PLANYC 2030

 

Wary of the economy, shoppers are increasingly shying away from credit cards, opting to use cash, checks or debit cards rather than to “pay later” on a credit card.

In fact, use of debit cards surpassed that of credit cards last year, according to a new study released by Javelin Strategy & Research.

The study found that in 2009, only 56 percent of consumers surveyed during a particular month had used a credit card, down sharply from 87 percent in in 2007.

What’s more, if this trend persists, credit card usage in 2010 could fall to 45 percent, the market research firm said.

“People are extremely wary,” said James Van Dyke, president and founder of Javelin. “They can’t tell which way the economic winds are blowing. They are just incredibly uncertain.”

Van Dyke sees this as “a sea change” in consumer behavior.

Javelin suspects debit card usage will continue to grow in the years to come. Based on Javelin’s research, the total purchase value for debit cards rose between 3 percent and 7 percent depending on the card brand from 2007 to 2009.

Consumers in their twenties helping to drive the trend as they are more likely to use a debit card than other forms of payment, Van Dyke said. One reason is that some consider it a better way to budget their money.

“Credit cards don’t make sense for many young people,” Van Dyke said.

Then, there are lower-income consumers, some of whom are being paid their salaries on reloadable prepaid cards rather than by getting a paycheck deposited into an account, Van Dyke said.

One danger here is that reloadable prepaid cards is a payment category that remains largely unregulated under the new credit card laws.

That’s more bad news for the nation’s biggest credit card issuers. These companies are already seeing a less profitable future as consumers spend less and pay off their credit card bills. And, raising interest rates and imposing new types of fees isn’t likely to fill the gap.

Instead, credit card issuers will need to come up with new types of products to encourage card-spending.

MasterCard, for example, announced last month that it plans to offer its Citi cardholders a new card that allows users to set spending controls and receive real-time spending alerts aimed at helping them avoid overspending. The program, dubbed inControl, also will allow customers to determine where, when, how and for what types of purchase their cards may be used.

This type of product goes right to the heart of why some cardholders are refraining from using their credit cards—they want to be in control of their spending.

Roughly 16,000 companies in the U.S. issue credit cards, but the six largest lenders are Citigroup, JP Morgan Chase, Bank of America, Capital One Financial, American Express and Discover Financial Services.

Credit-card loan balances at these six lenders have dropped 20 percent since their peak in the second quarter of 2008, to $544 billion, according to Credit Suisse.

The decline reflects not only moves by consumers to pare back debt, but also bank efforts to weed out risky borrowers.

A month look at consumer credit will be issued later Wednesday by the Federal Reserve.

 

Home Depot Inc., Dell Inc. and Burlington Northern Santa Fe LLC led the busiest day for U.S. corporate bond issuance in more than seven months as investment- grade borrowing costs hover near the lowest on record.

Companies sold $15.4 billion of the debt as yields fell to 3.83 percent yesterday and reached as low as 3.74 percent on Aug. 24, according to Bank of America Merrill Lynch’s U.S. Corporate Master index. In Europe, banks sold 8.5 billion euros ($10.8 billion) of bonds as lenders rushed to refinance almost a quarter-trillion euros of debt due this year.

U.S. investment-grade sales soared following signs last week the economy won’t slip back into recession. Private payrolls climbed more than economists expected and pending home sales rose from a record low, even as the unemployment rate rose to 9.6 percent last month. Treasury yields are rising from this year’s low on Aug. 25.

Yields on investment-grade debt are “probably as low as they’re going to get,” said Anthony Valeri, a market strategist in San Diego at LPL Financial Corp., which oversees about $277 billion of assets. “This level is an ideal trade-off of investors recognizing the fundamentals of a slow-growth economy are OK for corporate bonds.”

Home Depot, the largest-home improvement retailer, sold $1 billion of debt due in 10 and 30 years in its first offering since December 2006, according to data compiled by Bloomberg.

Dell, Burlington

Round Rock, Texas-based Dell, the third-biggest personal computer maker after Hewlett-Packard Co. and Acer Inc., raised $1.5 billion in a three-part sale.

Burlington Northern, the Fort Worth, Texas-based railroad company acquired this year by Warren Buffett’s Berkshire Hathaway Inc., sold $750 million of debt in a two-part offering, according to data compiled by Bloomberg.

Issuance may set a record for the week and month, said Tom Murphy, a money manager who helps oversee more than $25 billion of investment-grade credit at Columbia Management in Minneapolis.

“You’re seeing people definitely want to be invested in the market and definitely put money to work,” Murphy said. “The first week after Labor Day is considered the beginning of the push toward the end of the year.”

Elsewhere in credit markets, the extra yield investors demand to own company debt instead of similar-maturity government bonds was unchanged at 178 basis points, or 1.78 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Yields averaged 3.516 percent, down from 3.585 percent.

Bondholder Protection

The cost of protecting corporate bonds in the U.S. from default rose after falling for four straight days.

The Markit CDX North America Investment Grade Index Series 14 increased 3.3 basis points, the most since Aug. 11, to a mid- price of 107 basis points as of 5:37 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4 basis points to a mid-price of 109.5, also the first increase after four trading days of declines.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 3 basis points to 125 basis points as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.

The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of investments.

Most-Traded Bonds

Bonds from Atlanta-based Home Depot were the most actively traded U.S. corporate securities by dealers, with 182 trades of $1 million or more. Ranked second was New York-based Goldman Sachs Group Inc., the most profitable firm in Wall Street history, with 79 trades.

Dearborn, Michigan-based Ford Motor Co., with 35 trades, was the most active in junk bonds, which are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

The Canada Pension Plan Investment Board and Onex Corp. plan to raise $1.6 billion of leveraged loans to help fund their buyout of Tomkins Plc. Potential lenders were invited to a meeting today in New York to discuss a six-year $1 billion term loan, according to two people familiar with the situation who declined to be identified because the matter is private.

The rest of the financing will be raised through a $300 million term loan and a $300 million revolving credit line, both maturing in five years, one of the people said.

Loan Prices

Leveraged loan prices fell, with the S&P/LSTA US Leveraged Loan 100 Index declining 0.14 cent to 89.43 cents on the dollar, the first drop after three days of increases. The index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, returned 4.3 percent this year.

In emerging markets, the extra yield investors demand to own company debt rather than government bonds climbed the most in a week. Spreads widened 13 basis points to 288 basis points, according to JPMorgan Chase & Co. index data.

U.S. corporate borrowers are taking advantage of yields to raise “very inexpensive” money, said Zane Brown, fixed-income strategist at Lord Abbett & Co. in Jersey City, New Jersey.

“It reflects investors’ preference for risk and companies that want to take advantage of low absolute levels on yields,” said Brown, who helps oversee $53 billion of debt.

The yield on the benchmark 10-year Treasury note was at 2.60 percent at 10:17 a.m. in Tokyo today, 18 basis points higher than this year’s low, according to data compiled by Bloomberg.

Bond Issuance

U.S. investment-grade issuance yesterday was the most since $17.6 billion on Feb. 4, Bloomberg data show. There was one sale of high-yield debt as Richardson, Texas-based MetroPCS Communications Inc. issued $1 billion of notes due in 2018. It was the third-busiest day for corporate bond issuance this year with $16.4 billion of sales.

Companies sold $10.1 billion of dollar-denominated debt on the day following the Labor Day holiday last year, and $29.7 billion of notes in that week, Bloomberg data show.

Pending sales of existing houses unexpectedly climbed in July from a record low, figures from the National Association of Realtors showed Sept. 2. The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month.

Companies in the U.S. added more jobs than economists forecast in August, Labor Department figures in Washington showed Sept. 3. Private payrolls climbed 67,000 after a revised 107,000 increase in July.

‘Stay Very Busy’

“It’s going to stay very busy as long as the markets are this receptive to new issuance,” said Jim Kochan, the chief fixed-income strategist at Wells Fargo Funds Management, which oversees $175.6 billion of debt assets. “It’s been extremely busy on a trend basis all year, as yields kept coming down.”

Commerzbank AG and UniCredit SpA led the most bank bond sales in Europe in five weeks, Bloomberg data show. The cost of insuring bank debt against default rose by the most in a month on speculation the Basel Committee on Banking Supervision will propose higher capital requirements.

France Telecom SA sold $1.39 billion of bonds in euros and dollars. The nation’s biggest phone company issued $750 million of five-year notes that were priced to yield 82 basis points more than similar-maturity Treasuries and 500 million euros of 12-year bonds priced at 75 basis points more than swaps, Bloomberg data show.

Cosmetics Company Touches Up Department-Store Sections With Express Lanes, Browsing Areas

 

 

To lure shoppers to its department-store beauty counters, Estée Lauder Cos. Chief Executive Fabrizio Freda is tossing aside generations-old traditions like hidden price tags, nagging consultants and glass cases that keep makeup out of reach.

The moves are an attempt to hold the attention of increasingly fickle cosmetics shoppers, which has become an escalating challenge for beauty-industry executives.

Younger consumers don’t want to be hostage to department-store sales staff. Meanwhile, websites, television shopping networks and even grocery stores have become tougher competitors for consumers’ beauty dollars.

In an effort to reshape Estée Lauder’s U.S. department-store base, which is nearly one-third of the company’s revenue, executives from the company’s Clinique, Estée Lauder and MAC brands have been testing new counter designs that allow shoppers to browse on their own, new promotions and express lanes for busy shoppers.

“There is huge opportunity to restart sales growth and shopper traffic in department stores,” says Mr. Freda.

The cosmetics industry turned to U.S. department stores around World War I, in part for a reputational boost. “Cosmetics weren’t entirely respectable then,” says Geoffrey Jones, a Harvard Business School professor of business history. “They were more associated with actresses, or worse.”

But the rise of competitors in recent years has seen upscale department stores’ share of the $58.9 billion U.S. beauty market shrink.

The recession also took a bite: Beauty-product sales in U.S. department stores declined 9% to $8.1 billion in 2009 from the prior year, compared to a drop of just 1% for the U.S. beauty industry as a whole, according to market-data firm Euromonitor International Inc.

Executives at Estée Lauder, based in New York, have worked to offset the decline by opening more of their own stores, selling products on TV and boosting online selling. Mr. Freda spent much of his just-completed first year as CEO aggressively pushing the company overseas, including a focus on skin care in Asia.

Now, faced with mounting competition from cheaper drug-store brands and upstart niche brands touted by retailers such as Sephora, owned by LVMH Moët Hennessy Louis Vuitton SA, Estée Lauder executives are refocusing on their main sales channel.

Shaking up beauty departments involves cooperation between cosmetics manufacturers and retailers, because the counters and sales staff is typically funded jointly in closely guarded agreements. Mr. Freda says the economic downturn has helped ease negotiations.

“The recent recession has opened up many companies—for sure ourselves and many of our retail partners—to be willing to put more dynamic change into the way we go to market,” he says. “We are cooperating, I believe, better than in the past in the area of change.”

U.S. department-store chain Macy’s says the changes at Estée Lauder brands’ counters are part of broader adjustments to its beauty section, including offering shoppers more opportunities to browse independently.

“We see younger consumers in particular who like to test and play on their own, so we’re working closely with manufacturers to accommodate that,” says Muriel Gonzalez, Macy’s chief beauty merchant.

Department stores have much to gain from improving their beauty business, typically the most profitable section of the store, says Citigroup analyst Deborah Weinswig. Attracting beauty shoppers is also critical to creating customer traffic. Some 80% of women who use mascara replace it at least two to three times a year, according to an NPD Group survey. At least two-thirds of women say they replenish their facial cleansers and moisturizers every two to three months.

“If you can get a consumer to love a brand and product, they will keep coming back to your store to replace it,” says Karen Grant, an analyst for NPD.

Central to Mr. Freda’s strategy is offering shoppers new reasons to visit department stores. The Estée Lauder brand declared the evening of July 22 “America’s Night to Repair” and spent four hours giving away some 400,000 samples of its Advanced Night Repair eye treatment or face serum across some 2,200 stores.

When handing over a sample, beauty advisers collected consumers’ names and phone numbers and phoned them 10 days later to see how they liked the product.

Overall sales of the Estée Lauder brand increased by a double-digit percentage the week of the event, says Jane Hertzmark Hudis, global president of the Estée Lauder brand.

Walking through Clinique’s new counter in Bloomingdale’s New York flagship, Lynne Greene, president of Estée Lauder’s Clinique, Origins and Ojon brands, demonstrated the new ways women can now shop for the brand’s cosmetics: An express line for consumers who already know what they want, areas to browse on their own, and seats for those who want a full consultation.

Employees who staff Clinique’s express line try to deliver the product in 60 seconds and are coached not to offer shoppers other products unless they seem especially curious.

“If a shopper isn’t asked to see any other products, we see them physically relax,” says Ms. Greene. “Then, sometimes, they start browsing. Frequently, we get another purchase because of that.”

Signs now list Clinique’s prices, a practice adopted during the recession. “Consumers didn’t want to ask, ‘How much is it?’” says Ms. Greene.

Even Estée Lauder’s MAC brand is rethinking its approach. The brand, whose selling space resembles a photo studio, has been testing new hand-held devices that let staffers ring up purchases.

“People today are looking for real know-how, but they want to be served in the way they choose,” says John Demsey, group president of several Estée Lauder brands, including MAC.

 

British companies are beating the world in the bond market as investors bet Prime Minister David Cameron’s efforts to tame the budget deficit will preserve the U.K.’s top credit rating.

U.K. corporate debt denominated in all currencies returned 3.25 percent last month, the most in a year and the best among the 10 countries making up almost 90 percent of the $6.2 trillion Bank of America Merrill Lynch Global Broad Market Corporate Index. Bonds of Banco Santander SA’s Abbey National unit and Tesco Plc, the nation’s largest supermarket chain, led the gains, returning as much as 12.7 percent.

Cameron’s coalition government is pushing cuts and austerity measures worth 30 billion pounds ($46 billion) a year to shrink the U.K.’s 11 percent deficit to 2.1 percent by 2015. Investors are speculating this will preserve Britain’s AAA credit rating without slowing the economy too much that it curbs the ability of companies to meet their debt payments.

“Investors are happy with the measures taken by Cameron,” said Christian Weber, a senior credit strategist at UniCredit SpA in Munich. “The perception has spread that it’s better to actually tackle budget deficits than just keep spending and spending and spending, because that limits your ability in the future to help your economy stabilize.”

The extra yield investors demand to hold U.K. corporate bonds instead of benchmark government securities narrowed 4 basis points to 237 basis points in August, or 2.37 percentage points, compared with an increase of 6 basis points for U.S. company debt, according to Bank of America Merrill Lynch’s global index. Spreads widened an average 4 basis points across all countries in the index last month and were unchanged yesterday at 180 basis points. Yields averaged 3.558 percent.

Government Bonds

U.K. government bonds are also rallying. They returned 4.7 percent last month, second only to Denmark’s 4.75 percent, according to the Bank of America Merrill Lynch Global Sovereign Broad Market Plus index.

Elsewhere in credit markets, the cost of protecting corporate bonds from default in the U.S. fell after a report showed companies added more jobs than forecast in August. Auto- parts supplier Continental AG sold Europe’s first high-yield bond in a month and Citigroup Inc. will hold a meeting next week with investors to discuss the financing for the acquisition of Tomkins Plc.

Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 1.25 basis points to a mid-price of 105 basis points as of 11 a.m. in New York, the lowest since Aug. 10, according to index administrator Markit Group Ltd.

August Payrolls

The measure fell after private payrolls that exclude government agencies climbed 67,000, after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures in Washington showed. The median estimate of economists surveyed by Bloomberg News called for a gain of 40,000. Overall employment fell 54,000 for a second month and the unemployment rate rose to 9.6 percent as more people entered the labor force.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 2.5 basis points to 106, and the Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 8 basis points to 483, according to Markit.

Continental Sale

The indexes typically fall as investor confidence improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Continental, Europe’s second-largest auto parts supplier, sold 1 billion-euros ($1.3 billion) of seven-year bonds. The debt from the Hannover, Germany-based company priced to yield 7.625 percent, compared with 8.75 percent on five-year securities it sold on July 9, according to data compiled by Bloomberg.

Banco Bilbao Vizcaya Argentaria SA and Telefonica SA also sold bonds, putting this week on track to be the highest for European debt issuance in a month, Bloomberg data show. Sales of corporate and covered bonds total 15 billion euros this week, the most since the period ended July 30 and up from 12.6 billion euros last week.

Tomkins Financing

Citigroup will hold a meeting Sept. 8 at 10 a.m. New York time for the Tomkins financing, said a person familiar with the transaction, who declined to be identified because the talks are private.

Canada Pension Plan Investment Board and Onex Corp. have agreed to buy London-based Tomkins, a maker of auto parts and building materials, for 2.89 billion pounds, according to a July 27 statement. They will fund the acquisition with $3 billion of underwritten debt.

Leveraged loan prices rose for the second day to the highest since Aug. 23. The Standard & Poor’s/LSTA US Leveraged Loan 100 Index increased 0.09 cent to 89.51 cents on the dollar. Loans have returned 4.1 percent in 2010, based on the index, which tracks the 100 largest dollar-denominated first-lien leveraged loans.

Most-Traded Bonds

Bonds from Fairfield, Connecticut-based General Electric Co., the world’s biggest maker of jet engines, were the most actively traded U.S. corporate securities by dealers, with 87 trades of $1 million or more, Bloomberg data show. The most active in junk bonds was Anadarko Petroleum Corp., the U.S. partner in BP Plc’s damaged Gulf of Mexico well, with 78 trades.

Junk bonds and leveraged loans are rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P.

Bonds of Apache Corp. declined by the most since they were issued after an explosion aboard a Mariner Energy Inc. platform in the Gulf of Mexico yesterday.

Apache’s $1.5 billion of 5.1 percent debt due in 2040 declined 3 cents to 98.9 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The Houston-based energy company sold the bonds on Aug. 17 at 98.936 cents on the dollar, Bloomberg data show.

In emerging markets, the yield spread narrowed by 4 basis points to 281 basis points, according to index data from JPMorgan Chase & Co. The spread has decreased 15 basis points since Aug. 30.

Best Performers

French bonds were the second best-performing notes of the 10 countries after U.K. company debt gaining 2.46 percent, with Canadian securities third at 2.38 percent, according to Bank of America Merrill Lynch indexes. The global average was 2.14 percent. For the year, Britain’s company debt has handed investors 9.56 percent, overtaking U.S. corporate notes, which returned 9.55 percent.

Abbey National’s 167 million pounds of zero-coupon notes due 2038 were the best-performing U.K. corporate bonds in August, with a 12.7 percent return, while Cheshunt, England- based Tesco’s 287.5 million pounds of 5.2 percent notes due 2057 gained 10.5 percent, Bank of America Merrill Lynch index data show. The 135 million pounds of zero-coupon bonds due in 2038 issued by Barclays Plc, the third-largest U.K. lender, were the third-best performers, returning 10.2 percent.

“The benefit of the doubt has been granted to U.K. companies for the time being” in terms of the economy, helping the bonds, said Lucette Yvernault, who helps oversee the equivalent of about 7 billion euros as a money manager at Schroders Investment Management Ltd. in London.

Austerity Measures

Austerity measures in the wake of Europe’s sovereign deficit crisis in April will weigh on economic growth and increase the risk of credit rating cuts for some nations, Moody’s said in its semi-annual European Sovereign Outlook on Aug. 23.

The U.K., along with Germany and France, is likely to keep its top rating, Moody’s said. S&P affirmed the U.K.’s AAA rating on July 12, saying planned budget cuts supported the top grade.

The U.K. will announce measures to slash most departments’ budgets by about 25 percent in October as it seeks to tackle a deficit that as a percentage of the economy is greater than the U.S.’s 9.1 percent and the 6.3 percent average for euro-region nations. A total 490,000 public-sector jobs will be lost by April 2015 under the measures being carried out by Chancellor of Exchequer George Osborne, according to Treasury estimates.

Currency Markets

Bonds sold by British companies have returned 5.17 percent since a June 22 emergency budget weeks after Cameron’s Conservative-Liberal coalition came to power replacing the Labour Party’s 13-year reign. Bank of America Merrill Lynch’s broader index gained 3.71 percent in the period.

Credit-default swaps measuring perceptions of sovereign credit quality also show the U.K. outperforming its peers, with the cost of five-year debt insurance tumbling $17,500 since the start of the year to $65,000 annually for a $10 million contract. In the same period, the swaps on the Markit iTraxx SovX Western Europe of 15 countries climbed $72,000 to $141,000, according to CMA.

Currency markets are speculating Cameron’s cuts will hurt economic growth and weaken the pound, which fell to $1.5327 today, down from last month’s high of $1.5999 on Aug. 6.

Spreads on company bonds of only two other nations besides the U.K. narrowed in August, with a 4 basis-point drop on Netherlands securities and a 2 basis-point decline for Japanese corporate notes, Bank of America Merrill Lynch indexes show.

A lack of supply of new bonds in pounds has also helped British company debt, and means any increase in demand boosts the securities “disproportionately,” said Suki Mann, head of credit strategy in London at Societe Generale SA, France’s second-largest bank.

Companies sold 119 million pounds of bonds in the U.K. currency in August, the second-slowest month since at least 1998, according to data compiled by Bloomberg. The month with the least issuance was May, with 34 million pounds of bonds.

Even if the US and European economies manage to avoid a double dip, it will still feel like a recession, while more than half of the 800-plus US banks on the “critical list” are likely to go bust, according to renowned economist Nouriel Roubini of Roubini Global Economics.

The second half of the year will remain weak as tailwinds become headwinds, Roubini told CNBC on the shores of Lake Como, Italy at the Ambrosetti Forum economics conference.

“In the second half, fiscal policy becomes a headwind, no more cash for clunkers,” Roubini said. “The positive scenario is that growth will be below par.”

Roubini recently said the chance of a double-dip recession in the US was now more than 40 percent.

“The big risk is that there will be a downturn in markets that could impact the bond, the equity and the credit markets,” he said.

“Job losses have been higher, the US jobs number will show that. There is no private sector jobs growth,” he said. “Consumption is weak, exports are weak and housing is weak.”

“If there is no final sales and no final demand, companies will not invest,” he added.

New Normal Coming and More Banks Will Fail

Roubini said he believes hopes of decoupling will be dashed as the slowdown in the US impacts China, Japan and the euro zone.

“In Europe, Germany is strong but the rest of the continent is pretty dismal,” he said. “The rest of the world cannot cope without the prop of the US consumer. Chinese growth in the second half will be 7 percent.”

“Get used to it,” Roubini said. “Deleveraging has to continue as governments and consumers deleverage in the developed world.”

“We have to expect the new normal,” he added. “We do not need a double dip for it to feel like recession.”

“The biggest banks have been backstopped, but 800-plus small- and medium-sized banks in the US remain on the critical list and half of those will go bust,” Roubini said.

Roubini said corporate and consumer debt problems will get worse and that there are more problems ahead in the commercial and residential property market.

“Policy makers are running out of bullets, the problem is we need fiscal consolidation, fiscal policy is constrained by the debt problem, monetary policy is becoming ineffectual,” he said.

Roubini, known as Dr. Doom to most and voted as Roubini the Realist by CNBC.com readers, said further quantitative easing is pointless as interest rates are already low.

“We are in a liquidity trap and we have insolvency problems,” he said.

“What we need is credible spending plans over the medium term on health care, welfare and retirement age,” Roubini said. “This will create a fiscal constraint lasting well into next year.”

“The best growth over the next 18 months will come from the domestically-focused Brazil, which will outgrow China for the first time in 20 years,” he added.

This summer season has been one of the hottest recorded throughout many areas around the globe. The average global temperatures for this year may exceed those of 1998. If that is case, it would result in two of the hottest years on record in the last 13.

The National Academy of Sciences recently released data involving 1,400 climate researchers around the globe. Roughly 97% make the claim that humans are the cause of global warming.

If you are concerned about the future of the environment, here are ten environmentally friendly tips you can take that also have a return on investment — they can help sustain the earth as well as your monthly global cash flow.

1. Fix your home’s energy leaks. Over a fifth of energy consumption in the U.S. occurs within people’s homes, says the Department of Energy. That’s an average expenditure of $2,400 a year. Half of that figure goes to home heating and cooling, much of which results in waste. To prevent energy leaks, insulate ceilings and walls, and seal cracks and gaps. The simplest Cuyahoga County home remodeling fixes can make a tremendous impact. “Often people have so many small leaks around the home that it’s the equivalent of having a three-foot by three-foot window wide open,” says president of the Washington-based nonprofit Alliance to Save Energy.

2. Swap out your home’s light bulbs. The common home has up to 46 throughout the house, says the Department of Energy. However only five of them are energy-efficient. These can slash lighting energy bills by 75%. Not a fan of CFs? Matt Patsky, the CEO of Trillium Asset Management, says new LEDs are much better. They can slash power consumption by 95% and emit a better light than traditional bulbs. They cost more, however prices are dropping rather quickly.

3. Turn the heat off in an empty house or a house when everyone is sleeping. Look into a programmable thermostat for residential heating.

“They typically pay for themselves in three months,” says ASE’s Ms. Callahan. They can drop your home heating and cooling bills by 10%, she says.

4. Evaluate your home’s appliances. Replace any old ones with new, energy-efficient models. Today’s more efficient models have an EnergyStar seal from the Department of Energy. They typically use around 30% less energy than older models that lack the seal, experts say. With respect to your TV: The larger the screen, the more power it is sucking up. The same idea applies to PCs. Take into consideration the number of refurbished computers you have around the home as well as how long they remain on and idle throughout the day (if not week).

5. Similar to the tip above: stop leaving your used PCs and home entertainment systems on standby overnight. Although the screen is black, they still use power. Power strips make it more convenient to switch everything off at one time.

6. Get the most from taxpayer green incentives. For instance, the government is currently offering to pay up to $1,500 of your costs on items like insulation other Medina County home remodeling investments that save energy. Your state government may be offering additional incentives. Look for deals like these at DSIRE, the Database of State Incentives for Renewables & Efficiency.

7. Get a hold on your hot water heater. It is by far one of the biggest energy users as well as easiest approaches to evaluate your home’s energy financial risk management. Turn down the thermostat and wrap insulation around the heater and the pipes. Typically, they are set at around 140 degrees. According to The Energy Department, that is way too high. They suggest dropping it down to 115 to 120 degrees.

8. Invest in a more-efficient vehicle. Highly-efficient hybrids can be costly, but director of pricing and analysis at car experts Edmunds, Jessica Caldwell, claims there are numerous deals available at the moment that can bring the price down. You don’t need to go hybrid or buy tickets to all of the upcoming green trade show exhibits. Caldwell says the Versa by Nissan gets around 29 miles to the gallon and has a price tag of $16,000. If a new vehicle is not an option, consider ideas like energy saving truck bed accessories. Extang, an affiliate of BedRug – maker of truck bed liners and truck bed carpet, claims that by purchasing an Extang truck tonneau, you save up to 10% in gas mileage.

9. Get an energy audit of your home’s power consumption. By investing a few hundred dollars, experts using high-tech gadgets will analyze your home and offer insights as to what you can do to make your home more efficient. Getting a home audit can help you rethink your home heating and air conditioning, as well as identify potential sources of renewable energy, from geothermal heat pumps to solar water heating solutions.

10. Invest in an e-book reader. If you enjoy reading and read often, these little devices are very green. Books and magazines are not: they do a lot of damage to the environment, from cutting trees to manufacturing and distribution. The senior research analyst at the CleanTech Group, an environmental consulting firm, has calculated the figures. In essence, a gadget like the Kindle has about the same influence on the environment as about 23 books, or 280 newspapers, or 177 magazines.

Going green exhibits a change that is both healthy for the earth and the wallet. Take these tips to heart as well as the home, and start living a more environmentally friendly way of life.

Russia announced a 12-month extension of its grain export ban on Thursday, raising fears about a return to the food shortages and riots of 2007-08. The FT reports.

 

Russia announced a 12-month extension of its grain export ban on Thursday, raising fears about a return to the food shortages and riots of 2007-08 which spread through developing countries dependent on imports.

The announcement by Vladimir Putin came as the UN’s Food and Agriculture Organization called an emergency meeting to discuss the wheat shortage, and riots in Mozambique left seven dead.

The unrest in Maputo, in which 280 people were also injured, followed the government’s decision to raise bread prices by 30 per cent. Police opened fire on demonstrators after thousands turned out to protest against the price hikes, burning tyres and looting food warehouses.

Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the deadly Mozambique riots could be replicated.

The 2007-08 food shortages, the most severe in 30 years, set off riots in countries from Bangladesh to Mexico, and helped to trigger the collapse of governments in Haiti and Madagascar.

The Russian announcement extended an export ban first announced last month until late December 2011, sending wheat and other cereals prices to near a two-year high.

The FAO said that “the concern about a possible repeat of the 2007-08 food crisis” had resulted in “an enormous number” of inquiries from member countries. “The purpose of holding this meeting is for exporting and importing countries to engage.”

Russia is traditionally the world’s fourth-largest wheat exporter, and the export ban has already forced importers in the Middle East and North Africa, the biggest buyers, to seek supplies in Europe and the US.

Mr Putin said Moscow could “only consider lifting the export ban after next year’s crop has been harvested and we have clarity on the grain balances”. He added that the decision to extend the ban was intended to “end unnecessary anxiety and to ensure a stable and predict-able business environment for market participants”.

“This is quite serious,” said Abdolreza Abbassian, of the FAO in Rome. “Two years in a row without Russian exports creates quite a disturbance.” Dan Manternach, chief wheat economist at Doane Agricultural Services in St Louis, added: “This is a wake-up call for importing nations about the reliability of Russia.”

Jakkie Cilliers, director of South Africa’s Institute of Security Studies, said there was concern over a repeat of the protests of 2008: “That certainly strengthened a return of the military in politics in Africa.”

European wheat prices on Thursday hit €231.5 a ton, just shy of last month’s two-year high of €236. Wheat prices have surged nearly 70 percent since January, and analysts forecast further rises after Russia’s decision and concerns about weather damage to Australia’s crop.

 

Burger King Holdings Inc. agreed to be acquired by 3G Capital, a New York investment firm backed by Brazilian investors, for $3.3 billion in the biggest restaurant acquisition in at least a decade.

The $24-a-share price is 46 percent more than Miami-based Burger King’s close Aug. 31, before reports of a deal surfaced. Under the terms of the agreement, the second-largest U.S. burger chain can solicit superior bids through Oct. 12, according to a statement today.

The chain’s sales growth has slowed for two straight years as consumers ate out less during the U.S. economic slump. Burger King, which trails only McDonald’s Corp. in the U.S., has seen a slower recovery than its larger rival as its clientele suffered more from the recession, said Tom Forte, an analyst at New York- based Telsey Advisory Group.

“Burger King’s heavy user — young, male, and more likely to be a minority — has had a higher rate of unemployment than the McDonald’s consumer,” Forte said in a telephone interview.

The transaction with New York-based 3G amounts to about $4 billion including debt. The purchase would eclipse the 2007 sale of OSI Restaurant Partners Inc., the parent of Outback Steakhouse, as the biggest restaurant deal since Bloomberg started compiling data more than a decade ago.

Burger King rose $4.73, or 25 percent, to $23.59 at 4:02 p.m. in New York Stock Exchange composite trading. The gain was the largest since May 2006, when the company went public.

Trading of bullish Burger King options surged to a record Aug. 25, a week before today’s announcement. Volume for calls to buy the stock jumped Aug. 25 to 37,427, or almost 20 times the average during the preceding four weeks, data compiled by Bloomberg show. Call trading exceeded that level yesterday, reaching 54,284, after the Wall Street Journal said the company was in talks to be sold.

Deal Valuation

The deal values Burger King at 9 times earnings before interest, taxes, depreciation, and amortization in the year ended June 30. Over the past five years, U.S. restaurant acquisitions closed at a median multiple of 8.2, according to Bloomberg data.

Transactions in the restaurant industry have picked up as the U.S. economy begins to recover, with rival chains such as Wendy’s/Arby’s Group Inc. attracting interest. 3G has shown interest in fast-food chains in the past, disclosing last year that it owned about 4.2 million shares of Wendy’s/Arby’s. 3G’s disclosure of holdings as of June 30 didn’t show any Wendy’s/Arby’s shares.

3G is an investment vehicle whose main investors are three Brazilian business partners — Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira, according to three people with knowledge of the matter. The men founded Brazilian investment bank Banco de Investimentos Garantia SA and agreed to sell to Credit Suisse Group AG in 1998 for at least $675 million.

Lemann’s Background

Lemann, 71, whose personal fortune was estimated by Forbes magazine at $11.5 billion this year, and his partners also own stakes in Anheuser-Busch InBev NV, the world’s biggest brewer, and Brazilian retailer Lojas Americanas SA.

3G is run by managing partner Alexandre Behring, who joined in 2005 after previously working at a buyout firm founded by Lemann. Before the Burger King deal, 3G focused mostly on investments in public equities. In a U.S. regulatory filing, it disclosed holdings of about $1 billion in stocks as of June 30, including its biggest position, CSX Corp.

3G in 2007 joined with London-based TCI Fund Management LLP to start a proxy contest for board seats at CSX, the largest U.S. railroad. Behring eventually won a seat.

3G was in the news in July when a partner at the firm, Marc Mezvinsky, married Chelsea Clinton, the daughter of U.S. Secretary of State Hillary Clinton and former President Bill Clinton.

Chidsey’s Role

John Chidsey, Burger King’s chief executive officer, will remain CEO through a transition period, according to the statement. Chidsey will then become co-chairman of the board along with Behring.

Burger King gets about two-thirds of its revenue from the U.S. and Canada. The chain also operates in Latin America, Europe and parts of Asia. Total sales fell 1.4 percent to $2.5 billion in the year ended June 30, Burger King said last week.

TPG Inc., Bain Capital LLC and Goldman Sachs Group Inc. bought Burger King from Diageo Plc in 2002 before selling shares to the public again four years later. The three own about one- third of Burger King and agreed to tender their shares into the offer.

Lazard Ltd., J.P. Morgan Securities LLC, and Barclays Capital advised 3G. Burger King was advised by Morgan Stanley and Goldman Sachs Group Inc. 3G Capital’s legal advisers were Kirkland & Ellis LLP, and Burger King’s were Skadden, Arps, Slate, Meagher & Flom LLP and Holland & Knight LLP.

 

SAN FRANCISCO — Hewlett-Packard said Tuesday that it would commercialize a new computer memory technology with Hynix, the South Korean chip maker.

Hynix’s agreement to build computer memories using a technology H.P. scientists developed called memristors indicates that more computer memory will be packed in even smaller devices in the second half of this decade. The two companies said the memristors will be commercially available in about three years.

To date, the memristor’s most likely application is for dense nonvolatile memories, which is what is used in flash memory cards for products like cameras and PCs. It is not out of the question, however, that it might play a role in other kinds of chips, including microprocessors, in the future.

The agreement to build the memory chips validates the work of Leon O. Chua, a University of California, Berkeley, electrical engineering professor. In 1971, he proposed a fourth basic circuit element (the other three are the resistor, capacitor and inductor) and called it a memristor, or memory resistor, as a simpler alternative to transistors. The idea languished for many years before a team of H.P. researchers found a way to use it in 2006. Since then, memristors have attracted industrial, academic and military interest, but have not gone beyond being laboratory curiosities.

Competing in the memory business will not be an easy battle. Memristors are still viewed as laboratory and academic experiments by the majority of the world’s leading semiconductor firms, most of whom have settled on a competing technology known as Phase Change Memory, or P.C.M. However, H.P. scientists said they traveled the world discussing memristors with all of the leading chip makers before settling on their commercial development agreement with Hynix, the world’s second-largest maker of memory chips behind Samsung Electronics.

“Right now the memristor outperforms flash,” said Stan Williams, an H.P. Labs scientist who has led the development effort. He said the tiny switches could be turned on and off more than 100 times as fast as flash, use a tenth of the energy and have a much greater lifespan.

The storage densities are already staggering and will become even more impressive in the future. Next year the most advanced flash storage chips will have a capacity of roughly 64 billion bits per square centimeter, according to the industry’s annual road map. By 2014, that is expected to increase to 170 billion bits per square inch. Rice University scientists said that memristive storage devices could be five times as dense as the industry standard in 2014 and that the technology was more easily adaptable to three-dimensional packaging. That would make it possible to build even vastly denser chips.

H.P. researchers have described ways to design 1,000-layer memristor-based chips, although they acknowledged that with current manufacturing techniques such devices would not be practical.

 

Insurance takeovers are headed for the biggest year since the peak of the last merger boom as financial-services firms from Bank of America Corp. to Aegon NV of the Netherlands jettison assets.

Deals in the industry have jumped 60 percent to $44.8 billion so far this year, up from $28 billion in the same period of 2009, according to data compiled by Bloomberg. Bank of America, Aegon and Royal Bank of Scotland Group Plc have more than $10 billion in insurance assets currently on the block.

The financial crisis that crippled American International Group Inc. is providing a buying opportunity for competitors such as MetLife Inc. and Prudential Financial Inc., which were quicker to recover from the global recession and are seeking growth in new markets. AIG has sold more than 30 assets since its 2008 bailout, while RBS and Amsterdam-based ING Groep NV were told to sell insurance businesses as conditions of their government lifelines.

“There’s a lot of stuff on the market,” said Clark Troy, a senior analyst at researcher Aite Group LLC in Chapel Hill, North Carolina. “For deep-pocketed buyers with firm conviction, it’s a great time to be making acquisitions.”

While the year’s biggest insurance deal collapsed when Prudential Plc shareholders stymied the company’s planned $35.5 billion takeover of AIG’s biggest Asian unit in June, the total value of announced deals is still set to surpass 2008 and 2009, when there were $58 billion and $53 billion in takeovers, respectively, Bloomberg data show. That tally excludes a $40 billion U.S. government infusion into AIG in 2008.

Insurance transactions totaled $90 billion in 2007.

‘Hard Choices’

AIG, which is working to repay part of a $182.3 billion government bailout, has held talks with Newark, New Jersey-based Prudential Financial this year about selling two Japanese life insurance units, said two people with knowledge of the matter.

Prudential and AIG still have divergent views on the value of AIG’s Star Life and Edison Life units, said the people, who declined to be identified because the discussions are private. The divisions together had a book value of $4.8 billion as of June 30, AIG said in a regulatory filing.

Mark Herr, an AIG spokesman, and Robert DeFillippo, a spokesman for Prudential, declined to comment.

Insurers that were bailed out are being forced into “making hard decisions about where they want to play and where they don’t,” said Achim Bauer, an insurance partner at PricewaterhouseCoopers in London. “They are seeking to repay some of that money by selling businesses that are non-core.”

ING, RBS

ING is required to divest its insurance business by the end of 2013 as part of a restructuring plan to win European Union approval for its government rescue. While the company is preparing the business for one or two initial public offerings, ING is getting “a great deal of interest” from potential buyers, Chief Executive Officer Jan Hommen said on Aug. 11.

RBS agreed in November to unload its insurance businesses, including the Direct Line auto insurer, after receiving 25.5 billion pounds ($40 billion) of state aid. In 2008, RBS had sought as much as 5 billion pounds for the businesses.

Some asset sales are being driven by regulatory changes in the wake of the financial crisis, including the recent U.S. financial overhaul and reforms being contemplated by the Basel Committee on Banking Supervision, said David Havens, an analyst at Nomura Holdings Inc. in New York.

Bank of America, the largest U.S. lender, is being pushed by regulators to raise a net $3 billion this year. The bank’s Balboa Insurance unit, obtained as part of the Countrywide Financial Corp. acquisition in 2008, is likely to fetch roughly the amount of its policyholder surplus, which was $1.92 billion as of March 31, according to Havens.

More Capital

“The financial regulations in general are requiring firms to hold more capital, and you can achieve that concept either by raising more capital or reducing risk,” Havens said. “By selling off non-core units you can actually achieve both.

Aegon’s Transamerica Reinsurance unit, which helps life insurers pool their risks, has gotten interest from both competitors and investors, said Aegon CEO Alexander Wynaendts on an Aug. 12 conference call. It has book value, or assets minus liabilities, of 1.6 billion euros ($2 billion). Reinsurance Group of America Inc., the largest U.S. company that focuses on life reinsurance, trades at about 73 percent of book value, implying a value for Transamerica of $1.5 billion.

Some potential buyers, meanwhile, are seeking to free up their capital reserves to fund growth in faster-growing markets like Asia. Paris-based Axa SA, Europe’s second-biggest insurer, agreed in June to sell part of its U.K. life insurance unit to Clive Cowdery’s Resolution Ltd. for 2.75 billion pounds.

MetLife, based in New York, made the biggest purchase of an insurer this year when it agreed to buy AIG’s American Life Insurance Co. for $15.5 billion.

Deals are happening because there is “a greater level of stability in the system compared to where we were six or 12 months ago,” said Bauer at PricewaterhouseCoopers. “That provides a greater willingness on the part of both buyers and sellers to consider transactions.”