Search results matching tag 'Kim Peterson'

McDonald's abandons Iceland

Kim Peterson — Tue, 27 Oct 2009 17:08:00 GMT

Would you spend $6 on a Big Mac? I wouldn't, and neither will people in Iceland.

That's why McDonald's (MCD) is closing its three restaurants in Iceland and has no plans to return, according to the Financial Times.

The move says more about Iceland than it does McDonald's. Until recently, Iceland was one of the wealthiest countries in the world. But its financial system imploded in the global credit crisis, and its three biggest banks were ruined by high debt. Its currency went into a tailspin and its capital markets shut down.

The departure of McDonald's is perhaps a tacit acknowledgement that the country isn't coming back. McDonald's cited the "very challenging economic climate" on the island nation, according to the FT.

Icelandic McDonald's restaurants imported supplies from Germany, and their costs have doubled as the krona collapsed, the FT reported. The restaurants would have had to raise prices by 20% in response. That means the Icelandic Big Mac would have cost far more than the $6 Big Mac in Switzerland.

Now, Iceland will join Albania, Armenia and Bosnia and Herzegovina on the list of McDonald's-free countries in Europe.

Don't look now -- it's a second stimulus

Kim Peterson — Wed, 21 Oct 2009 17:49:00 GMT

A second stimulus won't fly with some Americans, despite the fact that Warren Buffett, Joseph Stiglitz and other experts have called for one.

That's why, even though the White House will likely push something that walks and talks like a stimulus, no one will call it the "S" word.

Lawmakers are set to extend some stimulus measures and create some new ones as well, CNNMoney.com reports. Here's a quick rundown:

Unemployment. One move being considered is extending unemployment benefits after they run out.

An estimated 1.3 million unemployed workers will have exhausted their benefits by the end of the year, according to CNNMoney. One proposal would extend the benefits by as much as 14 weeks, and up to 20 weeks in states with high unemployment.

Health care. Another idea in discussion is extending the Cobra health insurance program for unemployed workers. The current stimulus allows for the government to pay 65% of the Cobra premium for nine months after a worker becomes unemployed.

Seniors. Social Security benefits will see no cost-of-living increase next year because of a lack of inflation, CNNMoney reports. The government is considering making up for that by sending a $250 payment to seniors, veterans and the disabled.

Homebuying. The $8,000 tax credit for first-time homebuyers expires Nov. 30, and some people (namely, ahem, real estate agents) have called for an extension. There is talk of pushing the deadline into next June.

New hires. Finally, some have suggested giving companies a tax break for hiring new workers. But would it truly spur job creation, or just unfairly reward companies that were already planning to hire?

At any rate, it doesn't sound like this one has too much traction in Congress.

So what's the cost of all this? Tens of billions, CNNMoney.com reports.

The White House is smart not to promote this as another stimulus. The "S" word will drive some taxpayers batty, but each of these proposals don't sound that outrageous.

Citibank yanks MasterCards

Kim Peterson — Tue, 20 Oct 2009 16:46:00 GMT

Could banks have any less respect for their customers?

Citibank (C) has begun closing customers' accounts without telling them. That's a bitter surprise for some people who pull out their cards to make a purchase, only to learn that the card has been denied.

This isn't anything new, but it's a trend that's starting to involve more banks and affect more customers who least expect it. Pay your bill on time and keep a low balance? Doesn't matter. All types of accounts are getting hit.

Find a better credit card

One woman tried to pay for gas, according to the Associated Press. Citibank said it was because of something that appeared on her credit report. But when the woman accessed her credit report, it only said, "Closed at credit grantor's request."

The woman said she used the card regularly and always paid the bill promptly, according to the AP. Other people have reported similar incidents. Read this person's story for more.

And it isn't just Citibank that's yanking cards. The Wall Street Journal has the story of how American Express (AXP) suddenly canceled the card of one woman earlier this year. The woman -- a lawyer, in fact -- was told that her card was canceled because of information in her credit report.

That seems to be a standard line for credit card companies. And though it seems like bad business, experts tell the Journal that it is legal for companies to cancel cards without warning.

Customers have reportedly been affected by this at Bank of America (BAC), JPMorgan Chase (JPM) and HSBC Holdings, according to the Journal.

In Citibank's case, the company said it decided to close some MasterCard accounts that were co-branded with oil companies, including Shell, Citgo, ExxonMobil and Phillips 66-Conoco.

It's fine to close customer accounts. That's business, and banks do it all the time. And in this economy, credit-card companies are getting killed as people who have lost jobs abandon payments. Banks are responding with panic, raising interest rates and fees and canceling cards to try and minimize risk.

What gets me, however, is the way Citibank did it.

AP reports that Citi closed the accounts on Wednesday, but sent out letters Monday informing customers of the change. So Citibank waits until the last minute to tell customers, most of whom probably didn't receive the news before their cards were shut down.

Way to leave your customers in the lurch.

Executive perks at bailed-out banks still rising

Kim Peterson — Tue, 20 Oct 2009 14:45:00 GMT

The salary of banking executives is a sore point with, well, everyone, but the perks are just getting better.

Financial firms that received taxpayer bailout money boosted their executive perks about 4% on average last year, the Washington Post reports. Bosses that didn't quite get the bonus or salary they wanted had their ruffled feathers smoothed over with a nice country club membership.

Ken Lewis of Bank of America (BAC) and Jeffrey Peek of CIT Group (CIT), for example, each got an extra $100,000 in personal jet use over the year.

And Comerica (CMA) chief Ralph Babb Jr. got a slick new country club membership that would normally have cost him $200,000.

The chief of GMAC Financial Services got a $2.5 million check to help him pay his personal taxes. That practice is going to stop, however. In June, the Treasury Department banned bailed-out companies from giving their executives tax money.

About half the banks increased their perks to top executives, the Post reports.

American Express (AXP) spent a nice chunk of money on its chief executive's personal life. It paid $415,000 for the chief's personal travel on the company jet, $201,000 for his home security system and $46,000 for security during personal trips.

Does the CEO of American Express really need a bodyguard when he vacations? The company apparently thinks so.

Many of these companies are backing off of the corporate perks now. GMAC doesn't use corporate aircraft at all now, the Post reports. SunTrust Banks (STI) has stopped paying country club memberships, but it has increased salaries to make up the difference.

And Bank of America won't let it's top executives take the company jet for personal travel any more. Guess they'll have to fly commercial when they want to frolic in the south of France. The horror!

Apple's warning signs

Kim Peterson — Tue, 20 Oct 2009 14:08:00 GMT

Investors should take a long, hard look at Apple (AAPL) shares before jumping into the stock, writes Brett Arends of The Wall Street Journal.

A better investment in smartphones might be in network operators, which are cheap, he writes. Those include Verizon Communications (VZ), AT&T (T) and Vodafone (VOD), which have dividend yields in the 5% to 6% range.

Arends lists a number of reasons why, even after Apple's impressive earnings report this week, investors should tread carefully.

"The case for or against investing in Apple has little to do with whether it's a good company (it is) or whether it makes good products (it does)," he writes. "It isn't even about whether the company can beat expectations. It's about whether the shares, priced at these levels, make for a sound investment."

Here's Arend's case:

Analysts: Of the 37 analysts who follow the company, 32 are bullish, three are neutral, and two say sell. That suggests the most people who might want to own Apple already do, he writes.

Share price: Apple's already at about 25 times expected earnings. The market average is 15 times earnings.

Competition: Apple's had a nice run as the dominant company in the smartphone market, but competitors like Google (GOOG) are just beginning the campaign to unseat the iPhone.

Cash: Operating cash flow rose just 6% in the last year to $10.2 billion.

Balance sheet: Subtract Apple's liabilities from assets, and you get about $22 a share. That leaves Apple's enterprise value at $150 billion, or 15 times annual operating cashflow.

Fannie and Freddie are zeroes, analysts say

Kim Peterson — Mon, 19 Oct 2009 18:33:00 GMT

If you own shares of Fannie Mae (FNM) or Freddie Mac (FRE), you're sitting on a whole lot of nothing, according to analysts at Keefe, Bruyette & Woods.

The analysts cut the price target on both stocks to zero and downgraded them to underperform.

In order for these mortgage giants to survive, the analysts said, they need to be recapitalized from the banking industry. But even if that happens, their common and preferred stocks will be worthless.

The government has funneled $98 billion in capital into Fannie and Freddie, according to MarketWatch.

Both stocks dropped after the analyst note came out. In afternoon trading, Fannie Mae shares were down 18% to $1.20 and Freddie shares were also down 18% to $1.40.

Fannie and Freddie buy mortgages from lenders and bundle them into securities, according to MarketWatch. They also guarantee payment, and accounted for 68% of all mortgage originations in 2009.

The KBW analysts suggested the government separate out the Bad Fannie and Bad Freddie from the good. That way, the government can cut its losses and create an exit strategy from the industry.

Do we need a doggy tax break?

Kim Peterson — Mon, 19 Oct 2009 17:43:00 GMT

Animal care can be outrageously expensive. I've probably spent enough money on my cat's ailing kidneys to buy a small car.

Should the government be helping out? One Republican congressman thinks so, and has introduced a bill that allows pet owners to deduct the cost of animal care from their taxes.

The bill would let you deduct as much as $3,500 a year, according to NPR.

Rep. Thaddeus McCotter of Michigan said he's heard that economic hard times are causing some people to give up their pets.

"When you think about the relationship between people and pets and the humane way that it helps people think, it seemed to me to be a good idea," McCotter said in a video about the bill, according to NPR.

Some pet owners are thrilled at the idea. But it seems to me that if you choose to have a pet, you should be able to pay for it.

Julie DelCour, a columnist at Tulsa World, summed up the issue nicely: "We have a $11 trillion national debt; and 46 million people without health insurance," she writes. "With those realities, Congress can ill afford to pass out tax deductions like Milk Bones. This novelty bill will die in committee and McCotter's 15 minutes of pandering to us animal owners will end."

'Tis the season to layaway

Kim Peterson — Mon, 19 Oct 2009 16:53:00 GMT

Layaway, gone from most stores for years, is back this season as stores get creative in wringing every dollar they can from shoppers.

Toys R Us announced Monday it will launch a layaway program for its more expensive items. Chief executive Gerald Storch said customers were requesting the service.

Toy sales don't suffer as much as other retail categories in recessions. That's because, when your daughter looks at you with big eyes and says how much she would love the Fur Real Friends Lulu My Cuddlin Kiddy Cat, well, it's hard to say no.

And now, Toys R Us and other stores are making it that much harder to say no. Kmart and Sears are even offering online layaway programs. You must make a down payment of 15% or $10, whichever is greater, and pay a $5 fee, according to The Los Angeles Times.

The new interest in layaway -- from both shoppers and stores -- comes as forecasters expect retail sales to drop this holiday for the second year in a row. The expected 1% decline won't be as bad as last year's 3.4% fall, according to Bloomberg, but retailers are preparing for some bleak numbers.

Stores are also rolling out sales and promotions -- and we'll hear a lot about layaway in the next few weeks.

The lies and half-truths of hedge fund managers

Kim Peterson — Fri, 16 Oct 2009 17:18:00 GMT

Turns out that hedge fund managers are, well, a little loose with the facts. I'm sure you're completely shocked by this revelation.

Researchers at New York University compared hedge fund manager claims to the actual data in hundreds of due diligence reports between 2003 and 2008, writes Larry Swedroe of CBS MoneyWatch.com.

They found that managers lied about the amount of money in the funds, the performance of the funds and other details. One manager overstated the fund's assets under management by $300 million, Swedroe writes.

It gets worse. The study found that nearly one in six managers played down or flat-out lied about regulatory or legal trouble in their fund's past.

Swedroe suggests avoiding hedge funds altogether. The funds' risk-adjusted returns aren't all that different from Treasury bills, he writes. And the returns tend to have high risk factors, including lock-up periods that keep money from being liquid. They're aso tax inefficient, he writes.

Job openings scarcer than ever

Kim Peterson — Fri, 16 Oct 2009 16:48:00 GMT

Here's one of the more discouraging facts I've come across in a while: At the end of August there were fewer than 2.4 million job openings in the country.

To put this in perspective, that equals only 1.8% of all the filled and unfilled positions in the U.S. That's a new record low, according to the Atlanta Fed.

For every job opening, there were more than six unemployed people. That's a very bleak scenario, particularly when you compare it to 2007, when the ratio was less than 1.5.

The underlying message here is pretty obvious. "Finding a job right now is extremely difficult," writes John Robertson of the Atlanta Fed's research department.

You can see how this situation has affected the quit rate as well, which is at a record low of 1.3%. The people that are lucky enough to be employed are staying put.

And the tough job market has also caused people to spend more time unemployed. By the end of August, the average length of time people are unemployed has increased to 26 weeks.

With numbers like this, it's hard to believe the economy is in recovery and expansion mode.