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As 2009 approaches, plummeting oil prices have sent the price of gasoline to the lowest level in nearly five years, according to a daily survey of gas station credit card swipes.

Gas prices fell for the tenth consecutive day Monday, according to motorist group AAA. Regular unleaded fell to an average of $1.619 a gallon, the lowest since gas hit $1.617 a gallon in January 2004.

Prices are down nearly $2.50, or more than 60%, since hitting a record average high of $4.114 a gallon this July. Prices have plummeted along with the price of crude oil, the main ingredient in gas, as the current economic has crisis intensified and threatened demand for petroleum-based fuels.

Oil has shed more than $100 a barrel since July.

"When you have the price for the raw material drop over $100 a barrel, that’s why you see the price of gasoline drop," said AAA spokesman Troy Green.

In the United States, the world’s largest oil consumer, citizens drove 100 billion fewer miles during the 12-month period between November 2007 and October 2008 compared with the prior year, according to the U.S. Department of Transportation.

And crude demand in China fell 3 payday cash advances.2% in November compared to the prior year due to lower imports and a decline in refinery usage, according to estimates compiled by Reuters.

Gas may continue to sell at record lows heading into 2009 unless economic activity shows some sign of recovery, according to Green.

Usually gas prices rise in the spring as Americans take to the road.

"Will the economy be in such bad shape that we don’t see that typical runup?" posed Green.

State prices: Prices remained above $2 a gallon in only two states Monday: Alaska ($2.518) and Hawaii ($2.332).

Gas was cheapest in Missouri at $1.419 a gallon on average, and sold for less than $1.50 on average in ten states.

Diesel: Meanwhile the price of diesel fuel, which is used in most trucks and commercial vehicles, fell to $2.435 on average Monday.

The AAA figures, compiled by Oil Price Information Services, are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. 

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Japan’s economy may shrink at an annual 6.5 percent pace this quarter, Bank of America Corp. said after reports last week showed industrial production and exports posted the biggest declines on record.

Gross domestic product in the three months ending Dec. 31 will decline more than the 2.7 percent previously predicted, said Tomoko Fujii, head of Japan economics and strategy at Bank of America in Tokyo.

Companies from Toyota Motor Corp. to Sony Corp. idled plants and fired workers this quarter as recessions in the U.S. and Europe caused sales of cars and televisions to collapse. The global slump is spreading to developing markets including Asia, the destination for about half of Japanese exports.

“External demand has vanished all of a sudden,” said Fujii. “Almost every industrialized nation is in a recession. Even in China, growth is slowing sharply.”

A 6.5 percent annualized contraction would be the steepest since the first quarter of 1998, when the Asian financial crisis and a sales-tax increase led to a 7.5 percent decline. The world’s second-largest economy shrank in each of the past two quarters, entering the first recession since 2001 no teletrak payday loan.

Factory output plunged 8.1 percent in November from October, the most since comparable data were first kept 55 years ago. Exports slid an unprecedented 26.7 percent from a year earlier.

Consumers at home are unlikely to pick up the slack. Household confidence is at a record low and the government has indicated it doesn’t plan to add to two stimulus packages it has yet to implement.

“Japan needs further economic measures as demand from abroad is totally lacking and will probably decline further in the first quarter,” Fujii said.

Finance Minister Shoichi Nakagawa told the Financial Times that the government has no immediate plans to draft another stimulus, saying its priority is to carry out measures announced since October. The plans, which include spending about 10 trillion yen ($110 billion) on employment and aid for households, still await parliamentary approval.

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Bank of England policy makers voted unanimously to cut the benchmark interest rate to 2 percent this month and refrained from a bigger reduction on concern it may prompt about an “excessive” drop in the pound.

The Monetary Policy Committee, led by Governor Mervyn King, voted 9-0 to bring the rate to the lowest since 1951, minutes of the Dec. 4 decision published in London today show. While the economic outlook had worsened, a cut of more than one point may push the currency down too far and “undermine confidence in the economy more widely,” the minutes said.

The pound dropped to a record low against the euro after data showed unemployment rose in November at the fastest pace since 1991. King has signaled that the bank will cut the interest rate further if needed and the U.S. Federal Reserve yesterday lowered its rate close to zero.

“Given the significant probability of undershooting the inflation target in the medium term, a cut of at least 100 basis points was needed,” the minutes said. A larger reduction “might be justified by the scale of the downside risks to inflation.”

The number of people receiving jobless benefits rose 75,700 to 1.07 million, the highest level since July 2000, the Office for National Statistics said today in London. Economists had expected a gain of 44,000, according to the median of 27 forecasts in a Bloomberg News survey.

Prime Minister Gordon Brown today pledged 158 million pounds ($245 million) to help people who recently lost their jobs and said the U.K. government will do everything it can to help soften the blow of the recession.

Rate Forecast

The main U.K. lending rate has dropped 3 percentage points since October. The rate will drop another half-point to 1.5 percent at the next decision on Jan. 8, the median of 23 economists’ predictions in a Bloomberg News survey shows.

“It’s pretty clear that the MPC thinks that the general stance of policy remains out of kilter with prospects for the economy,” said Philip Shaw, chief economist at Investec Securities in London. “Rates will fall below 1 percent in the spring. The momentum of sterling means it’s vulnerable.”

The pound dropped to 91 pence per euro for the first time today, and has fallen more than 24 percent this year. The depreciation “should act to support net export growth,” policy makers said in the minutes payday loans for bad credit.

“Financial markets had priced in a cut of 100 basis points,” the minutes said. “There was a risk that going further could cause an excessive fall in the exchange rate.”

Fed Decision

The Fed lowered its rate to 0.25 percent from 1 percent yesterday and said it will use “all available tools” to generate a resumption in growth. European Central Bank President Jean-Claude Trichet signaled that further interest-rate reductions may be limited after a cut to 2.5 percent on Dec. 4.

“The monetary authorities have got to be aggressive,” former policy maker Charles Goodhart, now a professor at the London School of Economics and Political Science, said in a Bloomberg Radio interview to be broadcast today. He said King should approach next year with “courage, flexibility and perhaps going a bit too far with the very serious occasion we’re in.”

More to Do

U.K. policy makers said that more needs to be done to unfreeze lending between banks.

“The committee agreed that bank rate was not the right policy instrument to tackle supply constraints in the credit market,” the minutes said. “Further measures to underpin lending growth would be needed, building on the government’s package announced in October to recapitalize and guarantee funding to the banks.”

Brown last month cut sales tax to 15 percent from 17.5 percent as part of a stimulus package for the economy. King said yesterday that will further depress prices after the U.K. inflation rate fell to 4.1 percent in November from 4.5 percent the previous month. The bank aims to keep annual price gains at 2 percent.

The U.K. economy shrank 0.5 percent in the third quarter, and the central bank last month predicted it would contract through most of next year. Policy makers said at the decision that surveys signaled further drops in gross domestic product in the fourth quarter and the first three months of 2009.

“The committee agreed that a significant margin of spare capacity would open up over the next couple of years,” the minutes said. “It was most likely that, without further policy action, inflation would substantially undershoot the target in the medium term.”

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TOKYO– Sony Corp. is slashing 4 per cent of its worldwide workforce, reining in spending and shutting plants as it tries to ride out a looming worldwide recession that is battering Japan’s export-reliant manufacturers.

Tokyo-based Sony, which is cutting 8,000 of its 185,000 jobs, said yesterday it will shut five or six plants – about 10 per cent of its 57 factories.

Sony also plans to reduce its electronics investments by about one-third by the end of March 2010, although it did not give specific numbers. Sony will also cut at least 8,000 temporary jobs.

The job cuts are the most drastic here since the U compare car insurance prices.S. credit crunch hit over the summer.

Sony has been recovering from internal problems in recent years under cost-cutting reforms led by chief executive Howard Stringer.

Sony said the moves will deliver $1 billion (U.S.) in savings a year by March 2010.

As well, Sony will trim spending in semiconductors and will outsource output planned for image sensors for mobile phones.

Associated Press

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For the world’s largest brewery, the sale of Labatt USA represents a small ripple in an ocean of beer.

But for brewery workers in Canada, it could mean the loss of up to 15 per cent of production in Canada within three years.

And for border-town beer drinkers, it means the future of two favourite brands, Labatt Blue and Blue Light, is in doubt.

Belgium-based InBev announced yesterday it had agreed to divest Labatt USA as part of a $52 billion (U.S.) deal to buy America’s largest brewer, Anheuser-Busch Cos.

The U.S. Department of Justice required the divestiture as a condition for approval of the larger deal.

"At this time, it’s too early to tell what the impact will be to our Canadian operations," Charlie Angelakos, a spokesperson for Labatt Brewing Company Ltd., said yesterday.

However, he confirmed the sale of Labatt USA to an unidentified third party would mean the end of production of U.S.-bound beer at Labatt’s Canadian breweries within three years.

The London, Ont.-based company said it brews all the Labatt beer sold in the U.S., which accounts for "just under" 15 per cent of Labatt’s total production in Canada.

The company declined to reveal which of Labatt’s seven breweries ships to the U.S. market, citing competitive reasons.

The breweries are in London, Ont., Edmonton, St freecreditscore. John’s, Nfld., Montreal, Halifax, Creston, B.C. and the recently acquired Lakeport Brewery in Hamilton.

Considered the best-selling Canadian brand south of the border, Labatt USA accounted for 1.7 million hectolitres of production last year.

InBev said yesterday the sale of Labatt USA would have no material impact on its earnings.

The brewer also said it has identified "a number of interested potential purchasers" but has not yet determined a fair market value for the asset.

InBev has owned Labatt since 1995.

Labatt Blue and Blue Light have less than 1 per cent of the broader U.S. market, but upstate New York accounts for 60 per cent of those sales, said Eric Shepard, executive editor of trade publication Beer Marketer’s Insights, based in Nanuet, N.Y.

In Syracuse, Buffalo and Rochester, Labatt competes head-to-head with Anheuser-Busch brands such as Bud and Bud Light. Regulators feared the merger could lead to price increases.

"This divestiture will ensure that consumers will continue to benefit from the significant competition between the merging companies in upstate New York," deputy assistant Attorney-General Deborah Garza said in a statement.

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Thomson Reuters Corp (TRIL.L: Quote, Profile, Research, Stock Buzz) (TRI.TO: Quote, Profile, Research, Stock Buzz) reported stronger-than-expected quarterly results as gains in its professional division more than offset slowing growth in the business that serves financial institutions, sending its shares up as much as 5.5 percent.

The news and information publisher, which was formed by Thomson Corp’s purchase of Reuters Group Plc in April, did not provide financial forecasts for 2009, but affirmed its 2008 outlook for revenue and operating profit margin.

“If you look at our average monthly net sales, they’re positive again through October and positive in the third quarter,” Chief Executive Thomas Glocer said in a phone interview. “If you want to start thinking about growth for next year, that’s a good thing.”

The company’s London shares were up 3.72 percent at 1,117 pence in late trading after trading as high as 1,135 pence.

The London shares are down nearly 30 percent since the stock began trading in April.

Third-quarter net income was $380 million, or 46 cents a share, compared with $2.97 billion or $4.61 per share a year ago. Excluding nonrecurring items, discontinued operations and other items, profit was 48 cents a share, beating the average analyst forecast of 34 cents, according to Reuters Estimates.

Pro forma revenue rose 8 percent to $3.33 billion, topping Wall Street forecasts of $3 short-term cash loans.24 billion. Pro forma figures assume the Thomson Reuters deal had closed on January 1, 2007.

“The numbers look slightly ahead,” said Alex DeGroote, a media analyst at Panmure Gordon in London, adding that Thomson Reuters was “not too bearish on ‘09 markets growth potential.”

Thomson Reuters stood by its forecast for 2008 revenue growth of 6 to 8 percent excluding currency effects, and affirmed its forecast for an underlying operating profit margin of between 19 and 21 percent.

“NOT DISCRETIONARY GOODS”

The company raised its forecast for 2008 free cashflow margin to between 13 percent and 15 percent of revenue, excluding synergy and integration costs.

“We went out in February and said, in a company where there were a million moving pieces moving into an awful market, we would do 6-8 percent growth,” Glocer said.

“The fact that we don’t have to change that is a very good thing. Ditto the margin,” he said.

“Our products are not discretionary goods,” he added on a conference call, reiterating that the markets division, which serves financial institutions, could see positive growth in 2009.

Organic revenue growth at the markets division was 5 percent in the third quarter, slowing from 7 percent in the second quarter. 

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Pharmacy-benefits manager Express Scripts Inc. said today that it received a extortion letter from an unknown person or persons demanding money and threatening to expose millions of the company’s patients’ records.

The letter included information on 75 patients, including their names, birth dates, social security numbers and, in some instances, prescription information, the north St. Louis County-based company said. The letter arrived in early October, Express Scripts said.

The company said it has notified the affected clients and the FBI, which is investigating the letter fast payday loan no faxing. Express Scripts said it also is conducting its own investigation.

The company did not say how much money the extortionist wanted.
Express Scripts’ stock fell about 6 percent to $58.18 in afternoon trading.

atablac@post-dispatch.com | 314-340-8140

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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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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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The International Energy Agency warned last week that 50 per cent of global electricity supply will need to come from renewable energy sources by 2050 if we hope to "minimize significant and irreversible climate change impacts."

"Governments need to take urgent action," said Nobuo Tanak, executive director of the agency. "Governments need to do more. Setting a carbon price is not enough."

What’s interesting about this particular warning is that comes from an agency that, in the past, has been accused of paying only lip service to renewables as part of its broader energy mandate, which has traditionally been dominated by fossil fuels.

Indeed, the organization was founded during the early 1970s directly in response to the 1973 Arab oil embargo.

Here in Canada, Tanak’s "do more" message likely fell on deaf ears. The federal Conservative government is more focused on ways to clean up the image of the western oil sands so that development there can continue unabated. Provinces such as Ontario, Quebec and British Columbia have taken leadership, but at a federal level there’s no green vision for Canada — just a laundry list of half-measures aimed at creating a perception of action.

Given the Conservative lead in the polls, Canadians must be buying it. The only other explanation is that four in 10 voters don’t care about the environment, climate change or how we leave the world for future generations. Not enough, anyway, to sway them toward the Liberals, NDP or Green Party.

It gets worse.

The collapse of Wall Street has severely tightened lending markets. There’s a global credit crunch, and those looking to spend big bucks on wind, hydroelectric, solar and biomass projects will find it much more difficult — and expensive — to obtain debt financing.

The bottom line: the knee-jerk reaction to the financial crisis will lead to less, or slower action on the climate crisis.

"These are capital-intensive projects," says Tom Rand, director of Toronto-based VCi Green Funds Inc., a private-equity fund that invests in technologies that reduce greenhouse-gas emissions. "And we need renewable-energy production to step up tomorrow."

Rand has spent the past year promoting the creation of a government "green bond" that, during the current credit crunch, makes more sense than ever.

The idea is that Canadians could purchase tax-free green bonds in the same way they can purchase Canada Savings Bonds, earning about 4 per cent a year (fast cash). But the money, potentially billions of dollars, raised from the bond issue would be devoted to infrastructure projects that promote deployment of renewable energy.

"Renewables have to get built, that’s a priority, and our plan steps in to provide that liquidity, that cheap debt capital," explains Rand, adding that the bond money could also be used to backstop low-interest bank loans so homeowners have an affordable way to pay for energy retrofits.

"Canadians get a safe investment vehicle, and companies get guaranteed access to low-cost capital over a long period of time. They don’t have to worry about that credit crunch biting them in the ass. It’s the best of both worlds."

Jobs get created. Clean energy capacity gets built. And Canadians who purchased the bonds get a safe return on their investment and a chance to boost — for themselves, and for their children — development of a green economy.

Liberal leader Stéphane Dion is a strong advocate of the green bond concept.

Last month, Dion said if elected he would create a federal infrastructure bank that would use money raised from green bonds to provide low-cost financing for major clean-energy projects.

A week earlier, NDP leader Jack Layton announced similar plans for a climate-change bond.

The Conservatives, initially receptive to the idea, ended up backing away.

"Mainly because I don’t think they want to engage Canadians on climate-change issues," Rand says. "Because once Canadians are engaged and they have something at stake, their psychology changes and suddenly people want real action."

Europe introduced green bonds last year and within three months about $1.5 billion was raised.

The public appetite is enormous for this kind of investment vehicle, says Rand, who plans to shift gears if the Conservatives get re-elected and start pitching the idea to the provinces.

Why wait? Ontario should be looking into the green bond approach today. If Energy and Infrastructure Minister George Smitherman is serious about increasing the province’s targets for renewables, then reaching those targets in an environment of tight credit will require some creative financing.

A green bond could fit that bill.

Tyler Hamilton’s Clean Break appears Mondays. Email thamilton@thestar.ca

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