My finance view

The Wall Street Journal will close its Boston bureau to save money, and shift coverage of the mutual fund industry to its money and investing reporting team, the newspaper’s editor said on Thursday.

“The economic background is painfully obvious to us all,” Journal Managing Editor Robert Thomson told the paper’s employees in a memo. “That there has been truly great reporting… out of Boston over many, many years is not in doubt. But we remain in the midst of a profound downturn in advertising revenue and thus must think the unthinkable.”

News Corp, which owns the Journal, will keep sister news organizations Dow Jones Newswires and MarketWatch in Boston, the memo said. An investigative reporting operation for the Journal will remain too, Thomson said.

Nine bureau reporters at the Journal would have to apply for other jobs, the memo said.

A Journal spokesman declined to say how much money the closure will save.

There are no plans to close other U.S. or international bureaus, Thomson wrote. The Journal has 16 U.S. bureaus and 23 outside the United States.

Boston is a financial services hub, home to some of the world’s largest mutual fund firms, closely held Fidelity Investments and Sun Life Financial’s MFS Investment Management

The closing comes in the same month the Journal reported that it was one of the few U low fee payday advance.S. newspapers to report a circulation gain — of 0.6 percent — for the six-month period ending in September, compared with last year.

Additionally, the Journal said on Tuesday that it will stop selling its U.S. edition in London, and will offer a redesigned version of its European edition later this year.

Many U.S. newspapers are shedding jobs as advertising revenue falls and circulation declines as more people get their news online for free instead of paying for it in print.

The New York Times Co said earlier this month that it will cut 100 jobs through buyouts, and possibly layoffs, from its namesake newspaper’s editorial operations.

The Journal charges for access to its online edition, and News Corp Chief Executive Rupert Murdoch has redoubled his international newspaper empire’s efforts to charge for news online. The Journal recently began charging for many of its articles for people who read them on mobile devices.

(Reporting by Robert MacMillan. Additional reporting by Jim Finkle; Editing by Tim Dobbyn)

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Sales of newly built U.S. single-family homes unexpectedly tumbled 3.6 percent in September in their first drop since March, but the inventory of new homes available at the end of the month shrank to the smallest in 27 years, government data showed on Wednesday.

September single-family home sales totaled 402,000 units at an annual pace. Analysts polled by Reuters had expected new home sales to rise to a 440,000 unit annual pace from a revised 417,000 units in August, which was originally reported as 429,000 units faxless payday advance.

The median sales price rose in September to $204,800 from $199,900, while the average sales price rose to $282,600 from $256,500.

(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)

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India’s central bank took the first step toward withdrawing its record monetary stimulus as inflation pressures build, ordering lenders to keep more cash in government bonds.

“It may be appropriate to sequence the ‘exit’ in a calibrated way,” Governor Duvvuri Subbarao said today after increasing the statutory liquidity ratio to 25 percent from 24 percent and raising the inflation forecast. The central bank kept benchmark policy rates unchanged, while maintaining its economic growth forecast of 6 percent “with an upward bias.”

Stocks fell the most in two months after the statement spurred speculation the Reserve Bank of India will boost borrowing costs by year-end, eroding corporate profits. Today’s shift also signals intensifying global concern about consumer and asset-price increases, with Norway tomorrow forecast to follow Australia in raising rates this month.

“We will start to see G-20 economies exiting now, starting with the emerging ones and then the advanced countries,” said Mridul Saggar, the Mumbai-based chief economist at Kotak Securities Ltd. “In India’s case, growth is coming back on track and inflation is becoming quite a concern.”

The Bombay Stock Exchange’s Sensitive index fell 2.3 percent to 16,351.58 at 2:50 p.m. local time. The rupee extended losses to 0.7 percent, trading at 46.98 against the dollar.

Bonds Rise

Bonds rose because some banks will need to boost their holdings as a result of today’s move, said Murthy Nagarajan, a fund manager at Mirae Asset Global Investment in Mumbai. The yield on the 6.90 percent note due July 2019 fell 9 basis points to 7.32 percent, the biggest drop since Sept. 15, according to the central bank’s trading system.

Subbarao, who has injected 5.85 trillion rupees ($130 billion) of cash since September 2008 to protect the Indian economy from the worst financial crisis since the 1930s, said draining that money has become a “central issue in our policy matrix.” The liquidity injection was the equivalent to almost 9 percent of India’s gross domestic product, Asia’s third-largest.

The central bank said “unconventional” steps taken during the global meltdown in the past year can now be reversed to damp price gains, adding that reversing the “conventional measures is not considered appropriate for now.”

Subbarao maintained the reverse repurchase rate at 3.25 percent, the repurchase rate at 4.75 percent and the cash reserve ratio at 5 percent, in line with the median forecast of 24 economists surveyed by Bloomberg News. He increased the inflation forecast for the year to March 31 to 6.5 percent from 5 percent.

Exporter Credit

The central bank cut the refinance limit to exporters to 15 percent of their eligible outstanding credit from 50 percent, and asked lenders to set aside more funds as provision for loans to property companies.

India becomes the second country, after Australia, among Group of 20 nations to take steps to boost borrowing costs, underscoring a rising threat of accelerating consumer and asset prices. At the same time, today’s decision risks damping a recovery from India’s weakest growth pace in six years.

Subbarao said today’s action wouldn’t affect the “liquidity position” of the banking system, since most commercial banks have government bond holdings amounting to 27.6 percent of their deposits.

Central banks globally have stepped up their vigil against inflation and asset-price increases.

Global Context

The Reserve Bank of Australia increased rates three weeks ago, citing costlier real estate. Norway’s Norges Bank is set to raise borrowing costs tomorrow, according to a Bloomberg survey. Bank of Korea Governor Lee Seong Tae said Oct. 23 that keeping rates at a record low may not be healthy for the economy.

At the U.S. Federal Reserve, officials under Chairman Ben S. Bernanke are reviewing whether recent gains in asset prices and narrowing credit spreads are justified as they try to ensure near- zero borrowing costs don’t create bubbles.

Subbarao said there are “definitive” indications that India’s economy is recovering. Accordingly, attention around the world has shifted from “managing the crisis to managing the recovery.” He said the prospects for Indian industry have become “more promising” and with the revival in the stock market and international financial markets, there will be a pick-up in investments.

Political Factor

The decision to signal tighter monetary conditions comes after Finance Minister Pranab Mukherjee told Bloomberg-UTV television channel on Oct. 8 that promoting economic growth and containing inflation are both important and the central bank shouldn’t “compromise” one for the other.

Subbarao is concerned about consumer-price inflation in India that’s running above 10 percent and may accelerate further after the weakest monsoon rains since 1972 create food shortages. India’s $1.2 trillion economy depends on the June to September rains to water crops.

India uses wholesale price data as its key inflation gauge; consumer price indexes are calculated on the basis of rural and urban workers and don’t capture the aggregate price picture.

Wholesale prices rose for a sixth week on Oct. 10, gaining 1.21 percent. Robert Prior-Wandesforde, an economist at HSBC Group Plc in Singapore, expects the rate to hit 8 percent by March 31. Asset prices are also rising, evidenced by the 75 percent climb in the Bombay Stock Exchange’s Sensitive index since January.

“The central bank faces a very delicate situation to manage growth and inflation,” said Ravi Sud, chief financial officer at Hero Honda Motors Ltd., India’s biggest motorcycle maker. “On balance, inflation is the risk as it will hurt consumption and eventually hurt growth as well.”

It will be a “big challenge” to sustain Hero Honda’s profit margins because of rising commodity prices, Sud said last week. Hero Honda, based in New Delhi, is the Indian affiliate of Japan’s Honda Motor Co.

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Ukraine’s government must endorse a package of policy steps and veto a wage and pension law approved by lawmakers before it gets the fourth chunk of a $16.4 billion bailout loan, the International Monetary Fund said.

The eastern European nation was due to receive $3.4 billion after a mission from the Washington-based fund arrived in Kiev on Oct. 12 to review implementation of economic reforms.

The IMF is demanding an “agreed policy package, including assurances that the wage and pension law approved by Ukraine’s parliament, which is at odds with the objectives of the authorities’ program, will be vetoed,” the fund said in an e- mailed statement yesterday.

Ukraine is relying on the loan, approved in November, to stay afloat after the global recession and credit crisis undermined demand for exports such as steel and hammered its banking industry. The IMF program was suspended for three months this year because of government disputes over state spending.

“Ukraine is interested in getting the IMF money as soon as possible as part of it is likely to be used to cover the state budget gap,” said Olena Bilan, an analyst at Kiev-based investment bank Dragon Capital. “I think it may take between two to three weeks for Ukraine to solve the issue.”

The loan program was renewed in May after Prime Minister Yulia Timoshenko pledged to narrow the state budget deficit. The country has received $10.6 billion in loan payments to date.

Failure to Comply

Since then, Ukraine has failed to comply with the loan’s terms, including raising natural gas prices for households and adopting laws needed to stabilize the financial system. At the same time, Ukraine’s parliament approved a law on Oct. 20 increasing social payments, including the minimum wage, in an effort to win voter support ahead of Jan. 17 general elections.

The IMF said in July that reducing the budget deficit would be key to releasing the next tranche. The government will run a budget gap equivalent to 8.6 percent of gross domestic product this year, the IMF estimates. That figure excludes the cost of rebuilding the financial industry.

“The mission found that the economic and financial situation in Ukraine is stabilizing as a result of policies under this program,” the IMF said yesterday. “Preserving these gains will require policy discipline and corrective actions in some areas.”

Wage, Pension Law

Timoshenko said on Oct. 21 she would ask President Viktor Yushchenko to veto the wage and pension law adopted by the parliament as it “undermines the budget and fuels inflation.”

Larysa Mudrak, the spokeswoman for Yushchenko, declined to comment when Bloomberg news called her yesterday.

The economy contracted an annual 17.8 percent in the second quarter, after shrinking 20.3 percent in the three months through March.

Yushchenko and Timoshenko have clashed over fiscal policy. The president has criticized the government running a “huge” budget gap, while the opposition has blocked the passage of legislation through parliament until its demands for higher social spending are met.

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Britain’s economy contracted unexpectedly in the third quarter of this year, squashing hopes of an end to the downturn and instead making the current recession the longest on record, official data showed Friday.

The Office for National Statistics said British gross domestic product fell by 0.4 percent between July and September, versus analysts’ expectations of a 0.2 percent rise, meaning the economy has contracted for six successive quarters for the first time since records began in 1955.

Year-on-year, output shrank by 5.2 percent, only marginally better than the record 5.5 percent annual fall registered in the second quarter. The quarterly decline between April and June was unrevised at 0.6 percent.

With an election due by next June, the length of the recession will be an embarrassment to Prime Minister Gordon Brown’s ruling Labour Party, particularly as many of Britain’s major trading partners are already out of recession.

The government has forecast that growth will resume by the end of the year and is counting on a stronger rebound in the coming years than most independent forecasters.

The ONS said there had been a peak-to-trough GDP fall of 5.9 percent during the current recession, compared to 6.0 percent between the second quarter of 1979 and the first quarter of 1981 — a period when there were some quarters of growth.

A surprise decline in the services sector was a key factor behind Friday’s disappointing figures. The sector contracted by 0.2 percent over the quarter, with the distribution, hotels and catering sub-sector leading the decline with a 1.0 percent quarterly drop.

Economists had already expected industrial output to be weak, following a sharp monthly drop in August, and the GDP data bore this out. Industrial production fell by 0.7 percent over the quarter, taking its annual decline to 10.4 percent.

(Reporting by David Milliken and Christina Fincher)

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Bankrupt U.S. chicken producer Pilgrim’s Pride Corp reported a $56.71 million profit for the fiscal fourth quarter that ended September 26 and the company said on Wednesday that, upon exiting bankruptcy, it will be a “stronger, leaner company.”

The financial report was filed late on Tuesday as required by the bankruptcy court. It is not comparable with quarterly earnings reports filed with the U.S. Securities and Exchange Commission because the data may be incomplete. But it does give an indication of the company’s financial health.

The earnings of $56.71 million were on revenue of $1.63 billion.

Pilgrim’s Pride entered bankruptcy in December 2008 and did not file a fiscal 2008 fourth quarter earnings report, but at that time it had forecast a fourth quarter loss of $802 million on sales of $2.17 billion.

It filed a reorganization plan in September and expects to exit bankruptcy by the end of this year 24 hour payday loan.

As part of its reorganization plan, Pilgrim’s Pride agreed in September to sell a majority stake to Brazilian meat company JBS SA. Earlier this month, U.S. regulators approved that deal, but bankruptcy court approval is still needed.

In addition, while under bankruptcy protection, Pilgrim’s Pride has closed and sold plants and reduced production.

“Our financial position has improved significantly this year,” Pilgrim’s Pride spokesman Gary Rhodes said in an email on Wednesday. “We have returned to profitability, the quality of our asset base has improved significantly and we are gaining additional business.”

Pilgrim’s Pride shares were down 1 cent at $6.39 in midday Pink Sheet trading.

(Reporting by Bob Burgdorfer, editing by Gerald E. McCormick)

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European Union-led plans to conclude a number of accords with Liechtenstein and other non- EU countries to fight tax fraud may stumble over resistance from two of the bloc’s smaller members, Luxembourg and Austria.

Sweden, which holds the rotating presidency of the 27- nation EU, seeks to get political backing from the region’s finance ministers meeting in Luxembourg today for several tax- cooperation deals that it says would enhance transparency. Luxembourg today said it will veto such plans because they go against agreements earlier this year that information exchange on tax matters should occur only on a case-by-case basis.

Leaders of the Group of 20 nations have agreed to clamp down on countries that don’t comply with global tax standards as part of efforts to battle the economic crisis. At the behest of the G-20, the Organization for Economic Cooperation and Development published a “gray list” that identified Austria, Luxembourg and Belgium, among others, as countries that haven’t implemented internationally agreed tax standards.

“At the G-20 meeting, it was agreed that there should be information exchange upon request in Europe,” Luxembourg Finance Minister Luc Frieden told reporters today before the ministers’ meeting. “What’s on the agenda today, however, would mean automatic information exchange for Austria, Belgium and Luxembourg. We think this is not the right way.”

Austria’s Finance Ministry said yesterday that the country would veto any deal that would force the country to join a system of automatic exchange of tax information while failing to shed light on anonymous trusts. Sweden said it seeks political agreement to sign an EU treaty with Liechtenstein and also to get backing for similar EU accords with Andorra, Monaco, San Marino and Switzerland.

‘Full Transparency’

“We need full transparency also as regards financial products to prevent individual states from hiding behind certain products — even while agreeing to information exchange — by saying there are products where we have no information about who the owner is and who is the beneficiary,” Austrian Finance Minister Josef Proell said today before the meeting.

Luxembourg is in favor of fighting tax fraud, “but we’re not in favor of having two different systems inside and outside Europe,” Frieden said in Luxembourg. “That’s why we will contribute constructively to today’s discussion, but we won’t agree to the proposed treaties with Liechtenstein and the mandates for negotiations with other countries.”

Luxembourg, Austria and Belgium have been taken off the OECD gray list after their governments signed a series of bilateral double-tax treaties in line with G-20 demands.

“We have to adhere to the conclusions of the Group of 20 nations, which concluded that information exchange should happen on request,” not automatically, Frieden said. “We can’t now say that the G-20 was wrong and we have to change the rules of the game.”

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Stephen Schwarzman is rapidly becoming the king of the thrill ride.

The chief executive of Blackstone Group, one of the most powerful private equity firms in the world, is betting that theme parks will deliver strong returns as the economy slowly climbs out of the hole.

Earlier this month, Blackstone bought Anheuser-Busch Inbev’s 10 U.S. theme parks for $2.7 billion, and it has now become the second-largest company in the business behind Walt Disney Co.

Schwarzman isn’t alone in wagering on roller coasters, water slides and animal shows. JPMorgan Chase & Co and a host of hedge funds are among those jostling for ownership of bankrupt regional theme park operator Six Flags Inc, which owns 20 parks in North America.

Schwarzman last week explained why he finds the $10 billion industry so appealing.

“There’s usually room in the theme parks business for efficiencies on the cost side and new investment, which drives traffic,” he said in an interview while attending a conference in Dubai.

“And there’s also a cyclical rebound which occurs when an economy goes from a severe recession to a more normal environment.”

He said Blackstone examines every opportunity to buy theme parks.

Analysts and consultants say the business is a perfect hunting ground for investors. The cash flow tends to be steady when the economy is in reasonable condition and the high initial cost of building a park creates barriers to entry, allowing parks to retain pricing power.

Even in 2008, when traffic fell for many of the world’s 25 top theme parks, more than 185 million people streamed through their gates.

Mind you, the cyclical nature of parks can also be their downfall. Park attendance tends to ebb and flow with the health of the economy and lower attendance, when coupled with the high cost of maintaining the parks, can easily dent profitability.

“Although attendance has held up pretty well thus far, any material slippage in attendance levels can generate quite significant declines in EBITDA (earnings before interest, taxes, depreciation and amortization) or in cash flow,” said Fitch Ratings analyst Mike Simonton.

Dennis Speigel, president of theme park consulting firm International Theme Park Services, forecasts attendance will be down as much as 9 percent in 2009. This will hurt not only sales of admission tickets, which accounts for half of theme park revenue, but also food and beverage revenue, which tends to offer high margins.

That has forced theme park operators to discount heavily to draw guests.

“You see Disney right now and it’s discounting more deeply, more broadly than they ever have in their history,” Speigel said. 

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Citigroup Inc posted a quarterly per-share loss as credit losses shrank to a still-hefty $8 billion and its commercial and investment banking revenue weakened.

The loss per share was narrower than analysts expected but still underlined how far the bank — which is one-third owned by the U.S. government after three bailouts — has to go to catch up with stronger rivals like JPMorgan Chase & Co.

“You can see how they’re making progress, but there’s a lot more work to do, they don’t look as good as Goldman Sachs right now,” said Matt McCormick, portfolio manager, Bahl & Gaynor Investment Counsel Inc. Citigroup’s shares closed down 5 percent at $4.75.

Citigroup’s securities and banking revenue declined by a third from the same quarter last year to $4.9 billion, while JPMorgan and Goldman Sachs Group Inc both posted big gains in banking.

That decline came as JPMorgan Chase and Goldman Sachs this week posted big increases in investment banking revenue, driven by bond trading.

Goldman had a strong trading performance in areas like corporate debt and stock options. Citigroup cited those same products as sources of weakness.

On a conference call, Chief Financial Officer John Gerspach noted that many troubled fixed-income assets at Citigroup are in a special asset pool, and their rising value would not help results in the securities and banking business even if they do bolster the bottom line.

Citigroup posted a net loss to shareholders of $3.2 billion, or 27 cents a share, compared with a loss of $2.9 billion, or 61 cents a share, a year earlier.

Analysts’ average forecast was a loss to shareholders of 38 cents a share.

COMPLICATED RESULTS

Analysts have struggled to determine when Citigroup will start posting profits from its main businesses. Some have forecast a return to “core profitability” as soon as early next year.

Citigroup has posted more than $100 billion of writedowns and consumer credit losses since the credit crisis began. It posted more than $37 billion of net losses between the fourth quarter of 2007 and the fourth quarter of 2008.

In every quarter this year, the bank has reported net income, but through one-time gains and accounting items.

In the third quarter, the bank posted net income of $101 million after a $1.12 billion tax benefit. But it reported a $529 million loss from continuing operations before taxes. The bottom line for shareholders was negative, including one-time losses from converting preferred shares into common stock.

Results were further muddied by accounting losses that resulted from the bank’s bonds performing better. 

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The pace of hedge fund launches is taking off after a year-long slumber, but the incoming class of start-ups is finding it tougher to beat out established giants and lure money from investors still scarred by last year’s turmoil.

As recently as four or five years ago, star traders could hang a shingle and instantly attract $1 billion from crowds of investors. But last fall’s market meltdown left investors strapped for cash and wary of the hedge fund model; launches slowed to a crawl.

Now, as markets revive and traders see an opportunity to be their own boss, Wall Street’s largest prime brokers expect a spate of start-ups in the next year — just a lot smaller.

“It’s a promising environment for new hedge funds,” said Alex Ehrlich, the former UBS prime brokerage chief who took over as global head of Morgan Stanley’s prime services business last month. “Money is coming in from seasoned investors, many of whom are preparing to redeploy capital.”

A few weeks ago, Morgan Stanley hosted its largest ever capital introduction conference for fund managers and investors. It’s a positive signal even if the meetings took place in suburban Rye, New York, and not Morgan Stanley’s traditional venue in Florida’s Palm Beach.

Still, times have changed. Even the most talented traders and managers will have to accept that $100 million is the new $1 billion when it comes to fund-raising.

“The number of start-up proposals that come by our desk each week is consistent with what we saw in earlier times, but the amount of capital they’re starting with is much smaller,” Goldman Sachs Group global co-head of global securities services John Willian said. “Very few funds will have over $1 billion at their launch.”

NEW CROP

Fund managers are in a more “normalized” environment, UBS AG U.S. prime brokerage chief John Laub said. They have to be satisfied with $50 million, even if the same managers might have attracted nine figures in boom times.

One key reason is that young guns are competing for investment dollars with established fund managers with long track records.

“Some of the biggest funds were closed to investors for a long time, but after last year’s downturn they reopened and people took advantage,” Laub said.

So even as hundreds of managers scour the Street for money, almost no one is hitting their original fund-raising targets, said Louis Lebedin, co-head of JPMorgan Chase & Co’s prime brokerage.

“On average, we’re seeing clients raise roughly half of what they achieved historically,” he said.

According to Hedge Fund Research, start-up activity peaked at 2,073 new funds in 2005 — an average of one every four hours. That sank to 659 last year as investors pulled out record amounts of cash and 1,471 funds were liquidated.

As recently as the first half of 2009, liquidations outnumbered launches 2-to-1. Now Wall Street’s top prime brokerage executives tell Reuters they are gearing up to win their share of a new wave of funds. 

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