Bank of England’s monetary policy committee (MPC) is expected to extend its programme of quantitative easing (QE) by £25 billion, though there are doubts whether it will take action beyond that.
The Bank has so far committed £125 billion of QE in an attempt to boost the money supply, mainly through purchases in the markets of gilts and other assets. It has permission from the Treasury for a further £25 billion of such purchases, which analysts expect to be announced this week. Beyond this, it would have to seek new approval from the Treasury, which indemnifies the Bank against losses on the scheme.
The shadow MPC, a group of independent economists that meets under the auspices of the Institute of Economic Affairs (IEA), today calls on the Bank to maintain the base rate at 0.5% and extend QE beyond the £150 billion it currently has permission to undertake.
“There was a widespread feeling among the members of the IEA’s shadow committee that QE was the only effective monetary policy instrument presently available to the authorities,” it said. “Several committee members believed that the present schedule of gilt purchases should be extended. Some members thought that an additional £100 billion to £150 billion of debt repurchases was required once the current package had run its course.”….
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