DOW JONES NEWSWIRES
General Motors has completed the sale of its good assets to a new entity - Vehicle Acquisition Co. - completing the automaker's exit from bankruptcy protection, Fox Business Network and The New York Times reported Friday. The company will eventually be renamed General Motors Co. The U.S. government and GM officials signed documents at around 6:30 a.m. EDT at the offices of the company's legal counsel in New York City. GM is to hold a news conference at its Detroit headquarters at 9 a.m.
Full story at: http://www.nytimes.com/2009/07/11/business/11auto.html?_r=1&ref=business
-Dow Jones Newswires; 212 416-2900
(END) Dow Jones Newswires
07-10-09 0723ET
Copyright (c) 2009 Dow Jones & Company, Inc.
Sunday, July 12, 2009
Sentiment, Oil Dampen Stock Prospects
News at a Glance
Stocks Sag: Shares drop on range-bound trading.
Oil Slide: Worst one-week drop since January.
Chevron Warns: Earnings hit by weak dollar.
Sentiment Ebbs: Consumers less confident.
The Lowdown
Stocks dropped again Friday as oil declined and consumer sentiment worsened.
Traders looked ahead to tepid earnings prospects next week as many investors questioned the pace of recovery. The Dow Jones Industrial Average closed down 37 points at 8147. The Nasdaq closed up 3 points at 1756 after a seesaw session. The S&P 500 dropped 4 to close at 879.
Oil prices had their worst one-week slip since January, dropping 10%. Crude traded on the Nymex closed at $59.89 and remained below $60 in afternoon trading. The International Energy Agency slightly raised its 2010 world demand forecast Friday, saying it expects global crude consumption to rise 1.7%, up from its earlier forecast of 1.4%. A year ago, crude prices neared $147 a barrel.
But Chevron (CVX: 61.40, -1.68, -2.66%) warned that its fourth-quarter earnings would be "significantly lower" than the preceding quarter, pulling the energy sector down. The company said its anticipated decline was accelerated by the softening value of the dollar.
Tech shares showed relative strength, propping up the Nasdaq on Friday. Yahoo (YHOO: 14.93, +0.38, +2.61%) was upgraded to Market Weight from Underweight by Thomas Weisel Partners in a vote of confidence for new CEO Carol Bartz. Google (GOOG: 414.40, +4.01, +0.97%) continued to get buzz from its increased share of U.S. searches and its launch of the new Google Chrome OS operating system, a direct rival to Microsoft's (MSFT: 22.39, -0.05, -0.22%) Windows system.
Chinese fell for an eighth month because of weak global demand. Exports stood down 21.4% in June, compared to a year earlier, the Chinese customs bureau said. Exports had been expected to decline by 21% after a 26.4% decline in May.
Corporate News
General Motors exited bankruptcy in a streamlined state, shedding its Pontiac, Hummer and Saturn brands. Fritz Henderson, GM's chief executive and Edward E. Whitacre Jr., its new chairman, appeared at a 9 a.m. news conference to announce the start of the "New GM." The company spent a shorter-than-expected 40 days in bankrupcty protection, and its emergence could represent a major achievement for the Obama Administration, which has committed $50 billion to bail out GM.
AIG (AIG: 11.74, +2.26, +23.83%) is preparing to pay millions of additional dollars worth of executive bonuses on July 15, The Washington Post reported Friday, citing anonymous sources. The company is reportedly consulting with Kenneth Feinberg, the newly appointed compensation czar, in order to avoid the negative attention that accompanied its last bonus announcement. AIG will have to convince Feinberg of the fairness of the bonus package, an anonymous AIG official told the Post. His approval is critical to winning the government's blessing for the bonuses. AIG has received more than $80 billion in federal loans since September.
The Economy
The U.S. trade deficit fell 9.8% to $26.0 billion in May, the Commerce Department reported Friday. The news surprised economists who had forecast a deficit of $30 billion. The trade deficit is now at its lowest level since November 1999. Exports, excluding agriculture, rose 1.6% in May, while imports, excluding oil, fell 0.6%. REPORT
The Reuters/University of Michigan preliminary reading of the July index of consumer sentiment was worse than expected, falling to 64.6 from its earlier level of 70.8. Analysts projected that the index, which is designed to measure the national attitude toward buying, would come in at 70.0. STORY
Stocks Sag: Shares drop on range-bound trading.
Oil Slide: Worst one-week drop since January.
Chevron Warns: Earnings hit by weak dollar.
Sentiment Ebbs: Consumers less confident.
The Lowdown
Stocks dropped again Friday as oil declined and consumer sentiment worsened.
Traders looked ahead to tepid earnings prospects next week as many investors questioned the pace of recovery. The Dow Jones Industrial Average closed down 37 points at 8147. The Nasdaq closed up 3 points at 1756 after a seesaw session. The S&P 500 dropped 4 to close at 879.
Oil prices had their worst one-week slip since January, dropping 10%. Crude traded on the Nymex closed at $59.89 and remained below $60 in afternoon trading. The International Energy Agency slightly raised its 2010 world demand forecast Friday, saying it expects global crude consumption to rise 1.7%, up from its earlier forecast of 1.4%. A year ago, crude prices neared $147 a barrel.
But Chevron (CVX: 61.40, -1.68, -2.66%) warned that its fourth-quarter earnings would be "significantly lower" than the preceding quarter, pulling the energy sector down. The company said its anticipated decline was accelerated by the softening value of the dollar.
Tech shares showed relative strength, propping up the Nasdaq on Friday. Yahoo (YHOO: 14.93, +0.38, +2.61%) was upgraded to Market Weight from Underweight by Thomas Weisel Partners in a vote of confidence for new CEO Carol Bartz. Google (GOOG: 414.40, +4.01, +0.97%) continued to get buzz from its increased share of U.S. searches and its launch of the new Google Chrome OS operating system, a direct rival to Microsoft's (MSFT: 22.39, -0.05, -0.22%) Windows system.
Chinese fell for an eighth month because of weak global demand. Exports stood down 21.4% in June, compared to a year earlier, the Chinese customs bureau said. Exports had been expected to decline by 21% after a 26.4% decline in May.
Corporate News
General Motors exited bankruptcy in a streamlined state, shedding its Pontiac, Hummer and Saturn brands. Fritz Henderson, GM's chief executive and Edward E. Whitacre Jr., its new chairman, appeared at a 9 a.m. news conference to announce the start of the "New GM." The company spent a shorter-than-expected 40 days in bankrupcty protection, and its emergence could represent a major achievement for the Obama Administration, which has committed $50 billion to bail out GM.
AIG (AIG: 11.74, +2.26, +23.83%) is preparing to pay millions of additional dollars worth of executive bonuses on July 15, The Washington Post reported Friday, citing anonymous sources. The company is reportedly consulting with Kenneth Feinberg, the newly appointed compensation czar, in order to avoid the negative attention that accompanied its last bonus announcement. AIG will have to convince Feinberg of the fairness of the bonus package, an anonymous AIG official told the Post. His approval is critical to winning the government's blessing for the bonuses. AIG has received more than $80 billion in federal loans since September.
The Economy
The U.S. trade deficit fell 9.8% to $26.0 billion in May, the Commerce Department reported Friday. The news surprised economists who had forecast a deficit of $30 billion. The trade deficit is now at its lowest level since November 1999. Exports, excluding agriculture, rose 1.6% in May, while imports, excluding oil, fell 0.6%. REPORT
The Reuters/University of Michigan preliminary reading of the July index of consumer sentiment was worse than expected, falling to 64.6 from its earlier level of 70.8. Analysts projected that the index, which is designed to measure the national attitude toward buying, would come in at 70.0. STORY
Wednesday, July 8, 2009
Breaking Down the Obama IRA
Tucked into President Obama’s financial regulatory reform legislation still being debated in Congress is a proposal to get more workers saving for retirement. The plan calls for employers to set up mandatory automatic-enrollment IRAs, retirement accounts that allow for tax-deductible contributions.
If the measure passes, companies that don't currently offer a tax-deferred retirement-savings plan would funnel employee contributions into IRA accounts through direct payroll deposits. It would also represent the biggest increase in new retirement savers since the creation of the 401(k) in 1980.
Still, for as long as it’s been, the concept is hardly new. Some form of automatic retirement savings has been kicking around the legislature for a couple of years. The model’s roots are in the science of behavioral finance, a field whose findings routinely suggest that people tend to put off doing what they know they should do. For example, rather than choosing a retirement fund from the myriad options available – a daunting task – many people do nothing. They become victims of their own inertia and ultimately come up short when they retire. The Obama initiative is meant to make decisions on workers’ behalf.
Early estimates predict that the plan could direct roughly $100 billion into IRAs over five years and give some of the 75 million workers who don’t have access to an employer plan an opportunity to save, says David John, one of the plan’s designers, the principal of The Retirement Security Project and a senior research fellow at the Heritage Foundation, a conservative think tank. John says he hopes to have a draft of the legislation introduced to Congress within a month.
Many of the details about the automatic IRA have yet to be fleshed out, but here’s a look at how it would work and some of the early benefits and drawbacks.
How it would work
Companies that don’t currently offer a retirement plan, employ 10 or more workers, and have been in business for at least two years would be required to enroll their employees in an IRA. The accounts would automatically deduct money from employees’ paychecks starting with a default deduction of 3%. Employees can choose a higher or lower withdrawal rate or opt out of the plan altogether.
The default IRA portfolio would likely include a basket of conservative holdings. Those assets include I bonds (inflation-indexed savings bonds), money-market mutual funds or stable value funds, John says. “The goal here is to build up a certain amount, say $3,000 to $5,000,” he says, at which point the account would automatically roll over and new contributions would go into a target-date fund, a popular 401(k) investment option. Workers would retain control over their accounts, but the plan would make adjustments over time -- even if the workers did nothing.
Pros
More companies will cover workers. If passed, the legislation would cover roughly 40 million of the 75 million workers who do not have access to an employer-sponsored retirement plan, John says. The National Federation of Independent Business (NFIB), a Washington, D.C.-based lobbying group for small businesses, estimates that 27% of small businesses with fewer than 250 employees do not offer a retirement plan. For businesses with 10 to 19 employees, that number jumps to 50%.
Improved retirement prospects. Any measure to nudge workers into saving for retirement is a positive one, says Brigitte Madrian, a professor of public policy and corporate management at Harvard University’s Kennedy School of Government. Data from automatic enrollment in 401(k) plans suggest this plan would broadly lift employee savings rates. Nearly 5% of workers with 401(k) plans dropped out in 2008, but the participation rate remained flat that year at 74% as many new hires were automatically enrolled in comparable plans, according to a May report by Hewitt Associates, a human resources and outsourcing consultancy that studied more than 2.7 employees who were eligible for 401(k) plans during the last few months of 2008.
Cons
Pushback from small businesses. Small businesses stand to be impacted the most by this reform. Their biggest concern: the administrative burden associated with these plans. Many small businesses don't have in-house human resource departments, and a proposal like this would require some owners to hire an accountant or third-party payroll service to handle the new IRAs. “It’s a new expense,” says Bill Rys, a spokesman for NFIB.
John says the costs imposed on businesses would be minimal and would depend on how they process their payrolls. If a business uses an automatic payroll service provider like ADP, the cost could be as low as $6 to $8 per payroll period, he says. Initially, the IRA mandate would affect only firms with more than 10 employees, he says. Later, once the details are ironed out and businesses and officials watch the plan underway, the threshold could be lowered.
Not aggressive enough. Given the market turbulence that has washed out millions of Americans’ 401(k)s over the past year, the conservative investment approach pegged for the automatic IRAs is understandable. However, caution might not be the best investing tactic, especially for younger workers who have a longer-term horizon. “I’d be more in favor of getting more aggressive investments in there sooner rather than later,” particularly for younger employees, says Ron Rough, the director of portfolio management at Financial Services Advisory, an investment advisory firm in Rockville, Md. “I think if you’re dollar-cost averaging into your portfolio, you want to take advantage of market volatility.”
A more stock-heavy investment option might eventually become available, John says.
If the measure passes, companies that don't currently offer a tax-deferred retirement-savings plan would funnel employee contributions into IRA accounts through direct payroll deposits. It would also represent the biggest increase in new retirement savers since the creation of the 401(k) in 1980.
Still, for as long as it’s been, the concept is hardly new. Some form of automatic retirement savings has been kicking around the legislature for a couple of years. The model’s roots are in the science of behavioral finance, a field whose findings routinely suggest that people tend to put off doing what they know they should do. For example, rather than choosing a retirement fund from the myriad options available – a daunting task – many people do nothing. They become victims of their own inertia and ultimately come up short when they retire. The Obama initiative is meant to make decisions on workers’ behalf.
Early estimates predict that the plan could direct roughly $100 billion into IRAs over five years and give some of the 75 million workers who don’t have access to an employer plan an opportunity to save, says David John, one of the plan’s designers, the principal of The Retirement Security Project and a senior research fellow at the Heritage Foundation, a conservative think tank. John says he hopes to have a draft of the legislation introduced to Congress within a month.
Many of the details about the automatic IRA have yet to be fleshed out, but here’s a look at how it would work and some of the early benefits and drawbacks.
How it would work
Companies that don’t currently offer a retirement plan, employ 10 or more workers, and have been in business for at least two years would be required to enroll their employees in an IRA. The accounts would automatically deduct money from employees’ paychecks starting with a default deduction of 3%. Employees can choose a higher or lower withdrawal rate or opt out of the plan altogether.
The default IRA portfolio would likely include a basket of conservative holdings. Those assets include I bonds (inflation-indexed savings bonds), money-market mutual funds or stable value funds, John says. “The goal here is to build up a certain amount, say $3,000 to $5,000,” he says, at which point the account would automatically roll over and new contributions would go into a target-date fund, a popular 401(k) investment option. Workers would retain control over their accounts, but the plan would make adjustments over time -- even if the workers did nothing.
Pros
More companies will cover workers. If passed, the legislation would cover roughly 40 million of the 75 million workers who do not have access to an employer-sponsored retirement plan, John says. The National Federation of Independent Business (NFIB), a Washington, D.C.-based lobbying group for small businesses, estimates that 27% of small businesses with fewer than 250 employees do not offer a retirement plan. For businesses with 10 to 19 employees, that number jumps to 50%.
Improved retirement prospects. Any measure to nudge workers into saving for retirement is a positive one, says Brigitte Madrian, a professor of public policy and corporate management at Harvard University’s Kennedy School of Government. Data from automatic enrollment in 401(k) plans suggest this plan would broadly lift employee savings rates. Nearly 5% of workers with 401(k) plans dropped out in 2008, but the participation rate remained flat that year at 74% as many new hires were automatically enrolled in comparable plans, according to a May report by Hewitt Associates, a human resources and outsourcing consultancy that studied more than 2.7 employees who were eligible for 401(k) plans during the last few months of 2008.
Cons
Pushback from small businesses. Small businesses stand to be impacted the most by this reform. Their biggest concern: the administrative burden associated with these plans. Many small businesses don't have in-house human resource departments, and a proposal like this would require some owners to hire an accountant or third-party payroll service to handle the new IRAs. “It’s a new expense,” says Bill Rys, a spokesman for NFIB.
John says the costs imposed on businesses would be minimal and would depend on how they process their payrolls. If a business uses an automatic payroll service provider like ADP, the cost could be as low as $6 to $8 per payroll period, he says. Initially, the IRA mandate would affect only firms with more than 10 employees, he says. Later, once the details are ironed out and businesses and officials watch the plan underway, the threshold could be lowered.
Not aggressive enough. Given the market turbulence that has washed out millions of Americans’ 401(k)s over the past year, the conservative investment approach pegged for the automatic IRAs is understandable. However, caution might not be the best investing tactic, especially for younger workers who have a longer-term horizon. “I’d be more in favor of getting more aggressive investments in there sooner rather than later,” particularly for younger employees, says Ron Rough, the director of portfolio management at Financial Services Advisory, an investment advisory firm in Rockville, Md. “I think if you’re dollar-cost averaging into your portfolio, you want to take advantage of market volatility.”
A more stock-heavy investment option might eventually become available, John says.
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