Bob Williams, publisher of the Suburban Journals of Greater St. Louis, is leaving his position to become publisher of The Southern Illinoisan in Carbondale.
Both companies are subsidiaries of Davenport, Iowa-based Lee Enterprises Inc., which also owns the St. Louis Post-Dispatch.
Williams has been publisher of the Suburban Journals since 2007. Before that, he was Lee’s corporate director of sales and development and advertising manager for the Missoulian in Missoula, Mont. He spent a decade with Gannett Co. Inc. before joining Lee in 1998. Williams, who is married with four grown children, graduated from Brigham Young University with a degree in advertising paydayloans.
Greg Veon, Lee’s vice president for publishing, said Williams was selected after a nationwide search for a new publisher.
Williams will be replaced by Tom Wiley, a Lee executive now in charge of the Suburban Journals and Daily Journal in Park Hills.
The current publisher of the Illinoisan, Dennis DeRossett, is leaving the paper to become executive director of the Illinois Press Association.
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DETROIT — As Toyota dealers across the country work to repair the defective gas pedals in millions of vehicles, they also are trying to repair the automaker’s reputation by extending hours, making house calls and offering other services.
Toyota Motor Corp. recalled eight vehicles Jan. 21 and stopped selling those vehicles five days later because their accelerator pedals could stick in a depressed position. Toyota is sending dealers a piece of steel about the size of a postage stamp that can be inserted into the accelerator mechanism and eliminate the friction that causes the problem.
Kent Newbold, president of Newbold Toyota in O’Fallon, Ill., said Wednesday that he was even offering customers free tickets to a movie at the nearby O’Fallon 15 Cine while repairs are made to their recalled vehicles.
Nobody had taken him up on that offer, but he said it would remain until all of the recalled vehicles were fixed. "They’re our customers and we’re going to take care of them. … I was even tempted to sneak out and see ‘Alvin and the Chipmunks 2′ myself," Newbold said.
Jim White Toyota, a dealership in Toledo, Ohio, received about 350 steel pieces, or shims, and began repairs Wednesday morning. By mid-afternoon, about 25 cars were fixed, said Terry Treter, service manager.
Repairs were going smoothly and a little faster than the half-hour Toyota estimated, he said. Technicians do a test drive as part of the repair.
Dealers said they would extend service hours as needed to make repairs at the convenience of their customers. "The main thing the dealers want to do is to get the cars repaired and back on the road," said John S. Poppell, president of Twin City Toyota in Herculaneum.
Tom Seeger, owner of Seeger Toyota in Creve Coeur, added, "We’re going to get this done as seamlessly and comfortably for our customers as possible."
Dealers said customers had been calm despite a warning early Wednesday from U.S. Transportation Secretary Ray LaHood, who said owners of recalled Toyotas should stop driving them. LaHood later said he misspoke and told owners to get their cars repaired.
"There was an (increase in) concerned calls five minutes after Ray LaHood made his first comment, but people calmed down after he later explained himself," Seeger said.
Toyota is giving U.S. dealers payments of up to $75,000 to help them offer extra measures such as house calls. The automaker also suggested other steps, such as additional hires to help with recall repairs, dedicated recall service lanes and complimentary oil changes.
Toyota is sending checks this week based on the number of cars each dealer sold in 2009. Dealers who sold fewer than 500 cars will get $7,500. Dealers who sold more than 4,000 will get $75,000.
Robert Kelly of the Post-Dispatch contributed to this report.
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Independent Bank Corp., the parent of Rockland Trust Co., said net income in the fourth quarter increased 33 percent to $9.1 million from the previous three months as the bank saw a strong upswing in wealth-management revenue.
Net income was up more than 200 percent when compared with the year-ago quarter, or before the bank acquired Benjamin Franklin Bancorp Inc.
For the year ended Dec. 31, Rockland Trust’s (Nasdaq: INDB) net income was $23 million compared with $24 million in 2008.
Total assets increased by $48 million, or 1.1 percent, to $4 us fast cash.5 billion in the fourth quarter, compared with the previous quarter.
The company recorded non-interest income of $10 million during the fourth quarter, an increase of $5.6 million when compared with the quarter ended Sept. 30. The change in non-interest income included a wealth management revenue increase of $451,000, or 19.8 percent, because of general stock market appreciation and strong sales results. Assets under management in the wealth management division were $1.3 billion at the end of December.
Four top bank chief executives told a panel probing the financial crisis Wednesday that they made mistakes but didn’t realize how bad they were at the time.
In a heated exchange in Washington with the head of the Financial Crisis Inquiry Commission, Lloyd Blankfein, Goldman Sachs’ CEO, agreed the banks had assumed too much exposure to risk at the height of the crisis, and he wished he could go back and change things.
"Anyone who says I wouldn’t change a thing, I think, is crazy," Blankfein said. "Knowing now what happened, whatever we did, whatever what the standards of the time were — It didn’t work out well."
"Of course, I’d go back and wish we had done whatever it took not to find ourselves in the position we found ourselves in," he added.
The remarks came during a hearing of the Financial Crisis Inquiry Commission, a 10-member panel appointed last summer by Congress. Testifying were chiefs of some of the best-known and largest banks: Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).
The panel’s chairman, Philip Angelides, said he wanted to hear about the banks’ role in creating the crisis and benefiting from the Troubled Asset Relief Program, which was set up to provide them with liquidity.
During the hearing, Angelides cast doubt on Blankfein’s defense of Goldman Sachs’ actions in the mortgage markets — such as buying parts of risky mortgages and then placing bets against such morgages — as part of their job as a "market maker."
"It sounds to me a little like selling a car with faulty brakes and then buying an insurance policy on the buyers of those cars," Angelides said. "It doesn’t seem to me that that’s a practice that inspires confidence."
Blankfein responded that Goldman was just selling what investors wanted.
"These are the professional investors who want this exposure," he said. "Even today, people are coming for exposure to these very products. .. That’s what a market is."
The chief executives — Blankfein, John Mack of Morgan Stanley, Jamie Dimon of JPMorgan Chase, and Brian Moynihan of Bank of America — testified under oath, standing up for a swearing-in during the public session.
The hearing lasted more than three hours and most of the testimony revolved around bad lending in the housing market.
Dimon said that one of the the banks’ "big misses" was failing to "stress test" the housing market.
"We didn’t stress test housing prices going down by 40%," Dimon said.
It has been suggested that this lack of accountability could be remedied if all of the firms and individuals involved in the creation of financial instruments had to "eat their own cooking." That would, for example, require that the bulk of their fees not be taken in cash, but in the securities they created, which they would be required to hold unhedged until maturity.
One commissioner asked Morgan Stanley’s Mack if investment banks could have remediated the volume of illiquid toxic securities by eating "their own cooking," and taking fees for financial transactions via toxic securities, instead of cash. Mack said his firm did hold some of those securities.
"We did eat our own cooking and we choked on it," Mack said. " We kept positions and it did not work out."
‘Sound’ regulatory changes
Blankfein, Dimon and Mack all talked about the need for "sound" regulatory changes to help ward off future crises bad credit unsecured personal loans.
"I want to be clear that I do not blame the regulators … however, it is important to examine how the system could have functioned better," Dimon said. "The current regulatory system is poorly organized with overlapping responsibilities, and many regulators did not have the statuatory resolution authority needed to address the failure of large, global financial companies."
In written testimony, the bank chiefs laid out their banks’ mistakes that led to the crisis, detailing the housing bubble, with "new and poorly underwritten mortgage products," "excessive speculation," and mortgage securitization that allowed people to duck responsibility for poorly underwritten loans.
However, they added they didn’t expect the financial crisis and especially its magnitude.
"After the fact, it is easy to be convinced that the signs were visible and compelling," Blankfein said. "In hindsight, events not only look predictable, but look like they were obvious or known. But none of us know what is going to happen."
In the past several weeks, the commission has talked to Treasury Secretary Tim Geithner and Federal Reserve Board Chairman Ben Bernanke, but that testimony isn’t being made public yet.
Lawmakers say the commission was modeled after the Pecora Commission, a panel that was convened after the 1929 Wall Street crash and other events leading to the Great Depression.
The Pecora panel’s findings led to an overhaul of federal banking laws, including the creation of the Glass-Steagall Act of 1933. Glass-Steagall divided investment banking from government-insured commercial banking; ending that separation in the 1990s was seen by some critics as contributing to the current crisis.
Slow start
The Financial Crisis Inquiry Commission has taken a while to get up on its feet.
The panel was appointed last July and held its first meeting in September. It has only started getting staffed up over the past few months.
It has new offices in downtown Washington, a few blocks northwest of the White House. Funded to the tune of $8 million, it aims to employ between 40 and 50 investigators and other staffers.
The crisis panel’s one big goal is to complete a final report, sort of like the final 9/11 Commission report that found federal agencies missed signs of the impending terrorist attacks in 2001. The financial crisis report is due Dec. 15.
Critics have noted the panel’s impact may be blunted by timing, as the House has already passed a bill to overhaul regulations and the Senate is deep in negotiations on similar proposals.
But panel members have consistently pledged their work will serve as more than window dressing for politicians worried about the appearance that they allowed the financial crisis to happen.
The panel, which has subpoena power, plans to issue interim reports as it collects data, Angelides has said.
The panel’s second-in-command is Bill Thomas, a retired California Republican congressman described as strong-willed during his tenure running the powerful Ways and Means Committee.
Other key panel members include: Keith Hennessey, an economic adviser under President George W. Bush; former Sen. Bob Graham, a Florida Democrat; and Brooksley Born, a past chairwoman of the Commodities Futures Trading Commission, who called for stronger regulation of complex financial products such as derivatives in the 1990s.
Estate planner Richard Behrendt helped his client make $5 million loans to each of his children this year, avoiding gift taxes of 45 percent and saving the kids as much as $837,000 apiece in interest.
Rates for so-called intra-family loans have declined as much as 53 percent since 2008. “The timing of it was clearly tied to the rock bottom of these rates,” said Behrendt, who works for Robert W. Baird & Co., based in Milwaukee, Wisconsin.
The loans may be the perfect holiday gift to help relatives this year, according to Carol Kroch, head of wealth and financial planning at Wilmington, Delaware-based Wilmington Trust. For wealthy taxpayers, they can be used for estate planning purposes, since gains earned will be free of estate and gift taxes.
That’s because low interest rates and depressed asset values mean there’s a greater possibility that investments purchased with an intra-family loan, such as stock, will appreciate more than the loan’s cost, Kroch said.
The rate for an intra-family loan made in January 2010 for less than three years is 0.57 percent. The rate is 2.45 percent for a loan of three years to nine years and 4.11 percent for a loan of nine years or more, according to the Internal Revenue Service, which sets the rates monthly. That compares with an average rate of 10.55 percent for a personal bank loan in the New York metro area and 12.51 percent for a credit-union loan, based on data from Bankrate.com.
“The chances are they are going to go up, the only question is how fast or how soon,” said Bill Fleming, managing director of New York-based PricewaterhouseCoopers’s Private Company Services Group, referring to rates for intra-family loans.
Tax Savings
Behrendt’s client, who has a net worth of $100 million, loaned each of his three children $5 million for nine years. The children invested the money in a balanced portfolio seeking at least a 5 percent return, said Behrendt, a former estate tax attorney for the IRS.
Any amount above the 1.65 interest rate, which was the February rate, should pass to the client’s children free of estate and gift taxes, he said. The Standard & Poor’s 500 Index has increased 36 percent since February as of yesterday.
The borrowers also saved on interest costs because of the low rates. Each will owe $82,500 in interest annually, compared with $175,500 if the loan had been made in February 2008 when the rate was 3.51 percent.
Current federal law taxes estates exceeding $3.5 million for an individual or $7 million for a married couple at as much as 45 percent. Any gift to an individual of more than $13,000 annually may also be taxed as much as 45 percent with a $1 million lifetime exclusion per donor, according to the IRS.
Estate Tax
The estate tax is scheduled to expire for a year on Jan. 1 under the provisions of a tax-cut bill enacted in 2001. It comes back in 2011, taxing estates valued at more than $1 million as much as 55 percent. Senate Finance Committee Chairman Max Baucus, Democrat of Montana, has vowed to extend the estate tax in 2010 retroactively.
Lenders who are subject to the estate tax can use the loans to reduce the value of their estates because the appreciation of any investment made with the loan above the IRS rate accrues outside of the lender’s estate, said Larry Richman, chair of private wealth services at Neal, Gerber & Eisenberg LLP in Chicago.
Taxpayers with family businesses may also want to consider intra-family loans to help with the sale of the business to family members, according to David Kron, a partner in the Fort Lauderdale office of law firm Ruden McClosky.
Parents can loan their children money to buy the business and the children can repay using profits from the firm. The future appreciation and any income of the business beyond the loan amount are then considered part of the children’s, not the parents’, estate, Kron said.
‘Low-Tech’ Tool
Intra-family loans are a “low-tech” way to give money to family members because they’re easy to set up and are appropriate for anyone regardless of net worth, said Deborah L. Jacobs, author of “Estate Planning Smarts: A Practical, User- Friendly, Action-Oriented Guide,” which was published this month.
Family members should be aware the loans must be repaid in full with interest at the rate specified by the IRS. If the borrower doesn’t repay, it may be considered a gift subject to the gift tax, said Jacobs, who is based in New York.
Lenders should also consider the income tax they’ll owe on the interest received with repayment of the loan, said Kron.
‘Thanksgiving Firecracker’
Loaning money to family members may create relationship issues, said Dan Deighan of Melbourne, Florida-based Deighan Financial Advisors Inc.
“It’s like throwing a firecracker on the Thanksgiving dinner table when you bring money issues into the family dynamic,” Deighan said.
Borrowers can get “sloppy with repayments,” which is why setting up an automatic bank transfer for payments is recommended, said Fleming of PricewaterhouseCoopers.
Don Albritton, a 61-year-old executive in Longwood, Florida, gave his son $260,000 to buy a house through a 30-year intra-family loan four years ago. Albritton ended up taking the house back after his son was unable to sell it without taking a loss. Home prices have declined 17 percent since January 2005, according to the S&P/Case-Shiller index for 20 metropolitan areas.
“I’m not discouraged,” Albritton said. “I’m getting ready to make him another loan now.”
There’s something different about the Masters’ Select Funds. Though it’s not unusual for a team of professionals to manage mutual funds, these offerings put a fresh spin on it.
Rather than bulk up with an in-house team of analysts and portfolio managers to establish the Masters’ Select Funds, Litman/Gregory Fund Advisors chose to play overseer. It hired highly regarded money managers as subadvisers — each responsible for a portion of one of its funds.
"Each manager has a very concentrated mandate to own only eight to 15 of their best ideas," says Chief Investment Officer Jeremy DeGroot. The funds are diversified from the different styles in investment philosophies of each manager, so there’s a broader mix of industries and stocks.
The largest fund is top-rated Master’s Select International Fund, with $1.4 billion in assets and a return of just more than 39 percent this year. Its five-year annualized return of 7.6 percent still places it among the top in Morningstar’s foreign large blend fund category.
DeGroot recently offered insight on his market perspective:
What’s your take on the market rally we’ve seen this year, and what do you expect lies ahead?
I want to be clear that Litman/Gregory’s view doesn’t impact how the Masters Funds are invested since those funds are built stock by stock by the managers. The reason I’m saying that is because Litman/Gregory is not that optimistic about stock returns looking out three to five years from now.
We think the consumers’ need to increase savings and rebuild their balance sheets is going to lead to slower growth in consumption.
That among other factors will lead to reduced earnings growth for companies. So in terms of outlook, we’re kind of in the subpar economic recovery group. We’re not in the V-shaped economic recovery group.
What’s guiding that outlook?
The market is expecting a stronger earnings recovery than we think is likely.
We think the baseline case scenario is for subpar recovery coming out of this recession. That’s because of the overhang of debt in our economy — because of all the government spending, the huge deficit that’s likely to lead to higher interest rates down the road, probably higher taxes on individuals. Those are not going to be positive for economic growth.
After taking a hit, don’t consumers usually return to being fat and happy — shaking off what ails them?
This time is different from most typical economic cycles in that this recession is more of a balance sheet recession. It wasn’t caused by the Federal Reserve worrying about inflation and an overheating economy and raising rates — leading to a contraction in consumer credit and a reduction in spending and business inventories getting cut. That did happen, but that’s not really what triggered the recession. We’re building debt upon debt, and we’re overspending our income for a number of decades.
Historically there have been some studies that have looked at the after-effects of balance sheet recessions, and they take much longer for economies to rebound. Unemployment usually stays significantly higher than it does in a normal recession. You know the Fed can’t lower rates any more. They’re doing other things to increase liquidity. We’re always hesitant, as everyone in the investment business is, to say it’s different this time. But it’s different from the typical cycle in our view.
Are there any factors that would trigger you to adopt the more positive scenario?
We think there has to be a significant reduction in household debt levels. We think it’s going to happen, hopefully fairly gradually, but when that happens, that is a headwind to growth. But we also think there are some worst-case scenarios for subpar growth where there could be a significant decline in the dollar. We expect a modest sustained gradual decline because it’s in no one’s interest to have the dollar crash.
With all the turmoil in the market over the last few years, has your firm’s team approach been tested?
We talk to managers about their mistakes a lot. And we think you really learn about the person, the team and their mind-set. If they’re willing to admit their mistakes and learn from them or if their ego is too big to really even acknowledge it.
The bottom line is that we removed one manager in the fall of last year, not based on short-term performance. It had been a process of reassessing over a couple of years, but with the other mangers we reconfirmed our confidence in their ability to perform well.
LONDON–In a move that could help improve relations between Google Inc. and the media industry, the Internet search company is offering publishers a way to build more solid "pay walls" around their online stories while still appearing in search results.
In an official blog post Tuesday, Google said it will let publishers limit the number of restricted articles that readers can get for free through its search engine.
The change could remove one significant hurdle publishers face as they contemplate charging readers online. Many newspapers are considering such fees because online advertising on free sites hasn't offset the precipitous decline in print ad revenue that has come with the recession and competition from the Web.
The Wall Street Journal is perhaps the best example of how the new tool could help.
The newspaper charges for access to most articles on its Web site, but its pay wall is "leaky." Readers can grab the first sentence from a preview of the story, punch it in to Google and access the full story in the search results.
The Journal could simply block Google from indexing its stories, but that would cut traffic to its site significantly. Less traffic means less ad revenue.
The problem has infuriated executives at News Corp., which owns the Journal.
News Corp. Chairman Rupert Murdoch told a conference organized by the U.S. Federal Trade Commission on Tuesday that media companies should charge for content and stop news aggregators such as Google from "feeding off the hard-earned efforts and investments of others.''
The change to Google's "First Click Free" program would allow publishers to limit the number of paid articles a reader could access through its search engine to five per day.
That could assuage the anger of media titans like Murdoch, allowing news outlets to stay relevant by appearing in search results while still trying to wring fees from readers.
A News Corp. spokesman declined comment Wednesday.
In Google's blog post, Josh Cohen, senior business product manager, stressed that publishers and Google could coexist.
"After all, whether you're offering your content for free or selling it, it's crucial that people find it." he said. "Google can help with that.''
Cohen said that Google will also begin indexing and treating as “free" any preview pages – usually the headline and first few paragraphs of a story – from subscription Web sites. People using Google would then see the same content that would be shown free to a user of the media site. The stories would be labeled as “subscription" in Google News.
"The ranking of these articles will be subject to the same criteria as all sites in Google, whether paid or free," Cohen said. "Paid content may not do as well as free options, but that is not a decision we make based on whether or not it's free. It's simply based on the popularity of the content with users and other sites that link to it.''
The yen’s surge to a 14-year high and renewed deflation may prompt Japanese Prime Minister Yukio Hatoyama to press the central bank to take further steps to support growth.
Hatoyama, 62, will meet Bank of Japan Governor Masaaki Shirakawa “soon,” Chief Cabinet Secretary Hirofumi Hirano told reporters yesterday. Hirano said the leaders will discuss quantitative easing policies in addition to falling prices and the stronger currency.
The government has stepped up calls on the central bank to prop up growth since it declared the economy was in deflation on Nov. 20. Shirakawa, who yesterday pledged to act “promptly and decisively,” has few options given that the key overnight lending rate is at 0.1 percent and the bank is already purchasing government bonds and corporate debt.
“We’re not in a situation where the BOJ will act just because the government is pressuring it to,” said Junko Nishioka, a chief economist at RBS Securities Japan Ltd. in Tokyo. “There’s an election next year, so the government wants to show how much it has already done.”
Nishioka said she didn’t expect any policies to be announced from the central bank after this week’s meeting with Hatoyama, given that it’s common for policy makers to meet and discuss the economy and financial markets.
Deflation can undermine economic growth by making debt burdens heavier, eroding corporate profit margins and deterring capital investment and consumer spending. Japanese prices excluding fresh food slid 2.2 percent in October from a year earlier, a near record drop, and the government’s declaration of deflation was its first in more than three years.
‘Promptly and Decisively’
“The bank is always prepared to act promptly and decisively if judged necessary to ensure the stability of financial markets,” Shirakawa said yesterday in Nagoya, central Japan. “The bank will do its utmost to overcome deflation both in terms of monetary easing and ensuring the stability of the financial markets.”
Reports yesterday showed Japan’s recovery from its worst postwar recession may be weakening. Industrial output grew at the slowest pace in eight months in October as manufacturers including Toyota Motor Corp. pared production at home. Wages tumbled 1.7 percent, extending their longest losing streak in six years.
Hatoyama championed the Bank of Japan’s independence after he took power in September following his Democratic Party of Japan’s landslide August election victory. Hirano reiterated yesterday that the government respects the bank’s autonomy.
Testing BOJ
Other Cabinet members haven’t been shy in testing the central bank. Deputy Prime Minister Naoto Kan said on TV Asahi last week that he’d “like to see monetary policy work just a little harder” to battle deflation. Financial Services Minister Shizuka Kamei said in October that the bank “sometimes sounds like it’s talking in its sleep.”
“Hatoyama’s Cabinet seems to think that the BOJ isn’t playing a big enough role in fighting deflation,” said Susumu Kato, an economist in Tokyo at Calyon Securities. “The government may ask the BOJ to increase the amount of its government bond purchases” to around 2 trillion yen ($23 billion) a month from 1.8 trillion yen, Kato said.
The government may be looking for monetary policy measures to combat prices and the yen because it has the highest debt burden in the industrialized world, limiting the scope of fiscal policy. Nevertheless, Finance Minister Hirohisa Fujii said yesterday that he is compiling an extra budget of more than 2.7 trillion yen, the amount of money frozen from the previous administration’s budget, to spur growth.
Quantitative Easing
The BOJ introduced quantitative easing steps in March 2001 before suspending those policies in March 2006. Shirakawa has said the policy of flooding the economy with cash had a limited impact on economic growth.
Hatoyama and Shirakawa are also likely to discuss the yen, which rose to a 14-month high of 84.83 to the dollar on Nov. 27, setting off a chorus of complaints from Japanese manufacturers. Canon Chief Executive Officer Fujio Mitarai said Japan is “standing on the edge of a cliff.”
Shirakawa said yesterday the government will decide whether to intervene, adding that the central bank will “closely watch these developments and their effects with great interest.”
Canon Inc. would lose 4.4 billion yen in sales and 2.5 billion yen in operating profit this quarter for every 1 yen drop in the dollar compared with its forecast of 90 yen, the company said on Oct. 27.
Japan last intervened in the currency market in March 2004, when the yen traded around 109 per dollar. The central bank sold 14.8 trillion yen in the first three months of that year.
“We’re paying close attention to whether the BOJ will go along with intervening in the market,” said Shinichi Ichikawa, chief market strategist at Credit Suisse Securities Japan. “Intervention would stop the bleeding for now, so it’s important.”
Russian consumers are benefiting from a stronger ruble that’s boosted incomes and offset tight credit while a lack of investment is hampering a rebound in manufacturing, a series of economic reports showed today.
Real disposable incomes posted the biggest jump in more than a year last month and retail sales rose from September, signaling consumer demand is returning following October’s 3.4 percent gain in the ruble against the dollar.
The economy of the world’s biggest energy producer is showing signs of recovery as a return of global demand for commodities supported exporters and domestic demand rebounded after the ruble gained to the strongest level this year. Russia’s record 10.9 percent economic contraction in the second quarter eased to an 8.9 percent decline last quarter.
“Household consumption is stabilizing after lagging behind the rest of the economy,” said Olga Naydenova, an economist at Otkritie Financial Corp. in Moscow. She expected a broader improvement in indicators last month as “people have learned to adapt to the changing situation, and budget spending on social needs also helped.”
The ruble lost 0.8 percent to 29.0506 per dollar at 4:22 p.m. in Moscow, paring its weekly gain against the U.S. currency to 0.6 percent. The ruble slid 0.5 percent to 35.3348 against the central bank’s target currency basket.
Retailer Gains
OAO Dixy Group, Russia’s third-largest publicly traded food retailer, added 4.62 rubles, or 2.1 percent, to 219.99 rubles in Moscow. The stock has gained 323 percent so far this year. The shares of X5 Retail Group NV and OAO Magnit, Russia’s two biggest food retailers, are up 234 percent and 274 percent in 2009, outperforming the 30-stock Micex Index, which has jumped 114 percent this year.
Disposable incomes climbed a monthly 6 percent in October and rose 3.9 percent compared with the same period last year, the biggest annual jump since September 2008, the Federal Statistics Service said. Retail sales rose 3.2 percent from September and declined 8.5 percent on an annual basis compared with a 9.9 percent drop the month before.
The government has made spending on social needs, including benefits and pensions, a priority of its stimulus program, which deployed 2.5 trillion rubles ($86.4 billion) to bolster the economy with tax breaks, loan guarantees and subsidies.
‘Too Early’
Service industries, which account for about 40 percent of the economy, rose for a third month in October, advancing to the highest since September 2008, VTB Capital said on Nov. 5, citing its Purchasing Managers’ Index.
“Although the economy is no longer declining, it is too early to speak of a recovery,” Alfa Bank analysts led by Ekaterina Leonova said in a Nov. 18 report. “Signs of improvement are still very fragile and do not constitute a trend.”
The ruble appreciated 3.4 percent against the dollar for its second consecutive monthly gain in October. Imports account for about 49 percent of the consumer goods sold in Russia, the government estimated last year.
A stronger currency has increased spending power for the domestic market as “it transfers incomes into people’s pockets,” said Clemens Grafe, chief economist at UBS in Moscow.
Wage declines also eased last month as exporters returned to profitability. Wages fell an annual 4.5 percent in October, compared with a 4.9 percent decline the previous month. Retail sales have fallen for nine consecutive months, the longest period of declines on record.
Manufacturing Slump
Rebounding consumer demand isn’t reflected in the country’s manufacturing sector. Russia’s industrial slump deepened in October as companies failed to build up inventories and credit remained tight even after eight central bank interest rate cuts since April.
Output in October fell 11.2 percent from a year earlier after the decline eased to 9.5 percent in September. Manufacturers are struggling to stay profitable as banks rein in credit, hampering investment even as demand picks up for commodities, Russia’s chief export.
“High interest rates and sharp ruble appreciation may have added pressure to the competitiveness of Russian goods,” said Anton Nikitin, an analyst at Renaissance Capital in Moscow. “In this environment, fourth-quarter GDP growth might be weaker than we previously thought.”
Shrinking output may spur the central bank to further loosen monetary policy, Nikitin said.
Bank Rossii is scheduled to hold a board meeting on Nov. 24 where a rate decision may be discussed, First Deputy Chairman Alexei Ulyukayev said yesterday.
Treasury Secretary Timothy Geithner on Saturday stressed the necessity of keeping global economic stimulus in place until recovery is assured and opposed the utility of a tax on financial transactions as a way to dampen risky bank behavior.
Speaking at the conclusion of a two-day meeting of Group of 20 finance minister and central bankers, Geithner said there was broad agreement that “growth remains the dominant policy imperative across our economies.”
He said high U.S. unemployment, which hit a 26-1/2-year high at 10.2 percent of the civilian workforce in October, highlighted a “very tough economic environment” that will a period of sustained growth to correct.
Earlier, British Prime Minister Gordon Brown had suggested that the G20 should levy on banks — blamed for the excessive risk-taking that led the world into a now-easing financial crisis — and used the proceeds to fund future bailouts.
Geithner played down that idea, noting that the Obama administration was already pushing an overhaul of financial market rules in Congress that would ensure that banks pay the costs of their failures in future from their own pocket.
“A day-by-day financial transaction tax is not something we are prepared to support,” Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.
“This idea (of a bank transaction tax) has been around for a long time…I think frankly the experiences are mixed,” he said, expressing an American view that there was no widespread backing for such a tax.
Canadian Finance Minister Jim Flaherty was similarly skeptical.
“It’s one of the ideas that’s on the table, but is not particularly attractive to me as finance minister of Canada. We have been a government that has been reducing taxes,” Flaherty said.
ON DANGEROUS GROUND
Geithner’s key message was that recovery still remains on perilous ground and that it was too soon to discuss the timing for removing the massive fiscal and monetary stimulus that countries around the world have poured into their economies.
“Government policy has to provide a bridge to growth led by the private sector,” he said. “We’re now in the middle span of that bridge.”
That meant policymakers must move cautiously in trying to bring down huge budget deficits without choking off chances for growth led by consumer spending and business investment.
“If we put the brakes on too quickly we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater,” Geithner said.
“It’s too early to start to lean against recovery.”
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