US industrial output gains 1 percent in February
March 16, 2007
Industrial output in the United States was up by 1 percent in February, much better growth than had been anticipated by analysts, who had only expected output to be up by 0.2 percent in the month. In addition, December’s rise in output was revised upward, and January’s decline was revised to show only a 0.3 percent drop rather than the previously reported 0.5 percent decline. February’s gain was the largest in a year and a quarter.
Manufacturing output as a whole was 0.4 percent higher, while output minus vehicles and parts for vehicles was up 0.8 percent. Motor vehicle and parts production was up 3.1 percent from the January reading, but was still 3.3 percent lower than February 2006. In other sectors, mining production was 0.1 percent higher in February, while utility output was 6.7 percent higher. High-tech output was up 3.2 percent in February from January, and added 29.4 percent compared to the same month last year.
Factories, mines, and utilities in the United States worked at 82 percent of capacity in February, higher than the 81.3 percent that analysts had expected. Manufacturers worked at 80.1 percent of capacity, while utilities were at 90.4 percent of capacity and mining produced at 91.2 percent of capacity. Mining capacity use was the same as in January, while utilities had worked at 84.8 percent in January and manufacturers had used 79.9 percent of their capacity in the first month of the year.
Studies: US minorities in big cities pay more for mortgages
March 16, 2007
Two different reports, one from the Woodcock Institute, based in Chicago, and the other from the University of Massachusetts Boston have found that minorities in the United States are more likely to get home loans at higher interest rates in large cities around the country.
The Woodcock Institute study, carried out in cooperation with four other groups, looked at lending practices in Boston, Charlotte, Chicago, Los Angeles, New York City, and Rochester, New York. It focused on lending institutions Citigroup (NYSE: C), Countrywide (NYSE: CFC), GMAC, HSBC (LSE: HBSA; NYSE: HBC; Euronext: HSBC; SEHK: 005), JPMorgan Chase (NYSE: JPN; TYO: 8634), Washington Mutual (NYSE: WM), and Wells Fargo (NYSE: WFC). In the six cities studied, the study found that African American borrowers were 3.8 times more likely to get a higher-cost loan and Latinos were 3.6 more likely to get a higher-cost loan than were white borrowers in those cities.
The University of Massachusetts Boston study, carried out by economics professor Jim Campen, was more narrowly focused on Boston, found that high-income minorities were between six and seven times more likely than high-income whites to have a high-interest mortgage. Specifically, Professor Campen found that 70 percent of African American and Latino borrowers in Boston who had incomes between $92,000 and $152,000 had high-interest mortgages. Professor Campen attributed some of the disparity to suspicion of the banking system among minorities and to aggressive recruiting tactics from subprime lenders.
US wholesale prices up 1.3 percent in February
March 15, 2007
Wholesale prices were up by 1.3 percent in the United States in February, according to the latest report from the US Labor Department, published on Thursday. Core inflation, which excludes prices for food and energy, was up by 0.4 percent. Both increases were substantially larger than had been expected.
The 1.3 percent rise, the largest monthly rise since November, was fueled by an increase of 3.5 percent in energy costs. The pump price of gasoline was up 5.3 percent in the month. Food costs were also much higher, with the Producer Price Index showing a gain in food prices of 1.9 percent in the month. The rise in food prices was the largest monthly gain since October 2003, and was largely driven by gains in the cost of fruits and vegetables due to freezing weather in agricultural regions.
The rise in core prices was the largest since November. Toy prices rose by 2.3 percent, the most they’ve gone up in a month in twenty-four years. Among motor vehicles, light trucks, including sports utility vehicles, saw prices go up by 1.7 percent, while the price of a passenger car dropped by 1.2 percent.
Foreclosures, late payments at new highs
March 13, 2007
According to the Mortgage Bankers Association, late mortgage payments were at 4.95 percent in the final quarter of 2006, a three and a half year high. That delinquency rate was up from 4.67 percent in the third quarter of last year and was the highest it has been since Spring 2003.
The rate for late payments was substantially higher on subprime mortgages, at 13.33 percent in the fourth quarter, up from 12.56 percent in the third quarter. Subprime late payments in the October to December quarter were the highest in four years. Additionally, late payments on adjustable-rate subprime mortgages in the fourth quarter were even higher, at 14.44 percent.
Foreclosure starts in the fourth quarter were at 0.54 percent, also a record high. The previous high, 0.50 percent, was reached in the second quarter of 2002. Like late payments, foreclosure rates were much higher on subprime mortgages.
The new numbers come just as New Century Financial (NYSE: NEW) seems likely to go under. The second-biggest subprime lender in the United States has quit accepting new loan applications as its bank lenders have cut off funding or have said they will do so. Bank regulators have cautioned subprime lenders to be cautious in granting supreme loans as defaults have risen.
Halliburton comes under scrutiny for announced move to Dubai
March 12, 2007
Halliburton (NYSE: HAL), the US oil services firm that was headed by US Vice President Dick Cheney for the last half of the 1990s, has announced that it will move its world headquarters from Houston, Texas, to the Persian Gulf state of Dubai.
The news of the move has touched off criticism from some politicians and speculation that the move has to do with official questions in the US about its no-bid contracts in Iraq. House of Representatives member Henry Waxman, chairman of the House Oversight and Government Reform Committee, could call hearings to look into the implications of the move, according to an aide to Mr. Waxman.
Halliburton says that the move is an effort to take better advantage of business opportunities in the Middle East. It said the company would retain its business registration in the United States, but it plans on listing on a Middle Eastern stock exchange once its move is made.
The company’s chief executive said that it sees greater opportunity in the eastern hemisphere, as opposed to the western hemisphere. But its KBR engineering and military services division, which Halliburton is currently in process of splitting off, has been the target of several investigations into its billing practices in Iraq, where it is the Pentagon’s biggest contractor. KBR has been paid over $20 billion dollars so far for its work in Iraq since the war there began.
SEC’s “Operation Spamalot” targets e-mail scams
March 9, 2007
The US Securities and Exchange Commission has temporarily suspended trading in 35 companies who were advertising their shares via e-mail spam. Between them, someone had been sending out as many as 100 million e-mails a week that carried subject lines intended to entice people to invest in the companies. Their aim, according to the SEC, was to pump up the share prices of the stocks by encouraging people to invest and then quickly dumping their own shares while the price was artificially inflated.
The SEC did not say whether the companies in question themselves were behind the spam campaigns, and while they said they know who sent the e-mails, their identities were not made public. The shares are not traded on stock exchanges, but appear on “Pink Sheets”, an electronic service that does not investigate the backgrounds of brokers listing the stocks.
The investigation, called “Operation Spamalot” after the Broadway musical based on material by the Monty Python comedy troupe, is ongoing and the SEC said that they will continue to track down and punish those who send the e-mails, which it called “illegal and destructive”.
Trading in the 35 companies whose stock was advertised in this way have been suspended from trading for 10 days, through March 21.
Microsoft chairman calls US immigration curbs harmful to competitiveness
March 8, 2007
Microsoft (NAS: MSFT; HKSE: 4338) chairman Bill Gates has said that the competitiveness of the United States in the global market could be compromised by setting restrictions on the number of skilled workers allowed to enter the US each year. In testimony before the US Senate committee on health, education, labor and pensions, Mr. Gates expressed the concern that US immigration policies that have been tightened in recent years are “driving away” the “best and the brightest” from seeking education and work in the US.
Mr. Gates further held that other nations are taking advantage of the new, more restrictive policies to lure highly skilled workers to their countries. These are individuals who, Mr. Gates contends, would otherwise wish to live, study, and work in the United States. He said that he sees the detrimental effects of current US policies, put in place at least partly out of concern about terrorism, every day at Microsoft.
Currently, the US issues only 65,000 visas for skilled workers to enter the US each year, while it only issuese a total of 140,000 “green cards” granting permanent resident status each year. Mr. Gates said that while there are concerns that US workers could lose jobs to immigrants if the rules are loosened, he also said that highly skilled foreign workers could also help create new jobs in the US.
The warning came amid a more general concern from Mr. Gates that if the US does not act soon to improve education and invest in basic scientific research, the US would lose its ability to compete with the rest of the world. He said that the data he has seen suggests that the nation is currently not making the improvements that are necessary, especially in high schools.
Drivers given go-ahead to sue FedEx for discrimination
March 6, 2007
The Massachusetts Commission Against Discrimination has ruled that four Arab-American drivers for FedEx (NYSE: FDX), all practicing Muslims, can sue their employer for discrimination after the four charged that their supervisors harassed them by calling them “terrorists” and asking them if they were sending money to Osama bin Laden. One of the men said that besides the verbal harassment, his supervisor had thrown packages at him. When the driver complained about changes to his route, he claims the supervisor asked him not to get angry and blow up his car.
FedEx had argued that the four men, who worked for the delivery company’s ground package unit, were independent contractors and not employees and were therefore not protected by Massachusetts anti-discrimination laws. The Commission rejected that contention, which allows the suit charging that the unit and two of its supervisors engaged in a “pattern of racial, ethnic and religious discrimination”.
FedEx would not comment on the specifics of the ongoing case, but said that one of the supervisors named in the lawsuit has since left the company’s employ while the other still works for the company. A spokesman did say that FedEx “doesn’t tolerate” violations of its anti-discrimination policies and that those employees who do violate them are disciplined appropriately. In a similar case in 2006 in California, a jury awarded $61 million to two drivers who complained of similar harassment over a two-year period.
Bill to require shareholder vote on executive compensation introduced
March 2, 2007
Barney Frank, a member of the United States House of Representatives and chairman of the House financial services committee, has introduced a bill that would make require public companies to let shareholders vote on pay for company executives. The votes, which would be non-binding and advisory only, would be included with annual proxies sent to shareholders.
The bill comes as companies are getting ready for their annual meetings and at a time when executive compensation has become an issue with the public and likely will be on shareholders’ minds. Pensions funds and unions have been advocating for such advisory votes as a way of allowing shareholders to express their opinions about whether pay for top executives is appropriate to performance of their duties.
Critics of Mr. Frank’s bill say that an attempt to give shareholders any kind of say over executive compensation should wait until some indication of how new rules issued last year by the Securities and Exchange Commission affect executive pay packages. The rules require companies to disclose a single figure summary of executives’ compensation as well as a “narrative” that explains how compensation committees decided what to pay the executives. Mr. Frank has called the SEC rules a step in the right direction, but that he thinks the required disclosure is not enough.