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June 28, 2009

Potash demand plummets

Filed under: online — Tags: , — Snowman @ 7:25 am

Deferred fertilizer purchases, unresolved contract negotiations with China and India, and poor weather conditions in North America are making 2009 a difficult year for the potash industry.

But industry players say demand can only be deflected for so long before crops start to suffer, and expect 2010 to be a banner year for fertilizer producers as customers flock back to the market.

Potash Corp. of Saskatchewan (TSX: POT) has revised both its production and second-quarter earnings guidance in response to deferred customer purchases and lower realized prices.

The world’s largest potash producer said Thursday it now expects to earn roughly 70 cents per diluted share for the quarter ended June 30, down from an initial target of $1.10 to $1.50 per share.

It also reduced its 2009 output by 800,000 tonnes to bring curtailments this calendar year to 4.7 million tonnes and total curtailments to 5.5 million tonnes since August 2008. Many of its mines will be shut down for an additional four weeks this summer as a result.

The company blamed "an extremely slow U.S. spring season," caused by unusually cool, wet weather, and unresolved contract negotiations with India and China for the curtailments.

Potash Corp. isn’t the only company to cut its forecasts as farmers worldwide delay fertilizing their fields.

Europe’s largest potash producer, K+S AG, recently cut its forecast for global potash sales from 50 million tonnes to 40 million tonnes in 2009 and from 60 million tonnes to 50 million tonnes in 2010. The Germany-based company also warned current prices of US$735 to $750 a tonne are "unsustainable."

The potash industry is more concentrated than most, making it easy for producers to respond to slumping demand by cutting production. But the warning from K+S implied production will need to be cut even further to keep prices from tumbling.

Global demand for potash has fallen as farmers do without the expensive commodity in response to the recession and lower food prices. In addition, a late start to the growing season in the United States and severe drought in Western Canada are likely to lower North American crop production this year.

Major potash customers, China and India, have responded to the uncertainty in potash markets by delaying signing a new contract for the commodity.

Canadian fertilizer companies such as Potash Corp., Agrium Inc. of Calgary (TSX: AGU) and Mosaic Canada (NYSE: MOS) have long negotiated long-term deals through marketing company Canpotex Inc payday loans. with China, India and other buyers.

Canpotex is the world’s largest exporter of potash fertilizer, delivering between nine million and 10 million tonnes a year of Saskatchewan potash to global buyers.

Potash Corp. CEO Bill Doyle recently said the company may resort to selling fertilizer to China on the spot market instead of negotiating a long-term contract if the two sides can’t renew a three-year supply deal.

And Scotia Capital has said that although India seems close to reaching an agreement, China could skip signing a contract this year altogether and rely on strong domestic output, border trade and spot market purchases instead.

All this seems to add up to a bleak 2009 for the potash industry, but analysts and corporate players predict that demand will surge in 2010, as farmers can only delay fertilizing their fields for so long before it starts to affect crop yields.

"We’ve certainly said in the past and continue to believe that 2010 is setting up to be an extremely strong year for the fertilizer business as a whole and particularly for the potash business," Potash Corp. spokesman Bill Johnson said Friday.

"You can defer demand for a short period of time but you can’t defer demand forever."

Some say improving grain prices, new government subsidies for Brazilian farmers and the prospect for a new sales contract with India could even set the stage for a rebound by this fall.

"We do expect very strong demand in North America this fall, and demand has picked up in a number of places just in the last few weeks internationally, so we are seeing some improvement," said Agrium spokesman Richard Downey.

Russian potash miner Uralkali and its Belarusian Potash Co. joint venture have predicted a "substantial increase" in demand for potash in the second half of the year and a "complete recovery" in 2010.

In a research note Friday, UBS Investment Research analyst Brian MacArthur said he believes settlements will be reached with both China and India at prices of US$500 to $525 per tonne, with U.S. and Brazilian prices "well above" this.

Potash Corp. shares were down $1 to $107.05 in Friday afternoon trading on the Toronto Stock Exchange. Agrium shares were down 94 cents to $46.86.

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June 26, 2009

UBS problems to remain after $3.5 billion capital hike

Filed under: business — Tags: , , — Snowman @ 10:04 am

Investors welcomed UBS plans to raise 3.8 billion Swiss francs ($3.5 billion) of new capital but said the bank will not turn the corner until it stems client withdrawals and settles U.S. legal problems.

UBS, the world’s largest wealth manager and one of the hardest-hit major banks in the financial crisis, said late on Thursday it was to place 293.3 million new shares at 13 francs with a few big institutional investors.

The Swiss National Bank and banking regulator FINMA have indicated they want UBS to strengthen its capital base before the government withdraws a 6 billion Swiss francs ($5.5 billion) investment made in October to bail out the bank.

“We welcome that the bank has strengthened its capital base,” FINMA head Eugen Haltiner told Reuters on Friday on the sidelines of a banking event in Basel. “We can call the bank well capitalized … The bank is now prepared to weather an unexpected difficult economic scenario.”

UBS stock, which fell 6 percent on Thursday to 13.97 francs, was down 1.4 percent to 13.78 francs at 5:20 a.m. EDT (0920 GMT). The European banking sector was up 1.4 percent.

“UBS had to enhance its capital base after U.S. banks’ capital hikes and due to the high capitalization of its main competitor in Switzerland, Credit Suisse,” Vontobel analyst Tobias Bruetsch said.

“The capital raising should help restore confidence,” he said, adding the dilution amounted to about 10 percent payday loan online.

UBS said the share placement would help increase its tier 1 capital ratio — a key measure of financial strength — to a proforma 11.9 percent from 10.5 percent at the end of March, almost at the 12 percent new minimum required by FINMA.

Credit Suisse said in April its tier 1 ratio was 14.1 percent, making it one of Europe’s best capitalized banks.

NEGATIVE NEWS CONTINUES

Analysts said they were not surprised UBS said it would likely post a second-quarter loss although the bank also said its operating results, helped by improved investment banking conditions and lower losses and write-downs, should be better.

However, investors were disappointed the bank said it has seen net client outflows in its three wealth and asset management units so far this quarter.

“We find it extremely disappointing that the bank suffered another loss, albeit apparently lower than the 2 billion franc loss for Q1,” said Kepler Capital Markets analyst Dirk Becker.

“Even more disappointing was the fact that net new money flows were negative again.”

A string of negative headlines about UBS in the past year has prompted big client withdrawals, particularly over a U.S. case seeking the names of 52,000 Americans suspected of using the bank to hide nearly $15 billion in assets from the taxman. 

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June 24, 2009

Luncheon provides Ballpark Village, Kiel contrast

Filed under: technology — Tags: , — Snowman @ 10:07 pm

Hundreds gathered Tuesday to hear from the leaders of two big downtown St. Louis projects — one apparently getting under way within weeks and the other still stuck in uncertainty.

Bill DeWitt III, president of the St. Louis Cardinals, told those at a Partnership for Downtown St. Louis luncheon that continuing trouble in financial markets means that bonds to raise money for the first phase of Ballpark Village might not be sold until the middle of next year.

Regardless, "behind the scenes" leasing activity for the $520 million retail, entertainment and office project next to Busch Stadium remains strong, DeWitt said.

The Cardinals and Cordish Co. of Baltimore are co-developers of Ballpark Village.
DeWitt said the project will be completed.

"We’re going to stick this out," he said during the luncheon’s discussion that was moderated by KMOV (Channel 4) news anchorwoman Vickie Newton. No questions were taken from other journalists or the audience during the luncheon affordable health insurance quote self employed.

The bonds cannot be sold until the Missouri Development Finance Board gives final approval of state subsidies for Ballpark Village. DeWitt hopes the board will approve the subsidies at its July meeting.

In contrast, bonds to help pay for David Checketts’ $74 million plan to reopen the Kiel Opera House are on the market.

Checketts, owner of SCP Worldwide and the St. Louis Blues, told the luncheon crowd he believes work on the Kiel project should begin in early August and be completed late next year.

Checketts plans to restore the Opera House for shows and musical events. He also said the Opera House would host some activities surrounding the National Hockey League’s All-Star Game, which he hopes to bring to the adjoining Scottrade Center.

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June 23, 2009

Vacation jets for bailout bank execs - report

Filed under: money — Tags: , , — Snowman @ 6:04 pm

Executives from some banks propped up by federal funds used company jets for personal purposes, according to a report published Friday.

Executives from some of the banks backed by funds from the Troubled Asset Relief Program flew on company jets to resorts or their vacation homes in Europe, Mexico, the Caribbean, Florida and Aspen, Colo., The Wall Street Journal reported.

The newspaper said Dowd Ritter, chief executive of Regions Financial Corp fast cash advance. (RF, Fortune 500) of Birmingham, Ala., a recipient of $3.5 billion in TARP funds, flew in November with his family on two jets to a resort in West Virginia at an estimated round-trip cost of $17,700.

Last year, the Treasury earmarked $700 billion in TARP funds to prevent the total collapse of the finance sector. 

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June 22, 2009

St. Louis considering vacant building registry

Filed under: news — Tags: , , — Snowman @ 11:28 pm

ST. LOUIS — This city has a lot of empty houses. More per person than any other big city in the country, by one count. And, with foreclosures on the rise, there are more all the time.

Now city officials are considering a new tool to better keep track of them.

Earlier this month, a bill was proposed to the Board of Aldermen that would require owners of vacant buildings to register their properties with the city and pay an annual fee. It’s a bid to get a handle on a problem that has vexed St. Louis for decades, said sponsor Kacie Starr Triplett, 6th Ward: empty, decaying houses that can breed crime and vandalism and drag down whole blocks around them.

"Right now, the city of St. Louis makes it easy to own vacant properties," she said. "This bill allows the city to finally play offense."

Under the bill, owners of a home that’s vacant for more than 60 days and not under construction or actively for sale would have to give the city the name and phone number of an area representative — someone to contact in case there’s a problem — and pay a fee: $50 the first year, $150 the second and $250 each year after that. The registry would be made public. And it would cover both private and city-owned buildings.

The fee is relatively low, but comes on top of a $200 fine every six months for buildings with outstanding code violations.

"The purpose is not to fine the death out of someone," Triplett said. "It’s simply a push to get you to think twice about letting it sit."

Just as important is the contact info, she said. Many of the city’s vacant buildings are owned by the banks or investment groups. The city has ownership information, but it may be just a post office box or the address of the empty house itself. Notices and bills are mailed out and receive no response.

Better information would make it easier to get property owners to fix problems, said Antionette Cousins, executive director of the Riverview West Florissant Development Corp., a north St. Louis housing nonprofit.

"It’s definitely something that’s needed," she said business cards sale. "We need to be holding them more accountable."

Dozens of other cities, including Chicago and Cincinnati, have similar measures, said Jennifer Leonard, director of the National Vacant Properties Campaign in Washington. They’ve become much more popular in the past two years, as the mortgage crisis has spread.

"It seems like we hear about tens of them every week," she said.

And although vacancy is nothing new in St. Louis, the booming foreclosure trade has made it harder to know just how many empty buildings there are in the city, and who owns them.

There are about 4,000 privately owned buildings that are empty and on a Building Department watch list because of code violations. Roughly an additional 1,500 buildings are owned by the city’s Land Reutilization Authority. In 2000, the census counted more than 11,000 "long-term" vacant buildings in St. Louis — a figure that would give this city the highest vacancy rate in the country, according to the Federal Reserve Bank of New York. The bank estimates that the number has grown since. And there’s no way to know how many buildings owned by investors or banks just sit dark.

In recent years, the city has beefed up efforts against the worst of these vacant buildings, those 4,000 so-called "problem properties." The $200 fines for code violations generate more than $250,000 a year, said associate city counselor Matt Moak, and the attention helps keep the ranks of troubled buildings from growing, despite the wave of foreclosures.

But more can be done, Triplett said.

She first proposed the bill last year, but withdrew it "for more work," she said. It has raised some concern from real estate agents and developers, but there’s been little vocal opposition. This time around it has eight co-sponsors on the 29-member board, and it has been referred to the Public Safety Committee. No hearing has yet been scheduled.

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June 21, 2009

Obama Says Proposed Agency Will Protect Financial Consumers

Filed under: business — Tags: , , — Snowman @ 8:36 pm

President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.

The Consumer Financial Protection Agency would oversee products from mortgages to credit cards and require companies to plainly state the terms of financial products while banning “the most unfair practices,” Obama said in his weekly address on the radio and Internet.

“We’re going to level the playing field for consumers,” he said.

Obama proposed on June 17 changes to government oversight of the financial industry that he said would correct a “cascade of mistakes” that helped cause the first global recession since World War II.

The changes, much of which must be approved by Congress, would add an additional layer of regulation for the biggest financial firms. Obama’s plan would make the Federal Reserve the overseer of companies deemed too big to fail and bring hedge and private equity funds under federal scrutiny.

“This crisis may have started on Wall Street,” Obama said in his radio address. “But its impacts have been felt by ordinary Americans who rely on credit cards, home loans, and other financial instruments.”

Obama said some consumers bear responsibility for the financial crisis by taking on too much debt and loans they could not afford. More people, though, were misled by financial companies, he said.

‘No Coincidence’

“It’s no coincidence that the lack of strong consumer protections led to abuses against consumers,” Obama said. “The lack of rules to stop deceptive lending practices led to abuses against borrowers.”

The new agency, Obama said, would prevent unscrupulous financial companies from taking advantage of consumers in the future payday loan lenders.

While Obama’s proposals won support from Democrats who control the House and Senate, it is likely to face a lobbying assault from the financial industry. The American Bankers Association said in a statement after Obama announced his plan that the Consumer Financial Protection Agency may “go well beyond consumer protection” in its mandate and add a new regulatory layer for community banks.

Republican Address

In the Republican address, Senate Minority Leader Mitch McConnell of Kentucky said Democrat proposals to overhaul health care would drive up costs and lead to the rationing of care. McConnell also said Democratic congressional leaders are moving ahead too quickly with legislation.

“Americans want health-care reform, but they want the right health-care reform,” said McConnell. “That means taking the time and the care necessary to get it right.”

McConnell said the Obama administration’s claims that its health-care overhaul proposals would save the government money are the same as claims that passage of the $787 billion economic stimulus bill in February would prevent job losses. The current jobless rate of 9.4 percent is at a 25-year high.

“If the stimulus bill taught us anything, it’s that we should be wary anytime someone in Washington says the sky’s going to fall unless Congress approves trillions of dollars immediately,” McConnell said. “Yet once again in the health- care debate, it’s rush and spend.”

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June 19, 2009

Ex-BOE’s Gieve Says Moral Hazard for Banks Threatens Next Cycle

Filed under: money — Tags: , — Snowman @ 6:57 pm

Former Bank of England Deputy Governor John Gieve said government bailouts of banks have created “moral hazard” which threatens the next economic cycle as the current financial crisis shows some signs of abating.

“The government has dispelled any constructive ambiguity on how far it’s willing to let banks and investors suffer,” Gieve said at an event in Edinburgh late yesterday organized by the David Hume Institute. “There’s now a safety net covering every significant bank, even banks that have failed.”

Bank of England Governor Mervyn King said in 2007 he wanted to avoid measures to aid banks which could sow the seeds of the next financial crisis. A year later, Gordon Brown’s government spent billions of pounds to rescue Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc after the collapse of Lehman Brothers Holdings Inc. rocked the global financial system.

“Moral hazard is a real issue now,” said Gieve, who was the U.K. central bank’s financial stability chief until March. “In recovery, this could make the next cycle much worse. There are already signs of that” in competition among investment banks for staff.

Deutsche Bank AG, Germany’s biggest bank, said this week it hired Ram Nayak from Credit Suisse Group AG to be head of global markets structuring in London. Job openings in London’s financial-services industry rose in May as banks and insurers resumed hiring, recruitment firm Morgan McKinley said yesterday.

Gieve said investors “must not put too much weight” on recent signs that the British economy is emerging from the recession. Surveys on U.K. services, manufacturing and construction all showed improvement in May.

Too Early

“There are some signs that the global crisis may have passed its most acute phase, though it’s too early to announce a recovery,” Gieve said. “As fears subside, we must not allow the impetus for reform to weaken.”

Gieve said that existing banking rules needed a complete overhaul instead of just a few adjustments.

“The biggest lesson for regulators is to give more weight to systemic links,” he said. “You have to watch out for the behavior which is rational and sustainable for an individual but not for the whole system faxless cash advance.”

Gieve also added his voice to calls by officials including his successor, Paul Tucker, for so-called macroprudential tools to prioritize financial stability instead of leaving that burden to less suitable monetary policy instruments.

“We need to protect the economy against the banks by taking measures to dampen the cycle” with “bigger buffers that would dampen the pace of expansion and dampen the pace of contraction” of banks, Gieve said.

King’s Speech

King said this week that new banking rules should eliminate an implicit state guarantee for firms that combine household services with risky investment banking or funding strategies. He also said banks should not be allowed to become too big to fail.

Gieve said a focus on size may not be the right response, as there may be advantages in some firms becoming large enough to provide international services. Also, financial-industry consolidation in the next two decades will produce more large firms, and perhaps a focus should be on preventing banks from developing an excessive size in a number of markets, he said.

He also said regulatory oversight should be shared by multiple organizations, though the rules for governing this should require close cooperation. Regulators need to check each other to make sure that they provide a strong enough force against risky practices, he said.

“It’s harder for them to question common practices that have built up over a number of years and been blessed by the supervisors themselves,” Gieve said. “Saying something’s dangerous and needs to be reversed requires regulators to admit they’ve made a mistake in the past.”

Gieve added to comments in March that the bank’s focus on financial stability “slipped down the agenda” before the banking crisis, saying yesterday that its handling of the Northern Rock Plc panic in 2007 was “off the mark” and its treatment of the crisis “poor” at the end of that year.

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June 18, 2009

Wholesale price report shows inflation in check

Filed under: business — Tags: , , — Snowman @ 4:27 pm

Wholesale prices jumped slightly in May, the government said Tuesday, but the increase was less than expected and the 5% annual rate of decline was the sharpest since 1949.

The Producer Price Index, which tracks the changes in selling prices for domestic producers, rose by 0.2% last month. The report is widely watched to monitor inflation.

A consensus estimate of economists surveyed by Briefing.com had forecast a 0.6% increase.

The jump in wholesale prices follows a 0.3% increase in the index in April. January’s 0.8% increase snapped a five-month streak of falling prices.

"There’s no story on inflation here, and deflation doesn’t seem to be a concern," said Anika Khan, economist at Wachovia.

Inflation and deflation: Year-over-year, wholesale prices fell 5%, the largest decline in 60 years.

"That continues to show that even further back in the pipeline we don’t have inflation risk," Khan said.

Inflationary concerns rise in tandem with large increases in the so-called "core PPI," which excludes volatile energy and food costs, Khan said creditscores. In May, the core PPI edged up by only 0.1%, matching forecasts.

Conversely, deflation is characterized by "broad-based, continued declines in subsectors, which we haven’t seen," Khan said.

A 2.9% increase in energy goods prices offset a 1.6% decline in consumer foods, the report said. That’s due in large part to gasoline prices, which rose 13.9% following a 2.6% increase in April.

Prices at the pump have increased for 49 straight days, according to a separate survey for motorist group AAA.

Outlook: In the short term, neither inflation nor deflation should occur, Khan said.

"But eventually, we should be taking a watchful eye to the core numbers," she said. "With all of the stimulus spending, inflation should be a problem in the long term." 

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June 17, 2009

Exxon: Court-ordered $507.5M from Valdez spill

Filed under: money — Tags: , , — Snowman @ 3:06 am

A federal appeals court Monday ordered Exxon Mobil Corp. to pay $507.5 million in punitive damages stemming from the 1989 Exxon Valdez oil spill off Alaska, plus 5.9% interest running from the 1996 trial judgment, the opinion said.

The amount is a fraction of the $5 billion in punitive damages originally awarded to fishermen, Alaska natives, business owners and other litigants by a jury in 1996, and equals the compensatory damages agreed to in a subsequent settlement, the opinion said.

The opinion issued Monday by the Ninth U.S. Circuit Court of Appeals set the punitive damages figure, and determined the date from which the interest would run, after the U.S. Supreme Court ruled that the maximum ratio of punitive to compensatory damages is 1:1 under maritime law companies making payday loans.

In a split decision, the appeals court ordered each party to bear its own attorney fees and court costs.

Attorneys for the plaintiffs could not be reached immediately for comment. An Exxon (XOM, Fortune 500) spokesman had no immediate comment.

The oil spill from the Exxon Valdez supertanker in 1989 was the worst in the nation’s history, blackening more than 1,200 miles of Alaska’s coastline.

The clean-up alone cost around $2.5 billion.

The case is In Re: The Exxon Valdez, No. 04-35182, U.S. Court of Appeals for the Ninth Circuit. 

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June 16, 2009

Key Obama aide defends bailouts

Filed under: marketing — Tags: , , — Snowman @ 7:00 am

Chief White House economic adviser Lawrence Summers on Friday vigorously defended the administration’s aid for banks and carmakers as necessary, temporary measures rather than lasting market intrusions.

"Our objective is not to supplant or replace markets," Summers told the Council on Foreign Relations in New York. "Rather, our objective is to save them from their own excesses and improve our market-based system going forward."

His speech, monitored in Washington via audio feed, was clearly intended to take on criticisms that the Obama administration was taking on too much of an ownership role in industry rather than relying on free-market forces that have driven the American capitalist system.

"The actions we take are those of necessity, not choice," he insisted, adding that President Barack Obama had no desire to "manage banks, insurance companies or car manufacturers."

Summers said critics claim the administration was engaging in "backdoor socialism" and flatly denied it. "Where our focus has been as we have intervened when necessary is on the intervention being temporary, based on market principles and minimally intrusive," he said.

Summers offered a philosophical analysis of the financial system’s woes, noting that history shows that every two or three years some dire situation arises like the Latin American debt crisis, the 1987 stock market crash or the Asian financial troubles of the late 1990s.

In the current crisis, a reliance on excessive financial leverage and inadequate regulation was largely to blame and that needs to be addressed through regulatory reform that is at the center of the administration’s agenda, Summers said bad credit cash loan.

Capital levels are key

The administration is expected to unveil proposals for wide-ranging overhaul of the regulatory system on Wednesday.

Summers said a central element of any reform will be to ensure financial firms have and maintain adequate levels of capital so that they are less vulnerable to over-reliance on debt and borrowing in future.

But he warned that the nation’s financial system is not going to be "fail safe" until it is able to handle a failure.

That means some type of resolution authority must be in place to deal with failing firms rather than continue the current system in which some firms are deemed too-big-to-fail so that the government is forced to step in to help them.

Summers said there were some signs the economic system was stabilizing, including the fact that some major banks that got government help have been able to raise capital on their own and to repay the government.

But he added that the key to recovery will be to rebuild confidence that the nation’s financial system in future will be less prone to stumbling because of excessive leverage that contributes to asset "bubbles" developing. 

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