Finance topics

New Zealand’s budget cash deficit was wider than the government forecast after departments made payments for services earlier than they expected.

The cash deficit was NZ$8.85 billion ($6.2 billion) in the six months ended Dec. 31, or NZ$934 million wider than forecast in December’s fiscal update, the Treasury Department said in a statement released in Wellington today.

New Zealand’s budget showed a cash deficit for the first time in nine years in the 12 months ended June 30, and Finance Minister Bill English has projected six years of deficits as debt increases. Tax receipts fell and government welfare spending increased last year as New Zealand faced its worst recession in three decades.

Payments of NZ$1.3 billion occurred in late December which had been forecast in January, the Treasury said. The variance from forecast is expected to reverse in January, it said.

Tax receipts broadly matched forecast in the six months to December, the Treasury said. Company tax exceeded estimates after inclusion of the government’s settlement with banks over tax on structured finance transactions.

Excluding these transactions, company tax receipts were lower than forecast as firms lowered their tax assessments, suggesting “current-year profitability was weaker than expected in the December forecast and it is possible this will persist until the end of the year,” the department said.

The government’s budget operating deficit was NZ$1.04 billion, which was NZ$1.45 billion narrower than forecast.

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With the potential of a grocery-workers strike looming, one of the largest chains in the Denver area is looking for replacement workers and the other is discounting its prices.

About 15,000 members of United Food and Commercial Workers Union Local 7 are expected to finish voting in about a week on whether to accept contracts offered to them by King Soopers and Safeway or whether to go on strike. The two sides have been in negotiations on a new five-year contract since April but remain apart on issues such as pay increases, health care and pension funding.

King Soopers said it will begin advertising Saturday for replacement workers in the event of a work stoppage. The chain undertook a worker search back in May and identified some 4,000 workers to hire in the event of a strike, but it feels it needs to update that list, expecting at least some of those who were identified to have other jobs by now, spokeswoman Diane Mulligan said.

“There’s a lot of time that’s passed here,” Mulligan said. “In order that we’re where we need to be, we’re looking to identify another 1,500.”

Safeway officials have not announced any plans to advertise for new workers and said they continue to hope to avoid a work stoppage same day payday loans.

But in news that they said was unrelated to the potential strike, the chain announced this week that it has cut prices permanently by as much as 30 percent on items across the store. The “Everyday Low Price” campaign is a national effort, but the Rocky Mountain area is the last of Safeway’s nine regions to implement it.

Scott Grimmett, Denver division president for the grocer, said the effort is meant to attract more customers at a time when they are becoming more discriminating with their buying dollars. While the timing coincides with the contract negotiations, the company has been working on this promotion for more than a year, he said.

“All of us have seen kind of a new consumer emerge out of this recession,” Grimmett said. “I hear a lot of talk about the new consumer that is similar to those that emerged after the Great Depression — very savvy and sensitive to price.”

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A return to lavish bonuses for Wall Street’s top earners could be just the tonic that the Swiss watch industry needs this Christmas after months of austerity depressed sales.

The country’s watch sector, which makes up around 7 percent of exports, has been grappling with a sharp drop in demand over the past year after the worst economic crisis in decades killed consumers’ desire and ability to splurge on pricey treats.

But watchmakers are eyeing a modest rise in sales over the key festive period — the fourth quarter accounts for some 30 percent of sales — as a recovery in Wall Street earnings could lift bankers’ bonuses by up to 50 percent.

“The consumer mood between the continents varies, but on average it is better than last year,” said Philippe Merk, chief executive of privately owned Audemars Piguet, whose watches cost around $20,000 to $30,000.

“Luxury consumers, who are bankers, are better off now as this is the sector that has recovered the fastest. These are the indicators that tell us that this year’s Christmas sales will be better,” he said.

Bonuses are expected to be substantially higher this year despite pressure from politicians and regulators to restrain payouts.

Goldman Sachs, for example, has set aside nearly $17 billion for bonuses so far this year and looks well on track to break the $20 billion mark, which could mean higher payouts per employee than in the previous record year, 2007.

This comes after a revival in profits for most investment banks, and contrasts with a bleak year for the financial sector that has seen governments bailing out major banks and nearly 400,000 job cuts.

Richemont’s most important Cartier brand, Swatch Group’s Tissot marque, luxury watchmaker Parmigiani Fleurier and the head of LVMH’s watch and jewelry unit have all said they expect stronger demand this Christmas.

And Tiffany & Co posted better-than-expected quarterly results on Wednesday that showed its upscale shoppers around the world were spending again.

One Swiss banker said he was treating himself to one of Maurice Lacroix’s latest watches this year, adding that some people bought watches and jewelry as a solid investment, especially after this year’s volatile equity markets.

But he cautioned that there would still be many in the financial sector who would have to forego such purchases.

“It will not be as easy as it was in the past. There is a real difference between the winners and the losers. Employees at those banks that are now state-controlled can forget about bonuses this year,” the banker said.

ASIA A BIG FACTOR

Swiss watch exports have tumbled 26 percent so far this year, ending several years of strong growth, but some analysts predict the watch industry will grow 3-4 percent thanks to an easier comparison base next year and thriving demand from Asia. 

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The independence of the Federal Reserve is essential for credible monetary policy and doubts about the U.S. central bank’s ability to do its job without political interference could hurt the nascent economic recovery, a senior Federal Reserve official said on Sunday.

“Talk of eroding the Fed’s independence can be counterproductive for economic recovery,” St. Louis Federal Reserve Bank President James Bullard said in slides to accompany a presentation prepared for a panel discussion in New York.

Bullard said that non-independent central banks have historically been forced to finance large government budget deficits. “This can be very inflationary,” he added.

Last week, a U.S. congressional panel approved a measure to open the Fed’s monetary policy decisions to government audits — a surprise blow to the central bank’s efforts to shield its independence and a signal of the frustration on Capitol Hill with the central bank.

The amendment was a further congressional slap at the U.S. central bank after a Senate regulatory overhaul proposed stripping the central bank of its regulatory authority.

Some lawmakers fault the Fed for failing to anticipate or prevent the financial crisis that pitched the economy into a deep recession.

Bullard batted back criticism that the Fed missed the brewing crisis, saying the central bank provided “important warnings” before the crisis began.

He noted that his predecessor at the St. Louis Fed, William Poole, argued in the early 2000s that Fannie Mae and Freddie Mac were “ticking time bombs,” while former Federal Reserve Bank of Minneapolis President Gary Stern published a book entitled “Too Big To Fail,” warning some financial firms were growing too large for proper supervision payday loan.

“These types of warnings show that the Fed is well aware of systemic risk concerns in real time,” Bullard said in his slides.

He argued the Fed needs a role in regulating institutions to whom it may lend if required to as the “lender of last resort.”

Bullard also said that to do its job of setting monetary policy effectively, the Fed needs to know the conditions of the financial system.

“The need to know the status of financial markets has been underscored by recent events,” Bullard said. The United Kingdom’s model, in which the Financial Services Authority is in charge of regulation and the Bank of England is in charge of monetary policy “did not work well during this crisis,” he said.

“The crisis in the UK has been even worse in some dimensions than in the U.S.,” Bullard said.

He also said that despite the current crisis, the Fed’s track record of handling crises in the last 25 years has been “reasonably good.”

Bullard, who will vote on the Fed’s policy-setting panel next year, did not comment on outlook for monetary policy.

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It’s a tough time to be starting a career.

This year has been extremely rough: New college graduates had 40% fewer job prospects, a new report shows. And the outlook for 2010, while better, is still not very promising.

Jobs for graduates with bachelor’s degrees, which account for most new graduate hires, will drop nearly 1% next year, according to Michigan State University’s survey on recruiting trends.

Overall, hiring of grads with any degree will decline by 2% compared to 2009.

"Things fell apart really fast last year, but it looks like the job market for graduates has hit a bottom," said Phil Gardner, director of MSU’s Collegiate Employment Research Institute, which conducts the annual survey.

For sure, the job market in 2009 suffered an extraordinary decline. A year ago, Gardner anticipated that employment for new graduates would fall by as much as 10% in 2009. The national unemployment rate, now 10.2%, was 6.8% last November.

Hiring of master’s degree graduates will plummet by 11% based on a weaker labor market for accounting students, the study said.

Jobs for Ph.D.s will spike by 20% and those for MBA graduates will rise 11%.

Who’s hiring? Large companies, those with more than 4,000 employees, plan to decrease hiring of all graduates by 3%, and medium-sized companies, those with between 500 and 4,000 employees, expect to lower hiring by 11%.

Smaller companies, however, may provide a bright spot in the job market for new graduates.

Employers with fewer than 500 staff members said they expect hiring at their companies to jump by 15%. These companies will hire 11 new graduates on average in 2010, and 8 of them will be at the bachelor’s level.

A third of employers said they would consider graduates regardless of their major.

"Employers want to be much more flexible," said Gardner. "They want skill sets that they can plug in anywhere as the they evolve instead of getting stuck with someone focused in one area."

But even as companies look for versatile candidates, the most sought-after graduates are those who majored in environmental science and statistics, for whom job opportunities will climb by 6% and 11%, respectively cash advance in one hour.

"There is a reawakening in American society that environment sustainability is important, and there’s also a lot of stimulus money in that area," Gardner said. He added that statisticians are in demand because they are "quantitatively literate and companies are looking to tap into people that can manipulate and understand numbers."

Hiring will increase in sectors such as agricultural production, food processing, nonprofit and manufacturing. Hiring in consulting services, including engineering, computing, research and marketing, will hold steady at last year’s pace.

Where are the jobs? U.S. companies that recruit nationally are expected to rebound with a 3% uptick in hiring, and employers based in the South Central, Southwest and Northwest regions of the country are also indicating an improvement in hiring, the study said.

Job opportunities in the South Central will rise by 6%, in the Northwest by 4% and in the Southwest 2%.

Employment prospects for graduates in other regions of the country will still sag.

Hiring in the Mid-Atlantic will drop by 8%, in Southeast by 7%, in the Northeast and the Great Lake Region by 4% and in the Upper Plains by 3%.

What’s the pay? A majority of employers, 80%, will not be raising starting salary offers above those made last year. But 8% will lower base pay by 5%, according to the survey, and 12% will of employers will increase salaries by a modest 3%.

The average salary for bachelor’s degree graduates will be $39,900.

Only 7% of employers said they will offer signing bonuses, and 20% will provide performance-based bonuses at the year’s end, down from 33% in 2009.  

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The presidents of the nation’s top private universities got 6.5% more in pay last year, with 23 taking home more than $1 million, according to a study published Monday.

The Chronicle of Higher Education said the median pay for private-college chiefs rose to $358,746 in fiscal year 2007-2008.

The study of 419 private colleges nationwide also showed 110 presidents reported total compensation of more than $500,000.

Among the 23 presidents with total compensation above $1 million, the highest paid was Shirley Ann Jackson, president of Rensselaer Polytechnic Institute in Troy, N.Y., with $1,598,247 in salary and benefits.

Jackson, 63, a physicist and former chairman of the U.S. Nuclear Regulatory Commission, was recruited to lead Rensselaer in 1999. She took a voluntary pay reduction of 5% for the current fiscal year, according to the Chronicle.

In a statement issued Monday, Rensselaer defended Jackson’s compensation, saying she helped raise $1.4 billion in capital, which transformed the school into "a top-tier, world class teaching and research institution."

"The value she contributes to the Institute far exceeds the amount she is paid," said William Walker, Rensselaer’s vice president of strategic communications and external relations.

David Sargent, president of Suffolk University in Boston, was the second highest paid college executive in the study. Sargent took home $1,496,593 in total compensation last year. But that’s down from $2,800,461 in fiscal 2006-2007, when he topped the list.

About one-third of Sargent’s pay was reported as deferred compensation in 2006 tax documents, and was reported again as salary this year, according to the report.

The third highest paid college chief was the University of Tulsa president Steadman Upham, with total compensation of $1,485,275.

Looking ahead, the Chronicle said salary increases have probably leveled off in the current fiscal year, with some presidents taking pay cuts.

Meanwhile, tuition prices are going up at many private schools, at least in part because endowments at those schools have dwindled.

Tuition and fees at private 4-year schools rose 4.4% in the current school year to $26,273, according to a survey released by the College Board last month. That doesn’t include room and board. 

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U.S. companies hurt by the global credit crisis are continuing to hold more cash, even as the economy begins to show signs of improvement, the Wall Street Journal said, citing its analysis of company filings.

In the second quarter, the 500 largest non-financial U.S. companies by total assets held about $994 billion in cash and short-term investments, or 9.8 percent of their assets, according to the paper’s analysis of corporate filings.

In contrast, the companies held $846 billion, or 7.9 percent of assets, a year ago, the paper said.

The trend seems to have continued in the third quarter, despite an improving economy, the paper said companies making payday loans.

The 248 companies that have reported third-quarter results so far saw their cash holdings go up by a percentage point sequentially to 11.1 percent of assets, the paper said.

Companies such as Alcoa Inc, Google Inc, PepsiCo Inc and Texas Instruments Inc reported big third-quarter increases in cash holdings, the paper said.

(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)

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Sprint Nextel Corp reported a wider quarterly loss and a revenue decline, but its success in slowing the loss of the most valuable wireless subscribers took some of the sting out of the results.

At the heart of Sprint’s struggles is the loss of postpaid monthly-bill-paying subscribers, the most lucrative subscribers in the mobile business. That dwindling subscriber base has put Sprint further behind rivals Verizon Wireless and AT&T Inc in the wireless wars.

In the third quarter, Sprint, the No. 3 U.S. mobile service, lost 801,000 postpaid subscribers, a significant number but well below the 870,000 losses analysts had feared.

Helped by the introduction of Palm Inc’s popular Pre smartphone, the subscriber losses slowed from 991,000 in the second quarter and 1.25 million in the first quarter.

“They still have an extremely long way to turn around the business and generate positive post-paid subscriber growth,” said Soleil/Nelson Alpha Research analyst Michael Nelson.

“Clearly, a loss of 800,000 a quarter isn’t going to cut it, but it does show some sign of improvement and says they are at least heading in the right direction.”

Its shares fell 4 percent in early afternoon trading.

Sprint Chief Executive Dan Hesse called the sequential improvement the best in more than five years, and said he expected a smaller postpaid subscriber loss again in the fourth quarter. Hesse expects improving subscriber trends in 2010.

The results are a far cry from the numbers put out by AT&T and Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc no teletrek payday advance. Between them, AT&T and Verizon Wireless added more than 3 million subscribers in the third quarter.

Still, the improvement in the postpaid business helped offset depressed quarterly financial results, analysts said.

“Although it generated lower financial results, certainly the highlight of the quarter was the improvement in postpaid customer losses,” said Nelson.

Sprint’s third-quarter loss widened to $478 million, or 17 cents a share, from $326 million, or 11 cents a share, a year earlier. Revenue fell about 9 percent to $8.04 billion.

Excluding items, Sprint posted a loss of 19 cents a share, according to Thomson Reuters I/B/E/S, compared with analyst estimates of a loss of 15 cents per share. Revenue was forecast at $8.09 billion.

While losing monthly-bill-paying wireless customers, Sprint fared well with prepaid customers, adding some 666,000 of them in the quarter due to Boost Mobile, a service that allows for unlimited calls and texting at a set monthly fee.

Still, investors worry that Sprint could be overly dependent on growth from prepaid, a business that tends to be less profitable and less predictable than postpaid. Some also worry the market will pull back once the economy improves. 

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Prices paid to Australian producers rose in the third quarter as costs for electricity, water and gasoline climbed.

The producer prices index advanced 0.1 percent from the second quarter, when it fell 0.8 percent, the Bureau of Statistics said in Sydney today. The median estimate of 17 economists surveyed by Bloomberg was for a 0.3 percent gain. The index rose 0.2 percent from a year earlier.

The less-than forecast gain in wholesale prices as a surge in the Australian currency cuts the cost of imported goods and services, may give central bank Governor Glenn Stevens scope to slow the pace of interest-rate increases. Policy makers said last week their “very expansionary setting of policy was no longer necessary, and possibly imprudent.”

While domestic demand “remains reasonably firm, it’s unlikely to provide firms with any significant pricing power,” Shane Lee, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today’s report.

Electricity, gas and water costs rose 12.1 percent in the third quarter and prices for gasoline gained 6 percent, today’s report showed. By contrast, the cost of computer services fell 7.1 percent.

A report this week may show consumer prices rose at a faster pace in the third quarter, gaining 0.9 percent from the previous three months when they increased 0.5 percent, according to the median estimate of 20 economists surveyed by Bloomberg. Inflation figures will be published on Oct. 28.

Gasoline Prices

The increase in wholesale prices was stoked by a 12 percent gain in gasoline costs during the third quarter. That offset a 7 percent climb in the Australian dollar, which reduced the cost of imports, Craig James, a senior economist at Commonwealth Bank of Australia, said ahead of today’s report.

Australian central bank officials, who this month became the first Group of 20 policy makers to raise borrowing costs since the height of the financial crisis, said last week that maintaining the benchmark interest rate at “very low levels” could threaten the bank’s goal of keeping inflation between 2 percent and 3 percent.

Stevens raised the benchmark lending rate on Oct. 6 to 3.25 percent from a 49-year low of 3 percent. Investors are certain he will increase the rate by at least another quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange.

There is an 18 percent chance of a half-point increase, the futures showed at 8:52 a.m.

Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.

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Arbitration in the brokerage industry is run by the Financial Industry Regulatory Authority, which regulates brokerage firms.

One investor who has been through securities arbitration said it wasn’t a consumer-friendly experience.

"It’s still overwhelming when you go through the process," said C.B. Lee, a banker from Sherman, Texas, who went to arbitration in 2007 over his claim that his stockbroker was churning his account.

Lee had more than $1 million in his brokerage account at one point and "was left with a fraction of that amount after the broker’s conduct," said Richard Lewins, Lee’s attorney in Dallas. Lee ultimately settled his claim.

Lewins, a former stockbroker, said everything about securities arbitration put investors at a disadvantage.

"The forum is run by the industry’s self-regulatory organization, FINRA," said Lewins.

"One-third of the people deciding your case come from the industry you are bringing your claim against, and the remaining two-thirds are business professionals who rarely look like the people they are asked to relate to, the claimant free credit report and score."

Through July, 45 percent of cases that went before FINRA arbitrators this year resulted in the customer’s being awarded damages, according to the agency.

FINRA’s officials defend their arbitration process as fair.

Cases involving more than $100,000 are heard by three arbitrators — two "public arbitrators" with no ties to the brokerage business and one who does.

"The industry arbitrator often can recognize bad conduct when he or she sees it and offer that expertise to the panel," said George Friedman, FINRA executive vice president and director of dispute resolution.

"We think the industry arbitrator has value, but we’re doing something to address the perception," he added.

Todd Saltzman, deputy director of case administration at FINRA, said the agency was conducting a two-year pilot program to see if there was a better way to appoint arbitration panels in investor cases.

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