World oil consumption will rebound next year as the global economy recovers from a deep slump, according to a report released Friday.
The Paris-based International Energy Agency said it expects global oil demand to grow 1.7% in 2010 to an average 86.1 million barrels per day. That’s an increase of 350,000 barrels per day from its previous estimate.
Crude for November delivery rose 8 cents and settled at $71.77 a barrel. Oil prices had slipped earlier in the session as the U.S. dollar recovered some ground on speculation that the Federal Reserve could tighten monetary policy as the economy recovers.
In its monthly oil market report, the IEA said "buoyant economic activity in more oil intensive emerging countries" will help support demand next year. However, the group warned that next year’s economic outlook "is still fraught with uncertainty."
Global oil demand in 2009 is expected to average 84.6 million barrels per day, according to the IEA. That’s up 200,000 barrels per day from last month’s forecast. But overall consumption in 2009 is still expected to be down 1.9% versus the year before.
Oil surged more than $2 in the previous session as the dollar fell to a 14-month low and a surprise profit from aluminum producer Alcoa (AA, Fortune 500) on Wednesday boosted economic recovery hopes no fax pay day loans.
The dollar rebounded Friday after Fed Chairman Ben Bernanke said late Thursday that the U.S. central bank could reverse its easy money policies as economic conditions improve to ward off inflation.
"My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period," Bernanke said. "At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road."
The greenback was up 0.3% against the euro to $1.4755. It gained 0.5% versus the British pound to $1.5993. Against the Japanese yen, the dollar rose 0.4% to ¥88.74.
Crude often falls when the dollar strengthens because a more robust greenback makes commodities priced in dollars more expensive for overseas buyers.
There may not be as much slack in the U.S. economy as many forecasters believe, which means medium-term inflation risks could be higher, a Federal Reserve official said on Sunday.
In excerpts of remarks prepared for delivery at an economics conference, St. Louis Federal Reserve President James Bullard said it was hard to accurately measure the gap between what the economy is producing and its full potential.
“I am concerned about a popular narrative in use today — the narrative being that the output gap must be large since the recession is so severe,” he said. “And so, any medium-term inflation threat is negligible, even in the face of extraordinarily accommodative monetary policy. I think this narrative overplays the output gap story.”
He said calculations aimed at measuring the output gap do not take asset price bubbles into consideration, so if much of the current drop in output was tied to the bursting of the housing bubble, “then today’s output gap would be smaller than it appears,” which would mean a higher risk of inflation no telecheck payday loans.
Bullard also said the Fed’s $1.75 trillion asset purchase program was adding to uncertainty in financial markets because it was unclear how the central bank might adjust it as economic conditions change.
He proposed establishing something akin to the Taylor rule, which calculates the ideal interest rate for a given set of economic conditions, for asset purchases so financial markets would have a clearer sense of policy direction.
“Good policy means that the Fed needs to communicate to the private sector how it intends to react to shocks in the future,” Bullard said.
“There has been little indication of how or whether these (asset purchase) amounts might be adjusted given incoming information on economic performance. This lack of clarity has created uncertainty in financial markets.”
(Reporting by Emily Kaiser; Editing by Diane Craft)
Vikram Pandit’s stewardship of Citigroup just received the equivalent of a triple-A rating.
Egon Zehnder, the recruitment consultancy Citi (C, Fortune 500) paid to conduct a review of its top brass at the behest of regulators, gave the chief high marks — though a few of his deputies didn’t fare so well. But to call this a complete vindication for Pandit would be a mistake.
Like the top grades complex securities garnered from rating agencies selected and in effect paid by the securities’ designers, it’s hard to take Egon Zehnder’s plaudits at face value. Recruitment consultants are known for not biting the hand that feeds them.
That being said, Citi’s board should keep Pandit in place for the moment. Though the former Morgan Stanley executive took longer than he should have done to make up his mind, Citi is now pursuing a sensible strategy of focusing on its role as a global provider of financial infrastructure to big corporate clients.
The bank is cutting back in retail banking where it has few economies of scale; it is deciding how best to get out of the controversial Phibro energy trading business; it has put its retail brokerage on a long-term exit path; and it has shunted most of its uncollateralized lending operations into Citi Holdings, a de facto way-station for assets that are on the block cheap pay day loans.
Anyway, Pandit’s powers have been circumscribed to placate regulators. Relations with the government are now in the hands of the chairman, Dick Parsons. Citi’s interface with investors and regulators was forcibly changed as well. Even if Pandit were to make bad decisions, his power to execute them would be limited.
But Citi directors shouldn’t let Egon Zehnder’s report stop them considering who might replace Pandit, either. Though he has embarked on a reasonable course, he has yet to deliver. Failure to do so would necessitate a change of captain. Without a Plan B, Citi’s board could face a succession mess like the one now afflicting Bank of America (BAC, Fortune 500).
BofA’s board failed to prepare for the departure of chief executive Ken Lewis, despite calls to replace him and the possibility that looming legal battles could make his position untenable. The infighting at BofA, which is now considering hiring an emergency CEO, is more instructive for Citi’s board than anything a consultant might prepare.
Mortgage applications surged last week as interest rates on home loans remained low, an industry group said Wednesday.
The Mortgage Bankers Association said its index of mortgage application volume rose 16.4% last week versus the previous week.
The surge in activity came as rates on 30-year fixed rate mortgages, the most widely used loan, remained below 5% for the third week in a row.
The average interest rate for 30-year fixed-rate mortgages fell to 4.89% last week from 4.94% the week before, according to the MBA. It was the lowest level since May 2009 when 30-year rates were 4.81%.
The MBA said refinancing applications jumped 18.2%, climbing to the highest level since mid-May. Purchase applications rose 13.2% to reach the highest level since January.
The report bodes well for the U low fee pay day loans.S. housing market, which has been stabilizing following a major slump. In addition to low interest rates, home sales have been supported by affordable prices and government tax credits.
But analysts say the market remains hampered by rising unemployment and warn that the budding recovery could falter if a popular $8,000 tax credit is allowed to expire at the end of the year.
Meanwhile, the average rate for 15-year fixed-rate mortgages eased to 4.32%, the lowest rate ever recorded in the survey.
Rates for one-year adjustable rate mortgages, or ARMs, rose to 6.56%.
Reinhard Mohn, who turned his family’s religious publishing company into Bertelsmann AG, one of the world’s largest media conglomerates, died Saturday, the firm announced Sunday.
He was 88.
Mohn and his family were worth $2.5 billion, Forbes magazine estimated in its annual rich list in March, making them the 261st wealthiest family in the world. They own 23% of Bertelsmann, with the rest controlled by a trust Mohn established.
The company owns Random House, publisher of Dan Brown’s "The Lost Symbol," as well as authors ranging from Stephen King and John Grisham to Toni Morrison and John Updike.
It also controls RTL Group, Europe’s largest broadcasting company; magazine publisher Gruner + Jahr, which publishes the German magazine Stern; and Direct Group, a media-marketing firm.
"Bertelsmann mourns the loss of one of the greatest entrepreneurs of our age," Bertelsmann chairman and CEO Hartmut Ostrowski said in the statement announcing the death.
"He embraced his responsibility to society and developed new ideas systematically, and with impressive consistency. Reinhard Mohn’s concept of leadership was based on values like liberty and humanity," Ostrowski said.
"In his over 60 years of active service, Reinhard Mohn built Bertelsmann into an international enterprise, which today employs more than 100,000 people in over 50 different countries," the firm said.
Mohn, the fifth generation of his family to head the company, took over after serving as a German officer in World War II, when he was captured and imprisoned by the Allies.
In 1950, he presided over the publisher’s creation of its own book club, which became the company’s "silver bullet," attracting 3 million members by 1960, according to an official company history.
Bertelsmann expanded into encyclopedia publishing and the music business in the 1960s, and introduced an employee profit-sharing scheme in 1970, earning its head the nickname "Red Mohn."
"Only those enterprises whose employees can identify with their company will be fit to master the challenges of the future, and such an attitude requires material justice," Mohn said at the time, according to the company history.
The company’s other businesses have included Sony BMG and AOL Europe.
Mohn retired in 2001, according to Forbes. His widow, Liz, remains on the firm’s supervisory board.
Chicago lost its bid to host the 2016 Summer Olympics Friday to Rio de Janeiro, Brazil.
The news was announced by Jacques Rogge, president of the International Olympic Committee, at a meeting in Copenhagen, Denmark.
"Like in every competition, there can be only one winner," said Rogge, just prior to announcing Rio as the host city.
With help from hometown heroes like the Obamas, the Windy City was aggressively lobbying to host the games. The upside to the rejection is that Chicago possibly saved money, as making the Olympics profitable would not have been an easy win.
Chicago was competing with Tokyo, Madrid, Spain and Rio de Janeiro in wooing the International Olympic Committee in Copenhagen.
The IOC also rejected Tokyo and Madrid Friday.
Chicago 2016, the organization leading the effort to host the games, had projected a cost of $3.8 billion, including a "rainy day" fund of $450 million in case of unforeseen increases if the city won the bid.
But there was good reason to be skeptical of that projection, said Robert Livingstone, producer of GamesBids.com and a leading expert in the Olympic selection process. Host cities routinely overrun their Olympic budgets, he said.
"It’s going to be more expensive than we think it’s going to be, because it typically is," Livingstone said, before the decision was made Friday. "I think every [host] city is going to lose money. It’s not an efficient event."
The bidding process alone cost Chicago about $100 million, Livingstone estimated.
An argument often made by host city advocates is that presenting the international spectacle is good for a local economy. But such "trickle-down effects," like benefits to local businesses, are "almost impossible to measure," Livingstone said.
"I think a lot of people look at the Olympics, and they try to justify it by how much money it adds to the economy," said Livingstone. "[But] if you’re in this to make money and improve your economy, you’re in it for the wrong reasons."
A Chicago 2016 spokesman, who asked not be named, had stood by the $3.8 billion projection. "Our numbers are completely feasible thanks to the infrastructure already in place, the number of venues already built and the temporary nature of the majority of those we’re planning to build," he wrote, in an e-mail prior to the IOC rejection.
Prince Alwaleed bin Talal, a big investor in Citigroup, urged the U.S. government to sell its stake in the bank as soon as this year to boost investor confidence, Emerging Markets magazine reported.
“The earlier the U.S. government exits its investments in those companies, the better,” as long as the withdrawal is not done in a way that hurts the prices of U.S. banking stocks, the Saudi billionaire was quoted as saying in an interview published on Sunday.
“We need to give confidence back to the shareholders and investors that these companies are moving along without government support.”
A series of bailouts during the financial crisis has left the U.S. government with a 34 percent stake in Citigroup, after the bank obtained $45 billion from the government’s Troubled Asset Relief Program.
Sources told Reuters last month that Citigroup was talking to U.S. officials about how the government should shed its 7.7 billion shares in the bank.
Alwaleed, who owns part of Citigroup through his investment firm Kingdom Holding Co, has said little in recent months about the stake. Kingdom owned 3.6 percent of the bank in July 2007 and five months later Alwaleed said he was among investors who agreed to put more money into the bank.
OPERATING PROFIT
Citigroup is expected to return to the black on an operating basis next year at the earliest, Alwaleed was quoted as saying in the interview no teletrack payday loans.
“Citigroup has learned a huge lesson. The worst is behind them right now,” Alwaleed said, adding that the bank’s $100 billion of tangible common equity, “the highest in the industry,” and the large scope of its operations meant its future was “very bright.”
The bank has been profitable on a net basis in each of the last two quarters because of one-time gains and accounting items, but has not posted a quarterly profit from its main operations since 2007.
In the wake of the financial crisis, U.S. regulators have been discussing the problem of banks becoming “too big too fail” — since the collapse of a big institution could undermine the entire banking system, governments can find themselves forced to spend huge sums supporting debt-ridden and unprofitable banks.
But Alwaleed said the solution to this problem was not breaking up big banks, and that he did not expect the U.S. government to decide to do this.
“Any failure of a broken-up bank is still going to impact the whole system. You need to fix the problem, not a symptom of the problem,” he was quoted as saying.
(Reporting by Andrew Torchia)
General Electric Co. is holding talks to sell 51% of NBC Universal to Comcast Corp., which would pay up to $7 billion in cash and contribute some programming assets to the new, jointly owned company, according to a person familiar with the matter.
GE (GE, Fortune 500), which owns 80% of NBC Universal, is considering a host of proposals for NBC Universal as partner Vivendi SA explores whether to sell its 20% stake.
At the moment, however, a deal with Comcast (CMCSA, Fortune 500) appears to be the most likely outcome, though the source said discussions are still in the early stages and could fall apart.
Under the plan, GE would buy Vivendi’s stake, and put the borrowings that fund that deal on NBC Universal’s balance sheet. Other debt would also be added to the balance sheet of what would essentially be a new, stand-alone company.
Comcast would take a 51% stake in that company by contributing a combination of about $6-$7 billion in cash and some of its own programming assets, the source said.
Over time, Comcast could increase its ownership stake, most likely funding it from cash generated by the new NBC Universal, according to CNBC, which first reported the news.
The structure would allow Comcast to acquire the cable assets it has long coveted, without taking on any new debt or issuing equity.
Shares of Comcast dropped 6 payday loans.6% on Nasdaq. GE shares were down 2.2% the New York Stock Exchange at mid-afternoon.
Other sources said GE has also studied several additional options should Vivendi drop its stake in NBC Universal, which owns the NBC broadcast network plus theme parks, a movie studio and cable channels like Bravo, USA and CNBC.
Among those options, GE could find another buyer for NBC Universal or look to sell part of the media company through an initial public offering.
Vivendi, NBC Universal, Comcast and GE have declined to comment on any talks.
Time Warner Co. (TWX, Fortune 500) ,, the parent company of CNNMoney.com, is another company often linked to interest in NBC Universal. But another source said the company would rather avoid the burden of acquiring the poorly performing NBC broadcast TV network, even if it is attracted to the possibility of adding more cable channels to a current lineup that includes TBS, CNN, and HBO, among others.
Vivendi has the right to exercise its sell option in NBC Universal each fall until 2016, but is thought likely to do so this year to fund businesses that it finds more essential.
The recession has taken its toll on the nation’s super rich, whose collective net worth fell for only the fifth time in 28 years, according to a survey released Wednesday.
The collective worth of the 400 richest people fell by $300 billion, or 19%, to $1.27 trillion, according to the survey released by Forbes magazine.
As a result, the price of admission to appear on the list this year dropped to $950 million from $1.3 billion in the 2008 list.
The losses were driven by turmoil in the capital markets and plunging real estate values, according to the magazine. but fraud and divorce also took a toll.
The number of members who experienced year-over-year declines was more than double the number in 2008, with 314 of this year’s list members declining in wealth compared to 126 last year.
Microsoft (MSFT, Fortune 500)’s Bill Gates, with assets worth $50 billion, topped the list of richest Americans. That’s despite a $7 billion hit. Investor Warren Buffett came in second, with assets totaling $40 billion, after a $10 billion loss this year.
Oracle (ORCL, Fortune 500) founder Lawrence Ellison was the only top ten member to avoid major losses. Ellison, who was third overall, saw his net worth remain unchanged at $27 billion.
Among the 32 members who were booted off the list this year was disgraced financier R. Allen Stanford, who is accused of operating a Ponzi scheme.
Omid Kordestani, who made billions working for Google (GOOG, Fortune 500), was forced off the list because of his divorce, according to Forbes.
However, the lower threshold resulted in the addition of 19 new members.
Among the newbies is Jeffry Picower, who the magazine describes as "a longtime investor with Bernard Madoff who is alleged to have extracted billions of dollars from Madoff’s fund before it collapsed."
This year only 28 members added to their wealth, including banker Andrew Beal, who tripled his net worth to $4.5 billion buying cheap loans and assets.
There was another tick-up in home prices in July, a further indication that housing markets may be stabilizing, according to a report issued Tuesday.
Prices for the S&P Case-Shiller Home Price index of 20 cities rose 1.6% from a month earlier, the third consecutive month of gains. They went up 1.4% in June.
Prices were still down 13.3% compared with July 2008, but even that performance was better than expected. A panel of industry experts surveyed by Briefing.com had forecast a 14.2% loss.
"The rate of annual decline in home price values continues to decelerate and we now seem to be witnessing some sustained monthly increases across many of the markets" said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
Craig Thomas, a senior economist with PNC Financial Services Group, called the report very encouraging.
"The rule of thumb is that three observations is a trend," he said. "There have been three straight good reports, so, this is a trend."
The home-price gains also confirmed other positive recent housing reports such as lower inventories and more traffic being reported by home builders, according to Thomas. Trends in other economic indicators, such as job losses and retail sales have also improved lately.
A pattern is developing, according to Lawrence Yun, chief economist for the National Association of Realtors (NAR), one in which stabilizing prices could contribute to a self-sustaining recovery.
"When prices are falling, consumers ask themselves, ‘Why buy now when I can buy later for less,’" he said, adding that rising prices are a strong incentive to act more quickly.
Minneapolis’ gain: Among the 20 cities, Minneapolis recorded the biggest gain during July; with prices up 4.6%. San Francisco, up 3.3%, and Chicago, 2.7% higher, also recorded sizable gains.
The only price declines occurred in Las Vegas, where they fell 1.1%, and Seattle, down 0.1%.
Las Vegas has become the city hardest hit by foreclosures, which remain one of the big issues facing housing markets.
Yun points out that there will be another foreclosure spike over the next six to 12 months as the terms of option ARMs and interest-only mortgages reset, raising monthly payments for many borrowers and pushing some into delinquency. Foreclosed homes will continue to come back onto the market, padding supplies and dampening prices.
The other major uncertainty is over the first time homebuyers’ tax credit that currently gives back up to $8,000 to taxpayers who buy before Dec. 1 and who have not owned a home within the past three years.
Yun credits the tax credit with being a major market stimulus. NAR estimated that an extra 350,000 homes will be sold because of it. There are bills in Congress that would extend the program and even expand it to every home buyer. If none of these are enacted, the market could suffer a reversal.
There will be a clear-cut market recovery because of buyer interest tied to that stimulus, according to Yun, and if the tax credit is allowed to lapse, we could be looking at another bottom coming our way.
The Case-Shiller index compares the sale price of a home to its price the last time it was sold, then factors in changes in prices over time.
That, ideally, yields a more accurate picture of home price fluctuations than simply calculating the median or average prices of all homes sold during the month. Those averages can be skewed by changes in the mix of homes sold during any one period.
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