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Naysayers who predicted the U.S. dollar’s demise as the world reserve currency of choice have been silent of late given the greenback’s meteoric recovery in recent months.

Slammed over the last several years as U.S. government budget and trade deficits mounted, the greenback was seen ceding its status as the predominant currency to the euro.

Talk of nations reducing their dollar reserves in favor of the euro prompted talk the dollar would also lose favor as the medium of exchange for commodities.

However, the global financial crisis that has rocked markets worldwide has seen investors voting with their cash and buying U.S. dollars, indicating that reports of the greenback’s death as a reserve currency have been greatly exaggerated.

“Talk of the euro replacing the dollar is off the table,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. “The U.S. has the only economy in the world that supports a strong currency by policy and is an anchor for the global economy.”

The current credit freeze has its roots in the U.S. subprime mortgage market where overzealous lending in exotic debt products has led to a wave of homeowner loan defaults and problems with repackaged mortgage securities.

But the crisis went global when holders of those mortgage securities faced huge losses and became reluctant to take on additional risk through either lending themselves or buying more securities.

Investors then were quick to understand that the United States was the only nation with the political will to act quickly and the government and private sector infrastructure in place to implement policies http://paydayintime.com. The pockets of the U.S. tax payer to fund a bailout added to the allure of the U.S. currency.

“The United States continues to be the only entity sufficiently large and coordinated enough to deal with the multiple issues surrounding the credit crisis,” said Andrew B. Busch, global FX strategist BMO Capital Markets in Chicago. “It clearly is not over.”

The dollar’s value against major currencies had changed little in the first half of 2008, after a six year slide, but since mid-July when the magnitude of the credit crisis became apparent, the dollar has rebounded significantly.

The Intercontinental Exchange’s U.S. dollar index <.DXY has climbed 21.3 percent since that time, roughly corresponding to a 21.8 percent drop by the euro against the greenback.

The British pound has dropped 23 percent while the Australian dollar plunged 37.5 percent against the U.S. dollar.

Emerging market currencies have been particularly hard-hit as investors fled risk and repatriated funds either home or to the safety of the U.S. dollar.

Latin American-focused funds suffered their 20th straight week of outflows, EPFR Global data showed on Friday, losing a net $134.8 million to redemptions. Europe, Middle East and Africa funds had outflows of $189.1 million.

The U.S. dollar has gained 27 percent against the South African rand since mid-July and 21 percent against the Turkish lira. 

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ALBANY, N.Y. — Financially troubled American International Group, now supported by a federal bailout, has agreed to freeze millions of dollars in compensation and bonuses for former executives.

In a letter Wednesday to AIG’s new chairman, Edward Liddy, New York Attorney General Andrew Cuomo wrote that after his office’s review of company documents, the insurance and finance giant agreed to stop payments under former chief executive Martin Sullivan’s $19 million pay package.

AIG also confirmed that no payments will be made from the $600 million compensation and bonus pools of its Financial Products subsidiary, including $69 million the former head of the subsidiary, Joseph Casano, could have been paid and about $93 million that five other top executives might have been eligible to receive.

"The Financial Products subsidiary was largely responsible for AIG’s collapse, and Casano has been terminated," Cuomo wrote. Taxpayers’ financial interests should take priority over those managers, he said.

Company spokesman Joe Norton said Cuomo’s letter was consistent with AIG’s actions and discussions with the attorney general internet pay day loan. After a meeting last week, Liddy and Cuomo issued a joint statement that payments to outgoing chief financial officer Steven Bensinger were stopped and the company would help Cuomo recover any illegal expenditures.

Cuomo said Wednesday that the next step for his office will be investigating how to recoup executive bonuses paid previously, saying a fraud law could apply depending on timing, circumstances and contracts. Handling AIG’s case should be regarded as a template for other companies that require government help, he said.

"Taxpayers are, in many ways, now like shareholders of your company, and the new AIG has a responsibility to them in the first instance," Cuomo wrote Liddy, noting the $120 billion bailout will leave the U.S. Treasury with AIG stock.

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OTTAWA–Canadian inflation came off the boil last month and began what is expected to be a long slide that could see falling prices – rather than rising – become the next economic conundrum facing the country.

Statistics Canada reported Friday that annual inflation cooled by 0.1 point to 3.4 per cent in September, just off August's five-year high.

In Toronto, the rate was unchanged at 3.7 per cent.

Gasoline continued to power the headline rate, while core inflation, excluding volatile food and fuel items, remained tame at 1.7 per cent, below the Bank of Canada's two per cent target.

The central bank has predicted a year-long slowing of the rise in the cost of living toward one per cent rate in mid-2009. And Bank of Nova Scotia economist Derek Holt believes Canada could experience deflation – a rare phenomenon of declining general price levels – next year.

"With credit channels around the world impaired and with incomes and wealth facing a further hit, that's not an environment where prices are going to go up for many categories," Holt explained.

"The problem comes if people and companies expect prices to drop, they start to postpone consumption because those prices will be cheaper later … so that only makes the downside risk facing the economy a self-filling prophecy."

There is little doubt that price increases will slow further, commented Douglas Porter of BMO Capital Markets.

He estimates gasoline prices are on track to fall more than 15 per cent in October, largely taking the steam out of the consumer price index.

"Inflation is rapidly becoming the least of policymakers' concerns," Porter said.

"While this report doesn't make it obvious, Canadian inflation is poised to soon recede meaningfully, even with the recent steep sell-off in the loonie."

Krishen Rangasamy, an economist with CIBC World Markets, said Bank of Canada governor Mark Carney will feel little restraint from cutting interest rates further on Dec. 9. The central bank has already slashed the cost of short-term money by three-quarters of a point this month to stimulate the economy.

About one-third of September's inflation rate was attributable to a 10-cent-a-litre spike in gasoline prices blamed on hurricane Ike hitting Gulf Coast refineries http://full-free-credit-report.com. That left gasoline 26.5 per cent more expensive than in September 2007, Statistics Canada said.

Excluding gasoline, prices would have risen only 2.2 per cent last month on an annual basis, Statistics Canada said.

While fuel costs now are easing with the dramatic decline in global oil prices, some inflationary pressures remain, the Statistics Canada data indicated.

The food index was up 5.6 per cent from a year earlier in September, accelerating from a 4.5 per cent August increase as prices for baked goods and cereal products ballooned 15.5 per cent year-over-year.

"Just as Canadians finally get to enjoy cheaper gasoline, they get slapped with higher food prices," CIBC's Rangasamy commented.

"After initially bucking global trends, Canada's food CPI has soared over the last six months, with an annualized increase of nearly 10 per cent over the period. With the loonie currently flying low, food imports will likely cost more over the coming months, countering for price declines on other consumer products."

Shelter costs also continued to increase in September, up 4.5 per cent, mostly as a result of higher mortgage interest costs. But Canadians saw the impact of the cooling housing market as homeowner replacement costs declined 1.8 per cent on falling house prices.

And while students paid four per cent more for tuition this year, there was some relief from continued price declines for computers, video equipment and other electronic items.

Canadians also found more bargains in car dealerships as the cost of buying or leasing a vehicle was down 9.3 per cent from a year ago, the largest drop since February 1956.

Meanwhile, prices for clothing and footwear slipped 1.3 per cent.

On a month-to-month basis, the all-items consumer price index rose a seasonally adjusted 0.2 per cent from August.

The cost of living varied considerably last month from one part of Canada to the other, with annualized price increases as low as 2.4 per cent in New Brunswick and as high as 5.5 per cent in Prince Edward Island.

Prices in Alberta, previously a hotbed of inflation, registered their smallest increase since December 2005, up 2.8 per cent from September 2007.

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Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) said delivery of its new 787 Dreamliner to China probably would be delayed, but the ongoing strike made it impossible to say when passengers would be able to ride in the ultra modern plane.

The company’s latest quarterly profit fell 38 percent as a seven-week strike by its jetliner assembly workers wiped out almost a month of production at its Seattle-area plants.

Boeing has orders for nearly 900 of the fuel-efficient Dreamliner, 60 of which are from Chinese airlines. The planes were to have been delivered to the Chinese airlines starting in the third quarter of next year.

“Because of the strike that is ongoing at Boeing there will probably be some delay to that,” John Bruns, a vice president of China operations, told Reuters in an interview.

“But, we just don’t know the impact yet,” he said check cash advance.

Industry analysts had expected another delay to the plane, which is already at least 16 months behind schedule.

Boeing and union officials were scheduled to resume talks with the help of a federal mediator on Thursday, but they have so far struggled to find common ground on the key issue of outsourcing.

China is a focus for Boeing and rival EADS’ (EAD.PA: Quote, Profile, Research, Stock Buzz) Airbus unit as its booming economy is expected to require another 3,400 long-haul planes over the next 20 years, and as a base of production for key parts such as rudders, fairing panels and other composite parts. 

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3M Co (MMM.N: Quote, Profile, Research, Stock Buzz) reported a 10 percent rise in quarterly earnings on Tuesday, a pleasant surprise, sending shares as much as 7 percent higher compared with a decline in the broader market.

3M’s broad lineup of businesses — from high-tech industrial products such as chemicals used in aircraft maintenance to basic consumer goods like Post-It notes — make it a bellwether of the U.S. economy. With U.S. demand slowing, 3M has been relying on foreign markets for growth.

“They’re definitely benefiting from the fact that they make things that everybody needs,” said Sterne Agee analyst Nick Heymann, noting that international markets generated 62 percent of the company’s sales.

The company, which makes products ranging from Scotch tape to optical films for liquid crystal displays, posted third-quarter net income of $991 million, or $1.41 per share, compared with $960 million, or $1.32 per share, a year earlier.

Factoring out special items, the St payday advance lender. Paul, Minnesota-based company posted earnings of $1.42 per share, which compares with analysts’ estimates of $1.38 per share, according to Reuters Estimates.

Revenue rose 6.2 percent to $6.56 billion, a bit short of analysts’ estimates of $6.67 billion.

The company lowered its outlook slightly, predicting 2008 earnings in the range of $5.40 per share to $5.48 per share, an 8 percent to 10 percent increase, instead of the minimum 10 percent increase it had previously predicted. Analysts see 2008 EPS of $5.45, according to Reuters Estimates.

But even the reduction translated into a positive against reduced expectations, as the outlook was “far from the disaster many have come to expect,” wrote J.P. Morgan analyst C. Stephen Tusa Jr, who rates 3M shares “overweight.” 

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Ordinarily, cash exerts a drag on your returns. It’s safe and liquid, but low yielding. However, these are not ordinary times.

During the great September-October meltdown of 2008, the surest way to curb your losses was to be holding a large chunk of your nest egg in cash or equivalents.

The same goes for portfolio managers of mutual funds.

Scratch beneath the surface of a fund that has escaped with minimal losses, and you’ll probably find a cash-rich asset mix.

This does not mean that managers who remained fully invested are bad managers. On the contrary, they are probably just carrying out their investment mandates.

My personal bias is in favour of fully invested funds. If I’m paying equity fund fees, I don’t like paying the manager to hold cash. I prefer making my own decision about how much cash to hold.

That said, let us now praise those managers who insist on allowing their cash reserves to build if they can’t find stocks to their liking at prices they’re willing to pay. Inevitably, this will result in periods when they lag far behind their market benchmarks and peer groups. But for conservative investors who worry more about capital preservation than beating the market, this can be a fair trade-off.

In today’s market, cash-hoarding managers will shine, assuming they’re good stock pickers and not just picky about being willing to invest. Their cash is a cushion against the ravages of stock markets. And they have more buying power to scoop up bargains than do their fully invested competitors.

Exemplifying this breed of patient money manager is Gerald Coleman, the manager since inception of CI Investments Inc.’s Harbour Fund. Over more than 10 years, this fund in the Canadian-focused equity category has performed in the top 25 per cent of funds over the past one, three, five and 10 years, and holds the top 5-star Morningstar Rating for its risk-adjusted performance no qualifying payday advance.

Avoiding or at least minimizing losses in down markets is one of Coleman’s most important objectives, and one of the ways he accomplishes that is to keep an ample cash reserve, especially when markets are frothy. This helps improve his risk-adjusted return over time and build positions in high-quality stocks at cheap prices.

At the end of September, the fund held 22 per cent of its assets in cash.

Coleman isn’t alone. Deep value manager Larry Sarbit, who’s in the process of selling his Winnipeg firm to Industrial Alliance Insurance and Financial Services Inc., is another good example of a manager with a long history of hoarding cash when he can’t find bargains.

Between 2000 and 2006 while working at AIC Ltd., Sarbit came under criticism for keeping AIC American Focused Fund overwhelmingly in cash, a decision that served investors well during the previous bear market.

True to form, Sarbit U.S. Equity has again been one of the category’s cash-rich funds earlier this year, with a 32 per cent cash reserve in early July.

During a severe market downturn, hoarding cash probably won’t be enough to avoid negative returns. Through the first nine months of this year, CI Harbour has lost 8.5 per cent, and Sarbit U.S. Equity is down 6.8 per cent.

Then again, with the kind of year it’s been so far, most investors would be happy with losses that are only in the single digits.

Rudy Luukko, at rudy.luukko@morning star.com, is investment funds editor of Morningstar Canada.

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LOS ANGELES – A person close to the deal says Steven Spielberg’s DreamWorks studio has signed on with Universal Pictures to distribute its films.

Universal will distribute up to six DreamWorks movies a year domestically and overseas, except for India, said the person, who was not authorized to speak on the record and requested anonymity.

The deal has been anticipated as DreamWorks prepares to break off from Paramount, which has owned the studio since 2006 cash till payday advance.

There has been ongoing friction over the costs of keeping Spielberg and his outfit there.

DreamWorks has lined up $1.5 billion through Reliance Entertainment of India to finance its future film slate.

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Only five U.S. companies filed initial public offerings in the third quarter, an 87 percent drop from the third quarter of 2007, according to Hoovers Inc.

The five companies that went public on U.S. exchanges last quarter raised $917 million. That is down considerably from the 38 companies that went public a year ago, raising $11.2 billion.

“The IPO market is as bad as we’ve seen since 2003, and the ongoing troubles of the U.S. financial sector aren’t making conditions any friendlier for IPO aspirants and their underwriters,” said Tim Walker, Hoover’s industry expert.

The sobering third-quarter figures come on the heels of a 77 percent year-over-year drop in second-quarter filings and a 73 percent drop in first-quarter filings.

Among the companies that filed in the third quarter, Energy Recovery Inc. (NASDAQ: ERII) of San Leandro, Calif. had the best first day of trading, with shares gaining 16 percent. Rackspace Hosting Inc. (NYSE: RAX) of San Antonio had the worst first day—its shares dropped 20 percent the day it went public.

“Any company coming to the IPO market wants to feel sure that it can get a favorable hearing from potential investors,” said Walker. “If you’re Google or Visa, your brand ensures you’ll get that hearing. But if you’re anybody else – even a billion-dollar arm of an existing business that wants to spin off – you’re gambling right now that the week of your debut won’t be a market roller-coaster.”

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Wells Fargo’s Merger With Wachovia to Proceed as Whole Company Transaction With All of Wachovia’s Banking Operations

Merger on Schedule for Completion by End of 4th Quarter 2008

Wells Fargo & Company (NYSE:WFC) said today that it and Citigroup Inc. (NYSE:C) have terminated discussions concerning a possible sale of certain banking assets of Wachovia Corporation (NYSE:WB) and reaffirmed that it is proceeding with its merger with Wachovia Corporation as a whole company transaction with all of Wachovia’s banking and other operations, requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Wells Fargo has submitted its application to the Federal Reserve Board seeking expedited approval of the merger and the share exchange agreement previously entered into between Wachovia and Wells Fargo. Under the share exchange agreement, Wachovia is issuing Wells Fargo preferred stock that votes as a single class with Wachovia’s common stock representing 39.9 percent of Wachovia’s voting power. The acquisition of the non-banking related operations of Wachovia and the share exchange agreement have received early termination from the Federal Trade Commission (FTC), under the Hart-Scott-Rodino Act.

As previously announced, under the definitive agreement between the two companies, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits.

Wells Fargo Chairman Dick Kovacevich said the merger is “simply an incredible fit that will result in an immensely strong, stable financial services company that will carry on Wachovia’s proud tradition of being one of the very best financial institutions in the world. We’re combining the industry’s number one ranking customer service culture of Wachovia with the industry’s number one sales and cross-selling culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination. We also bring to this merger our 157 years of experience in financial services and the unparalleled convenience we can offer Wachovia customers through one of the most extensive financial services distributions systems in North America 100% approval faxless payday loans. We have the highest regard for the quality and commitment and caring of Wachovia team members. We believe their demonstrated commitment to outstanding customer service and their highest standards of community leadership are identical to our own values.”

Kovacevich reiterated that the two companies have a firm, binding merger agreement, are confident the merger will be completed, that it will keep Wachovia intact and create significant value for Wachovia and Wells Fargo shareholders. Wells Fargo will record Wachovia’s credit-impaired assets at fair value. “Credit teams at Wells Fargo have had an opportunity to work with their counterparts at Wachovia,” said Kovacevich. “Much of Wachovia’s portfolio involves businesses where Wells Fargo has a significant market presence, operating history and expertise. We have had experience with such businesses through a variety of credit cycles. Given our broad based operating expertise, and specific understanding of these individual businesses we believe we have adequately evaluated the risks inherent in the portfolios as of the time of this merger agreement.”

In addition, Kovacevich said Wells Fargo is pleased that Citigroup announced that it is no longer seeking that the Wells Fargo-Wachovia merger be enjoined. “We believe that that is the correct and right decision for our Country and our citizens and the health of our already stressed financial system, as well as our and Wachovia’s respective shareholders and stakeholders,” said Kovacevich.

“We are delighted to stride ahead with Wells Fargo in creating a coast-to-coast financial institution — one of the strongest financial firms in the world,” said Wachovia Corporation President and CEO Robert K. Steel.

For complete Charlotte Business Journal coverage of the developing Wachovia story, click here.

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Prime Minister Gordon Brown will say bold and far-reaching action is needed to tackle the global financial crisis when Britain unveils a multi-billion pound bank rescue package Wednesday.

The package, due to be announced at about 7 a.m. (0600 GMT), will involve what a government source has described as a large-scale injection of capital into major retail banks, some of which have lost half their value this week.

“Extraordinary times call for bold and far-reaching solutions,” Brown will say at a news conference with finance minister Alistair Darling scheduled for 9 a.m. (2:00 a.m. EDT), according to extracts released by his press office.

“This is not a time for conventional thinking or outdated dogma but for fresh and innovative intervention that gets to the heart of the problem.

“These decisions on stability and restructuring are the necessary building blocks to allow banks to return to their basic function of providing cash and investment for families and businesses (payday loans).”

Financial analysts expect the package to involve the government providing up to 50 billion pounds to the banks in exchange for equity stakes in the form of preference shares, which could see taxpayers benefit if the banks recover.

The package follows a meeting Tuesday involving Brown, Darling, Bank of England governor Mervyn King and the head of the Financial Services Authority. There was pressure from bank chief executives to act.

British media have suggested the package could also involve a stand-by facility that would effectively allow banks to tap as much money as they need, but the government source played this down. 

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