Financial Freedom. Best business news.

The Federal Reserve is worried about indecision in Congress.

At its last meeting in April, the central bank’s top officials discussed how coming tax increases and spending cuts could weigh on the recovery, and debated whether the Fed should provide additional stimulus to spur consumer spending.

"Participants expected that the government sector would be a drag on economic growth over coming quarters. They generally saw the U.S. fiscal situation also as a risk to the economic outlook; if agreement is not reached on a plan for the federal budget, a sharp fiscal tightening could occur at the start of 2013," the minutes from the meeting said.

The central bank is not alone in its fear of a coming "fiscal cliff" in 2013. The Bush tax cuts, payroll tax cut and extended unemployment benefits are all set to end, at the same time that the government slashes more spending.

While the Fed also acknowledged improvement in the economy early in the year, several members expressed concern that it could be due to waning temporary factors such as warmer winter weather.

As the Fed prepares to wind down its latest round of stimulus, known as Operation Twist, some have called for the central bank to do more to fuel growth.

Fiscal cliff: What you need to know

While those calls have yet to be answered, the minutes showed that the Fed is not ready to close the door on that option.

"Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough," the minutes said.

Operation Twist was designed to bring down long-term interest rates and encourage spending by shifting $400 billion from short-term to long-term bonds faxless cash advances. Launched last September, the program is set to end in June.

Since 2008, the Fed has taken numerous steps to bolster the economy, including keeping its key interest rate near zero in an effort to give businesses and consumers cheaper access to credit.

In addition, the Fed has also enacted two rounds of asset purchases known as quantitative easing, also designed to bring down interest rates. But nearly four years later, the economy is still struggling to return to robust growth, leading many to call for more action from the Fed.

The minutes also showed that Fed members discussed the job market in great detail.

"Labor market conditions improved in recent months," the minutes said. "So far this year, payroll employment had expanded at a faster pace than last year and the unemployment rate had declined further, although it remained elevated."

At the last meeting, the Fed improved its forecast for the unemployment rate this year, but continued to believe the economy would be weak enough to warrant historically low interest rates until "at least through late 2014."

The unemployment rate was at 8.1% as of April, and the Fed expects it to fall to between 7.8% and 8% by the end of the year.

Separately, the Fed released a new schedule of two-day meetings for its policy-making committee. Previously, the meetings were set to last either one or two days. 

Source

If you’re in your mid-40s, you should expect an unpleasant retirement surprise from Uncle Sam.

The Social Security trust fund is scheduled to run out of money in 2033, about when today’s 40-something workers hit retirement age. When that day arrives, all Social Security checks would have to be reduced by about 25 percent.

For most retirees, that’s a doomsday scenario. A 25 percent cut would leave them unable to pay their everyday bills.

Unfortunately, doomsday keeps drawing closer. As recently as 2005, the Social Security trustees thought insolvency was 47 years in the future. Their latest report, issued last week, moved it up 3 years, and it’s now just 22 years away.

The Simpson-Bowles deficit cutting plan of 2010, for instance, proposed gradually raising the full retirement age from 67 to 69 and the early retirement age from 62 to 64. It also would have increased the amount of income that is subject to payroll taxes, and made future inflation adjustments less generous.

Source

Asian stock markets rebounded Wednesday after a slew of solid earnings boosted the outlook for U.S. companies and a successful Spanish bond auction eased worries over Europe’s debt crisis.

Japan’s Nikkei 225 index jumped 1.7 percent to 9,622.39. South Korea’s Kospi added 0.9 percent to 2,003.03 and Australia’s S&P/ASX 200 rose 1.2 percent to 4,339.40.

Hong Kong’s Hang Seng gained 0.9 percent to 20,750.55. Benchmarks in Singapore, Taiwan and Indonesia also rose.

On Tuesday, European stocks had their best day in four months after Spain attracted strong investor interest at an auction of two-year debt.

The government sold more than (EURO)3.2 billion ($4.2 billion) in short-term debt, more than had been expected, and the yield on Spain’s 10-year government bond fell, a sign of improving confidence in the country’s finances.

“This saw investors less pessimistic about Europe and lifted risk assets all round,” said Stan Shamu, analyst with IG Markets in Melbourne.

In the U.S., first-quarter results gave markets a lift. Coca-Cola’s profit was better than Wall Street analysts had forecast. Goldman Sachs and Johnson & Johnson also posted strong results.

The Dow Jones industrial average rose 1 bad credit payday advance.5 percent to 13,115.54, its best day in a month. The S&P 500 closed up 1.6 percent to 1,390.78. The Nasdaq composite index soared 1.8 percent to 3,042.82, its biggest point rise in three weeks.

Positive news also came from the International Monetary Fund, which raised its outlook for the global economy because of faster U.S. growth and a coordinated effort in Europe to address its debt crisis.

The global lending organization said Tuesday the U.S. economy should expand 2.1 percent this year. Europe will likely shrink 0.3 percent and the world economy should grow 3.5 percent. All three estimates are slightly better than the IMF’s January forecasts.

Benchmark oil for May delivery was up 3 cents to $104.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.27 to settle at $104.20 in New York on Tuesday.

In currency trading, the euro fell to $1.3111 from $1.3139 late Tuesday in New York. The dollar rose to 81.37 yen from 80.80 yen.

Source

The U.S. economy needs to grow more quickly if it is to produce enough jobs to bring down the unemployment rate further, Federal Reserve Chairman Ben Bernanke said on Monday.

Bernanke said the recent decline in jobless rate, which dropped from 9.1 percent last summer to 8.3 percent in February, was “somewhat out of sync” with the rather modest pace of economic growth.

U.S. gross domestic product grew 3 percent in the fourth quarter, but is expected to have slowed to just below 2 percent in the first three months of this year.

“Further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” Bernanke told a gathering of the National Association for Business Economics paydayloan.

Bernanke reiterated his concern about long-term unemployment, but argued against the notion that much of the problem is due to structural factors that monetary policy could not address.

“The continued weakness in aggregate demand is likely the predominant factor. Consequently, the Federal Reserve’s accommodative monetary policies, by providing support for demand and for the recovery, should help, over time, to reduce long-term unemployment as well,” he said.

Read more

As their first birthday nears, Scottrade is finally putting some marketing behind its young Focus Morningstar family of exchange-traded funds.

The big Town and Country-based online brokerage hopes to lift the pint-sized funds out of obscurity and send them tilting at Charles Schwab, Vanguard, iShares and other giants of the ETF trade.

Like traditional mutual funds, ETFs invest in a basket of stocks and other financial instruments. However, ETF shares are priced throughout the day and traded on stock exchanges like stocks; traditional mutual funds buy and redeem their shares through a mutual fund company, which prices the mutual fund shares once a day.

Scottrade is also joining the investment equivalent of an airline fare war, in which mushrooming competition is driving ETF expense ratios ever lower.

“It’s fair to call it a race to the bottom,” says Erik Liik, chief executive of Scottrade’s FocusShares unit, which runs the funds. “There’s been fee compression for the past five or six years.”

That’s good news for the investor, who pays those expenses. But it’s bad for the investment firms sponsoring the funds. They take their profits as a percentage of mutual fund assets, and that slice is getting slimmer.

Scottrade is banking on such cheapness to give it a leg up with investors. Its Focus Morningstar US Market ETF has an expense ratio of 0.05 percent, a quarter of the 0.2-percent bite taken by the iShares Dow Jones U.S. Index Fund. Both funds track the broad American stock market.

“From a marketing standpoint, that gives Scottrade something to talk about,” said Adam Bold, CEO of the Mutual Fund Store, an advisory service based near Kansas City. But such a tiny advantage probably won’t swing too many decisions, he said.

Today’s cut-rate funds are a far cry from the start of the ETF boom in the late 1990s, when some broad-market ETFs had expense ratios of 1.25 percent.

Tiny expense ratios make it hard for a fund sponsor to turn a profit. So, the goal is to grow funds large enough so that a thin slice of the assets equals a lot of money. At $100 million in total assets, the 15 Focus Morningstar funds are still tiny.

Scottrade is subsidizing the funds’ expenses, something common with startup ETFs. Officially, Scottrade promises to keep the subsidy going only through this year, although Liik says there are no plans to raise costs to investors later.

Hence the marketing campaign, which is timed for the funds’ March 30 birthday, when they will have a one-year record to show investors.

Scottrade is a giant of the discount brokerage business, with online trading, 500 offices nationwide and 1,000 independent investment advisors who place trades through Scottrade. The firm makes its living offering low-priced services, but little personalized investment advice.

Independent advisers are a main target of the new promotional push, since they can swing their affluent clients’ money toward Scottrade’s ETFs.

The company plans to advertise in investment magazines and websites, and to sponsor financial shows on cable TV no faxing payday loans. The company wouldn’t put a figure on its marketing budget.

“It’s open-ended,” said Liik.

The fate of ETFs can be fickle, and it’s hard to tell if the push will work, says Paul Baiocchi, an analyst at IndexUniverse, which tracks the ETF industry. “They can slog along and then something happens and before you know it, they can have $500 million in assets,” he said.

Nationally, the growth rate for ETFs would put rabbits to shame. There were 113 funds in 2002, compared to 1,155 this year. Twenty-one new ones were born in the month of January. All told, they hold $1.15 trillion in assets, according to the Investment Company Institute, the mutual fund trade association.

“There is an awful lot of product being created, probably more than needs to exist in the world,” said Bold. “At some point, we will have a shakeup, and some will go away.”

The last such shakeup happened after the crash of 2008. About 150 funds liquidated between 2008 and 2011, all while new funds were forming, according to the Institute.

ETF births tend to follow investing fads, says Bold. If dividend stocks, for instance, is doing well, new dividend ETFs will pop up.

“The vast majority of these are being created by the marketing departments, in exactly the way that Frito will bring out 10 new brands of Doritos hoping one will stick,” said Bold.

Unlike traditional mutual funds, ETFs don’t need a bureaucracy to handle share purchases and redemptions, so they can pass on some savings in the form of lower expense ratios for investors.

On the other hand, ETF investors pay commissions when they buy and sell shares. Scottrade, like some other brokerages, waives commissions on trades of its own name-brand ETFs.

There are other quirks to ETF investing. Some funds are small and thinly traded, and that can mean a wide spread between the bid and asked prices, raising the cost of trading.

The vast majority of ETFs track indexes, and there are lots and lots of indexes, which has led to a cottage industry of people selling ETF advice.

Scottrade follows indexes run by Morningstar, the well-regarded mutual fund analysis company in Chicago.

Some indexes are broad — tracking value stocks or growth, and companies big, small or in between. Even those tend to vary; for instance, some big-capitalization stock funds will track bigger companies than other big-cap funds.

Lots of funds track narrow sectors of the market, and they slice those sectors differently.

For instance, the Materials Select Sector SPDR has no coal investments. A competing basic materials fund, Dow Jones US Basic Materials ETF has coal stocks. By contrast, the Dow Jones fund has Monsanto as its second-largest holding, while the SPDR fund doesn’t own it, according to a Morningstar analysis.

Source

It takes Mikael Ohlsson five minutes _ and the help of one other person _ to assemble IKEA’s Ektorp sofa.

After 33 years at the Swedish home-ware chain, the 54-year-old chief executive is an expert at configuring IKEA’s famous flat-pack furniture.

But Ohlsson is not bragging about the fact that he can beat the assembly time the company itself advertises by some 10 minutes. What makes him proud is that the Ektorp can be flat-packed at all.

Seated on a “Blekinge white” example of the Ektorp in a cozily furnished exhibition room at an IKEA store in Zaventem, Belgium, Ohlsson recounts how, until recently, the popular couch also came packed in one of the company’s biggest cardboard boxes _ a pain for customers to squeeze into their cars or carry up narrow staircases.

But then in 2010, IKEA’s product designers came up with a way of breaking the Ektorp into different pieces. The results was a package half its former size, which the company claims took some 7,477 trucks off the roads and cut its yearly CO2 emissions by 4,700 tons. Savings in production and transport costs knocked euro100 ($128) off the price IKEA charges its customers, Ohlsson pointed out.

It’s innovations like these, the CEO says, that make IKEA so successful even in the uncertain economic times that some of its biggest markets are facing.

On Friday, IKEA reported a 10.3 percent jump in net profit to euro2.97 billion ($3.81 billion) for the year ended Aug. 31, even though it cut prices by 2.6 percent. Revenue rose 6.9 percent to euro25.17 billion in the same period and Ohlsson says the sales pace has been accelerating since then _ even as stock markets around the world have taken a dive amid the worsening financial crisis in Europe.

“We are becoming a more natural choice when people are looking after their spending or are concerned about the future,” says Ohlsson, his black trousers, black sweater and half-rimmed glasses all possessing the understatement of a Billy bookcase.

“A lot of people see that home is a very important place, maybe the most important place in their lives.”

While sales have fallen in some Southern European countries like Greece, Ohlsson says IKEA has gained market share in all of them.

Over the past decade, the company expanded into big emerging markets like Russia and China, although 79 percent of its sales are still generated in Europe. In the next two or three years, IKEA wants to open stores in Serbia and Croatia and it has recently bought land in South Korea.

But the biggest opportunity may lie in India, a fast-growing country of around 1 bad credit unsecured personal loans.2 billion people, that Ohlsson says IKEA has been eyeing “patiently but also impatiently” for years.

“The impatience is that of course there are a lot of people that are moving into the city, have better incomes and want to furnish their homes and that’s why there is space for us,” says Ohlsson. “And patient because we wanted FDI (foreign direct investment) legislation to change.”

That change happened last week, when the Indian Commerce Ministry announced it would allow foreign companies that sell products under a single-brand name, such as IKEA, to own 100 percent of their stores there.

Ohlsson and his chief financial officer, Soeren Hansen, say the company is still studying the fine print, to make sure, for instance, that requirements to source a certain percentage of products locally won’t interrupt its cherished value chain, where it controls design, production, storage and retail.

In contrast to other companies, which are under pressure to quickly produce new value for shareholders, IKEA can move more slowly. The retailer is not traded on the stock market, but is owned by a foundation controlled by the family of its octogenarian founder Ingvar Kamprad.

That structure not only protects IKEA from being split up or taken over, but, says Ohlsson, allows him to make investments in new markets or store upgrades that may not pay off for several years.

Throughout the conversation, the CEO stresses IKEA’s eco-friendly policies and humble origins in a poor area of Sweden. In the Zaventem store on the outskirts of Brussels, solar panels on the roof provide up to 20 percent of the energy. The company owns several wind parks and one of its Berlin stores uses local wastewater to control internal temperatures.

IKEA has come a long way from its start in the Smaland region in Southern Sweden. Today it employs 131,000 people in 41 countries and its 287 stores drew in 655 million customers last year.

Ohlsson says he believes the urge to upgrade and become more comfortable does not seem to recede during an economic downturn. Asked whether IKEA’s business was “recession-proof,” Ohlsson laughs somewhat embarrassed.

“I wouldn’t say it like that and it would not be humble to say it,” he said.

Source

Australia unexpectedly lost jobs for a second straight month in December, capping the nation

Premier Mario Monti has called a Cabinet meeting in Rome on Sunday to approve emergency austerity and growth measures aimed at saving the euro currency from collapse, his office said in a statement.

The premier, an economist who once was an EU commissioner, is under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency.

The meeting was originally scheduled for Monday, when Monti is also expected to outline the measures to both houses of Parliament on Monday.

The premier has been briefing political parties, unions, business groups and consumer lobbies on his plans over the weekend.

Monti hasn’t disclosed details of his rescue plan, but has said it includes both austerity cuts and measures to boost growth in Italy’s anemic economy. He has promised it would be socially equitable, and that it would go after those who hadn’t paid their share of taxes before

Italian borrowing costs have spiked, which could spell disaster if Italy is unable to keep up on payments to service its enormous debt of euro1.9 trillion ($2.57 trillion), or 120 percent of its GDP.

Unlike Greece, Portugal and Ireland, which got bailouts after their borrowing rates skyrocketed, the eurozone’s third-largest economy is considered to be too big to bail out. An Italian default would be disastrous for the 17-member eurozone and reverberate throughout the global economy.

The head of Italy’s industrial lobby said Sunday that the survival of the common euro currency depends on Italy’s coming up with very strong austerity and growth measures _ followed by a concerted effort at the European level so that Italian sacrifices are not in vain.

The various parties briefed have said the package likely includes reinstating an unpopular home property tax abolished by Berlusconi, raising the sales tax and the income tax at the highest brackets by a few percentage points, and requiring Italians to work more than the 40 years now needed to receive a pension.

Source

Greece’s tortuous power-sharing talks entered a fourth day Thursday, with the country’s president hosting a meeting of party heads a day after negotiations descended into chaos and political leaders failed to name a new interim premier.

Outgoing Prime Minister George Papandreou, the head of the opposition conservatives, Antonis Samaras, and the leader of a small right-wing party were meeting with the president Thursday morning to settle on a new prime minister and cabinet.

The new temporary government’s aim will be to secure a new European debt deal and ensure Greece receives the vital next euro8 billion ($10.9 billion) installment of its existing euro110 billion facility, without which the country faces a catastrophic default within weeks. Elections are then expected to be held in February.

Thursday’s talks come after a similar meeting Monday night collapsed, with Giorgos Karatzaferis, the head of the right-wing LAOS party, storming out in a rage only minutes after entering the presidential mansion. The precise reason for his anger was unclear.

The hope is that the fourth day of talks will finally yield a new prime minister to head an interim government that will secure the country’s continued bailout funding payday loans. European leaders have been pressing for an end to the political turmoil in Athens that has endangered the country’s bailout funding and even its continued presence in the eurozone.

“This is the third time I’m coming here for (this) issue, and I hope it’s the last,” Samaras said as he arrived for the meeting.

Despite three days of wrangling and intense European pressure, Greece’s main parties have been unable to agree on who will lead the new government, which is expected to only be in power for a few months before leading the country to early elections in February.

Greece’s deliberations over the past few days have taken a backseat to developments in Italy where Premier Silvio Berlusconi has announced his intention to resign soon after a new package of economic reforms are passed. But his announcement has done to little to assuage market concerns that Italy is facing a Greek-style economic crisis and the country’s borrowing costs have shot through the roof.

Source

For three years now, Efrem Rone has been keeping a close eye on an Adelaide St. E. parking lot, watching for a condo sales centre to rise from the asphalt.

“I know how things work,” says Rone, 45. “If you don’t get on the list (to get into the sales centre early), the best units are gone, prices start going up and you’re stuck with the leftovers.”

His agent was getting nowhere, despite registering early to view floor plans for the 22-storey Ivory on Adelaide project. So Rone was surprised last weekend to walk past an Ivory on Adelaide sales centre bustling with activity.

“On the door was taped an ad from a Chinese newspaper with a picture of what the project would look like. Deals were being done,” says Rone. “It looked like the sales centre was open for business, but only to people of a certain ethnicity.”

Toronto’s condo market is on fire. And much of the frenzy is being fuelled by investors, many of them Asians, who are being given preferential treatment — early access to the best and cheapest units.

“It may look like discrimination, but these people have actually earned the right to be first in line. Any business will go to their best customers first,” says realtor turned condo developer Brad Lamb.

Almost 68,000 new units are now in the planning stages or under construction across the GTA as investors, a lot of them immigrants with ties to Hong Kong and mainland China, the Middle East, India, Pakistan, Russia and Brazil, look to cash in on the biggest condo boom in the world.

A record 20,729 units have been sold in the GTA as of the end of September — smashing the pre-recession record for the same period in 2007 of 17,285. An estimated 45 to 60 per cent have been snapped up by investors, with estimates closer to 90 per cent in some newer downtown condo projects.

They are looking for solid investments in a shaky world — the keys to hard assets like real estate.

“We are a tranquil island in a sea of despair,” says one of Toronto’s leading condo development consultants Barry Lyon. “If it wasn’t for the multicultural community, we would have no condo market to speak of right now in Toronto.”

Even realtors who find themselves, and their clients, with no hope of being among the first buyers in all these new glass and steel towers springing up on Toronto’s skyline understand why this is happening.

Targeting agents with strong ties to big buyers in the multicultural community — one developer calls them his “rainmaker list” — means developers can sell 70 per cent of the units in a project faster, which keeps costs down. That’s what most banks demand before they will free up loans to start construction.

The practice has paid off: In 2005, it took an average of 13 months for condo builders to sell 70 per cent of their units, says George Carras, president of RealNet Canada, which monitors building activity across the GTA.

This year, they’re hitting the threshold in just four months, largely because of their “growing sophistication” in wooing brokers who can deliver multiple investors.

Carras likens the process to Initial Public Offerings of stocks. Those willing to spend the most and not afraid of risk potentially get the biggest payback.

But some agents complain that a handful of condo builders, such as Plaza Corp., are being so aggressive at racking up early sales, it’s becoming impossible for the average buyer, looking for a home or little investment property, to get in before prices are less affordable.

It also gets tougher to find the most desirable units, such as the cheapest one-bedroom corner units high enough to have a view.

Several realtors spoke to The Star about the focus on investment buyers, but none would be named for fear of being blacklisted from getting access to any units at all, which are now essential to their livelihood.

One Asian agent who has sold numerous Plaza Corp. units, said he had to pull strings to get clients a peek at their York Harbour Club project on the Railway Lands: “I’m not part of their stable of VIP agents.”

“York Harbour Club was a little bit unfair to the public,” concedes Plaza Corp. vice-president Scott McClellan. “The (pre-sales) took off on us a little bit and we probably didn’t have as much as we wanted to have for the general public.”

By the time the public could buy, just 30 per cent of units were available.

“This isn’t new. Everybody does it,” says McLellan of what he calls his “rainmaker list” — realtors who can deliver 15 or more buyers willing to buy from floor plans, rather than wait for built units.

McLellan says all of the early buyers of Ivory on Adelaide are Canadian citizens, buying units as long-term investments or as homes for their kids or relatives who might be migrating from overseas.

No one knows how much is offshore investment.

Lyon points out that investors have become essential landlords in a city where almost no one is building apartments. He also sees the units as “warehousing” for first-time buyers who can rent while saving up a down payment. Often investors are willing to sell without requiring the 20 per cent down payment a bank demands.

“These investors bear no relationship to the speculators of the 1980s,” Lyon says. “They’re very sophisticated” and recognize Toronto as a bargain compared with other major cities in the world.

A lot of developers point out they hold back units so less high-achieving realtors, and the public, don’t miss out altogether. Often they are at higher prices — parking spots alone can be almost $10,000 more expensive — but McLellan says there are no plans to raise unit prices on Ivory on Adelaide when the public gets their first crack this weekend.

Rone is fairly savvy — he has been involved in the condo market since 2006 — but is still shaking his head: “This just seems unfair.”

He finally got his email invitation to the “grand opening” of the Ivory on Adelaide sales centre Friday. Like everyone else who may walk through the doors, he has no clue that almost half — 43.5 per cent — of the 358 units have already been sold.

McLellan insists that no buyer is being left out. Even those who’ve dropped by the last few days have been asked to leave their names.

But Rone’s agent now knows she gained nothing by registering early and that the smallest and most affordable places will likely be gone.

“I’m not going to lie and tell you that I haven’t heard this (complaints about the early sales process) before,” McLellan says. “I have people who have called me upset. We figure it out for them.

“Have him give me a call.”

Source