Germany’s Axel Weber leads the race to succeed Jean-Claude Trichet as president of the European Central Bank and Portugal’s Vitor Constancio is likely to be his deputy, a survey of economists shows.
Of 27 economists in the Bloomberg News survey, 24 said Weber will be chosen to replace Trichet, whose term ends on Oct. 31 next year. Only three picked Italy’s Mario Draghi, Weber’s main rival for the job. Twenty economists said Constancio will succeed Lucas Papademos as vice president when his term expires on May 31 this year. Euro-region finance ministers are due to vote on the vice president post today.
Jockeying for the ECB presidency has already started as governments across the 16-nation euro region grapple with a fiscal crisis that has prompted investors to question the sustainability of the monetary union. Installing Weber at the ECB’s helm next year would give Europe an outspoken inflation fighter who has stressed the need for fiscal discipline to protect the euro.
“Weber has a very strong personality and will definitely give the euro a very powerful and visible face,” said Laurent Bilke, a former ECB economist now at Nomura International Plc in London, who expects Bundesbank President Weber to win. “He’s a recognized economist and will make a difference. Under him, the ECB may even grow in its international stature.”
Weber’s Influence
Weber, 52, has sped to the top of European policy making. Like Federal Reserve Chairman Ben S. Bernanke, he is a former academic. He joined the Bundesbank as president from the University of Cologne in 2004 after a scandal over hotel expenses forced predecessor Ernst Welteke to resign.
Weber quickly established himself as one of the most influential of the ECB’s 22 Governing Council members, often pre-empting policy shifts and moving currency and bond markets with his comments.
He landed on Trichet’s so-called “Black List” last November by revealing the ECB would tighten its lending to banks. The remarks breached ECB protocol that major announcements be made by the president and also came within a week of a council meeting, when officials are supposed to refrain from commenting on policy.
Weber is perceived by economists as one of the ECB’s toughest inflation-fighting “hawks” because of the emphasis he places on curbing risks to price stability.
Hawks and Doves
If Constancio wins the ECB vice presidency, he would strengthen Weber’s chances by lending balance to his ticket. Constancio, Portugal’s central bank chief, is known as a “dove” who pays more attention to economic growth. Between them they would also ensure representation from northern and southern Europe at the top of the ECB.
Luxembourg’s Yves Mersch and Belgium’s Peter Praet are also on the ballot for the vice presidency business cards design. If finance ministers pick Mersch, who like Weber has a reputation as an inflation hawk, Draghi’s chances of replacing Trichet would rise.
Draghi, 62, left Goldman Sachs Group Inc. to become governor of the Italian central bank in January 2006. He replaced Antonio Fazio, who resigned after a criminal investigation was opened into his handling of Italian bank mergers. A former economics professor like Weber, Draghi chairs the Financial Stability Board and has pushed for limits on bankers’ pay and stronger capital requirements.
A spokesman for Italian Prime Minister Silvio Berlusconi said last week that the government backs Draghi for the ECB job.
‘Neck and Neck’
German Chancellor Angela Merkel has won French President Nicolas Sarkozy’s support for Weber’s candidacy, German magazines Spiegel and WirtschaftsWoche reported this month.
“It will be a neck-and-neck race,” said Holger Sandte, chief European economist at WestLB Equity Markets in Dusseldorf, who expects Draghi to win. “Policy makers probably want someone who’s a bit more diplomatic than Weber,” he said, adding the ECB “resides in Frankfurt and it’s pretty much designed in a German way.”
Germany, Europe’s largest economy, hasn’t held a major European policy position since Walter Hallstein led the Commission of the European Economic Community from 1958 to 1967. It didn’t put up a candidate when the ECB’s first president was picked in 1998, pushing instead for Wim Duisenberg of the Netherlands in exchange for the ECB being headquartered in Frankfurt, Germany’s financial capital.
The decision on Trichet’s successor “ultimately comes down to politics,” said Nick Matthews, senior economist at Royal Bank of Scotland Group Plc in London, who believes Weber will prevail. “I would imagine the argument that ‘it’s Germany’s turn’ is being used in the discussion.”
Musical Chairs
Whoever takes over from Trichet, the ECB’s six-member Executive Board may need to be reconfigured to ensure one country doesn’t dominate it.
With Juergen Stark and Lorenzo Bini Smaghi, Germany and Italy are already represented on the board. Economists said one of them will probably have to step down before his term expires to make way for Weber or Draghi and avoid giving either country too much weight in the ECB’s decision making.
“Stark will be upgraded to Bundesbank president,” said Carsten Brzeski, senior economist at ING Group in Brussels, who believes Weber will win the race. “Stark is a good Prussian. He’s dutiful and does everything that’s good for his fatherland. He’ll clean his desk.”
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European finance chiefs sought to bolster international confidence in Greece’s ability to cut its budget deficit by endorsing the country’s austerity plan and promising to ensure the government delivers on it.
“The European members of the G-7 will make sure it is managed,” French Finance Minister Christine Lagarde told reporters on Feb. 6 after meeting counterparts and central bankers from the Group of Seven in Iqaluit, Canada. European Central Bank President Jean-Claude Trichet said the ECB is “confident” Greece will cut its deficit below the limit of 3 percent of gross domestic product in 2012 from 12.7 percent.
The struggles of the Greek government to convince investors it can reduce the largest budget gap in the European Union without outside assistance forced their way on to the agenda of the G-7 talks after the MSCI World Index of stocks fell to its lowest in four months on concern of a default.
“I just want to underscore they made it clear to us, they the European authorities, that they will manage this with great care,” U.S. Treasury Secretary Timothy F. Geithner said in Iqaluit. “The European authorities gave us a very comprehensive review of the program now in place to address the challenges faced by the Greek economy.”
Greek bonds have tumbled in the past two months, pushing the yield on the country’s 10-year debt above 7 percent, the highest since 1999, the year the euro began trading. The premium investors charge to hold Greek 10-year bonds over the benchmark German bund has widened to 356 basis points, about 10 times what it was two years ago, and credit-default swaps on Greek debt rose to a record on Feb. 5.
Foreign-Exchange Markets
“No measure of official reassurance would be enough unless the nations in question retain credibility in financial markets, which remains to be seen,” Geoffrey Yu, a currency strategist at UBS AG in London, said in a note to clients. “We expect foreign-exchange markets to continue trading on a risk-averse tone.”
Borrowing costs have also jumped for Portugal and Spain, raising concern among policy makers that Greece’s woes will be shared elsewhere in Europe and overseas as governments try to rein in the record budget deficits they ran up fighting the worst global recession since World War II.
“This is a crisis that has been on the horizon for quite a while,” Harvard University Professor Niall Ferguson told Bloomberg Television, adding that Belgium and Italy are also at risk. “The contagion is going to spread.”
‘Intense Concern’
German Finance Minister Wolfgang Schaeuble said in Iqaluit that policy makers outside Europe “have the impression that Europeans will solve this problem and that they’re aware of the problem.” Canadian Finance Minister Jim Flaherty said the size of Greece’s economy means “in global terms it’s not of intense concern.”
Schaeuble said Greece still has to “pay a price” for running up the deficit and said the euro remains “stable.”
“Euro-area members of the G-7 gave an update on the efforts and commitments by the Greece government to ensure fiscal sustainability and economic reform,” Trichet said. “We said that the euro area would continue to monitor closely the implementation of this stability program.”
Greek Prime Minister George Papandreou has already pledged to step up budget cuts if needed and EU Monetary Affairs Commissioner Joaquin Almunia, who also attended the G-7 meeting, said last month that leaders have no “plan B” to help Greece.
Painful Measures
Most Greeks object to increases in the retirement age and fuel taxes even as a majority say painful measures are needed to reduce the budget gap, according to a Kappa Research poll for To Vima newspaper, published yesterday.
Harvard’s Ferguson said Greece’s economy will suffer as it tries to restore fiscal order with the resulting increase in unemployment triggering public strikes. Teachers, hospital workers and tax collectors already have called a 24-hour strike for Feb. 10 and private-sector workers will follow two weeks later.
“It’s going to be messy,” said Ferguson, who predicted Germany and France will provide financial aid if needed. “Suddenly the markets woke up and realized these weren’t credible fiscal policies.”
Australia’s central bank said economic growth will continue to accelerate this year even if policy makers are forced to raise the benchmark interest rate by another three quarters of a percentage point.
The economy will be growing at an annual pace of 3.25 percent in the three months through December 2010, up from 2 percent last quarter, the bank said today in Sydney. Officials based their forecast on an assumption that the overnight cash rate target will climb to 4.5 percent this year, in line with market estimates.
Reserve Bank Governor Glenn Stevens unexpectedly kept borrowing costs unchanged this week, saying information about the impact of the bank’s record three increases last quarter “is still limited.” A report this week showed retail sales unexpectedly fell in December for the first time in five months and stock markets tumbled today amid increasing concern that the global recovery may falter.
“They are uncertain and waiting for more information,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. “It looks like they need greater justification to tighten further. They need to see a broadening in global growth.”
The Australian dollar traded at 86.57 U.S. cents at 12:37 p.m. in Sydney from 86.90 cents before the statement was released. The two-year government bond yield fell 4 basis points to 4.05 percent. A basis point is 0.01 percentage point.
Stocks Fall
Australia’s S&P/ASX 200 Index dropped 2.8 percent to 4,493.40 at 12:05 p.m. in Sydney, setting the benchmark gauge on course for its lowest close in five months.
While interest rates are “no longer at exceptionally low levels,” it is “likely” that borrowing costs will be increased further over time to ensure inflation stays within Stevens’s target range of between 2 percent and 3 percent, the bank said in its quarterly monetary policy statement.
Stevens became the first central banker in the world to raise borrowing costs three times last year after Australia’s economy skirted the global recession, helped by A$20 billion ($17 billion) in cash handouts to consumers from Prime Minister Kevin Rudd and another A$22 billion in spending on roads, railways and schools.
U.S., Europe
By contrast, officials in the U.S., the U.K. and Europe have kept their benchmark lending rates at historic lows, partly on concern that recoveries in their economies will be hampered by high unemployment and weak consumer sentiment.
Australia’s economy will expand 2.5 percent in the June quarter of 2010 from a year earlier, and 3.5 percent in the year through June 30, 2011. Three months ago, the bank predicted growth rates of 2.25 percent and 3.25 percent respectively.
Core inflation will cool this year to an annual pace of 2.5 percent from 3.25 percent, before accelerating again to 2.75 percent in 2011.
The bank said those forecasts are based on the “technical assumption” of an increase in the cash rate, “with the assumed path broadly consistent with market expectations as the statement was finalized.”
Money market yields continue to reflect expectations for “further tightening, though at a slightly slower pace” than anticipated three months ago. “The cash rate is expected to reach around 4.5 percent by the end of the year,” today’s statement said.
“They’re being a little more specific and open about” their assumptions about future interest rates, said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. “They were probably always assuming something similar to the market.”
Rate Bets
Traders are betting there is only an 18 percent chance of a quarter-point increase in the overnight cash rate target when policy makers meet on March 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:33 p.m.
Today’s forecasts “represent a modest upward revision” to figures released in November, “with recent data suggesting that the economy starts the current upswing in activity with somewhat less spare capacity than earlier thought likely,” today’s statement said.
“It now looks likely that the unemployment rate has peaked at around 5.75 percent, a much better outcome than thought likely early last year,” when the government forecast the jobless rate would peak at 8.5 percent this year.
Australia’s unemployment rate dropped in December to an eight-month low of 5.5 percent after employers added 135,700 jobs between September and the end of 2009, the biggest four- month surge in hiring in more than three years.
Energy Demand
Increased demand for workers is being stoked by a surge in investment by companies such as Chevron Corp., which is expanding its Gorgon liquefied natural gas venture in Western Australia to meeting rising demand from Asia for energy.
“Mining investment is expected to increase further from its already very high level,” today’s statement said. Exports of resources will “grow strongly, reflecting capacity increases resulting from the high level of mining investment over recent years.
“However, growth outside of the mining sector is expected to be only modest, reflecting the reallocation of productive resources within the economy.”
This is partly due to the surge in Australia’s currency, “which has reduced the international competitiveness of import- competing and exporting sectors, including the manufacturing and tourism sectors,” the bank said.
Household Spending
While increased hiring and an annual 13.6 percent surge in house prices last quarter have helped stoke consumer confidence, which jumped in January by the most in six months, “households are still taking a more cautious approach to their spending than was the case a few years ago,” today’s statement said.
One risk to today’s forecasts is whether the nation’s recent economic performance was prompted by a “bring-forward” of spending by consumers and businesses amid last year’s earlier interest-rate cuts and government spending, the bank said.
“If so, underlying growth would be soft into 2010 as the effects of the temporary stimulus fade,” the bank said. This may be offset by “the improvement in the outlook in the resources sector” which is “clearly not due to temporary policy factors.”
There are also questions about the durability of recent growth in the world’s largest economies, which have been boosted by temporary fiscal measures and the restocking of inventories by companies, today’s statement said.
“For a sustained recovery to take hold, a substantially stronger pick-up in private demand than has been evident to date will be required,” the bank said. “Many of these countries also face very significant fiscal challenges that will need to be addressed over time.”
French business confidence rose more than economists forecast in January on signs that the recovery is gaining pace after the worst recession in six decades.
The index of sentiment among factory executives jumped to 92 from a revised 88 in December, Paris-based statistics office Insee said today. Economists expected a reading of 90, according to the median of 18 forecasts gathered by Bloomberg News.
France’s economy emerged from the slump last year, growing 0.3 percent in the second and third quarters. The Finance Ministry said this week that growth accelerated in the three months through December and raised its 2010 forecast, predicting that Europe’s second-largest economy will expand 1.4 percent.
“French industry is benefiting from the pickup in world trade,” said Joost Beaumont, an economist at Fortis Bank Nederland in Amsterdam. “Growth should mainly come from foreign demand.”
French bonds gained after the report, pushing the yield on the benchmark 10-year bond due in 2019 down 2 basis points to 3.43 percent. A basis point is 0.01 percentage point.
French 10-year debt yielded an average 37 fast cash online.18 basis points more than 10-year German securities in 2009, according to data compiled by Bloomberg. The spread today was 23.5 basis points.
“Manufacturers see business significantly improving,” Insee said. “Inventories of finished products are judged to be small and order books, overall and from abroad, are filling up, even if they are still considered much less than full.”
The level of orders from foreign clients now shows a reading of minus 48, up from minus 58 in December, Insee said.
Domestic demand may be restrained by rising unemployment. The Finance Ministry expects France to lose 71,000 jobs this year, mostly in the first half, after shedding 373,000 in 2009.
“We have a recovery and the only question is how strong it will be,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas in Paris. “In the U.S. inventories are being re- built and in Europe we are positive on the prospects for France and Germany.”
New Zealand’s economy grew less than economists estimated in the third quarter, driving the nation’s currency to a three-month low on speculation the central bank may not need to raise interest rates until mid-2010.
Gross domestic product rose 0.2 percent from the previous quarter, Statistics New Zealand said in Wellington today. That was half the median forecast of a 0.4 percent gain in a Bloomberg survey of 12 economists.
A decline in construction, manufacturing and business investment hobbled New Zealand’s recovery from its worst recession in 30 years. Reserve Bank Governor Alan Bollard said this month the bank may raise the benchmark interest rate from a record low sooner than he previously indicated should the economic rebound be sustained.
“The recovery is in train, but has been off to a subdued start,” said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. The data doesn’t “warrant hiking rates as early as March. We see June 2010 as the central case for when the tightening cycle starts.”
New Zealand’s dollar dropped to 69.75 U.S. cents, the lowest since Sept. 14, from 70.20 cents before the report was released. It bought 69.91 cents at 6:30 p.m. in Wellington. The currency had climbed 12 percent against the U.S. dollar the past six months and the NZX 50 stock index gained 14 percent on signs of a pickup in the economy.
Global Rates
Swaps traders are betting that the Reserve Bank of New Zealand will increase the benchmark rate by 203 basis points over the next 12 months, according to a Credit Suisse index.
“The recovery remains fragile,” Finance Minister Bill English said today. “To climb back up the world income ladder and to replace jobs lost during the recession, we need businesses to have the confidence to invest and create jobs.”
Central bankers around the world are assessing when to remove stimulus as the global recession abates. Australia and Norway have started raising rates and the Federal Reserve has committed to scale down buying of mortgage-backed debt.
Europe’s economy emerged from its worst slump in more than six decades, growing 0.4 percent in the third quarter from the previous three months. The U.S. economy grew at a revised 2.2 percent annual pace last quarter. Australia’s economy expanded in the three months through September for a third straight quarter.
Governor’s Comments
New Zealand’s central bank may begin to “remove monetary stimulus around the middle of 2010,” Bollard said on Dec. 10. In October, the governor said the nation’s benchmark interest rate would be kept on hold until the second half of next year.
The economy shrank 1.3 percent in the third quarter from a year earlier, today’s report showed. That compared with a 1.2 percent contraction estimated by economists.
“The central bank needs strong data in order to bring forward its tightening cycle to the same degree as the market has priced in,” said Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington. “Is this the sort of data that would shift the Reserve Bank from its published view? You’d have to say no.”
Business investment fell 0.9 percent, the fifth straight decline, as companies spent less on plant and machinery, today’s report showed. Manufacturing dropped 1.9 percent and construction declined 4.4 percent.
Manufacturers, Retailers
Bridgestone Corp., the world’s largest tiremaker by sales, said in October it would close a plant in Christchurch, New Zealand, by the end of the year because of lower cost competitiveness.
Fisher & Paykel Appliances Holdings Ltd., the country’s biggest manufacturer of washers and dryers, said sales in the three months ended Sept. 30 fell 11 percent from a year earlier. Sales are likely to remain flat for the rest of the fiscal year, Chief Executive Officer Stuart Broadhurst said Nov. 27.
Smiths City Group Ltd. yesterday said sales at its furniture and appliance stores dropped 6.2 percent in the six months ended Oct. 31. “The retail environment has continued to be very tough and in big ticket, the worst for 20 years,” Chairman Craig Boyce said.
Warehouse Group Ltd., the nation’s biggest discount retailer, last month said sales were below expectations in the three months ended Nov. 1.
Household Spending
Household spending, which makes up 60 percent of the economy, rose 0.8 percent in the third quarter. Sales of cars, home appliances and other so-called durable goods gained 2 percent. Purchases of food and non-durable items fell.
Exports of goods and services were unchanged in the third quarter as increased spending by tourists offset a decline in commodity exports including meat and seafood.
The GDP deflator, a measure of prices, rose 2 percent in the year ended Sept. 30.
“GDP growth is showing little upward momentum from one quarter to the next,” said Ian Pollick, economics strategist at TD Securities in Toronto. “From a monetary policy perspective, this particular report is unlikely to light a fire under the RBNZ.”
Federal Reserve Chairman Ben Bernanke will be a featured speaker at an economic forum in Atlanta next month.
Bernanke will speak Jan. 3 at the American Economic Association annual meeting at the Atlanta Marriott Marquis.
Bernanke’s speech will open the AEA’s 125th anniversary meeting. The AEA publishes several economics periodicals, including the American Economic Review and the Journal of Economic Literature easy payday loans.
Other notables attending the three-day summit include Nobel Prize-winning economist and New York Times columnist Paul Krugman.
Option-ARMs: File under, "It sounded good at the time."
These exotic mortgages allowed homebuyers to come to closing with little cash and choose, monthly, how much to pay: interest and principal, interest only, or a minimum amount less than the interest due.
Of course, the last option is the one 93% of option-ARM buyers selected, according to a new report released this week by Standard & Poors.
But eventually, everyone has to pay the piper.
Nearly all of the 350,000 option-ARM borrowers owe more than when they first bought their homes thanks to the unpaid interest accumulating. And many loans written during the first big wave, which started in 2004, are getting ready for their five-year reset, when they become standard amortizing loans. Additionally, some newer loans will reset early if the accumulated interest has pushed the loan-to-value ratio above 110% to 125%.
That means borrowers are about to start paying very hefty prices for their homes. In one scenario outlined in the S&P report, the payment on a $400,000 mortgage jumps from $1,287 to $2,593.
25% default rate
But that doesn’t just spell bad news for borrowers. Some industry pessimists say the looming default problem could have the power to derail the nascent housing market recovery. "The crux of the matter is that as soon as these mortgages recast, the history is that they will default," said Brian Grow, one of the S&P report’s coauthors.
And the newer the loans, the worse they will perform, the report said. The last year that any option-ARMs were issued was 2007. In the first 20 months after issuance, this vintage of option-ARMs had an average default rate of just over 22%.
That includes all option-ARMs issued in 2007. But if you calculate default rates for only 2007 option-ARM borrowers who are now underwater, the default rate jumps to 25% after just 20 months, according to S&P.
So, while there may not be an awful lot of these loans out there, their high default rates will have an outsized influence on housing markets, adding to already bloated foreclosure inventories and driving prices down further.
Bubble markets
And the markets where they’ll produce the most foreclosures are still among the most vulnerable in the nation.
Option ARMs were most popular in bubble markets — California, Nevada, Florida and Arizona — where double digit home annual price increases put the cost of buying a home out of reach.
In fact, 60% of these loans went to residents of California and other Western states, places where prices have fallen the most, according to report coauthor Diane Westerback. "The geography is negative for these products," she said.
Many borrowers in these places could only afford a home if they chose the option ARM. Many counted on continued hot market conditions to add value to their homes. The extra equity could then be tapped to pay their bills.
We all know how that worked out.
Home prices in many of the markets where option ARMs are most concentrated have fallen 30%, 40% or more. When the loans recast, most borrowers will find themselves severely underwater.
"Because borrowers of [options ARMs] are in a much worse position," said Westerback. "You’ll see defaults rising very rapidly."
And most option ARM borrowers will not be good candidates for refinancing or mortgage modifications because their loan-to-value ratios will be far too high. Under the administration’s Making Home Affordable program, for example, mortgages with balances that exceed 125% of the home’s value are not eligible for help.
Not so white lies
There is another little problem that many option-ARM borrowers seeking refinancing would face: "Upwards of 80% of were stated-income loans," said Westerback.
These are the so-called "liar loans" in which lenders did not verify that borrowers earned as much money as they said they did. Lenders may not be able to modify mortgages because many of the borrowers’ income could not stand up to the scrutiny. Borrowers may also not want to go through underwriting again because they could be held legally liable for deliberate inaccuracies on their original applications.
Add to those conditions the still fragile economy and high unemployment rates, and you have a recipe for disaster.
Motor Trend magazine named the Ford Fusion mid-sized sedan as its 2010 Car of the Year on Tuesday. The award includes both the gas-only and hybrid versions of the Fusion.
This year’s Car of the Year was selected from among a field of 22 different cars all of which were newly introduced or, like the Fusion, substantially redesigned for the 2010 model year.
The Fusion was first introduced in 2006 but has been substantially upgraded and redesigned for the 2010 model year.
"It’s a credit to the [Ford] team to deliver a car in the hottest selling segment in the market and to make it absolutely competitive with the benchmarks," said Motor Trend editor-in-chief Angus McKenzie at an award presentation ceremony.
The benchmark cars in the mid-sized segment are generally considered to be the Toyota Camry and Honda Accord, which have been the two top-selling cars in America for years.
McKenzie praised the Fusion for the excellence of all versions of the car including the 4-cylinder, V6 and hybrid models.
"Another thing that impressed us was the attention to detail," McKenzie said cash til payday.
While the 2010 Fusion shares much of its engineering with the previous version, the car looked and felt like a completely new car, McKenzie said.
Motor Trend, one of the most influential automotive enthusiast magazines in the United States, also gives out SUV of the Year and Truck of the Year awards. The SUV of the Year was announced earlier with the award going to the 2010 Subaru Outback. The Truck of the Year will be announced in December.
Vehicles were judged on six different criteria: design, engineering, efficiency, safety, value and how well the vehicle fulfills its intended function.
The cars were put through track tests by Motor Trends editors. Then cars that were not eliminated in the track testing process were put through additional road tests.
Derrick Kuzak, Ford Motor Co. group vice president for product development credited the Fusion with "getting Ford back into the car market" in 2006 after the carmaker had become competitive only in large trucks and SUVs.
Shares in Exxon Mobil Corp, the world’s largest publicly traded oil company, could rise more than 20 percent to $90 next year if energy prices increase as expected, Barron’s reported on Sunday.
Exxon shares have lagged rivals in the stock market rally this year, falling about 10 percent, but futures contracts anticipate higher energy prices next year that would be a major boost to the company, according to Barron’s November 16 edition.
The Irving, Texas-based company could earn $6.50 a share in 2010 if the higher oil and natural-gas prices materialize, compared to its expected 2009 profit of $4 a share, the newspaper said. Exxon earned a record $8.69 a share in 2008 when oil prices peaked.
Analysts have criticized Exxon for weak production growth, but it has an impressive record for getting a high return on its investments, according to Barron’s. It replaced more than 100 percent of its production in each of the last 15 years and, between 2004 and 2008, its finding costs of $7 a barrel on average were below its peers, Barron’s said.
In addition, Exxon has a relatively low dividend yield of 2.3 percent, which is below several of its rivals, but analysts estimate the dividend could rise another 5 percent or more in 2010, Barron’s reported.
Exxon shares closed at $72.47 on the New York Stock Exchange on Friday.
(Reporting by Elinor Comlay; Editing by Leslie Adler)
Gas prices are up slightly from two weeks ago — despite a decline in the price of oil, according to a survey published Sunday.
The average price nationwide for a gallon of self-serve regular is $2.68, up 3 cents from Oct. 23, the Lundberg Survey found.
"This is not from the price of crude, which actually backed off slightly in the past few days," said publisher Trilby Lundberg. "Instead, that small rise came from a bounce-back in the gasoline retailers’ margin, which had been squeezed into single digits in October."
The margin retailers take per gallon is generally about 10 to 14 cents, she said. In October, it averaged between 7 and 9 cents. "This is a normalization," Lundberg said, "because (the margin) had been abnormally low."
The price is 39 cents higher than it was a year ago — the first time a year-to-year increase has been seen this year, she said. "Last year, prices peaked in early July and they crashed all the way through the rest of the year at varying speeds … but now, with the 18-cent rise between Oct. 9 and Oct. 23 plus this additional 3 cents … these two lines in the graph, as it were, have crossed."
It’s likely, however, that the current price represents a peak, and prices will begin to slip, absent a rise in crude oil prices, Lundberg said bad credit payday loans. Demand is down for a number of reasons, chief among them the unemployment rate.
"It is the work commute that causes that gallon to be sold much more than anything else," she said. In addition, fewer daylight hours and the approach of winter weather leave people driving less this time of year.
The highest average price for a gallon of self-serve regular was in Anchorage, Alaska, at $3.30 for a gallon of self-serve regular, Lundberg said. The lowest was in Tucson, Ariz., at $2.36. Interactive map: Gas prices state by state.
A look at prices in some other cities:
- Honolulu, Hawaii — $3.20
- San Francisco, California — $3.04
- Houston, Texas — $2.49
- Atlanta, Georgia — $2.58
- Des Moines, Iowa — $2.62
- Boise, Idaho — $2.70
- Burlington, Vermont — $2.78
- Chicago, Illinois — $2.88
- Sacramento, California — $2.91
- Boston, Massachusetts — $2.70
- Long Island area, New York — $2.85
- Los Angeles, California — $2.97
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