My finance view

St. Louis-based Ralcorp Holdings has rejected ConAgra Foods’ offer to buy the company.

Ralcorp issued a statement Monday morning saying the company intends to move forward with its plans to spin off its branded food business, Post Foods, as a separate public company rather than sell the entire company to Omaha, Neb.-based ConAgra. ConAgra’s earlier offers to buy Ralcorp this year so far have been rejected.

Last week, ConAgra issued a statement saying it would retract its offer to buy Ralcorp for $94 a share, or nearly $5.2 billion, by today unless Ralcorp entered into negotiations for a sale. So far, Ralcorp’s board of directors has refused to meet with ConAgra executives about a sale fast payday loans.

“Post Foods is on track to be spun off to Ralcorp shareholders, at which time I will become chairman of the board of the new Post Foods,” Ralcorp Chairman Bill Stiritz said in a statement today. “Post Foods’ main asset is its great brand name — it has untapped potential. Looking forward, the management of this valuable asset will not be a combination of the past, but rather it will be creative, imaginative and adaptive in pursuit of shareholder value creation — nothing is off the table.”

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It slowly began to dawn on Esther and Bruce Huffman that perhaps they were being filmed.

“Warning,” the gray-haired, bespectacled grandmother reads off the screen. “You must stop recording before trying to close cyber link.”

Pause. “Maybe this recorded us,” says the neatly coiffed, rosy-cheeked man next to her.

“Aw, gee,” Esther replies.

The realization came toward the end of a nearly three-minute video that has launched the retired Oregon couple to YouTube stardom. They had unwittingly captured their first attempt at learning how to work the webcam on a new laptop.

The Huffmans met a couple of years after Bruce’s first wife died, at the retirement complex in which they both lived. She liked his vivacity; he thought she would be a sturdy rudder to his boundless energy.

In the video, she plays the straight man as she tries to make a serious attempt at the request of their children and grandchildren. He’s bouncing in his seat next to her, making monkey faces.

Esther had bought a laptop late this summer. Already a Facebook user, she was asked by her family to try recording videos for the amusement of the grandchildren.

In mid-August, the couple sat in front of their laptop, fiddling with the controls of a video recording program. Somehow, they got the program running. Somehow, they pressed “record.”

It was filming as Bruce jokingly fretted about his appearance. “I’m so sad, Esther, I’m so sad,” Bruce says with a sad-clown expression. “Look at all the wrinkles up there and the cracks in my head.”

There is singing.

“Hello my darling, hello my baby, hello my ga-doh-go,” Bruce intones, sliding from Looney Tunes into gibberish. “Lala-te-ki-ka.”

Bruce makes faces, leaning close to the laptop screen and blowing out his cheeks: “Now look at the monkey. That’s a pretty good monkey!”

When the couple realizes the webcam might have been recording their antics, they stiffen. But their 21-year-old granddaughter, Mindy, saw the video’s potential. With their permission, she uploaded the file, dubbing it “Webcam 101 for Seniors.” By Thursday, it was nearing 3 million views on YouTube.

In the crush of media that has descended on them, the Huffmans struggle to explain what made the video so compelling. After all, it was just a couple minutes of two Oregonians in a retirement community doing … well, not much.

Perhaps, Esther said, people were attracted to its joy. We’re under such a negative news barrage daily, she said. War, crime, natural disasters _ wouldn’t people rather watch an 86-year-old man singing Looney Tunes?

Lynette Paulson, Esther’s daughter, ventured that the unmitigated happiness in the video resonates with viewers.

“They want to see that joy,” Paulson said. “It just brings you up.”

Or maybe, said 27-year-old grandson Luke Erickson, it shows the possibility that age doesn’t mean infirmness or discontent, but that two spectacularly unself-conscious people eight decades on are capable of happiness and supporting and loving each other.

“I don’t know how to do this,” Esther complains in the video.

Bruce leans in to her.

“Whatever you do,” he says, “you do fine.”

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The Toronto stock market reduced afternoon losses but closed down more than 200 points amid plummeting gold prices and fresh anxiety over a potential default by the Greek government on its loans.

The S&P/TSX composite index was down two per cent or 238.71 points at 12,148.83. The TSX Venture Exchange lost 39.57 points to 1,745.53.

The Canadian dollar was up 0.40 of a cent at 100.80 cents (U.S.) after earlier dipping below parity for the first time since January as investors nervous about Europe

State-owned China Construction Bank Ltd., the country’s third-biggest commercial lender, says its first half profit rose 31 percent, buoyed by higher income from fees and interest.

The Beijing-based bank reported late Sunday that profit for January-June was 92.8 billion yuan ($14.5 billion), or 0.37 yuan (6 U.S. cents) a share. Profit for the same period a year earlier was 70.8 billion yuan.

Like other Chinese lenders, the bank has benefited from rising interest rates and higher fees and commissions as it diversifies its revenue sources.

Interest income in the first half of the year rose 24 percent, while income from fees and commissions jumped 42 percent to 47.7 billion yuan ($7.5 billion).

The bank said it was strictly controlling lending to industries designated by the government as having excess capacity, such as iron and steel, coal and plate glass. Meanwhile, it boosted lending to small and medium-size companies.

Smaller businesses have usually struggled to get bank financing. Such lending increased 9.5 percent by the end of June over December of last year, compared with a 6.8 percent increase in total corporate lending.

Construction Bank, which is relatively heavily exposed to the property sector, also said it was limiting lending to local government investment entities, whose debts have ballooned in the wake of a binge of recession-fighting construction investments.

Lending to the real estate sector climbed a modest 4.1 percent in January-June, the bank said.

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Hurricane Greg has gained a little strength as it heads farther out over the Pacific away from Mexico’s coast.

Meanwhile, a tropical depression formed Thursday night off the coasts of Honduras and Guatemala.

The U.S. National Hurricane Center in Miami says winds are at 35 mph (56 kph) and that the government of Guatemala has issued a tropical storm watch for its coast. Tropical storm force winds are also possible along the north coast of Honduras and the Bay Islands.

It is moving west and is expected to strengthen into a tropical storm.

Greg’s maximum sustained winds had decreased to 80 mph (130 kph) by late Thursday.

The Category 1 hurricane is expected to weaken more over the next couple of days as it heads over cooler waters.

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The wars in Iraq and Afghanistan are winding down, Osama bin Laden is dead, and the federal government is deeply in debt. This spells the end of what was a golden decade for the defense industry.

In the decade since the Sept. 11 attacks, the annual defense budget has more than doubled to $700 billion and annual defense industry profits have nearly quadrupled, approaching $25 billion last year.

Now defense spending is poised to retreat, and so are industry profits. “We’re about to go into the downhill side of the roller coaster here,” said David Berteau, a defense industry analyst at the Center for Strategic and International Studies.

Congress agreed last month to cut military spending by $350 billion over the next 10 years. The defense budget will automatically be cut by another $500 billion over that period if lawmakers fail to reach a deficit-cutting deal by November.

Defense industry stocks have already begun to suffer; they are lagging the S&P 500 in recent months. During the last defense spending downturn, which lasted from 1985 to 1997, defense stocks underperformed the broader market by 33 percent, according to an analysis by RBC Capital Markets.

The Sept. 11 attacks forced the world’s biggest and best-funded military to quickly retool itself. It needed to develop technologies, weapons and strategies to find and fight an elusive network of terrorists that seemed more sophisticated and dangerous than ever imagined.

The U.S. spent $1.3 trillion in the ten years following the attacks chasing al-Qaida and fighting two wars. That was on top of baseline military spending in excess of $4 trillion.

“After 9/11 the floodgates opened,” says Eric Hugel, a defense industry analyst at Stephens Inc.

The defense budget grew from $316 billion in 2001 to $708 billion in 2011. Federal spending on homeland security, which includes everything from airport security to border control, also rose dramatically. Last year dozens of federal agencies, including the Department of Homeland Security, spent $70 billion on such programs, according to the Office of Management and Budget. That’s up from $37 billion in 2003, the first year after DHS was formed.

All that spending was reflected in the soaring performance of the defense industry, led by the top five defense contractors: Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and Raytheon.

In 2001, revenues for U.S.-based defense contractors totaled $217 billion, according to data compiled by the analytics firm Capital IQ. By 2010 revenues had grown to $386 billion. Profits grew more than twice as fast over the same time period, from $6.7 billion to $24.8 billion. Contractors based abroad, such as BAE Systems, also flourished. BAE was the sixth biggest defense contractor in 2010, with $7.2 billion in U.S. military contracts.

Stock prices of defense companies in the S&P 500 index have risen 67 percent since September 11. The index as a whole climbed 8 percent in that period.

Military spending typically rises during wartime and falls during peacetime. But after Sept. 11, and as the wars in Iraq and Afghanistan evolved, it became clear the country needed to spend money on very different military technologies and strategies.

Fighter jets, missile defenses and other Cold War-era systems designed to deal with the perceived threats of nation-states were less useful. The U.S. military had to increase its ability to find, recognize and track enemies that were scattered in many countries and dispersed among the civilian population same day payday loans.

During the war in Iraq the military realized that it couldn’t protect troops from a low-tech, but potent threat: jerry-rigged road side bombs. In Afghanistan, commanders needed ways to find and root out insurgents that had tucked themselves in caves in hard-to-reach mountains.

These challenges led to new hardware. Among the most important:

_ Transport trucks that protect troops and supplies from roadside bombs. Mine-resistant, ambush-protected vehicles, or MRAPs, quickly became crucial equipment for the Army. Oshkosh Corp., a maker of these trucks, was the 9th biggest military contractor last year. Before 9/11, it wasn’t in the top 20.

_ Identification tools. Soldiers now carry small portable devices that identify a person by scanning fingerprints, irises and faces. These devices, made by L-1 Identity Solutions, which was recently acquired by Safran, can weigh as little as 3 pounds, transmit data by several different wireless methods and remember 1 million identities.

_ Unmanned aircraft. General Atomics’ Predators, drones that can fire missiles, have killed several al-Qaida commanders. Lockheed Martin’s RQ-170 Sentinel reportedly kept watch on Osama bin Laden’s compound as the raid that killed him was taking place.

Another type of company surged in importance in the last decade: Companies that provide services and support to military operations.

As of March, the Defense Department had more contractor personnel in Afghanistan in Iraq than uniformed personnel, according to a study by the Congressional Research Service. Afghanistan has the highest ratio of contractors to military personnel than any other U.S. war.

This has boosted companies like KBR, once a division of Halliburton. KBR, which builds and maintains military bases and other facilities, had $4.7 billion in military contracts in 2010, up from $860 million a decade earlier.

Analysts say the heavy reliance on contractors should allow the military to wind down spending more quickly, because it is easier to terminate a contract than to reduce uniformed troop levels. Also, the government isn’t responsible for pensions, health care and other benefits for contract workers, which should save money.

Equipment spending is already being scaled back. In 2009, funding for the F-22 fighter jet, a $65 billion program, was discontinued. Spending on the F-35 fighter jet is in danger of being cut back. An advanced warship called the DDG1000 has been canceled, and an upgrade to the Bradley tank called the Ground Combat Vehicle may also be scaled back or canceled.

Over the past six months, defense company stocks in the S&P 500 index have fallen 16 percent. That compares with an 11 percent decline for the entire index.

During wartime, when dollars are flowing, the new equipment developed to battle new enemies is used together with the equipment that had been developed for earlier wars. But as budgets shrink this time, some of the technologies that were developed during the past decade, such as the unmanned aircraft, will have to replace older systems entirely.

“The era of manned airplanes should be seen as over,” says Michael O’Hanlon, a defense policy expert at the Brookings Institution. “The problem is nobody wants to give up the previously agreed on platform.”

Jonathan Fahey can be reached at http://www.facebook.com/Fahey.Jonathan

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Who gets hurt by a credit downgrade?

The U.S. government could end up paying higher interest rates when it has to borrow money, says Steve Foerster, a finance professor at the University of Western Ontario

What relief rally? Hope that the stock market would surge on news of Washington’s debt ceiling deal has given way to pessimism. Increasingly defensive-minded investors are adapting to the reality that the economic recovery is stalling, if not ending.

Stocks rose slightly on Wednesday to snap an eight-day string of declines that sent prices down nearly 7 percent.

That stumble complicates matters for investors who recently pulled cash from the market, fearing a government default was a strong possibility. With that worry behind, the question is what to do next.

Richard Shortt had expected to be buying stocks, putting his sidelined money back to work. Yet he was at his home computer Wednesday, selling some of his stocks, and trimming investments in stock mutual funds. The 66-year-old from Somerville, Mass. put the proceeds into safer money-market mutual funds _ the same actions he took last week, when he sold stocks before Congress and President Obama reached the debt ceiling deal.

Shortt kept selling because he worries there’s a growing risk that the economy will slip back into recession. He notes the debt deal emphasizes spending cuts, without revenue increases, or stimulus spending that he believes is needed to create jobs.

“It just doesn’t seem like a formula for very happy times, for a long, long time,” says Shortt, a semi-retired small business consultant. “I’m preparing for a long downturn, but leaving options open, to see if things do change.”

President Obama’s spokesman said Wednesday that the administration doesn’t believe there’s a risk that the economy will head back into a recession.

But investors like Shortt have become more cautious in response to troubling news, such as Tuesday’s report that consumers cut spending in June for the first time in nearly two years. A weak manufacturing report came out a day earlier, and the government last week said the economy’s growth in the first half of this year was the weakest since the recession ended in June 2009. Another influential report is due Friday, when the government will release its employment data for July, which will include the unemployment rate and number of jobs created.

Yet some sense an opportunity. The market research firm Birinyi Associates on Wednesday said that market indicators it tracks suggest stock prices could be set to rebound. Birinyi said too many investors have left prematurely, which creates an opportunity for buyers.

Still many are anxious:

_Stocks: The Dow Jones industrial average on Wednesday finished up 0.3 percent. But it was down most of the day, which put the market at risk of posting its longest losing streak since 1978, the last time there were nine daily declines in a row.

After the recent losses, a broader stock index, the Standard & Poor’s 500, is almost exactly where it started the year.

Investors withdrew a net of nearly $8.8 billion from stock mutual funds during the week that ended last Wednesday, according to the Investment Company Institute. Investors also pulled money from international stocks funds, withdrawing a net $1.3 billion.

_Gold: Prices hit a new record on Wednesday, not adjusted for inflation, topping $1,670 an ounce. Gold prices have risen nearly 13 percent since July 1, and have steadily risen since the start of 2009, when an ounce of gold sold for $880 payday advance.

Investors believe gold is safe because it tends to hold its value when stocks are falling, and often rises when the dollar falls in value against other currencies, as it did Wednesday.

HSBC precious metals analyst James Steel said in a report that gold’s continued rise after the debt deal was reached indicates the rally “is clearly supported by more than just the long drawn-out political arguments over the debt ceiling.”

_Treasurys: Prices for Treasury bonds have been rising since the debt deal concluded, reflecting greater investor demand for the government IOUs. Their reputation as a safe haven has been renewed now that the government avoided a default. Treasury yields move opposite their prices. On Wednesday, the yield on the 10-year Treasury slipped to 2.61 percent, its lowest level since November. That’s even though Moody’s Investors Service assigned a negative outlook to U.S. debt, but confirmed its AAA rating, for now.

_ Money-market mutual funds: Investors had been withdrawing huge sums from these investments a few days ago, but reversed course once the debt ceiling deal was signed into law. Money funds are typically safe places to stash cash, because they invest in only the safest forms of debt securities. But many money funds invest in Treasurys, a fact not lost on investors who withdrew money as the debt ceiling talks stalled. Nearly $122 billion was withdrawn from money funds in the seven-day period that ended Monday, a surge that cut the $2.6 trillion that the funds hold by almost 5 percent, according to Crane Data. But there was a shift on Tuesday with the debt deal’s conclusion, with a net $6 billion flowing back in. That new cash suggests investors once again see money funds as safe.

_ Volatility: The stock market’s fear gauge, formally known as the Chicago Board of Options Exchange’s Volatility Index, has risen to levels last seen in August 2010. The VIX, as market pros call it, is up 35 percent over the past eight trading days. In an unusually volatile market, investors are willing to pay hefty premiums for options that offer protection from price swings of stocks in the Standard & Poor’s 500 index.

The recent return of volatility worries Harvey Rowen. He’s trying to figure out when to shift more money into stocks on behalf of individual investors whose portfolios he manages as CEO of San Francisco-based Starmont Asset Management.

About 80 percent of the clients that Rowen’s firm contacted during the debt ceiling debate chose to sell a portion of their stock holdings and leave the money in cash. But Rowen was reluctant Wednesday to move that money back into the market, noting that negative economic reports have offset positive news from the debt deal.

He’s considering adding more alternative investments to the portfolios, such as gold and other commodities, but worries they carry big risks as well.

“It’s a hard question now what to do,” says Rowen. “It’s a struggle to find investments that are prudent, and will give our clients a reasonable return….So for now, we’re sitting on that cash.”

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The economy slowed in the first six months of 2011 to its weakest pace since the recession ended. High gas prices and scant income gains forced Americans to sharply pull back on spending.

The Commerce Department says the economy expanded only 1.3 percent in the April-June period. And it downwardly revised the January-March figures to show growth of just 0.4 percent, the weakest since the recession ended two years ago.

Consumer spending was almost flat this spring. It increased only 0.1 percent, after 2.1 percent growth in the winter. Spending on long-lasting manufactured goods, such as autos and appliances, fell 4.4 percent.

Government spending fell for the third straight quarter. And state and local governments cut spending for the seventh quarter in eight since the recession ended.

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Moody’s downgraded Cyprus’ credit rating by two notches over concerns about the economic toll of a deadly blast that took out the island nation’s main power station.

As well as cutting its rating on Cyprus from A2 to Baa1, the credit rating agency also slapped a negative outlook on the country Wednesday, meaning that another downgrade may be in the offing.

Moody’s said the destruction of the Vasilikos power plant as a result of a July 11 blast at a nearby naval base has amplified concerns about the fiscal situation in Cyprus, which began using the euro currency in 2008.

As well as killing 13 people, the blast has led to rolling, two-hour power cuts to cope with demand.

“This incident has caused material disruption to the Cypriot medium-term economic and fiscal position,” Moody’s said, adding that it has reduced its growth forecasts for Cyprus to zero percent and one percent in 2011 and 2012 respectively.

Before the blast, the European Commission projected Cyprus’ economy to grow by 1.5 percent this year and 2.4 percent in 2012.

Moody’s also said that an “increasingly fractious political climate” in the wake of the blast raises the risk that planned economic reforms may be watered down or delayed.

Public anger at the government over the blast of dozens of seized containers filled with Iranian munitions has yet to subside. Thousands continue to protest outside the presidential palace, accusing the government of negligence and calling on President Dimitris Christofias to quit.

Some 98 containers, most of them filled with gunpowder, were left stacked in an open field since being seized from a Cypriot-flagged ship in 2009 that the U.N. said breached a ban on Iranian arms exports.

The Cyprus government and opposition leaders agreed last week to cuts cost to buoy the economy in the wake of the blast.

But there is still disagreement on how deep cost cuts should go, especially to the public payroll that takes up about a third of the island’s euro8 billion ($11.58 billion) budget.

Cyprus’ top banker last week warned that the blast may force Cyprus to seek a bailout if deep spending cuts aren’t swiftly made.

Cyprus has pledged to the EU to cut its fiscal deficit which now stands at 5.3 percent to 3 percent of GDP by next year.

Moody’s also said there is a material risk that the Cypriot government may need to prop up some of the island’s banks over the next few years because of their heavy exposure to bailed-out Greece.

“Therefore, a period of prolonged macroeconomic stress would increase the likelihood that these contingent liabilities will crystalize on the Cypriot government’s balance sheet,” said Moody’s.

Moody’s also pointed to the Cypriot banking sector’s large size relative to the economy, as domestic bank assets total 600 percent of the island’s euro17.4 billion ($25.18 billion) gross domestic product. Around 40 percent of the total loans of the island’s three largest domestic banks are to customers based in Greece.

However, Cypriot banks should remain well capitalized over the short term after strengthening their capital reserves over last year.

The agency said it would consider upgrading Cyprus’ credit rating if the government moves ahead with large scale structural reforms. But it warned of additional downgrades if those reforms are watered down or significantly delayed.

Credit rating agencies Fitch and Standard and Poor’s have also downgraded Cyprus in recent months, mainly because of the island’s Greek exposure.

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