China and the United States have pledged during a visit by Treasury Secretary Timothy Geithner to cooperate on boosting the global economic recovery, but Chinese backing for U.S. sanctions on Iran’s oil industry appeared unlikely.
China buys almost one-third of Iran’s oil exports and has rejected the U.S. sanctions as a tool to rein in Tehran’s nuclear program. That sets Washington up for a public setback if the government of the world’s second-largest economy refuses to cooperate.
Geithner was expected to make the U.S. case for sanctions in meetings Wednesday with Premier Wen Jiabao, Vice President Xi Jinping _ who is in line to become China’s next leader _ and Vice Premier Li Keqiang, another rising star.
Geithner met with his counterpart, Vice Premier Wang Qishan, on Tuesday night. He said he told Wang that the two sides “share so many important interests, and among those are increasing our cooperation on global economic issues.”
China’s official Xinhua News Agency said China and the United States pledged to further cooperate to boost the global economic recovery, and quoted Wang as saying the world economic situation is still “very complex and grim.”
Wang also called on the United States to loosen export controls of high-tech products to China, one of China’s complaints about the countries’ trade relationship. U.S. critics, meanwhile, say Chinese currency controls keep the yuan undervalued and give its exporters an unfair advantage, distorting trade at a time when Washington and other governments are under pressure to bring down unemployment.
China’s trade surplus with the United States widened 24.2 percent to $17.4 billion in December, according to data released Tuesday.
Geithner also is due to visit Tokyo, another major buyer of Iranian oil, for talks after he leaves Beijing on Thursday morning.
China has criticized U.S. sanctions on Iran, approved by President Barack Obama on New Year’s Eve, as improper and ineffective. Beijing supported U.N. sanctions on Iran’s nuclear program but says action should be multilateral.
The sanctions would target Tehran’s oil industry by barring financial institutions from the U.S. market if they do business with Iran’s central bank.
China’s oil imports “have nothing to do with the nuclear issue,” a Chinese deputy foreign minister, Cui Tiankai, said Monday.
“We should not mix issues with different natures, and China’s legitimate concerns and demands should be respected,” Cui said.
Analysts in Beijing said China has no reason to go along with the sanctions. “China does not want to be seen as helping the U.S. when China’s own interest is concerned,” said Wang Lian, an Iran expert at Peking University’s School of International Relations.
He said Chinese opposition might be reinforced by Washington’s latest military strategy report published last week. It singles out Beijing as a power with the potential to affect the U.S. economy and security.
Industry analysts say that even if China agreed, it would face formidable challenges in trying to replace Iran as an oil source.
China’s fast-growing economy is the world’s biggest energy consumer and imports half its oil. Some 11 percent comes from Iran, or about 600,000 barrels per day in November, according to energy market analysts Argus Media.
Still, Geithner’s trip might not be wasted, because Washington is only starting a campaign to promote its sanctions, Peking University’s Wang said. He said China might face pressure to cooperate if other governments agree to comply.
“The U.S. is not wasting their efforts,” Wang said. “Pressuring China is what they can do, but it is fairly difficult to get China to stand on their side.”
WINDING DOWN: After 58 years of selling music, Webster Records is pulling the plug.
The store at 117 West Lockwood Avenue in Webster Groves will shut its doors on Jan. 31, Bill Wondracek, a clerk, said today.
The store has mainly been reduced to selling rock ‘n’ roll CD’s to teens over the past few years, despite having a history of specializing in classical, jazz and pop music, much of it on vinyl, Wondracek added.
Jennifer Bellm has owned the shop for about five years. She was not available for comment.
Prior to that, it was owned by Dan Warner who sold it when he became part of the team that was involved in trying to revive the Switzer’s Licorice brand low rates payday advance.
Until the shop is shuttered, remaining inventory will be on sale, store manager Jim Lovins said in an email. Starting today it’s 30 percent off of retail and prices will be discounted through the month, he added.
Credit card rewards are the new social currency.
Citibank customers can now use Facebook to pool their rewards points online.
The bank on Tuesday launched a Facebook application that lets users team up to use their points, whether it’s for charity, a group gift or a personal goal. Citi says it’s the first bank to offer such a feature.
The app builds on a service Citi introduced last year that lets customers transfer points to one another on the bank’s homepage. After getting feedback, executives decided to expand the rewards sharing capability and offer it through social media.
“Now we’re delivering it to where customers are every day,” said Ralph Andretta, who heads Citi’s loyalty programs and co-branded cards.
Andretta noted that customers will have far more flexibility with their points, whether it’s to help a friend fly home from college or team up for a big-ticket reward. The company is giving away 2,500 free rewards points to each of the first 4,000 customers to sign up.
To get started, customers download the ThankYou Point Sharing App, which is linked on Citi’s Facebook page at http://www payday loan.facebook.com/citibank.
Customers can then start a rewards pool by naming a recipient and explaining its purpose. The recipient of the points maintains control of any contributions, so it’s best if you know and trust that person.
Pool recipients must be individuals and cannot be an organization, even if the intended goal is a charitable donation.
Users can promote their goals by sharing links on their Facebook pages or privately inviting other Citi customers to contribute. Donors can see the total number of points a cause has amassed.
The app can collect personal information from Facebook profiles. But Citi says it does not share any customer account information with Facebook.
The program isn’t only for credit card holders either. Citi checking account customers can also earn ThankYou points. Citi introduced its lineup of ThankYou credit cards last year.
Manufacturing in India and China improved in December, a sign the world
The so-called January effect, in which small-cap stocks have tended to outperform large-cap stocks at the start of each year, is not evoking the same bold confidence that it has during more predictable market periods.
“Small-cap stocks do tend to benefit from the increased attention that investors pay to their stock portfolios at the beginning of each year,” acknowledged Tom Jacobs, lead adviser for Motley Fool Special Ops (a special situations and opportunistic value service) in Marfa, Texas. “Having said that, however, a number of factors such as Europe’s problems are really freaking out investors right now.”
For example, his current favorite small-cap stock, Canadian-based Primero Mining Corp. (PPP), is actually a play on precious metals. That company owns Mexico’s highly productive San Dimas gold and silver mine; its cash flow equals its market capitalization; it carries little debt; and it has stated its intention to expand its metals assets in the Americas.
Investor nervousness about stocks of all sizes has encouraged the managers of some of the better-performing small-cap portfolios to aggressively seek out stocks they consider currently undervalued.
“Investors should remember that, in an improving economic environment, small caps tend to outperform large-cap stocks,” said Matthew Hart, portfolio manager of the $1.1 billion Invesco Van Kampen Small Cap Growth Fund A (VASCX), which has a three-year annualized return of 13 percent.
But while small caps are capable of supplying high growth and high returns, the economic sensitivity of these companies can never be disregarded, Hart cautioned.
“Small-cap stocks still look good and their valuations are reasonable when compared to large-cap stocks,” said William McVail, portfolio manager of the Turner Small Cap Growth Fund (TSCEX), which has a three-year annualized return of 21 percent. “We like the energy sector and especially the natural gas plays.”
The small-cap choices they prefer feature unique characteristics.
One example owned by both Hart and McVail is Clean Harbors Inc. (CLH), one of the nation’s largest providers of environmental services. As the largest operator of non-nuclear hazardous waste disposal in North America, Clean Harbors serves more than 50,000 customers.
Strong financially with modest debt, Clean Harbors has the assets, facilities and expertise that are difficult for competitors to match. McVail considers Clean Harbors especially well-positioned to profit from hydraulic fracturing — the method by which natural gas is released from shale rock. That practice has evoked controversy as its environmental, health and safety impacts are debated.
Insight Capital Research and Management Inc. in Walnut Creek, Calif., also recommends Clean Harbors. Insight Capital’s CEO and CIO Jim Collins, a longtime small-cap expert, predicts that “2012 will be a stock picker’s market,” requiring “discipline and patience.” Health care, technology and energy are Collins’ favored small-cap themes for the year.
Collins’ two other favorite small-caps are unique: Questcor Pharmaceuticals (QCOR), which develops medications for central nervous system disorders such as epilepsy and multiple sclerosis, and Silicon Motion Technology Corp. (SIMO), which manufactures graphics, video and audio applications for products ranging from handheld devices to LCD products and whose clients include the likes of Hewlett-Packard and Intel.
“I see the employment picture improving in 2012, and I believe we’re in the sixth or seventh inning of the bad housing environment,” said McVail of Turner Small Cap Growth. “For example, we have a portfolio holding in TrueBlue Inc. (TBI), a blue-collar staffing company in Tacoma, Wash., and any turn in the economy is going to be reflected in a company like this.”
TrueBlue, with most of its branch offices located in the U.S., primarily sends manual-labor temps to small and midsize businesses. With strong finances, no debt and plenty of cash, its business model and brand are well-respected.
The top portfolio holdings of Turner Small Cap Growth were recently Healthspring Inc., Taleo Corp. A, Genesee & Wyoming Inc., The Finish Line Inc., Clean Harbors Inc., Questcor Pharmaceuticals, SuccessFactors Inc., Cubist Pharmaceuticals, Northern Oil & Gas Inc. and WellCare Health Plans. This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
While an economic upturn is still not a certainty, it would make a positive difference for small-cap stocks in 2012.
“The U.S. consumer is gradually improving, and the employment picture, while not great, is at least stabilizing,” says Hart of Invesco Van Kampen Small Cap Growth. “What we haven’t seen on the consumer side is wage growth and, once we start to see that, I think the picture will improve even more.”
Spain’s new conservative government is about to unveil its first austerity measures as it embarks on an urgent mission to energize an economy saddled with shrinking output, sky-high unemployment and mountains of debt.
Prime Minister Mariano Rajoy is presiding over a Cabinet meeting Friday that will approve the first in what is expected to be a painful series of spending freezes or cuts and other reforms over the next few months.
Rajoy’s Popular Party won a sweeping victory in Nov. 20 elections over the discredited Socialists.
Like other troubled governments in Europe, Rajoy faces the delicate task of enacting growth-discouraging deficit reduction measures in a country whose economy is expected to contract in the last quarter of 2011 and the first of 2012.
As Wall Street traders cheered positive jobs data on Thursday, they seemed to ignore layoffs and bonus cuts on their own trading floors that will hurt growth in the broader U.S. jobs market in the coming months, TrimTabs Chief Executive Charles Biderman said.
U.S. jobless claims dropped to a 3 1/2-year low last week, the Labor Department said on Thursday morning, sending major stock indexes higher. But more current indicators for jobs and wages show opposite trends, said Biderman, a Wall Street veteran who founded the investment research firm in 1990.
“The conventional wisdom on Wall Street is that the U.S. economy is picking up steam despite the turmoil in the rest of the world,” Biderman Said. “The key real-time indicators we track - wage and salary growth and online job demand - suggest Wall Street is wrong.”
In contrast to the positive jobless claims figure, a TrimTabs index showed that a rise in online job postings has slowed over the past month . The firm’s pay analysis showed that wages have fallen 1.2 percent over the past month, adjusting for taxes and inflation, a bigger drop than the 0.2 percent decline over the past three months.
Job cuts at big Wall Street banks including Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and Bank of America-Merrill Lynch (BAC make quick cash.N: Quote, Profile, Research, Stock Buzz) will only hurt job growth further , Biderman said, while dwindling bonus pools will add pressure to wage growth.
Large U.S. banks have outlined plans to lay off nearly 40,000 employees so far this year as a result of the European sovereign debt crisis and weak economic growth, according to a Reuters tally.
Reports from compensation consultants such as Johnson Associates and Options Group suggest that Wall Street bonuses may decline as much as 30 percent to 40 percent this year. That will only hurt U.S. wage growth more in the weeks ahead, Biderman said, since bonuses are typically paid from late December through early February.
The earnings report from Jefferies Group Inc (JEF.N: Quote, Profile, Research, Stock Buzz) on Tuesday may offer clues to broader Wall Street trends. Jefferies’ fiscal year ends November 30, a month earlier than those of bigger rivals like Goldman and Morgan Stanley.
The investment bank laid off roughly 70 people in equities trading and cut overall compensation and benefits 24 percent during its fourth quarter. Chief Executive Rich Handler and a number of other senior executives also agreed to forgo bonuses for 2011.
“We recognize our shareholders had a tough year,” Handler said. “We’re shareholders and we’re getting zero bonus.”
Carmaker Volkswagen AG says net profit more than tripled in the second quarter on stronger sales in emerging markets and the United States, but warns that the outlook is difficult.
Net profit reached euro4.78 billion ($6.86 billion), far above the euro1.35 billion recorded in the same quarter a year ago.
Despite rising sales, the company fell just short of analyst estimates on some earnings figures, and chief executive Martin Winterkorn warned the months ahead would challenge the company payday loan lenders.
VW shares are trading down 6 percent.
Revenues rose 21.5 percent to euro40.3 billion. The company said Thursday that unit sales rose strongly in emerging markets such as Russia, Turkey, South Africa, China and Argentina. U.S. sales also rose.
NEW YORK
Some airline customers won’t see savings this weekend even though several federal taxes on tickets have expired.
US Airways and American Airlines raised fares to offset the tax savings.
That means instead of passing along the savings from expired taxes, the carriers are pocketing the money while customers pay the same amount as before.
But other airlines left their prices unchanged on Saturday. Consumers could save money by shopping around.
The expired taxes can total $25 or more on a typical $300 round-trip ticket. For a September trip between Dallas and San Francisco, the cheapest American flight on Travelocity.com was $24 higher than offerings from United, Continental, Delta and Virgin America, which did not raise fares.
The taxes expired after midnight Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running.
That gave airlines a choice: They could do nothing _ and pass the savings to customers _ or they could grab some of the money themselves.
“We adjusted prices so the bottom-line price of a ticket remains the same as it was before … expiration of federal excise taxes,” said American spokesman Tim Smith. US Airways spokesman John McDonald said much the same thing _ passengers will pay the same amount for a ticket as they did before the taxes expired.
Smith declined to say whether the increase would be rescinded if Congress revives the travel taxes.
Tom Parsons, who runs the Bestfares.com travel website, said consumers should get a break.
“Why would the airlines deserve it?” he said. “They already hit us with enough fees. Now they’re keeping the government fees too.”
The Transportation Department says it will lose $200 million a week. J.P. Morgan analyst Jamie Baker said airlines could take in an extra $25 million a day by raising fares during the tax holiday.
Parsons said competitive pressure eventually will force the airlines to match _ either they’ll all pass the tax savings on to passengers, or they’ll all raise fares and keep the money themselves.
Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip, said spokeswoman Marilee McInnis.
Southwest’s support could be crucial if the airlines decide to keep the tax money. Southwest carries more U.S. passengers than anyone, and it effectively sets rates on many routes. Southwest torpedoed attempts by other airlines to raise prices in the last two weeks. CEO Gary Kelly has publicly worried that airlines could frighten away passengers by raising prices too high.
That may be less of a fear this time, however, since consumers wouldn’t be shelling out more money for tickets _ they just wouldn’t get an unexpected discount, courtesy of Congress.
Several federal travel taxes expired when Congress adjourned for the weekend without passing FAA legislation. Lawmakers couldn’t break a stalemate over a Republican proposal to make it harder for airline and railroad workers to unionize.
Air traffic controllers stayed on the job, but thousands of other FAA employees were likely to be furloughed.
Airlines stopped collecting a 7.5 percent ticket tax, a separate excise tax of $3.70 per takeoff and landing, and other fees. Those add up to about $32 on a round-trip itinerary with base fare of $240 and one stop in each direction.
Other government fees for security and local airport projects are still being collected. They boost the final cost of that $240 base-fare ticket to $300.
Passengers who bought tickets before this weekend but travel during the FAA shutdown could be entitled to a refund of the taxes that they paid, said Treasury Department spokeswoman Sandra Salstrom. She said it’s unclear whether the government can keep taxes for travel at a time when it doesn’t have authority to collect the money.
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