World financial news

Looking for a holiday gift for the kids that might have lasting meaning? There’s an abundance of well-written, even entertaining books on the market that teach kids lessons in finance.

The Berenstain Bears’ Trouble With Money — Stan & Jan Berenstain, Random House Children’s Books, $3.99

From junk food to environmental pollution, the Berenstain Bears haven’t been afraid of tackling the issues since they first appeared on the children’s literature scene with 1962’s "The Big Honey Hunt." This title, first published in 1983, teaches kids ages 4 to 7 the basics about money. It’s not just about spending, but earning. Brother and Sister Bear find ways to build up a stash of quarters so they can play video games. Along the way, they learn how to find a middle ground between being spendthrifts and little misers.

The Teens Guide to Personal Finance — Joshua Holmberg, David Bruzzese, iUniverse Inc., $12.95

Designed for young adults taking the first step to learn about money management, "The Teens Guide to Personal Finance" lays out the basics concepts of saving, borrowing, investing and maximizing tax advantages. It’s all explained in a way that’s easy to understand with graphics, work sheets and action plans.

Prepare to be a Teen Millionaire — Kimberly Spinks-Burleson, Robyn Collins, Health Communications Inc., $16.95

The authors are founders of a Texas-based business magazine called "Millionaire Blueprints" and here they compile some of the best advice from some of their issues on how successful young entrepreneurs turn their vision for a business into reality. The book features the real stories of successful teens. It details how they raised money, promoted their business ideas and other aspects of launching their ventures.

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A group of General Motors of Canada dealers is suing the auto giant for millions in damages for alleged contract breaches and is seeking a court injunction to stop GM from terminating their franchises.

Eleven long-time southern Ontario dealers and one from Prince Edward Island filed a statement of claim in Ontario court on Thursday alleging that GM ended their franchise agreements in a "highhanded, oppressive and patently unfair" manner.

The dealers, including owners of Giles Chevrolet in Stouffville, Robinson Pontiac Buick in Guelph and Robert Slessor Pontiac Buick in Grimsby, say they want a permanent injunction to prohibit GM from ending their agreements and a declaration entitling them to remain open for at least another five years.

The claim says that unless the court rules in favour of an injunction and renewal of the agreements, the dealers "shall be destroyed."

The claim, which must still be proved in the Superior Court of Justice, is also seeking unspecified compensatory damages for loss of profit, goodwill, reputation, market share and business opportunities because of the alleged breaches, plus $1.5 million in punitive damages for each dealer.

Tony La Rocca, GM’s manager of communications, said he had not seen the 24-page claim and therefore could not comment.

The claim follows GM’s announcement in May that the company would close between 240 and 250 dealerships, or more than one-third of its Canadian store network, by the end of October 2010, when franchise agreements expire.

GM is also planning to trim its network by another 50 stores through attrition.

The moves are part of GM’s massive restructuring plan to cut costs and stay alive.

But critics have questioned the amount of savings and the damage to GM, which is still the industry leader here.

The federal and Ontario governments had pressed GM to reduce its dealer network as a cost-cutting measure before a deadline last May 31 so the company could qualify for more than $10.5 billion in loans.

The dealers’ claim says their franchise agreements state GM assured them that when the current deals expire next year they would have the opportunity to enter into new ones for another five years if the company found they fulfilled their obligations.

The claim says GM acknowledged that the 12 dealers, which have up to 54 years of service in their communities and poured millions of dollars into store upgrades in recent years, met all their obligations low fee payday loans.

GM introduced a "wind down agreement" that would pay most closing dealerships anywhere from a few hundred thousand dollars to more than $1.5 million under a formula related to 2008 retail sales.

Dealers who accepted the terms and compensation could not sue GM.

The claim says the wind down agreement is lengthy and complex and took months to prepare, but GM told dealers to accept or reject it within four business days.

"GM deliberately created an atmosphere of fear and oppression and denied the plaintiffs the opportunity to receive fair and meaningful legal advice and financial consultation to permit them to evaluate the purported termination," the claim says.

"It did so for the improper purpose of pressuring them into accepting a proposal which it knew was substantially less than they were entitled to and to engineer a release from its contractual, statutory and equitable obligations."

The claim adds the termination and wind down agreement "expropriates" the customer bases and local markets that the dealers built and provides them with no compensation for the breaches and loss of their livelihoods.

Furthermore, the claim says that even with a renewal option next year, the dealers will suffer irreparable damage to their operations, reputations and market share.

The claim says GM also refused to fill car orders for some dealers who face closure and encouraged customers to take their business to other store owners.

The claim says GM has also refused to provide the affected dealers with compensation for the discontinued Pontiac brand, but the company is doing it for remaining store owners.

The dealers say they also requested management reviews of the termination decisions but GM has dragged out the process without explanation.

More than 200 dealers have accepted the agreements and closed up shop, while GM and Chrysler dealer groups are still pressing lawmakers in the U.S. to pass legislation to reverse more than 2,100 terminations.

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The traditional start of the Christmas shopping season gets underway Friday, known to retailers as Black Friday, since it's the time they hope to be able to move those balance sheets from unprofitable (red) into the black.

Retailers have been battered by the recession, but have seen some signs of hope in recent months. According to the National Retail Federation, retail industry sales, excluding auto, gas and restaurant sales, were down 1.3 percent over October of last year and flat over September.

Prime Outlets in Grove City, about an hour north of Pittsburgh, will be kicking things off not long after shoppers have digested their Thanksgiving dinners. Its Midnight Madness sale starts, predictably, at midnight.

Michele Czerwinksi, senior marketing manager at Grove City, said the weather plays a big role in the turnout to the midnight event, but the crowds are generally in a good mood.

"This year, with the tough economy, people are really looking for values," she said. She arrives in Grove City at 9 p.m. Thursday, and doesn't quit until the following morning.

This year is the fourth time the mall has opened at midnight on Thanksgiving, and Czerwinski said it's become a tradition of sorts for some area families, who shop together.

Other area malls will be opening early, as well. Ross Park Mall, north of the city, opens its doors at 5 a.m., as does South Hills Village, south of the city. Monroeville Mall, to the east, kicks things off at 6 a.m., and the Galleria at Pittsburgh Mills will be open starting at 7 a.m. Friday.

Some consumers have already started their holiday shopping, according to market research firm The NPD Group. Twenty percent of those polled in NPD's annual holiday survey said they started their holiday shopping before Thanksgiving this year.

“This year while Black Friday is still an important business indicator, it is not an obvious one,” Marshal Cohen, chief industry analyst with the NPD Group, said in a prepared statement. “There may be some panic when the rush seems lighter than past years, but based on our holiday market research that doesn't necessarily mean less business in the long-run.”

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Retailers heading into the traditional start of holiday shopping are facing consumers who are only a bit less gloomy than they were a year ago as they worry about a weak job market.

The latest snapshot from the Conference Board showed shoppers’ confidence improved only slightly in November, from October, but it’s stuck far below what could be considered healthy and is about half of the historic average.

The private research group said Tuesday that its Consumer Confidence Index edged up to 49.5, up from a revised reading of 48.7 in October. Economists surveyed by Thomson Reuters expected a reading of 47.7. That compares with a reading of 44 no checking account payday advance.7 in November 2008, a level that sank even lower before enjoying a three-month climb from March through May. But the road has been bumpier since June as rising unemployment has taken a toll on consumers.

A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

How consumers behave during the holidays and beyond will be key to how strongly the economy rebounds from the worst recession since the 1930s.

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Is it too early to call a GM turnaround?

Less than five months after emerging from bankruptcy protection in July, General Motors Co. last week reported a significant drop in losses, a stronger-than-expected balance sheet at this early stage in its recovery, and that it would start repaying loans received from Washington and Canada next month – five years ahead of schedule.

While it is still losing money in the core North American market, no global automaker is thriving in a U.S. market with a 10.2 per cent jobless rate.

Meanwhile, GM is turning an impressive profit in its Asia-Pacific and Latin American markets. Buick is something of a dead brand in North America, as GM design czar Bob Lutz acknowledged a few years ago. But in China and Japan, Buick is a sought-after status symbol.

GM is solidly entrenched in the rapidly-growing Chinese market, where it sold 478,000 vehicles in the third quarter – more than it sold in North America. And Chevrolet has made significant inroads in Russia, expected to be Europe’s fastest-growing market in the next few years, eclipsing Germany.

In the so-called BRIC nations – Brazil, Russia, India and China – GM has powered itself to a 13 per cent market share. Its volume and revenues are climbing in what collectively will be the planet’s highest-growth market in the decades to come.

GM’s steep losses earlier this decade in continental Europe have narrowed considerably over the summer. GM’s Opel brand benefited greatly from European "Cash for Clunkers" programs.

In an ironic twist, better-engineered GM models with curb appeal for Canada and the U.S. were in the pipeline when GM was hitting the wall last year. The government bailout has made it possible for GM to get those vehicles onto the market.

GM hits with auto critics and buyers include the Chevy Equinox SUV, the Chev Malibu, the Buick LaCrosse full-size sedan and the Chev Camaro retro muscle car assembled in Oshawa. The Chevy Cruze compact, due next fall, is GM’s make-or-break entry in what will be the fastest-growing market segment over the next few years.

Not being forced to sell Opel, which GM has owned since 1929, to a Magna-led consortium has been a blessing.

"It would have made everything a lot harder," said Mark Reuss, GM’s new head of global engineering, of the prospective loss of Opel. "I’m really happy that we’re keeping it."

Opel has been key to many of GM’s most promising current models.

The Buick LaCrosse, the first "agile" quasi-land yacht offered by Buick maybe since David Buick was still drawing breath, is a rebranded Opel Insignia, voted by auto critics the European Car of the Year. The Opel-designed Buick Regal for next fall will be the brand’s first credible sports sedan.

Opel styling and engineering are also behind the bestselling Malibu and the forthcoming Cruise. The dull, ultrasafe GM styling of previous decades has given way in GM’s most successful models to the pleasing angularity of Mercedes, BMW and Audi.

But of course there are lingering problems from the GM of old. Product is everything in GM’s bid for survival. But GM’s product line is spotty payday loans guaranteed no fax. One of the reasons the above models stand out is that too little of GM’s output has been overhauled. By contrast, Ford will have replaced its entire lineup by 2011. GM’s crosstown rival already has a jump on GM’s Cruise, for instance, with an all-new Focus and a critically acclaimed Fiesta coming soon.

The battleground for global automakers next century will be small cars boasting advanced fuel-economy technology. And here GM remains behind the curve, having unduly put most of its chips on an overhyped Chev Volt. The Volt’s technology isn’t proven, and it will bear too steep a sticker price for its small size. It also won’t reach the market until after an abundance of better-value rivals have hit the showrooms, including the Fiat small-car flagship 500 due in Chrysler showrooms next year.

GM needs to use its formidable, post-bankruptcy cash horde of $42.6 billion (U.S.) not on premature loan repayments, but on two things only: developing still more must-have products, and marketing the heck out of them.

To pick an example of sorry GM marketing, GM Oshawa is routinely at or near the top of the North American factory rankings in quality and productivity. GM could shoot a commercial around that. Buick, which commands a pathetic 3 per cent of the North American market, has been running a close second to Lexus in J.D. Power’s quality rankings for several years, with BMW and Porsche languishing in the middle of the pack.

Yet these winning attributes are GM’s little secret. GM, perhaps out of misplaced pride, is averse to sharing its compelling story with the buying public.

But the biggest worry is GM’s continued obsession with market share. Maintaining market share is pointless if, like GM in North America for the past decade, you’ve been losing money on almost every vehicle you make.

In announcing its financial results last Monday, GM bragged about reclaiming market share. What GM needs to do is emulate Ford’s discipline in aiming to make a profit on every single vehicle, even if that means surrendering market share. Apple made more money in the third quarter with 2.5 per cent of the global cellphone market than Nokia did with its 35-per-cent share.

Apple’s iPhone is a must-have product and with high profit margins to match. GM has hit that sweet spot with its Camaro, and must work to achieve that status for everything it puts on the market.

"GM’s old management often seemed eager to blame their problems on just about anything — the economy, exchange rates, gas prices – except the deficiencies in their product lineup," veteran auto observer John Rosevear wrote in response to last Monday’s good news out of Detroit headquarters. "Have they really transcended that mindset?"

A much smaller but assuredly successful new GM was the object of the exercise in Washington’s decision to provide GM a second chance. It’s not clear GM understands that.

Absent the dramatic culture change of which GM critics have always thought "the General" incapable, the firm’s nascent recovery will be short-lived.

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Mergers are all the rage in Corporate America again. Healthy companies are looking to take advantage of their strong balance sheets and surging stock prices to strike while the iron is hot.

So far this month, Hewlett-Packard has agreed to buy 3Com, Stanley Works announced a deal for tool rival Black & Decker, and in the biggest deal of them all, Warren Buffett’s Berkshire Hathaway is taking over railroad Burlington Northern Santa Fe.

But these strategic deals aren’t the only type of mergers that have made a comeback.

Private equity firms, the so-called "Masters of the Universe" or "Barbarians at the Gate" that became famous for taking over companies in the 80s, are starting to get more active as well.

On Thursday, Pinnacle Foods Group, which is owned by private equity firm Blackstone Group (BX), said it was buying frozen foods company Birds Eye for $1.3 billion.

Earlier this month, defense contractor Northrop Grumman (NOC, Fortune 500) agreed to sell its advisory services unit TASC to an investor group led by private equity firms General Atlantic Partners and Kohlberg Kravis Roberts & Co. for $1.65 billion. (KKR, of course, is the original Barbarian. Its takeover of RJR Nabisco in 1989 was the subject of the book "Barbarians at the Gate.")

Also this month, private equity firm TPG and the Canada Pension Plan teamed to buy prescription drug data provider IMS Health (RX) for $4 billion. That deal is the biggest leveraged buyout of the year.

The return of the Barbarians is worth noting. It could be yet another reflection of growing optimism about the economy. After all, private equity firms don’t often hold on to companies they buy for long.

The goal is usually to clean a company up and generate a healthy return by selling it to another company or bringing it public once again. If private equity firms are now willing to invest instead of sit on cash, they must see something they like.

"Private equity firms have raised a significant amount of money and they have to deploy that cash. So they are going to step up and make some investments," Haag Sherman, managing director with Salient Partners, an investment firm in Houston.

But there’s another reason why more LBOs could actually be good news.

Private equity shops tend to rely on debt to finance their takeovers. As such, their return to the M&A landscape could mean that the credit markets and the banking system really are starting to return to normal.

"The credit markets are no longer on life support. So that has led to stabilization in stocks and the economy, and that’s a good sign," Sherman said.

To that end, Barclays Capital, Credit Suisse, BofA Merrill Lynch, HSBC, and Macquarie Capital all kicked in debt financing to Blackstone for the Birds Eye deal.

Antony Page, a professor at Indiana University School of Law-Indianapolis who focuses on mergers and acquisitions and corporate law, said the comeback in private equity deals could be a refection that banks are willing to once again take on more risk and increase their lending.

But Page said it also shows that private equity firms are being more cautious and are not willing to throw large amounts of money at deals that may not make financial sense. Otherwise, banks would probably remain reluctant to back them.

"Private equity firms are being more selective and the deals are probably looking better for the banks. So banks can be more comfortable about financing them," he said.

Sherman stopped short of saying that the days of easy cheap money are here again. For many consumers, it is still difficult to get approval for a mortgage or a credit card.

Just because Blackstone can get money to buy Birds Eye doesn’t necessarily mean that banks are going to suddenly start making crazy subprime mortgage loans again.

And that’s a good thing. Another credit binge would prove that no lessons were learned from this recession and could set the stage for another nasty downturn.

Still, the latest results from the Federal Reserve’s quarterly survey of senior bank loan officers show that credit is not as tight as it was earlier this year.

According to that survey, released earlier this month, a smaller percentage of banks reported tighter standards for credit cards and other consumer loans than they did in July.

So as long as the economy doesn’t backslide into recession, it seems likely that some banks will be more willing to extend credit to those who need it and deserve it.

"There are good banks and bad banks. Some won’t have to hunker down and preserve capital, " Page said. "Standards won’t be as loose as they were. But there should be some hope for people who have good, if not great, credit and are still good credit risks."

Talkback: Do you think the credit markets have returned to normal? Share your comments below.  

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Financially troubled San Francisco streaming music service imeem Inc. has been acquired by MySpace, according to numerous reports.

CNET News quoted sources valuing the deal at $8 million, with a $1 million payment in cash together with earn outs and accounts receivable. The company had raised more than $30 million in venture funding, according to CNET.

At least half of the company's 55 employees will lose their jobs as as a result of the acquisition, sources told CNET cashadvance. MySpace is owned by Rupert Murdoch's News Corp.

Imeem is the fourth ad-supported streaming music site to go bust or sell for peanuts, CNET said.

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A senior U.S. lawmaker unveiled a much-anticipated proposal on Wednesday that would give government regulators the power to break up financial firms that pose a risk to economic stability.

Democratic Representative Paul Kanjorski, chairman of the House capital markets subcommittee, said his proposal would give that power to a Financial Services Oversight Council, subject to review by the president in some cases.

He offered the plan as an amendment to a bill being debated and amended this week by the House Financial Services Committee as part of a broad push by the Obama administration and Democrats to tighten bank and capital market regulation.

“If my amendment is accepted, financial firms would need to demonstrate to regulators that their failure would not undermine the financial stability of the American economy,” Kanjorski said in a statement.

“No firm should be considered to be ‘too big to fail.’ Financial firms that want to play in a casino need to have their own resources to cover their bets and not assume that tax dollars are available in reserve if their bets fail,” he said.

Financial companies could appeal council actions, under the bill, according to a summary.

Size would be one factor considered by the council in determining whether to take action against a firm. Other factors would include “scope, scale, exposure, leverage, interconnectedness of financial activities,” the summary said.

Actions that could be taken would include “modifying existing prudential standards, imposing conditions on or terminating activities, limiting mergers and acquisitions, and in the most extreme cases, breaking up the company,” it said cash til payday.

Kanjorski added he will coordinate with the European Union on the issue. “After meeting with many European Union officials and members of the European Parliament earlier this year, I realized that we share many of the same concerns,” he said.

EU regulators are considering measures to force banks across Europe to sell assets and sometimes even break up to compensate for massive state aid they have received.

BIG BANKS WARN

On Monday, some of the world’s largest financial firms urged Financial Services Committee Chairman Barney Frank, a Democrat, not to pursue big bank break-up legislation.

The Financial Services Forum, a lobbying group for CEOs of firms such as Goldman Sachs and JPMorgan Chase, said empowering regulators to break up “too-big-to-fail” banks could cause “long-term damage to the U.S. economy.”

But small and mid-sized banks, which have demonstrated considerable political clout through this year’s financial reform debate, support break-up legislation, which would cut their largest rivals down to size, lobbyists said.

Giving break-up power to regulators would be “a good thing,” said Paul Miller, a policy analyst at investment firm FBR Capital Markets, on Wednesday. 

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The Hawaii Medical Assurance Association reported a $55,046 profit in the third quarter of 2009, compared to a $2.3 million profit during the same period last year.

The state’s fourth-largest health insurer said it collected $23.4 million in premium revenues during the third quarter, down from the $28 million it collected during the same period in 2008.

The health plan spent $20.8 million on hospital, medical and administrative expenses, up slightly from the $18.8 million it spent during the same period last year guaranteed online payday loans.

Investment income totaled $97,867 for the quarter, compared to an investment loss of $217,990 in the third quarter of 2008.

The health plan’s reserves totaled $19.3 million, up slightly from $19.2 last year.

HMAA has 25,923 members, down from 29,719 members during the same period in 2008.

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The number of Americans filing first-time claims for unemployment insurance fell last week to their lowest level this year, the government said Thursday.

There were 502,000 initial job claims filed in the week ended Nov. 7, down from an upwardly revised 514,000 the previous week, the Labor Department said in a weekly report. It was the lowest number since the week ended Jan. 3, when 488,000 initial claims were filed.

The tally was also smaller than expected. A consensus estimate of economists surveyed by Briefing.com anticipated 510,000 new claims.

The 4-week moving average of initial claims was 519,750, down 4,500 from the previous week’s revised average of 524,250.

A new jobs forum

President Obama said the figures were a "hopeful sign" but cautioned that unemployment is one of the "great challenges" facing the U.S. economy.

"Given the magnitude of the economic turmoil that we’ve experienced, employers are reluctant to hire," he said.

Speaking at the White House, Obama announced plans to hold a new forum on jobs and economic growth in December. He said the forum will bring together chief executives, small businesses and labor groups to discuss ways to improve the job market.

"We have an obligation to consider every additional responsible step that we can to encourage and accelerate job creation in this country," Obama said.

Initial jobless claims have been declining for several weeks, raising hopes that employers could begin adding jobs as the economy appears to be emerging from one of the deepest recessions on record.

Government figures showed last month that the U.S. economy grew at a 3.5% annual rate in the third quarter, ending a string of declines over four quarters.

However, many economists expect the national unemployment rate, which rose to 10.2% in October, to remain elevated even as the economy recovers.

"The numbers are still terrible in absolute terms, but at least they are clearly heading in the right direction," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Continuing claims. The number of Americans continuing to file weekly claims for jobless benefits fell by 139,000 to 5.63 million in the week ended Oct. 31, the most recent data available.

The 4-week moving average for ongoing claims fell to 5.79 million.

But the decline in continuing claims may reflect a growing number of fliers that have dropped off those rolls into extended benefits.

Last week, President Obama signed into law a bill to provide up to 20 additional weeks of jobless benefits to unemployed Americans.

The legislation will extend jobless benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% will receive an additional six weeks. The proposal will be funded by extending a long-standing federal unemployment tax on employers through June 30, 2011. 

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