Circuit City may close 150 stores rather than file for bankruptcy, according to the Wall Street Journal. Bankruptcy lawyers have reportedly been hired. There are 15 Circuit City stores in the Houston area.
President Bush says Americans’ attitudes about the financial crisis are shifting from “near panic” to a more relaxed state. Bush spoke to reporters after a closed meeting with Louisiana business leaders. Despite continued turmoil and uncertainty in the markets, Bush says he was heartened to hear that people were starting to understand the efforts being made to free up credit and keep businesses working properly. He reiterated it will take awhile for the credit crisis to be resolved, but he said the attitude–at least among the business leaders he spoke with–was better than it had been. As people fret about rising bills and plummeting retirement savings, Bush is on a campaign to remind the nation his government is working to fix the crisis.
The White House says President Bush is open to the idea of a second government stimulus to further boost the U.S. economy amid the financial crisis. Press Secretary Dana Perino told reporters on Air Force One as the president flew to Louisiana for an economic event that the White House will have to see what kind of package Congress crafts. Perino says the administration has concerns that what has been put forward so far by Democratic leaders in Congress would not actually stimulate the economy.
Federal Reserve Chairman Ben Bernanke says a new round of government stimulus is a good idea, with an economy that could remain weak for some time. He tells the House Budget Committee the economy will “likely” stay weak for several quarters. His testimony marks his first endorsement of another round of stimulus, which Democrats on Capitol Hill have been advocating. Bernanke says any stimulus package would need to kick in quickly to help boost consumer and business spending. He also says a package should include provisions to help break through the credit clog. The Fed chief also mentions that the measure should limit longer-term effects on the budget deficit. The deficit hit a record high in the recently ended budget year. When pressed for his idea on the size of such a package, he said it should be “significant.”
Treasury Secretary Henry Paulson says government purchases of stock in banks represent an investment that should eventually make money for taxpayers. Paulson said the government will own shares in the banks that should be paid back with a reasonable return and the government will also receive warrants for common shares in the banks. He made his comments as he announced a streamlined application process that banks can follow to apply to sell shares to the government by a deadline of November 14th.
A private industry group says the economy’s health improved for the first time in five months in September as interest rate spreads, supplier deliveries and new orders strengthened. The New York-based Conference Board said its monthly forecast of future economic activity rose 0.3 per cent–a better reading than the 0.2 per cent drop expected by Wall Street economists surveyed by Thomson/IFR. “Data on hand reflect a contracting economy, but not one in free fall,” said Ken Goldstein, a labor economist at the Conference Board.
One of President Bush’s top economic advisers says parts of the country are already experiencing what “anyone would characterize as a recession.” Ed Lazear, the chairman of the White House Council of Economic Advisers, tells CNN’sLate Edition that the national unemployment stands at 6.1 per cent. But Lazear says some parts of the country, such as California, have even higher rates of people out of work. Many analysts predict the economy could contract over the final three months of this year and in the first 90 days of 2009. That would meet the classic definition of a recession–two consecutive quarters of economic contraction. But some economic analysts say the sagging economy already is in recession. Also, Lazear says it will take “a few months before we really see a significant impact”‘ from the $700 billion rescue plan.
The share of people who think the country is moving in the right direction has plunged in just a few weeks–from 28 per cent in September to 15 per cent this month. The latest Associated Press-Yahoo! news poll finds the number of people who say they’re personally happy is at 59 per cent–down from 70 per cent last month. About a third of those polled say they’re worried about losing their jobs. Half fret that they’ll be unable to keep up with mortgage payments and credit card bills. And 70 per cent say they’re anxious that the value of their stocks and retirement benefits is down. Just over half approve of the recently passed financial rescue plan.
The U.N. labor chief says the world financial meltdown will lead to at least 20 million lost jobs. The International Labor Organization says the increase will put the global unemployment total at 210 million by the end of 2009. The ILO says that will be the first time the figure has been above 200 million in a decade of record-keeping. ILO Director-General Juan Somavia said that global leaders need to focus on the impact on individuals, not just financial institutions, when they devise rescue plans.
Saying it would bring “universal legitimacy” to the effort, U.N. Secretary-General Ban Ki-Moon is offering to host an emergency summit at the United Nations on the global financial crisis. Ban met with French President Nicolas Sarkozy in Canada over the weekend, and issued a statement backing Sarkozy’s appeal for world leaders to act collectively to address the economic meltdown. Ban said holding a summit at the U.N. would be a “symbol of multilateralism” and “demonstrate a collective will” to face a serious global challenge. Sarkozy says such a summit should be held by December. He says European Union nations all support a radical restructuring of international institutions like the International Monetary Fund and World Bank. British Prime Minister Gordon Brown says the meeting will require vision similar to the Bretton Woods Conference that laid out an international financial and monetary system in the 1940s.
Germany’s chancellor is holding talks in the Czech Republic on global economic turmoil and European Union issues. Angela Merkel’s visit comes amid criticism over the decision by Germany and a handful of other EU nations to fully guarantee savings deposits in their banks. Czech leaders fear the decision will lead to a flight of capital to neighboring countries like Germany. The Czech government says the Czech banking system is stable. European issues are also to be on the agenda, because the Czech Republic is taking over the EU rotating presidency from France on January 1st. Merkel is scheduled to meet with Prime Minister Mirek Topolanek and Euro-skeptic President Vaclav Klaus.
Gasoline is averaging $2.92 a gallon across the country, after falling more than a dime since Friday. Those numbers come from AAA, the Oil Price Information Service and Wright Express. Pump prices have fallen 29 per cent from their July record high of $4.11 a gallon and are only ten cents higher than a year ago. That difference could be bridged this week if gasoline keeps falling at the current rate. The pullback at the pump comes amid a dramatic turnaround in crude oil prices.
Oil prices rose to $73 a barrel in Asia on expectations that OPEC will cut production quotas at an extraordinary meeting later this week. Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Sunday that members plan to announce a “substantial” cut at a meeting that begins October 24th in Vienna. Khelil, who is also Algeria’s energy minister, said OPEC may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about two million barrels a day, Khelil said. Venezuelan President Hugo Chavez said Sunday he would like prices between $80 and $90 a barrel. Investors largely ignored an OPEC output reduction of about 520,000 barrels a day last month, focusing instead on weakening demand.
Nearly 20 per cent of the nation’s car dealerships could close next year, according to the Automotive Aftermarket Industry Association. STUDY BY Grant Thornton expects as many as 3,800 dealerships are at risk of closure because of dwindling sales and tighter credit. The association contends that already there are not enough dealerships in all the right places to keep every motor vehicle services, repaired and operating safely.
A new study says California has saved about $56 billion in electricity costs and created 1.5 million jobs over 35 years by using energy more efficiently than other states. The report has been released by an economist at the University of California at Berkeley. It finds that state policies that boost energy efficiency aren’t just good for the environment–they’re also good for the economy. California was among the first states to create energy-efficiency standards in a number of areas. The average Californian now uses about 40 per cent less electricity than the average American. The study also says plans to reduce greenhouse gas emissions could create 400,000 new jobs and increase household incomes by up to $48 billion annually by 2020.
Two public transportation agencies in Southern California are facing possible service cuts after a major lender fell victim to the nationwide economic crisis. Los Angeles County Metropolitan Transportation Agency officials said their deal to lease trains and buses from investors is in jeopardy because American International Group–which loaned the agency $1 billion to finance the transactions–recently ran short of cash and nearly collapsed. Now MTA must find another lender or pay back hundreds of millions of dollars to investors to keep all its commuter services running for its 1.5 million riders. And a spokesman for Metrolink, a commuter rail agency in Southern California, says it also must find a find a replacement for AIG. Other large transit agencies in San Francisco, Chicago and Washington, D.C., have entered into similar lease-back transactions. The chief counsel for the American Public Transportation Association says the impact could be “pretty horrendous across the industry.”
Airline customers looking to avoid higher fares are cashing in more frequent-flier awards this year. But many of those customers also suspect the miles just aren’t worth the same anymore. With so many new ways to earn miles, savvy travelers fear it’ll soon become harder to go where they want when they want for free. Randy Petersen tracks frequent-flier programs as publisher of Insideflyer magazine. He says recent fare hikes are leading many passengers to burn up miles on humdrum trips instead of vacations to Hawaii or Europe. Houston-based Continental Airlines reports that through July, customers had cashed in 1.34 million awards this year. That’s up 21 per cent from the same period last year. Fort Worth-based American Airlines has the oldest and largest loyalty program in the industry. The AAdvantage program has 60 million members who racked up 200 billion miles last year. Use of awards on American was flat from 2006 to 2007 but is up ten to 15 per cent this year through August. Like Continental, American credited Web site advances that let customers see at a glance when they can travel a particular route and how many miles it’ll cost.
Mexican oil production has fallen ten per cent so far this year, compared with the same period in 2007. Petroleos Mexicanos, or Pemex, says exports have fallen 18 per cent over the same period. Pemex blamed bad weather, particularly Hurricane Ike. The state-run company cut production by 250,000 barrels a day for nearly two weeks after Ike hit key refineries in Texas and Louisiana. Much of Mexico’s oil is refined in the U.S. At the same time, Mexico spent a record $19.5 billion on fuel imports this year, 71 per cent more than the same period in 2007. So far this year, Mexico is producing an average of 2.8 million barrels of oil a day.
A vote by the leaders of the Screen Actors Guild on Sunday has simultaneously ratcheted up negotiation efforts and the possibility of strike. The guild’s national board of directors voted to formally request a federal mediator for stalled contract talks with studios and, at the same time, agreed to ask members if they want to authorize a strike. If 75 per cent of SAG’s 120,000 members vote in favor of a labor action, it would then be left to the national negotiating committee to call the strike if it deems it necessary. SAG’s chief negotiator Doug Allen said the union’s goal remains securing a good contract without a strike. Actors in prime-time television and movies have been working under the terms of a contract that expired June 30th, hoping to avoid a repeat of the 100-day writers strike that ended in February. That strike cost the Los Angeles area economy an estimated $2.5 billion. The studios, represented by the Alliance of Motion Picture and Television Producers, said recently that, considering the current economic turmoil, it is “unrealistic for SAG negotiators now to expect even better terms during this grim financial climate.”
A trade paper reports that NBC Universal plans to cut $500 million in spending next year to prepare for an expected continuation of the worldwide economic slowdown. Variety says President and CEO Jeff Zucker announced the cuts in a staff memo. The reduction would equal three per cent of the company’s budget. Variety says division heads will decide how to reduce their spending. But Zucker’s memo suggested several ways, including staffing reductions and cutbacks in budgets for travel, entertainment and promotions. Variety says the memo didn’t specifically mention any layoff plans. It’s unclear how many staffers might be affected by the spending drop.
A fairly quiet week is on tap for economic reports, after a heavy helping of them last week. Thursday, the Labor Department releases the weekly jobless claims. And Friday brings a report on sales of previously-owned homes from the National Association of Realtor.
Halliburton says its swung to a net loss of $21 million in the third quarter, due largely to the cash settlement of convertible debt. But the oilfield services provider says its operating income is up. The Houston-based company said it lost two cents per share in the July-September period in contrast to a profit of $727 million in the year-ago period. The most-recent results include a non-tax deductible loss of $693 million, related to the cash settlement of convertible senior notes and a $15 million charge related to the acquisition of Welldynamics. It says its operating income rose to $1 billion compared to $910 million a year ago.
Texas Instruments’ earnings fell 26 per cent in the latest quarter, and the chip maker says it will take steps to cuts costs as business is slowing down. TI earned $536 million in the third quarter, compared with $758 million in the same quarter last year. Revenue declined eight per cent to $3.39 billion. Analysts polled by Thomson Financial were expecting sales of $3.4 billion. However, their estimates generally exclude one-time charges and benefits. Such items reduced TI’s earnings in the quarter by $10 million, or nearly a penny per share.