Finance & Business World

Asia-Pacific leaders will pledge on Sunday to keep stimulus policies in place to stop the world from sliding back into recession, wrapping up a summit that has been dogged by accusations of U.S. trade protectionism.

President Barack Obama arrived in Singapore late on Saturday, missing most of the day’s formal talks and speeches where several leaders suggested the world’s largest economy was hampering free trade through policies such as “Buy America” campaigns.

Speaking in Tokyo before he arrived, Obama called for a new strategy to rebalance global growth, referring to the excessive consumption in the United States and the over-reliance on exports from some countries that many blame for the economic crisis.

Leaders from the Asia Pacific Economic Cooperation (APEC) forum will vow to “maintain our stimulus policies until a durable economic recovery has taken hold,” according to a draft of their final statement, to be issued later on Sunday.

APEC is the last major gathering of global decision-makers before a U.N. climate summit in Copenhagen in three weeks meant to ramp up efforts to fight climate change.

Those negotiations have largely stalled, but a U.S. official said Obama had backed a two-step plan by the Danish prime minister to aim for an operational agreement and to leave legally binding details until later.

The APEC draft earlier dropped a reference to emissions reductions of 50 percent by 2050, and pledged instead to “substantially” cut carbon pollution by 2050.

The statement said job creation would be at the heart of economic policy, a hot topic as unemployment has risen across the industrialized world and put pressure on governments to act.

“Looking beyond supporting the recovery, we recognize the necessity to develop a new growth paradigm for the changed post-crisis landscape, and an expanded trade agenda for enhanced regional economic integration,” the draft APEC statement says.

DOHA RHETORIC

The leaders of APEC, a 21-member grouping accounting for more than half of all global output and 40 percent of world trade, will also resolve to exert more political will to jump-start the Doha Round of global trade talks, stalled for eight years.

Beyond the rhetoric of trying to conclude the Doha Round, APEC officials have sought to instead talk up a so-called Transpacific Partnership aimed at forging a regional trade deal.

Obama said Washington would work with the partnership countries, but stopped short of saying Washington would join the pact. The former U.S. administration said last year it would launch talks to join the partnership with Singapore, Chile, Brunei and New Zealand, countries that together comprise a minor component of trade within APEC.

It is the first free trade agreement that spans both side of the Pacific and supporters are touting it as a precursor to a possible APEC-wide pact in the future.

Washington has been criticized on several fronts for its trade policies, especially toward China, which will be the most closely watched of Obama’s four stops on his first Asia tour as president. He leaves for Shanghai later on Sunday. 

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The U.S. economy seems to be on the mend, but some economists are arguing that another round of stimulus is needed to keep the recovery on track.

Congress passed the largest stimulus bill on record in February, a $787 billion package that included aid to states and local governments, money for public works projects, tax breaks and more assistance for the unemployed.

With the help of that package, most economists now believe the recession that started in December 2007 came to an end at some point this summer.

But unemployment has continued to climb, hitting a 26-year high of 10.2% in October. Now there are some worries that the economy could slip back into recession at some point next year. And that is prompting calls for another shot of federal help.

The case for more stimulus

Mark Zandi, chief economist for Moody’s Economy.com, said that between $125 billion and $150 billion in new stimulus, with about $50 billion to $60 billion of that going to further extensions in unemployment benefits beyond what was passed by Congress last week, is needed.

A big portion of the remaining new stimulus funds could be used to give more help to state and local governments. Zandi said without another stimulus package, "the odds of sliding back into recession rises with the incredibly weak labor market."

Zandi is not alone in calling for more stimulus. On Wednesday, the Center on Budget and Policy Priorities, a think tank that concentrates on state and local government financial issues, called for additional help to states.

The center estimated that about $50 billion in additional state and local government aid is needed, and added that state budget cuts could lead to a loss of 900,000 jobs next year if there isn’t additional federal help.

Robert Greenstein, executive director of the center, said calls for more stimulus are justified because the recession has dragged on longer and unemployment has risen higher than foreseen in February.

"The magnitude of the state budget deficits that lie ahead could be a significant drag on the economy just as it is beginning to recover," he said.

Other economists argue that the original stimulus package didn’t go far enough to spur economic growth or job creation.

Gary Burtless, senior fellow at the Brookings Institute, a liberal think tank, said that it is not clear if the economy can continue to grow once the effect of February’s stimulus plan fades.

He said that while concerns about the size of the federal deficit will limit what can be approved in any additional stimulus act, a bigger danger "is that we may have an extremely weak, slow recovery in which unemployment remains high for an unnecessarily long time no credit check payday loan."

Some think existing stimulus is already working

Still, there are plenty of economists who question the need for additional stimulus.

"Rather than force feed an economy, you have to show some patience that it will perform as it did in the past," said Joseph Carson, chief economist at AllianceBernstein. "Trying to push a button and get an immediate result — economies don’t work that way."

Lakshman Achuthan, managing director of the Economic Cycle Research Institute, added that offering additional unemployment benefits might be a good idea but agreed that Congress shouldn’t hastily approve another stimulus package.

He said that by the time another round of stimulus has an actual impact, the economy would already have improved even more on its own.

"Throwing some money into [the economy] doesn’t change the direction or the fact that the [recovery] process is happening," he said.

The administration has been noncommittal about whether it would call for additional stimulus as it concentrates on the health care reform battle.

When asked about more stimulus recently, White House Press Secretary Robert Gibbs said only that the administration would continue to look at "any idea that can help our economy become stronger."

Nadeam Elshami, a staffer for House Democratic leadership, said that another large stimulus package is not being discussed right now. But he said there have been discussions about what smaller steps can win support, such as additional help to state governments. But nothing is likely to start moving on these fronts until the debate over health care reform is complete.

Even advocates of additional stimulus acknowledge that increased government spending is a tougher sell now than at the start of the year. But Zandi said the near unanimous vote for a partial extension in unemployment benefits approved by Congress last week shows that there can be support for what he calls "smaller scale stimulus."

"Another extension in unemployment benefits to help those who are suffering the most: who is going to vote against that?" Zandi asked. 

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Donald Trump’s personal jet is the latest victim of his famous "You’re fired!" line. The real estate mogul’s plane is for sale — and not because he’s been hit by the recession.

Trump is upgrading to a larger plane, and "Mr. Trump simply doesn’t need two [planes]," said George Sorial, managing director of international development and assistant general counsel at Trump Organization.

The current jet, a 1968 Boeing 727 originally operated by American Airlines, is completely kitted out. It has "all the amenities that you would expect," said Sorial, including gold-plated seatbelt buckles and sinks in the plane’s three bathrooms.

In addition the plane, which seats 24, has a master bedroom, ladies bidet, and "abundant storage for fine china and crystal," according to the seller’s Web site.

The jet, which is equipped with up-to-date avionics, had a facelift earlier this year with a fresh paint job and a custom logo: the tycoon’s last name spelled out in all caps. It’s reported that the letters are in 23 carat gold leaf and stretch 30-feet across and 4-feet high.

Todd Rome, president and founder of air charter broker Blue Star Jets, estimates the jet is worth between $4 and $8 million, but notes that it will be expensive to fly and maintain because of its old age online cash advance lenders.

"The problem with that plane is that the direct operation costs are so high," Rome said. "It has three engines, so it would cost about $10,000 an hour to fly." Rome added that a newer and more fuel-efficient plane of equal size would cost between $10 and $12 million to buy and $2,500 an hour to fly.

"There has to be a specific person who wants that plane — someone who wants it because it belonged to Donald Trump," Rome said.

Trump uses the plane, which has logged 41,833 hours and completed 29,664 landings, to fly to Mar-A-Lago in Palm Beach, Fla., weekly in the winter, to his projects around the world, including in Las Vegas and Chicago, and overseas to Scotland.

Sorial said Trump will continue to use the jet until it is sold and the new one is delivered, but "obviously we want things sooner rather than later." 

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It is the most prestigious job that nobody wants.

Bank of America is searching for a new chief executive, and by all accounts, it is having a tough time finding someone for the job.

Heading up Bank of America, an appealing task in better times, has become unpalatable to potential candidates from outside the bank amid a bevy of operational, regulatory and political challenges.

“This job doesn’t have all the advantages it would normally have,” said Anthony Polini, an analyst with Raymond James Financial Services.

The bank is struggling to staunch real estate and consumer credit losses, while simultaneously integrating two large businesses– mortgage lender Countrywide Financial and brokerage Merrill Lynch & Co.

On top of that, government regulators are bearing down hard on Bank of America, issuing a secret regulatory oversight agreement, overhauling the company’s board and mandating pay cuts for some top employees. The bank needs to not only maximize shareholder profit, it must also placate regulators and politicians.

As a result, high profile external candidates linked with the job — like Bank of New York Mellon’s CEO Bob Kelly and BlackRock CEO Laurence Fink — have either declined the post, or denied any interest in the position to begin with easy payday loans.

“Who wants this headache right now? Nobody,” said Paul Miller, a bank analyst with FBR Capital Markets.

Some internal candidates are still expressing interest. Brian Moynihan, head of the bank’s consumer unit, told Reuters on November 4 he would take the top job if offered it.

“Anybody would want this job, it’s one of the best jobs in the business,” he said before a speaking engagement in Los Angeles.

A CNBC report on Monday said Moynihan and Greg Curl, Chief Risk Officer, were two finalists for the position, and the board was divided on them.

Although some investors would like to see the bank pick a CEO as soon as possible, others recognize that the process will take time.

“A 90-120 day period would not be unusual in a search like this,” said Dan Genter, CEO of RNC Genter Capital, which owns 400,000 shares. “There’s a significant amount of searching and its very difficult to find a candidate for this job.”

The bank has until the end of the year to replace outgoing chief Kenneth Lewis, scheduled to retire on December 31.

CREDIT LOSSES 

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The U.S. dollar may come under renewed pressure from emerging market currencies and the euro after a meeting of the world’s top finance officials failed to take concrete action on rebalancing global money flows.

Finance ministers and central bank governors of the Group of 20 major countries, meeting in Scotland at the weekend, launched a “framework” in which they will discuss how to reduce trade and savings imbalances between nations.

But their communique talked only in general terms about rebalancing economies, and implied they might not agree on specific policies for individual countries to adopt before the end of next year at the earliest.

The result may be a continuation of heavy fund flows into emerging markets, boosting currencies there. And central banks intervening to slow currency appreciation may keep investing much of the money they obtain in the euro, pushing up that currency too.

“We’re probably looking at fresh dollar weakness in the short term” in the wake of the G20 meeting, said Kenneth Broux, senior markets economist at Lloyds TSB.

CHINA, BRAZIL

At the center of the currency issue is China’s reluctance to permit appreciation of its tightly controlled yuan, which it has kept flat against the dollar since mid-2008.

That has prompted additional fund flows into emerging market currencies that do trade freely, such as the Brazilian real, which has soared over 30 percent this year. Last month, Brazil slapped a 2 percent tax on foreign investments in fixed income and stocks in an effort to slow the real’s rise.

Last week, Brazilian officials said they would discuss this problem at the G20 meeting. But the G20 communique made no reference to the issue, and Brazil appeared to get little sympathy from a senior official of the International Monetary Fund, which is a key player in the global rebalancing campaign.

Youssef Boutros-Ghali, who chairs the International Monetary and Financial Committee, the IMF’s policy steering committee, told Reuters that Brazil’s tax was unlikely to work and that “we should not be fixated on currencies.

Officials from several countries, including Brazil, Japan and Indonesia, urged China on the sidelines of the meeting to let the yuan move more flexibly.

But as a group, the G20 did not press China on the sensitive issue, G20 sources said. British finance minister Alistair Darling told reporters: “We didn’t discuss the renminbi. I think that’s a question for China rather than us.”

In fact, China appeared in a combative mood. Finance Minister Xie Xuren and central bank governor Zhou Xiaochuan, speaking to the official Xinhua news agency after the meeting, made no mention of the yuan and instead warned developed countries to focus on the quality of their own policies.

Xie said countries with global reserve currencies should work to maintain the currencies’ value, to avoid destabilizing the global economy — implying it was up to Washington, not Beijing, to resolve the issue of the weak dollar.

The silence on the yuan in Scotland suggested countries accepted the G20 was not a forum in which to press China. The other main global economic forum, the Group of Seven nations, last met in October; it did mention the yuan, but only in the softest terms, “welcoming China’s continued commitment” to free up the yuan without referring to a timetable. 

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Costco Wholesale Corp reported a 5 percent increase in October same-store sales, helped by a weak U.S. dollar that helped push up international sales.

Analysts on average were expecting a rise of 4.7 percent in same-store sales, including the impact of fuel prices and foreign exchange, according to Thomson Reuters data.

Same-store sales at U.S. locations rose 2 percent, while international division sales surged 17 percent, the company said.

October net sales rose 7 percent to $5 payday loan with savings account.68 billion.

Excluding the impact of gasoline prices and foreign exchange, the company said U.S. comparable sales rose 3 percent, while on a local currency basis international same-store sales rose 7 percent.

(Reporting by Sakthi Prasad in Bangalore; Editing by Mike Miller)

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The dollar’s edge as the world’s leading reserve currency will be chipped away only slowly, and it is likely to remain dominant for many years, a Reuters poll of foreign exchange strategists showed.

The dollar makes up an estimated 63 percent of central banks’ global exchange reserves at present. The ratio has been falling gradually from above 70 percent in 1999, when the euro was introduced.

The Reuters poll of 34 strategists shows them giving a median forecast for the dollar to make up 60 percent of reserves five years from now, 55 percent in ten years, and 48 percent after 20 years.

That is in line with a Reuters poll in April which saw the dollar making up around 55 percent of reserves in 2020.

Some central banks have been putting a larger fraction of incoming reserves into currencies other than the dollar partly because of concern about the dollar’s long-term stability. China has suggested that the dollar eventually be replaced as the main currency for global reserves.

But the unmatched depth and liquidity of U.S. financial markets means the shift away from the dollar will remain very slow, strategists in the poll said.

“It will take decades for another capital market to be built as deep as is currently available in the U.S. Accordingly, this is a slow trend that will play out over many years,” said Camilla Sutton at Scotia Capital.

YUAN

The survey also suggested that despite China’s growing economic power, the yuan is still a long way from becoming a major reserve currency.

Of 35 strategists who discussed the yuan, 15 said the yuan would not reach this status for five to ten years, while 13 said it would take more than ten years.

Two predicted the yuan would become a reserve currency in just two years, while five estimated between two and five years.

Central banks appear unlikely to embrace the yuan unless China eases capital controls and makes its currency more freely tradable.

“China still has to deliver another revaluation of about 2 to 3 percent and extend the period of yuan-based payments with its trading partners before easing FX controls,” said Ashraf Laidi at CMC Markets.

(Polling by Bangalore Polling Unit; Editing by Victoria Main)

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While foreclosure rates are easing in some of the hardest-hit cities, the crisis is beginning to expand into new metro areas.

On Wednesday, RealtyTrac released its list of cities with the biggest foreclosure problems during the third quarter. As expected, towns in California, Florida and Nevada dominated the top 10, with Las Vegas taking the top spot with a rate of 1 in 20 homes. That’s a 53% increase over the third quarter 2008.

But there was a bright spot: Half of the cities in the top 10 showed year-over-year declines in their foreclosure rates, and 60% showed improvement compared with the second quarter.

For example, second place Merced, Calif., saw foreclosures fall by 11% from last year and 13% from last quarter, to 1 out of every 27 homes. And Stockton, Calif., slipped to No. 4 from No. 2 last quarter. The city, which is 80 miles east of San Francisco, had ranked highest for all of 2008.

"We’re not sure if that will be a one-time thing or a true continued trend, but it’s one of the first positive signs we’ve seen," said Rick Sharga, a senior vice president at RealtyTrac.

New hotspots. But if Las Vegas was the big loser, its neighbor, Reno, Nev., was hot on its heels. The No. 9 city posted an 80% gain in foreclosures — 1 in 37 homes — compared to the third quarter of last year. And it’s just one of several smaller metro areas that are creeping their way up RealtyTrac’s foreclosure list payday advance loan.

"Foreclosure activity is spreading from primary cities into secondary areas," said Sharga. "These aren’t your LAs and Phoenixes — it’s moving into outlying regions."

Boise, Idaho, cracked the top 20 for the first time as foreclosures jumped 141% — the largest increase from 2008. Similarly, Provo, Utah, rose 120%.

The pair of cities "are the first two cases where areas with very high unemployment are breaking into the top spots," Sharga said. "That will continue over the next few months."

Outlook. "The fact is, we’re still seeing record levels of foreclosure activity," said Sharga, who doesn’t expect rates will peak until 2010 because many option-ARMs will reset over the next several months.

Still, the housing market seems to be adjusting, because home prices are stabilizing — albeit at a lower level, Sharga said.

A record number of properties "are coming down the foreclosure pipeline" as well, Sharga said, and they will be trickling into the housing market over the next four years.

"We expect a longer, less robust recovery for the housing market," Sharga said. "We won’t know what’s what until everything gets worked out of the system." 

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