World financial news

If you thought having thousands of Twitter followers made you famous, how about showing up in a reality television series?

Bravo announced plans on Wednesday for two new shows focused on the tech realm.

The network is teaming with Facebook founder Mark Zuckerberg’s sister Randi Zuckerberg, who left Facebook in August to start her own media company, for a series with the working title of "Silicon Valley."

According to Bravo’s site, the show "captures the intertwining lives of young professionals on the path to becoming Silicon Valley’s next great success stories."

It’s too early to tell say whether Facebook founder Mark Zuckerberg will make a cameo. Perhaps instead of cat-fights, viewers will see code wars and hackathons. Bravo was mum on the details, and Zuckerberg — that’s Randi, not Mark — did not immediately respond to a request for comment.

Bravo also unveiled plans for a tech series with the working title called "Huh?," giving viewers an inside look at the crew behind ICanHasCheezburger.com. Run by entrepreneur Ben Huh, the Seattle-based Cheezburger, Inc. is known for LOLcats, FAIL blog, and its empire of Internet memes.

Bravo has frequently teamed up with buzzy tech startups, from Foursquare to TaskRabbit, to promote its shows, so a show tracking the young founders behind many of those startups isn’t a complete surprise.

Let’s just hope "Silicon Valley" doesn’t end up titled "Real Entrepreneurs of Silicon Valley."  

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While the debate over "QE3" continues within the Federal Reserve, it seems more policymakers are leaning away from supporting further stimulus.

At the central bank’s last policymaking meeting, Fed officials continued to discuss whether they should buy more assets in a third round of quantitative easing, commonly known as QE3.

But only "a couple" members were in favor of more stimulus, as opposed to two months earlier, when a "few" did so.

"A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate consistent rate of 2% over the medium run," minutes released Tuesday said.

The Fed’s language on the overall economy also seemed more upbeat than in January, pointing to "encouraging" jobs data.

Since the financial crisis, the Fed has purchased $2.3 trillion in Treasuries and mortgage debt in the first two rounds of quantitative easing. The intent is that these policies will bring interest rates lower, boosting the economy by giving businesses and consumers access to cheaper credit.

Some members have recently indicated that by buying more mortgage backed securities, the Fed may be able to give a bigger boost to the struggling U.S. housing market.

Others have pointed to stronger jobs data as a sign that the economy is healing on its own, and may not need further assistance from the Fed.

Richmond Fed President Jeffrey Lacker was the only member of the central bank’s 10-person Federal Open Market Committee voting against the use of language that specifies interest rates will likely remain low until the end of 2014.

He believes the economy will heat up enough to warrant a hike in interest rates before then. 

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China

People under 65 are applying for reverse mortgages at a much higher rate than previously, according a new survey, and they’re using the money largely to pay down debt.

The survey, by the Metlife Mature Market Institute and the National Council on Aging, found that 21 percent of people considering reverse mortgages in 2010 were under 65.  That age group made up only 6 percent of applicants in 2006.

The authors didn’t speculate as to whether tough economic times might be behind the interest among people who are still of working age.

The biggest motive cited at all ages was to pay down debt.  But those under 70 listed that as a priority in 73 percent of cases, compare to 62 percent for the over-70 group.

The survey was based on answers from 21,000 people who attended independent counseling required for people applying for reverse mortgages guaranteed cash advance.

Reverse mortgages are limited to people aged 62 and over.  Homeowners can borrow a certain percent of the equity in their homes, and borrowers make no payments on the debt as long as they live in the house.

Because of that long delay in collection, the amount people can borrow rises with their age.  The rising interest among working-age people comes despite the fact that they could borrow more if they waited.

For instance, the study notes that a 65-year-old with a $250,000 home

could borrow $103,000.  An 85-year old could borrow more than $141,000 on the same house.

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Hong Kong Chief Executive candidate Henry Tang pledged to boost government spending to tackle a widening wealth gap as he sought to reverse a slump in public support ahead of this month

Chesterfield-based Aegion Corp. reported fourth-quarter net income of 15.2 million, or 38 cents per share, compared with $17.4 million, or 44 cents a share, in the corresponding period a year ago. Quarterly revenue rose to $256.7 million, compared with $246 million a year earlier.

Since October, Aegion has been the parent company of Insituform Technologies Inc. The company specializes in sewer and drinking water system renovation.

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China, the biggest supplier of rare earths, may almost double exports this year and meet quotas set by the government as lower prices stimulate demand.

Chinese exports were 49 percent of the government-alloted quota in the first 11 months of last year because the slowing global economy sapped demand, the Ministry of Commerce said in a Dec. 27 statement. Overseas sales quotas may be virtually unchanged this year at 31,130 metric tons, based on Bloomberg calculations.

French bank Credit Agricole SA reported a euro3.07 billion ($4.06 billion) net loss in the fourth quarter on Thursday, as an intensifying European debt crisis drove down the value of its Greek bonds and shaved billions off the bank’s bottom line.

Credit Agricole _ hit by the Greek debt crisis largely through its ownership of Greek bank Emporiki _ said fourth-quarter net profit plunged nearly tenfold from a loss of euro328 million in the last quarter of 2010. It also posted a net loss for 2011 of euro1.47 billion.

Investors dumped the bank’s stock on the news, driving the share price down nearly 4 percent in early afternoon trading Thursday.

As part of an effort to drastically reduce Greece’s unsustainable debt burden and avoid a chaotic default on the country’s bonds in March, private bondholders are being asked to take substantial losses on their Greek bonds. They hope that if Greece’s finances can be righted, they can draw a line under Europe’s debt crisis, which has threatened to drag down bigger economies like Italy.

In anticipation of the losses on Greek debt, European banks have been writing down the value of those bonds. BNP Paribas and Societe Generale _ French banks that also have substantial Greek holdings _ saw their fourth-quarter profits plummet as they discounted their Greek bonds by 75 percent, roughly in line with what European leaders are asking of private institutions.

Credit Agricole has now taken similar measures. The bank said the overall net loss from Greece _ including losses at Emporiki and the writing down of Greek debt _ was euro2.38 billion for 2011.

Credit Agricole said it was also reducing the amount of money it lends to Emporiki.

However the bank’s problems go beyond Greece. Credit Agriocle said a wide-range of factors had dragged down its bottom line, including “the slowdown in the European economies, the downgrades in European sovereign debt ratings, a particularly difficult situation in Greece and tensions in the financial markets.”

Banks across Europe are also facing European Banking Authority requirements that they keep more funds in case of further market turmoil and are struggling to get the overnight loans they use to fund day-to-day operations on fears that one of them could collapse.

While the European Central Bank has stepped in to offer unlimited funding to banks, Credit Agricole said it was reducing its exposure to U.S. dollar denominated debt which is becoming increasingly expensive for some European banks as U.S. banks pull back on loans.

Despite the large losses, Jean-Paul Chifflet, chief executive of the bank, still called the results satisfactory, underscoring that the bank was now better positioned to operate in the tough economic times, noting in particular it had trimmed its investment banking division, where net income plunged 27 percent in 2011. Net income at its French retail banks, by contrast, was up more than 5 percent.

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Asking prices for London homes rose to close to a record in February, helping push national values the most in almost a decade, Rightmove Plc said.

Average asking prices in the U.K. capital rose 2.5 percent from January to 449,252 pounds ($710,300), less than 1,000 pounds below the record reached in October, the operator of Britain

Throughout the extraordinary surge in Apple Inc.’s share price, a persistent question has lingered:

Why is the stock still so cheap? One overlooked answer may be that Apple’s accounting isn’t as conservative as it used to be.

After topping $500 a share last week, the iPhone and iPad maker now has a $468 billion market capitalization. Yet Apple trades for only 14.3 times its earnings for the previous four quarters — about the same as the Standard & Poor’s 500 index’s price-earnings ratio — in spite of growth that’s far above average. Revenue last quarter rose 73 percent to $46.3 billion, while earnings more than doubled to $13.1 billion.

Many theories have been floated for why such a rapidly expanding company with such loyal customers would trade for so little. Perhaps investors believe Apple will cling to its $97.6 billion hoard of cash and marketable securities, rather than pay a fat dividend. Others have suggested a lack of confidence about the future. It’s a consumer electronics company, after all, and competition is brutal.

While each of those points has merit, here’s an explanation that hasn’t gotten enough attention: Thanks to an accounting rule change for which it lobbied, Apple gets to book revenue from sales of bundled products such as iPhones — which include hardware, software, services and upgrade rights — more quickly than it used to.

The easiest way to see the rule change’s impact is to look back at the two sets of numbers Apple reported for fiscal 2009.

Originally, the company said it had $5.7 billion of net income for the year on $36.5 billion of revenue. Then in January 2010 Apple retroactively adopted the new accounting principles and restated its previous numbers. The restatement boosted Apple’s fiscal 2009 net income 44 percent to $8.2 billion. Revenue was revised to $42.9 billion, 17 percent higher than originally reported.

Nothing changed economically, of course. Only the accounting did. On the surface, though, Apple’s valuation looked cheaper under the new reporting regime.

On Dec. 31, 2009, for instance, Apple had a market capitalization of about $191 billion low fee pay day loans. Using the fiscal 2009 earnings that Apple initially reported, its price-earnings ratio that day was about 33. Using its restated numbers, the ratio would have been about 23.

“It would appear that the market continues to consider a significant component of Apple’s revenues and gross profit to be presently unearned and not deserving of a normal market multiple,” said Charles Mulford, an accounting professor and director of the Financial Reporting and Analysis Lab at Georgia Institute of Technology in Atlanta.

Apple was one of a handful of companies that lobbied the Financial Accounting Standards Board for the new rules in 2009.

The impact for Apple seems to have been greater than for most others, probably because of the nature of its products. Dell Inc. said the rule switch had no material impact on its results.

Microsoft Corp. and Oracle Corp. said the same. Hewlett-Packard Co.’s earnings got a slight boost.

The FASB rule change had two main parts. One related to so-called multiple-deliverable arrangements, while another covered software sales. When Apple sells an iPhone, for example, the hardware and software are delivered at the time of sale. Other deliverables include the rights to future software upgrades and other features.

The old accounting rules required Apple to defer large chunks of its revenue and recognize the amounts gradually over each product’s economic life. While the details are complicated, the gist under the new rules is that Apple is allowed to record more revenue upfront.

Let me be clear: I’m not opining on whether Apple is overvalued or undervalued, and I’m certainly not making any predictions about its stock price. The point here is that it makes sense for Apple’s earnings multiple to have declined significantly once you consider how the company’s accounting has changed.

The bottom line: Not all iEarnings are created equal.

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