Personal spending stagnated in August as the slowing economy continued to weigh on consumers, according to a government report released Monday.
The Commerce Department reported Monday that personal spending was virtually unchanged in August. Economists had forecast a 0.2% increase in personal spending.
Spending has not been this weak since February, when it was also flat.
Personal income, meanwhile, increased by 0.5% in August after a revised 0.6% decline in July. Economists surveyed by Briefing.com were expecting income to have grown by 0.2% last month.
After adjusting for taxes and certain price changes, however, real disposable income contracted 0.9%, according to the report.
"With the labor market remaining very weak, slow to negative growth in disposable income will most likely plague the consumer for at least the next six months," said Adam York, an economist at Wachovia Economics Group.
Consumer spending increased in May and June thanks to billions of dollars in payments sent to Americans as part of the Economic Stimulus Act of 2008.
The stimulus package was aimed at boosting consumer spending, which makes up the bulk of economic activity. But that spending waned as the stimulus program wound down http://fcrwizard.com.
The government said Friday that gross domestic product, the broadest measure of the nation’s economic health, expanded at an annual rate of 2.8% in the April-June quarter, down from the 3.3% growth rate previously estimated.
With consumer spending accounting for two-thirds of the nation’s GDP, "it’s pretty clear now that were looking at a negative GDP number this quarter," said Bob Brusca, an economist at Fact and Opinion Economics.
Brusca noted that energy prices were subdued in August and that contributed to the income growth registered in the month. But he warned that "with weakness creeping into the economy, the outlook for income growth is not very good."
Monday’s report comes as Congress prepares to vote on a controversial $700 billion bailout of the financial system.
The plan would use tax dollars to buy up bad mortgage-related assets from Wall Street companies in a effort to stabilize the financial markets and prevent further damage to the economy.
Britain nationalized Bradford & Bingley on Monday, making the buy-to-let mortgage lender the second bank to be taken into public ownership this year as a deepening financial crisis claims more victims around the world. After intense weekend talks failed to find a completely private sector solution, the Treasury said it would take over B&B’s mortgage portfolio and sell its branches and deposits to Spanish bank Santander, which owns domestic rival Abbey.
“To pretend that somehow there was some other solution, unnamed, unspecified — it seems to me to be clutching at straws. You needed to take decisive action. That’s what we’ve done,” finance minister Alistair Darling said on BBC Radio.
The government will take over B&B’s 50 billion pounds ($92 billion) worth of mortgages and Santander gets the 20 billion pound savings and branch network following the rescue deal.
B&B, with its heavy exposure to Britain’s slumping housing market, is only the latest victim of a global banking crisis that has felled some of the world’s largest financial institutions in the last few weeks.
Benelux financial group Fortis also underwent a part-nationalization on Sunday cash advance paydayloans free credit report.com. –>. In the United States, the administration is putting together a $700 billion bailout package to buy up banks’ toxic assets to prevent more failures.
Santander is paying some 400 million pounds for B&B’s 200 branches and deposit portfolio while the government will take over the mortgage assets, meaning it should be business as usual for the troubled lender’s customers.
While the public takeover puts even more risky assets on to the government balance sheet only seven months after the nationalization of Northern Rock bank, which had the same funding model as B&B, Darling said the risk would be borne by the banking industry.
The Treasury said the Financial Services Compensation Scheme, which is funded by the banks, was triggered on Saturday because B&B was unable to meet its funding obligations.
Architects of a $700 billion bailout plan urged U.S. lawmakers to act swiftly or face dire economic consequences amid growing concern the rescue may be delayed, but markets were heartened by news that Warren Buffett was investing $5 billion in Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz).
In Tokyo, Kyodo news agency reported that Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz), Japan’s third-largest bank, plans to invest several billion dollars in Goldman, with which it has a long relationship.
SMFG said it had no plans at this time to invest in Goldman, whose spokesman Lucas van Praag said he could not confirm the Kyodo report.
Stocks in Asia gained and U.S. Treasury yields rose after news of the Goldman stake purchase by one of the world’s most respected investors http://payday-z.com creditreports cash til payday loan. –>.
The MSCI index of Asian shares outside Japan .MIAPJ0000PUS edged up 0.4 percent, but Tokyo .N225, which was closed on Tuesday for a public holiday, fell 1.2 percent.
Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz) <BRKb.
Treasury Secretary Henry Paulson told lawmakers during five hours of hearings on Tuesday that the bailout was “sad” and “embarrassing,” but needed to stave off a deep recession and restore confidence in markets.
Andrew Barrett, managing director and strategist with Citi Private Client Investment in Hong Kong, said there is sufficient political will in Congress to approve the plan.
General Motors Corp. said Friday it intends to draw down $3.5 billion of a $4.5 billion secured revolving credit facility for its restructuring in what it called "uncertain times in the capital markets."
General Motors (GM, Fortune 500) will be using the remainder of the credit facility. The company said it was making the move to have more liquidity while capital markets are under pressure.
The automaker was reacting after a week that brought the bankruptcy of Lehman Brothers Holdings Inc. (LEH, Fortune 500), the sale of Merrill Lynch & Co free credit report without a credit card faxless online payday advances. (MER, Fortune 500) to Bank of America Corp. (BAC, Fortune 500) and a government bailout of insurer American International Group Inc. (AIG, Fortune 500)
General Motors also said in the news release it had completed a $322 million debt to equity exchange.
The company’s shares rose $1.68, or 15%, to close at $13.08 on Friday.
If you thought banks weren’t doling out much dough before, try getting a loan now.
The recent turmoil on Wall Street has frozen lending among banks, sending rates soaring and prompting financial institutions to hoard cash. The situation grew so dire that central banks in the United States, Europe and Japan were forced to inject tens of billions into the system in hopes of greasing the lending wheels.
Even if consumers have no direct dealings with the now-bankrupt Lehman Brothers or the now-bailed out American International Group, they may very well feel the ripple effects. The most evident impacts are rising mortgage rates and instability in once-safe money market funds. But the tensions on Wall Street will make it even harder for people - even those with good credit - to get a loan.
Consumers won’t be the only ones hurt. Businesses will also find it tough to get financing.
"The price of money has increased and the availability of financing has been impacted," said Keith Gumbinger, vice president of HSH Associates, which tracks mortgage rates. "It’s pure volatility right now. There’s no way to know on any given day what’s going to happen in any given market."
Mortgage rates jumped sharply on Wednesday, after falling more than a half-point after the federal government took over Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) on Sept. 7. Rates spiked to 6.11% Wednesday, up from 5.87% the day before, Gumbinger said.
In the wake of the government’s $85 billion rescue of crumbling insurer AIG, investors fled to the safety of Treasurys, freezing out mortgage-backed securities and sending rates soaring.
While rates remain below their summer highs, the spike is troubling. The economy needs low mortgage rates to stabilize the housing market, Gumbinger said. Higher rates make it harder for people to buy a home or to refinance into more affordable mortgages.
The demise of Lehman Brothers and troubles at AIG (AIG, Fortune 500) have put stress on many money market funds, which invest in short-term debt issued by the federal government or by companies.
Putting money in these funds was thought to be as safe as money in the bank, and many people stash their extra cash in them.
But unlike money in the bank, these funds can lose value cash till payday payday loan payday loans. –>. Traditionally, financial institutions make sure that money market funds maintain their $1 per share value, but with this week’s turmoil, fund companies found themselves scrambling. Investors withdrew nearly $80 billion from money market funds on Wednesday alone, according to Peter Crane, founder of Crane Data, which tracks money market funds.
The Reserve Fund announced Tuesday that it had to cut the price of shares in its primary fund to 97 cents and investors who wanted to withdraw money would have to wait a week for the proceeds. Under siege from redemptions, Putnam Investments said Thursday it would close its institutional prime money market fund and return all proceeds to investors at $1 a share.
Meanwhile, other fund companies - including Wachovia’s Evergreen Investments and Frank Russell Funds - announced Wednesday that their parent companies would have to inject money into the accounts to maintain their $1-a-share value.
Most money market fund investors, particularly those whose holdings are at larger institutions, will not suffer losses, said Christine Benz, director of personal finance at Morningstar. Companies will step in to prop up the funds.
"Many firms that offer money market funds would face huge reputational risk if they allow them to break a buck," she said.
While financial institutions are stepping in to prop up their funds now, they can’t do this indefinitely. Also, they may have to think twice about acting if the funds’ values fall too steeply.
Some people think they have money market funds, when they actually hold short-term bond funds. The value of these investments can fluctuate since they put their money in riskier assets.
But even true money market funds vary in their investments. Those that invest in safer Treasurys offer lower rates, while those in short-term corporate commercial paper have higher yields but are more likely to stumble, said Hildy Richelson, co-author of "Bonds: The Unbeaten Path to Secure Investment Growth."
"If your money market fund is yielding more than others, then they are reaching in some way," Richelson said.
Missouri’s Department of Economic Development is providing $1.8 million in remediation tax credits for the redevelopment of Building 9 of the former Cupples Warehouse complex in downtown St. Louis, the department said Wednesday.
St. Louis-based Blue Urban LLC is spending $43 million to renovate the building, said Kevin McGowan, chief executive of the firm. The tax credit will be used for
remediation of lead-based paints and asbestos in the
113-year-old building.
Vacant for 30 years, the seven-story, 160,000-square-foot building will feature 54 condos and 66,000 square feet of retail and office space paydayloan no fax payday advances faxless payday loans. –>. The majority of space in the building already has been sold or pre-leased. The renovation is scheduled to be completed in September next year. — Christopher Boyce
As global investors lost more than $3 trillion in market value this week, Barack Obama saw his own stock gaining among American voters.
The crisis rocking financial markets has upended the U.S. presidential campaign, taking the focus off Republican presidential nominee John McCain and moving the debate to Obama's turf: the economy. The Democrat blamed both McCain and President George W. Bush for the turmoil, calling for more regulation and casting himself as the agent of change.
McCain escalated his own rhetoric, vowing to oust the head of the Securities and Exchange Commission and attacking Wall Street and “an outdated patchwork quilt of regulatory oversight.'' Still, national polls this week showed Obama rising.
“Clearly, Obama is gaining,'' said Jim Pinkerton, a Republican strategist. McCain has to distance himself from the Bush administration to avoid being pinned to the crisis, Pinkerton said. “When consumer confidence falls, it's not good for the perceived incumbent.''
Obama's earlier lead had evaporated as McCain announced his vice presidential pick of Alaska Governor Sarah Palin and the Republicans held their national convention in St. Paul, Minnesota, early this month.
An Opening?
Sensing a chance to regain his lost momentum, Obama has told crowds they should look at the way McCain is handling the market tremors, citing his Republican rival's Sept. 15 comments that “the fundamentals of our economy are strong.'' Yesterday, Obama used McCain's call for SEC Chairman Christopher Cox's firing to tie his rival to the Republican establishment.
“Here's what I say: In 47 days, you can fire the whole trickle-down, on-your-own, look-the-other-way crowd in Washington who have led us down this disastrous path,'' he told a crowd of 9,500 in Espanola, New Mexico. “Get rid of this philosophy, get rid of the do-nothing approach to our economic problems and put somebody in there who is going to fight for you.''
That message underlined how Obama is trying to use the growing anxiety to promote his call for change, said Michael Dimock, associate research director at Washington's Pew Research Center for the People & the Press.
“Reminding people of how worried they are about the economy increases the value of the change mantra that Obama has been focusing on,'' Dimock said bad credit payday loans direct payday loan cash advance.
Shifting Campaign
Obama yesterday sent a note to supporters, using Wall Street's woes to urge them to donate. Two days earlier, the Illinois senator told backers at a Beverly Hills fundraiser that he was convinced he would triumph over McCain.
“In the last couple of days suddenly the entire campaign has shifted,'' said Obama, 47. “Sadly, the fact of the financial crisis has suddenly focused people's attention and it's reminded people of what's at stake.''
McCain, 72, tried to turn those words against Obama.
“My friends, that is the kind of me-first, country-second politics that are broken in Washington,'' the Arizona senator said yesterday in Cedar Rapids, Iowa. “My opponent sees an economic crisis as a political opportunity instead of a time to lead.''
Still, McCain's fumbles this week may have cost him.
He was first to appear on television, speaking at a Monday morning rally and releasing an advertisement touting his ability to handle an emergency as Lehman Brothers Holdings Inc. filed for bankruptcy and the markets absorbed news that Bank of America Corp. would take over Merrill Lynch & Co.
Economic Fundamentals
Then he said the fundamentals of the economy were strong.
Obama jumped on the words later, saying: “Senator McCain, what economy are you talking about? What's more fundamental than the ability to find a job that pays the bills and that can raise a family?''
The next day, as the focus shifted to the plight of American International Group Inc., McCain said taxpayers shouldn't bail out the company — then a day later, after the government put together an $85 billion takeover of AIG, said the rescue was unavoidable.
Obama's words throughout the week were more consistent. He blamed regulators and came up with new lines of attack. On Wednesday, after McCain linked Obama to Fannie Mae and Freddie Mac, Obama mocked McCain's pledge to take on the “old-boys' network,'' pointing out that some of McCain's top advisers had worked as corporate lobbyists.
“The old boys' network?'' Obama said in Elko, Nevada. “In the McCain campaign, that's called a staff meeting.''
With the Federal Reserve stepping in to rescue global insurance giant AIG (AIG.N: Quote, Profile, Research, Stock Buzz) this week, one title must have looked particularly prescient to judges drawing up a shortlist for the Financial Times/Goldman Sachs Business Book of the Year Award.
“When Markets Collide: Investment Strategies for the Age of Global Economic Change” (McGraw-Hill), by Mohamed El-Erian, contends that the world financial system is in a period of deep change, as emerging economies like China and India bump up against the United States and Europe.
The result is market turmoil, leading to such events as the rescue of AIG and U.S. mortgage giants Fannie Mae and Freddie Mac, and the bankruptcy of Lehman Brothers Holdings Inc.
“This bumpy process is nothing less than a collision of markets, where the markets of yesterday collide with those of tomorrow,” writes El-Erian, co-CEO of PIMCO, which runs the world’s biggest bond fund.
An even bigger figure in the financial markets is the subject of another of the six books on the shortlist http://payday-faxless.com cash advance loan. Warren Buffett has never written a memoir, but he has given former insurance industry analyst Alice Schroeder unprecedented access to write “The Snowball: Warren Buffett and the Business of Life” (Bantam).
“Life is like a snowball,” Schroeder writes, quoting the Oracle of Omaha’s famous homespun wisdom. “The important thing is finding wet snow and a really long hill.”
“Cold Steel: The Multibillion Dollar Battle for a Global Industry” (Little Brown), by Tim Bouquet and Byron Ousey, chronicles how Lakshmi Mittal fought for control of Arcelor and transformed the global steel industry through consolidation.
Journalist and historian Misha Glenny spent three years following gun runners in Ukraine, money launderers in Dubai, drug syndicates in Canada, cyber-criminals in Brazil and others to write “McMafia: A Journey Through the Global Criminal Underworld” (Knopf), a tale of the growing shadow economy.
While the stock market was choking on news that two Wall Street titans had buckled in the credit crunch, Larry Swedroe, research director at Buckingham Asset Management LLC in Clayton, went for a walk before lunch on Monday.
By contrast, Joe Terril, president of Terril & Co. in Des Peres, said the government’s refusal to help out struggling investment banks left him questioning the stability of the entire financial system.
Swedroe’s nonchalance and Terril’s despair marked the extremes of reaction among St. Louis-area investment advisers Monday as markets staged a dramatic retreat. The 504.48-point drop in the Dow, which closed at 10,917.51, was the worst one-day drop since the market reopened after the terrorist attacks of Sept. 11, 2001.
Swedroe said he was confident in his strategy of buying and holding passively managed investment funds. Bear markets happen, he said, and every investment plan should allow for them. "Investing is simple," he said. "It’s just not easy because emotions get in the way."
The government’s refusal to prop up Lehman Brothers, the purchase of Merrill Lynch by Bank of America and the precarious position of insurance giant American International Group shocked many investment advisers, including Terril.
"That’s real scary," said Terril, who is known for his bearish opinions check cash advance no fax payday loans. "It’s almost like saying, ‘There’s no way we can bail this situation out. We’re going to have to take our chances.’"
Terril said he was more concerned about troubles in the bond market than those in the stock market. "No one wants anybody’s credit," Terril said. "You can’t trade it. If people can’t borrow money, they won’t be able to roll over their debt."
Ken Crawford, senior portfolio manager at Argent Capital Management LLC in Clayton, said he was surprised the government didn’t make more of an effort to salvage Lehman, but saw no need for investors to abandon their financial plans.
"The last thing you want to do in a time of distress, or even in a time of euphoria, is to throw the baby out with the bath water," Crawford said. "People should be worried, certainly, but they shouldn’t be frightened. Eventually the stress the financial world is feeling will be alleviated."
Scott Wren, senior equity strategist at Wachovia Securities LLC in St. Louis, said that while many investors are feeling some pain, there are some reasons for optimism. He said he expects companies to begin reporting earnings growth soon, and the threat of inflation may be ebbing along with oil and other commodity prices.
Peter Schick, chairman of
Consumer electronics retailer Best Buy Inc. said Monday it will acquire online music-sharing site Napster Inc. for about $126.8 million in cash in a move to boost its digital media capabilities.
Best Buy (BBY, Fortune 500) will begin a tender offer for all outstanding Napster (NAPS) shares for $2.65 per share, representing a 95% premium to the stock’s closing price Friday of $1.36 per share.
According to its most recently quarterly filing, Napster had about 47.9 million shares outstanding as of June 30, implying a price of $126.8 million.
In a statement, Best Buy valued the deal at $121 million - or $54 million after netting about $67 million in Napster’s cash and short-term investments.
The takeover is expected to close in the fourth quarter no qualifying payday advance no teletrak payday loans. The deal includes Napster’s 700,000 subscribers, its Web-based customer-service platform and mobile capabilities.
Napster Chief Executive Chris Gorog and other senior management will continue in those roles. The Los Angeles-based company has about 140 staffers; Best Buy said it does not plan to relocate the headquarters or make "significant" changes in personnel.
Napster said it will postpone its annual meeting of stockholders, scheduled for Thursday, due to the acquisition agreement.
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