London’s departing police chief revealed Tuesday that 10 of the 45 press officers in his department used to work for News International, but he denied there are any improper links between the force and Rupert Murdoch’s media empire.
Paul Stephenson was giving evidence to a committee of lawmakers investigating wrongdoing at the now-shuttered tabloid News of the World, and allegations of bribery and collusion between Murdoch employees and the police.
“I understand that there are 10 members of the (Department of Public Affairs) staff who have worked in News International in the past, in some cases journalists, in some cases undertaking work experience with the organization,” he said.
News International is the British newspaper division of Murdoch’s global News Corp.
Stephenson denied wrongdoing, or knowing the News of the World was engaged in phone hacking _ but acknowledged that in retrospect he was embarrassed the force had hired Neil Wallis, a former executive of the paper, as a PR consultant,
After being asked about his relationship with Wallis, who was arrested last week, Stephenson said he had “no reason to connect Wallis with phone hacking” when he was hired for the part-time job in 2009.
He said now that the scale of phone hacking at the paper has emerged, it’s “embarrassing” that Wallis worked for the police.
Stephenson announced his resignation Sunday, saying allegations about his contacts with Murdoch’s News International were a distraction from his job.
He was followed out the door by assistant commissioner John Yates, who gave evidence before a hotly anticipated appearance by Rupert Murdoch, his son James and the media mogul’s former U.K. newspaper chief, Rebekah Brooks.
Yates said that with the benefit of hindsight he would have re-opened an inquiry into electronic eavesdropping of voicemail messages.
Yates said if he “knew now” how the phone hacking scandal would enfold, he would have done something different.
He has denied wrongdoing in the scandal.
Rupert Murdoch’s car was mobbed by photographers as he arrived for a grilling from U.K. lawmakers about the phone hacking scandal that has swept from his media empire through the London police and even to the prime minister’s office.
The elder Murdoch’s Range Rover was surrounded as he arrived at the Houses of Parliament three hours early, and it quickly drove off. The vehicle returned to Parliament about half an hour before the hearing was due to start.
Politicians will be seeking more details about the scale of criminality at the News of the World, while the Murdochs will try to avoid incriminating themselves or doing more harm to their business without misleading Parliament, which is a crime.
Lawmakers are also holding a separate hearing to question London police about reports that officers took bribes from journalists to provide inside information for tabloid scoops and to ask why the force decided to shut down an earlier phone hacking probe after charging only two people.
Detectives reopened the case earlier this year and are looking at a potential 3,700 victims.
London’s Metropolitan Police force said Tuesday it had asked watchdog to investigate its head of public affairs over the scandal _ the fifth senior police official being investigated. The Independent Police Complaints Commission will look at Dick Fedorcio’s role in hiring a former News of the World executive as an adviser to the police.
Fedorcio also was questioned by lawmakers Tuesday, along with Stephenson and Yates.
It was the appearance by the Murdochs and Brooks that was drawing huge public interest.
Members of the public and journalists lined up hours ahead of time in hope of a spot in the small committee room, which holds about 40 people. More will be able to watch in an overspill room, and Britain’s TV news channels are anticipating high ratings for the appearance.
Prime Minister David Cameron cut short a visit to Africa and is expected to return to Britain for an emergency session Wednesday of Parliament on the scandal.
A former News of the World reporter, Sean Hoare, who helped blow the whistle on the scandal, was found dead Monday in his home quick pay day loan. Police said the death was “unexplained” but is not being treated as suspicious. A post-mortem was being conducted Tuesday. Hoare was in his late forties.
Brooks’ spokesman, David Wilson, said police had been handed a bag containing a laptop and papers that belong to her husband, former racehorse trainer Charlie Brooks. Wilson said the bag did not contain anything related to the phone hacking scandal and he expected police to return it soon.
The bag was found dumped in an underground parking lot near the couple’s home on Monday, but it was unclear how exactly it got there. Wilson said Tuesday that a friend of Charlie Brooks had meant to drop the bag off, but he would say only he left it in the “wrong place.”
Murdoch shut down the News of the World tabloid that Brooks once edited after it was accused of hacking into the voice mail of celebrities, politicians, other journalists and even murder victims. Still, the closure has done little to end a string of revelations about the murky ties between British politics and the country’s tabloid media.
The scandal has prompted the resignation and subsequent arrest of Brooks and the resignation of Wall Street Journal publisher Les Hinton, sunk Murdoch’s dream of taking full control of lucrative satellite broadcaster British Sky Broadcasting and raised questions about his ability to keep control of his global media empire.
Rupert Murdoch is eager to stop the crisis from spreading to the United States, where many of his most lucrative assets _ including the Fox TV network, 20th Century Fox film studio, The Wall Street Journal and the New York Post _ are based.
In New York, News Corp. appointed commercial lawyer Anthony Grabiner to run its Management and Standards Committee, which will deal with the scandal. But News Corp. board member Thomas Perkins told The Associated Press that the 80-year-old Murdoch has the full support of the company’s board of directors, and it was not considering elevating Chief Operating Officer Chase Carey to replace Murdoch as CEO of News Corp.
News Corp.’s widely traded Class A shares fell 68 cents to $14.97 Monday _ down 17 percent since the scandal reignited on July 4.
Britain’s Independent Police Complaints Commission also is looking into the phone hacking and police bribery claims, including one that Yates inappropriately helped get a job for the daughter of Wallis. Wallis has been arrested on suspicion of conspiring to intercept communications.
London police also confirmed that they once employed a second former News of the World employee besides Wallis. Alex Marunchak had been employed as a Ukrainian language interpreter with access to highly sensitive police information between 1980 and 2000, the Metropolitan Police said.
The police force said it recognized “that this may cause concern and that some professions may be incompatible with the role of an interpreter,” adding that the matter will be looked into.
Meanwhile, Internet hackers took aim at Murdoch late Monday, defacing the sites of his other U.K. tabloid, The Sun, and shutting down website of The Times of London. Visitors to The Sun website were redirected to a page featuring a story saying Murdoch’s dead body had been found in his garden.
Internet hacking collective Lulz Security took responsibility for that hacking attack via Twitter, calling it a successful part of “Murdoch Meltdown Monday.”
Lulz Security, which has previously claimed hacks on major entertainment companies, FBI partner organizations and the CIA, hinted that more was yet to come, saying “This is only the beginning.”
It later took credit for shutting down News International’s corporate website. Another hacking collective known as Anonymous claimed the cyberattack on The Times’ website.
__
Danica Kirka and Bob Barr contributed to this report.
Meera Selva can be reached at http://twitter.com/Meera_Selva.
Jill Lawless can be reached at http://twitter.com/JillLawless
LONDON—James Murdoch scaled the rungs of the global media empire that his father built. Now scandal taints the heir apparent, threatening to derail the expected succession and shaking the assumption that the Murdoch dynasty would preserve its tight grip over the multibillion-dollar business.
Founder Rupert Murdoch, 80, has long expressed a wish to hand his publicly traded News Corp. to his offspring, and he retains the voting power to make key decisions. But shareholders and board members are said to be troubled by revelations of wrongdoing on Murdoch’s watch, and feel the U.S.-based company needs fresh leadership.
Bloomberg News is reporting that two anonymous sources within News Corp. “have begun questioning the company’s response to the crisis and whether a leadership change is needed.”
Shares in News Corp. tumbled Monday to $14.98, down 13 per cent since July 4 — the day the Guardian newspaper reported that News of the World journalists had hacked into the voicemail belonging to murdered schoolgirl Milly Dowler.
A pivotal moment for the Murdoch family comes Tuesday when the media mogul and his son testify before British lawmakers investigating the hacking and alleged police bribery at a now-shuttered tabloid, News of the World.
“The future is looking increasingly grey” for James Murdoch, said Ivor Gaber, professor of political journalism at City University London. “There are now investors, particularly in the United States, who are suggesting that the time has come to end the Murdochs’ dynastic hold on News Corp.”
Some analysts believe Murdoch is positioning 42-year-old daughter Elisabeth as a successor in the event that 38-year-old James, chief executive of his father’s European and Asian operations, is forced to step aside or faces arrest.
“At the end of the day, that’s what made it a success. It’s ‘Brand Murdoch,’” said Richard Hillgrove, a London-based public relations consultant and former commentator for Murdoch-owned newspapers in New Zealand. “He’s going to do anything in his power to make sure it stays that way.”
Hillgrove described Elisabeth Murdoch, who is expected to join the board of News Corp. in October, as the “likely contender” for leadership of the company and noted that she appears “untainted and pretty clean” in comparison to the pressure bearing down on her brother, James.
There have been unconfirmed reports in the British media of family tension and dissatisfaction on the part of Elisabeth with how the company has been run; some observers speculate people close to the family have leaked information to elevate her stature.
However, a suit in the United States has questioned News Corp.’s move in February to buy Shine Group., the television production company founded in Britain by Elisabeth, in a $670 million deal viewed by some shareholders as overpriced and fueled by nepotism. And while the company is successful, Elisabeth lacks experience at the highest levels of international management.
Another Murdoch son, 39-year-old Lachlan, is on the board of News Corp., but he quit a high-level position in the company in 2005 and does not have a management role. He is saddled in part by the legacy of a failed investment in an Australian telecoms company a decade ago.
Chase Carey, the American deputy chairman and president of News Corp., could step in to head the group as an option from outside the family. He previously worked with Fox television, a company holding.
Murdoch crafted a behemoth over the decades, acquiring newspaper, television, publishing and entertainment interests in Asia, Europe, the United States and Latin America. New York-based News Corp., which employs more than 50,000 people, said it had total assets as of March of $60 billion, and total annual revenues of $33 billion, though the scandal has pushed down share prices.
In 2001, a former wife of Rupert Murdoch predicted that there would be heartache among her children — James, Lachlan and Elisabeth — when the time came to choose his successor. At the time, Anna Murdoch Mann told the Australian Women’s Weekly magazine that she would prefer that none of her children took the reins.
“I think they’re all so good that they could do whatever they wanted, really,” she said. “But I think there’s going to be a lot of heartbreak and hardship with this. There’s been such a lot of pressure that they needn’t have had at their age.”
The accusations of phone hacking and police bribery by journalists at the News of the World reached into the elder Murdoch’s inner circle with the arrest Sunday of Rebekah Brooks, former head of his British newspaper unit.
James Murdoch did not directly oversee News of the World, where the phone hacking of celebrities and others allegedly occurred, but he approved payments to some of the paper’s most prominent hacking victims, including 700,000 pounds ($1.1 million) to Professional Footballers’ Association chief Gordon Taylor.
He said he “did not have a complete picture” when he approved the payouts. Still, commentators view his position as fragile because of questions about whether the criminal investigation will go higher up the chain of command at News Corp. Additionally, the company could be liable under the U.S. Foreign Corrupt Practices Act, which bars American companies from bribing foreign officials for business.
Journalists at the News of the World hacked the voice mail of mobile telephones in an attempt to get information for stories that would help sell newspapers, and allegedly paid police for information that could also be used in the production of news reports.
Louise Cooper, an analyst in the London office of the brokerage BGC Partners, described years of speculation about who would take control after Rupert Murdoch as a perpetual process of “one’s up, another one’s down” that focuses on the tycoon’s children. In the end, she said, it is the patriarch’s decision.
“He still has absolute control over that company,” Cooper said. She said that barring further revelations about the involvement of James Murdoch in the scandal, “it’s difficult to write him off completely.”
Rupert Murdoch controls News Corp. through a family trust that holds 40 per cent of the company’s Class B voting shares. The succession question has centred on James, Elisabeth and Lachlan, children by Murdoch’s second marriage to Anna Torv, later Anna Murdoch Mann after she remarried.
Elisabeth is married to prominent British public relations executive Matthew Freud. She resigned as managing director of British Sky Broadcasting, a lucrative satellite broadcaster in which News Corp. is the biggest shareholder, in 2000 to go her own way. This month, Murdoch dropped a bid to take full control of BSkyB in response to the uproar over phone hacking.
Lachlan Murdoch, once seen as the heir apparent, had been elevated to deputy chief operating officer of News Corp. by the time he quit in 2005 to go back to Australia.
That left James as the expected heir. He has been chairman and CEO of the company’s European and Asian operations since 2007, and later became deputy chief operating officer of News Corp.
Rupert Murdoch has another daughter, Prudence, from his first marriage to Patricia Booker; she is married to Alasdair MacLeod, who stepped down last year after 20 years as a News Corp. executive, most recently as managing director of the Australian newspapers.
Murdoch also has two daughters, 9-year-old Grace and 7-year-old Chloe, with his third wife, Wendi Deng. She was a junior News Corp. executive in Hong Kong before marrying Murdoch in 1999 at the age of 32. Her name has occasionally cropped up in succession speculation in the past.
Struggling to avert an unprecedented national default, congressional leaders jettisoned negotiations on a sweeping deficit-reduction package Friday despite a plea from President Barack Obama to “do something big” to stabilize America’s finances.
Instead, lawmakers embarked on rival fallback plans as a critical Aug. 2 deadline neared, a House version given little chance of success, even by some supporters, and a bipartisan Senate approach holding out more promise.
At the behest of conservatives, House Republicans announced plans to vote next week on legislation to raise the $14.3 trillion debt limit automatically if Congress approves a balanced-budget constitutional amendment. Senate approval of that amendment seemed extremely unlikely in a vote set for the next few days.
Senate leaders from both parties worked on their own measure that would allow Obama to raise the debt limit without a prior vote by lawmakers. That plan was likely to include limits on spending across thousands of government programs, and possibly a down payment on cuts, as well.
As part of that proposal, a panel of lawmakers would recommend cuts in benefits programs by the end of the year, with the House and Senate required to vote yes-or-no on the package without possibility of changes.
“If they show me a serious plan I’m ready to move,” declared Obama at his second news conference of the week, even though he said he wanted a far more sweeping deal that might even have raised the age of Medicare eligibility from 65 to 67 if Republicans would increase selected taxes.
“We are obviously running out of time,” he said.
Numerous officials have cautioned that a default will occur if the debt limit is not increased by Aug. 2, warning also of a calamitous effect on an economy struggling to recover from the worst recession in decades.
“Now the debate will move from a room in the White House to the House and Senate floors,” said Senate Republican leader Mitch McConnell, indicating that the daily closed-door negotiations at the White House were a thing of the past.
The House Republican rank and file were advised in a GOP meeting that, barring action by Congress, the government would be able to pay only about half its bills after Aug. 2, and separately that a default could cost the government trillions of dollars in the form of higher interest rates on the debt.
“No matter what 50 percent you choose to pay, there are things in that 50 percent you don’t pay that would have really severe consequences,” Rep. John Campbell, R-Calif., said afterward.
“There are people out there who keep saying we don’t need to increase the debt limit at all. I think this was a way of saying, the people who are saying that need to look at the practical consequences of what they are saying.”
Rep. Paul Ryan, of Wisconsin, chairman of the House Budget Committee, told reporters after the meeting he had discussed the additional costs generated by a default _ an event that would be likely to raise interest rates no fax cash advance.
At his news conference, Obama said that would mean “effectively a tax increase on everybody” by affecting car purchasers, students and businesses.
The second White House news conference in a week was a testament to the overriding political and economic significance of the issue that has convulsed Congress as well as the administration.
Urging lawmakers to cut trillions from deficits at the same time they raise the debt limit, the president said he favored a balanced approach that included spending cuts, changes to huge government benefit programs and higher taxes on wealthy individuals and certain industries.
It was an offer Republicans could _ and did _ refuse.
“There are going to be no tax hikes because tax hikes destroy jobs,” said House Speaker John Boehner of Ohio.
While Boehner had earlier shown some flexibility on closing tax loopholes as part of an unprecedented deal with Obama, many Republican lawmakers are adamant that deficit reductions be limited to spending cuts.
To underscore their conservative priorities, GOP leaders scheduled a vote for next week on legislation they said would cut $111 billion in the budget year that begins Oct. 1. It would also require a steady decline in spending as a percentage of the overall economy over the next decade.
Even some supporters conceded it was a symbolic gesture given the realities of divided government.
“I think everybody knows the president won’t sign this,” Campbell said after the closed-door Republican meeting.
“But we’re putting a marker down, and that’s an important step that begins the process of resolving this,” he added.
If so, it was in a style that only congressional insiders might recognize as the beginning of the endgame to an unprecedented problem.
McConnell issued a statement announcing the Senate would vote on both a balanced budget amendment and the House’s “Cut, Cap and Balance Plan.”
His statement didn’t say so, but neither measure has much, if any, chance of passage in the Democratic-controlled Senate.
Still, the votes themselves would clear the way for debate on the fallback plan the two Senate leaders have been working on for the past several days.
Senate aides said the measure was not yet fully drafted, but likely to come up for debate by the end of next week.
A two-thirds vote of each house is required for passage of a constitutional amendment. Approval would send the issue to the states, where ratification by three quarters of the legislatures is needed to make it part of the Constitution.
Presidents play no official role in amending the Constitution, but Obama expressed his opposition to the GOP-backed measure anyway.
“We don’t need a constitutional amendment to do that. What we need to do is do our jobs,” he said.
WATERLOO, ONT.
Shares in British Sky Broadcasting PLC are falling for the sixth straight session Tuesday, a day after News Corp.’s bid for the satellite broadcaster was referred to the competition regulator.
With the review likely to take many months, there’s little incentive for short-term investors, such as hedge funds, to keep hold of the stock. BSkyB shares were 2.1 percent lower early Tuesday at 700 pence ($11.07). The decline means that the stock is underperforming in the FTSE 100 index of leading British shares. Shares around the world have been hit Tuesday by mounting fears over the financial health of Spain and Italy.
BSkyB shares have taken a battering over the past week, falling from 850 pence, as a phone-hacking at the Sunday tabloid News of the World escalated.
The paper, which closed Sunday after 168 years, was owned by News Corp.’s British subsidiary News International. News Corp. shares have also taken a pounding, as investors doubt whether it will get the 61 percent of BSkyB it doesn’t already own.
On Monday, News Corp. withdrew its promise to spin off Sky News, which had been a condition for buying the remaining shares in BSkyB, triggering a referral to the Competition Commission from Culture Secretary Jeremy Hunt.
Britain’s Competition Commission now must hold a full-scale inquiry into whether the takeover would break anti-monopoly laws. These inquiries usually take six months and Murdoch must be hoping that the current febrile atmosphere surrounding the bid cools down.
“News Corp. now has a decent time for the crescendo of allegations to peak and be dealt with and relevant actions to be taken, assuming these are containable,” Investec Securities analyst Steve Liechti said.
However, with police apparently still in the early stages of a criminal investigation of the News of the World, Liechti said there is a danger that News Corp. could be forced to reduce its stake in BSkyB if Britain’s communication regulator decides it is not “fit and proper” to control a broadcasting license.
On Tuesday, former Prime Minister Gordon Brown joined the criticism of News International, repeatedly accusing the company of employing criminals to obtain confidential information about his bank account, taxes and other issues.
“If I, with all the protection and all the defenses and all the security that a chancellor of the exchequer or a prime minister, am so vulnerable to unscrupulous tactics, to unlawful tactics, methods that have been used in the way we have found, what about the ordinary citizen?” Brown said in an interview with the BBC.
An unexpected drop in hiring put an end to the excitement that had been bubbling up on Wall Street over the past two weeks.
Stock indexes fell sharply Friday, erasing most of the week’s gains, after the government reported that U.S. employers created the fewest number of jobs in nine months. The 18,000 net jobs in created in June were a fraction of what many economists expected and dampened hopes that the economy was improving. Private companies added jobs at the slowest pace in more than a year. The unemployment rate edged up to 9.2 percent, its highest level this year.
A broader measure of weakness in the labor market was even worse. Among Americans who want to work, 16.2 percent are either unemployed or unable to find full-time jobs. That was up from 15.8 percent in May.
“There’s just a lot more evidence than before that we’re in an extended weak patch,” said Brian Gendreau, market strategist for Cetera Financial Group. He said private economists will likely reduce their projections for overall economic growth this year.
The Standard and Poor’s 500 index fell 9.42 points, or 0.7 percent, to 1,343.80. That eliminated the index’s gains from Thursday and left it with a 0.3 percent gain for the week.
The Dow Jones industrial average lost 62.29, or 0.5 percent, to 12,657.20. The Dow, which had been down by as much as 150 points Friday, had only its second down day over the past nine. The Nasdaq composite dropped 12.85, or 0.4 percent, to 2,859.81. It was its first loss in two weeks.
Companies whose business would be most affected by a weakening economy were hit hardest. Bank of America Corp., General Electric Co. and Boeing Co. were among the biggest decliners in the Dow average.
“The chance of a July bounce back in the economy looks pretty slim now,” said Jay Tyner, president of Semmax Financial Group in Greensboro, North Carolina.
Expectations for Friday’s jobs report were raised Thursday after payroll processor ADP said that private companies added more than 150,000 jobs in June. While the ADP report does not always accurately predict the broader Labor Department report, some investors said that the apparent clashing pictures of the job market were due to a jobs pickup in the last weeks of June.
Phil Orlando, chief market strategist at Federated Investors, said he believes manufacturers began rehiring workers in late June following signs that Japan’s economy was improving. Hiring slumped in May due partly to high fuel prices and disruptions of industrial supplies because of the earthquake and tsunami disasters in Japan guaranteed online payday loans.
Traders rushed to the relative safety of government bonds. The yield on the 10-year Treasury note fell to 3.01 percent from 3.19 percent just before the jobs report came out. Bond yields fall when demand for them increases.
Oil prices fell 2.5 percent. The slowdown in hiring suggested that demand for fuel will increase less than traders had expected. Lower fuel prices could eventually help the economy by leaving consumers with more money to spend on things other than gas.
Weak economic data this spring pushed stocks near their lowest levels of the year two weeks ago. Markets recovered last week, giving the Dow its best week in two years, on signals that the economy was rebounding. Stock indexes closed near their 2011 highs on Thursday.
Despite the weak job market, analysts still expect earnings at big U.S. companies to be strong. Companies are benefiting from export growth as the weak dollar makes American goods cheaper, and therefore more competitive, in overseas markets. Aluminum maker Alcoa Inc., one of the 30 companies in the Dow average, will be the first major corporation to report second-quarter financial results on Monday.
Orlando, the market strategist, said investors will be looking to see how companies have responded to higher commodity costs and a shortage of parts from Japan. “It’s not going to be an earnings season where you can have a blanket proclamation regarding how companies are doing this time around,” he said.
In other company news, Rupert Murdoch’s media conglomerate News Corp. fell nearly 4 percent as a phone-hacking scandal at its News of the World tabloid deepened. A former editor of the paper who later served as spokesman for British Prime Minister David Cameron was arrested Friday. News Corp. shuttered the 168-year old paper on Thursday in hopes of saving its deal to take over the lucrative British satellite TV company British Sky Broadcasting. Government approval of that deal will now be delayed because of the crisis, which has shocked Britain.
The Dow rose 0.6 for the week, the Nasdaq 1.6 percent.
Two stocks fell for every one that rose on the New York Stock Exchange. Volume was lighter than average at 3.1 billion shares.
As the jobless rate inches up and the economic recovery sputters, investors looking for a few good stocks may want to follow the money _ or rather the TV, the beloved Fender guitar, the baubles from grandma, the wedding ring.
Profits at pawn shop operator Ezcorp Inc. have jumped by an average 46 percent annually for five years. The stock has doubled from a year ago, to about $38. And the Wall Street pros who analyze the company think it will go higher yet. All seven of them are telling investors to buy the Austin, Texas, company.
Is the economy still just in a soft patch? A hard patch? Will the market rise or drop? Even experts are just guessing. In investing, it’s often better to focus on what you can safely predict, even if that safety is found in companies that thrive on hard times. One good bet: The jobless aren’t likely to find work anytime soon. And companies profiting from their bad fortune will continue to do so.
Among them:
_ Stock in payday lender Advance America Cash Advance Centers (AEA) has doubled from a year ago, to just under $8. Rival Cash America International Inc. (CSH) is up 64 percent, to $58. Such firms typically provide high interest loans _ due on payday _ to people who can’t borrow from traditional lenders.
_ Profits at Encore Capital Group, a debt collector that targets people with unpaid credit cards bills and other debts, rose nearly 50 percent last year. Encore has faced class action suits in several states, including California, over its collection practices. The Minnesota attorney general filed a suit in March. No matter. The stock (ECPG) is up 59 percent from a year ago, to more than $30.
_ Stock in Rent-A-Center (RCII), which leases televisions, couches, computers and more, is up 57 percent from a year ago to nearly $32. Nine of the 11 analysts covering the company say it will rise further and that investors should buy it.
The idea of investing in companies catering to the hard-up might not be palatable to some people. But it is profitable.
Mark Montagna, an analyst at Avondale Partners in Nashville, has developed what he calls “value retail” index of 11 companies _ dollar stores, off-price shops and clothing and footwear chains favored by shoppers looking for deals. The index is up 149 percent since February 2009, which marked the lowest month-end closing value for the S&P 500 during the recession.
Desperation stocks continue to be lifted by a drumbeat of bad news. Consumer spending, adjusted for inflation, has fallen for two months in a row _ the first back-to-back fall since November 2009. On Friday, the government reported the unemployment rate rose to 9.2 percent in June, sending stocks in tailspin. On top of that, one in seven Americans now live below the poverty line, a 17-year high.
“It’s been a good year,” says John Coffey Jr., a Sterne Agee analyst, referring to the companies he follows, not the economy. Coffey created a stir late last month when he issued a report arguing shares of Ezcorp (EZPW), which also makes payday loans, were worth a third more than their price and urged investors to buy. The stock rose 7 percent in just a few hours.
The next day a widely followed survey showed consumer confidence at a seven month low.
“Here we are celebrating the second year of recovery and confidence is at levels consistent with a recession,” says David Rosenberg, an economist at money manager Gluskin Sheff. “The folks in the survey are probably not the same folks shopping at Tiffany’s.” (That company’s stock is also up nearly 50 percent since March, to about $82.)
But they probably are shopping at Dollar General Corp. Stock in the discount retailer recently hit $34.13, up 50 percent from its IPO in late 2009. And it may be worth about a third more, at least according Avondale’s Montagna.
“People are broke. They’re all chasing value. It’s a seismic shift in mindset,” he says.
Some experts think these down-and-out stocks are just as likely to fall now instead of rise. It’s not that they think the recovery will turn brisk and people will get jobs and shop elsewhere. It’s that things could get worse _ making customers too poor to borrow or buy even from these outfits. Rent-A-Center, the furniture store, is already suffering. Some of its core low-income shoppers have seen money they would have spent leasing a couch or cocktail table eaten up by rising food and fuel bills.
But not to despair. According to Nick Mitchell, an analyst at Northcoast Research, wealthier customers, say those making $45,000, are feeling so strapped lately that they’re starting to rent furniture, too.
Montagna, the Dollar General bull, says he’s seeing people earning $70,000 or more at that chain, too. Even he shops there now.
“If I’m driving past one, I stop in,” he says, adding triumphantly, “I just bought toothpaste _ Crest _ two tubes for $4.”
A unique initiative to improve labour relations at auto parts giant Magna International is fizzling.
Aurora-based Magna and the Canadian Auto Workers say they continue talking about expanding the
TMX Group Inc. says London Stock Exchange Group plc has agreed to pay a special cash dividend of $4 per share, sweetening its bid for the Canadian stock market operator by $660 million.
TMX says its shareholders will get the special payment of $4 a share in cash when the proposed merger closes.
The move sweetens the friendly merger
After two years without seeing an increase in their Social Security checks, more than 59 million retirees and other beneficiaries can expect a bump up in benefits next year.
The Social Security trustees’ annual report released last month estimates that the cost-of-living adjustment in next year’s checks will be 0.7 percent. The increase, which will be announced in October, could be higher, depending on where prices head in the coming months.
Still, experts say, retirees could see all or some of that raise eaten up by higher Medicare premiums.
News of the potential rise in benefits didn’t generate much excitement last week among seniors at the Allen Center, a Baltimore senior center, although some retirees say they would be grateful for any boost.
“If it was $5 more, I would be happy,” Frances McCready, 69, a retired cashier, said about her monthly benefit Same day payday loans. “I would dance a jig.”
The past two years have been “very bad,” said McCready, who receives $616 a month from Social Security and about $400 working for the Department of Aging.
She said she lives with her son and his wife, who help her pay her bills.
“If it wasn’t for them, no way in the world could I make it,” she said.
The Social Security trustees projected the cost-of-living adjustment using inflation assumptions from December. Since then, the price of gas has spiked and then pulled back. If fuel prices tick up again, beneficiaries could see as much as a 2 percent increase.
The actual cost-of-living increase will be based on the inflation rate in July, August and September, and how it compares with the rate during the third quarter of 2008
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