My finance view

Reflecting on a challenging year, President Barack Obama says he’s hoping for more economic progress following action by Congress to prevent tax increases at the start of 2012.

“It was good to see members of Congress do the right thing for millions of working Americans,” said Obama, using his weekly radio and Internet address Saturday to deliver a New Year’s message.

He said the public made itself heard on a Social Security payroll tax cut and that was one big reason that lawmakers agreed to extend it for two more months.

The American people, Obama said, “had the courage to believe your voices could make a difference.”

The president said he expects Congress to finish the job when lawmakers return to Washington in January and extend the tax cut through the end of the year.

Reflecting on 2011, Obama said it was a time of great challenge and progress, including the end of the war in Iraq, the death of Osama bin Laden and signs of an economic recovery.

“There’s no doubt that 2012 will bring even more change,” Obama said. “And as we head into the new year, I’m hopeful that we have what it takes to face that change and come out even stronger _ to grow our economy, create more jobs and strengthen the middle class.”

On the eve of an election year, Obama said the months ahead will help determine “what kind of country we want to be and what kind of world we want our children and grandchildren to grow up in.”

Sen. Johnny Isakson, delivering the GOP address, outlined his party’s commitments to the American people for 2012.

The Georgia lawmaker said his party’s No. 1 goal is to make it easier for small businesses to create jobs.

“We’ll accomplish this by focusing on three things: fundamental tax reform, regulatory reform and energy security,” he said.

Isakson said that while some people may think Congress will be too consumed with the 2012 elections to accomplish anything significant, the public deserves better.

“Americans cannot wait until after the November election,” he said. “They need us to do our job and do it right now to create an economic climate that makes it easier to put people back to work.”

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Workers in the U.S. earning the minimum wage are worse off now than they were four decades ago.

The CHART OF THE DAY shows that after adjusting for inflation, the federal minimum wage dropped 20 percent from 1967 to 2010, even as the nominal figure climbed to $7.25 an hour from $1.40, a 418 percent gain.

The decline would have been worse if not for increases that took place from 2008 through 2010 in how much employers were legally obligated to pay. Combined with more stable consumer prices, those adjustments helped trim the reduction in earnings from 41 percent at the end of 2007, following a decade of no change in minimum pay.

U.S. stock futures are falling Monday as the initial enthusiasm over last week’s agreement on fixing the European debt crisis is replaced by worries that it won’t be enough.

The deal would allow for a central European authority to oversee future budgets for the 17 countries that use the euro. But it doesn’t help cut existing debt, which has caused Greece, Ireland and Portugal to need bailouts and is threatening Italy and Spain.

Less than an hour before the opening of trading in New York, futures for the Dow Jones industrial average are down 99 points to 12,044 while futures on the broader S&P 500 index are down 11 points to 1,242.

Markets in Europe are dropping, with France’s CAC-40 down 1.5 percent to 3,123.71, Germany’s DAX off by 1.2 percent to 5,862.44, and London’s FTSE 100 down 0.5 percent to 5,499.62.

Credit rating agency Moody’s said last week’s summit “offers few new measures.”

“The announced measures therefore do not change Moody’s previously expressed view that the crisis is in a critical and volatile stage,” Moody’s said, warning that it still intends to review all EU governments’ ratings for possible downgrades during the first three months of 2012.

Asian stocks mostly closed higher, as they caught up with the gains made in Europe and the U.S. on Friday.

Japan’s Nikkei 225 index jumped 1.4 percent to close at 8,653.82. South Korea’s Kospi added 1.3 percent to 1,899.76 and benchmarks in Singapore, Taiwan, Australia and Indonesia also rose.

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OTTAWA—The New Housing Price Index rose 0.2 per cent in October after a similar increase in September.

Statistics Canada reports the metropolitan regions of Toronto and Oshawa, and Edmonton were the top contributors to the increase.

The agency says their positive impact was offset in part by decreases in Vancouver and Victoria.

Between September and October, Edmonton (up 0.6 per cent) posted the largest monthly price advance, followed by Toronto and Oshawa (0.4).

In Edmonton, price increases were primarily the result of higher material and labour costs as well as higher land values, while in Toronto and Oshawa, some builders cited good market conditions paperless payday loans.

The agency says prices were unchanged in nine of the 21 metropolitan regions surveyed.

The most significant monthly price declines were recorded in Victoria (down 0.6 per cent) and Saskatoon (down 0.3).

Year over year, the index was up 2.5 per cent in October.

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Ski resort operator Peak Resorts filed documents with federal authorities this month that more than doubles its plans for an initial public offering of its common stock to $103.5 million. 

Wildwood-based Peak Resorts, which owns the Hidden Valley ski area locally and owns or leases 11 other ski properties nationwide, originally filed for a $40.3 million IPO in mid-April, but shelved its plans to go public for several months.

According to documents Peak Resorts filed with the Securities and Exchange Commission on Nov. 21, the company has significantly expanded its IPO plans and now will offer 5 million shares of its stock  on NASDAQ under the symbol PEAK, priced between $16 and $18 per share.

The prospectus also reveals other details about the company’s operations and its growth in recent years. Peak Resorts, led by CEO Tim Boyd, has grown its revenue 305 percent from fiscal 2006 to fiscal 2011, when it had $98 million in revenue, according to its prospectus. In fiscal 2010, the company had $90 million in revenue.

Peak Resorts, which says it owns more ski areas in the U.S. than any other company, plans to use the $79 million in proceeds from the offering to repay debt on several of its properties, including $9 million to purchase the land beneath two ski areas in northeastern Pennsylvania, Jack Frost and Big Boulder, that it currently leases. The properties are both under contract with closing dates expected before the end of the year. 

Peak Resorts also plans to use $6.5 million of the IPO proceeds to construct a new high-speed chair lift at its Mount Snow ski area in southern Vermont.

The economic downturn did not stop customers from hitting the slopes, Peak Resorts stated in its prospectus, and the number of visitors to its 12 ski resorts increased during the past two winter ski seasons. 

Locally, Peak Resorts’ 250-acre Hidden Valley ski area and tube park opens from mid- December through February. Boyd developed Hidden Valley in 1982 and incorporated Peak Resorts as a holding company in 1997. In Peak Resort’s fiscal year, which ended April 30, 2011, Hidden Valley had $3.6 million in revenue, accounting for 4 percent of Peak’s total revenue.

 

 

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Will Santa drop any loot into your 401(k) or IRA this year?

Typically, investors can count on a “Santa Claus rally” in the stock market between Thanksgiving and New Year’s, as an upbeat mood about the coming year prompts investors to indulge in stocks along with all the holiday fare.

But this year, questions abound about whether a fragile economy could fall back into recession. The European debt crisis looks increasingly out of control, while the latest chapter in Capitol Hill dysfunction raises the chance of higher taxes for all taxpayers and a smaller safety net for the unemployed.

“Supercommittee failure means that there is a greater risk that the payroll tax cut expires, though there is still a chance this could be attached to a year-end spending bill,” said Goldman Sachs economist Alec Phillips.

Payroll tax relief, which was enacted to put more spending money into consumers’ pockets, will expire at the end of the year if Congress takes no action, and so far, Congress has shown no inclination to work cooperatively on tax or deficit-cutting measures. If the payroll tax cut disappears, the government will collect about $110 billion more a year, but that money will no longer be in paychecks as potential spending money.

That’s a concern to investors, because the economy needs consumer spending to grow. In addition, extended unemployment benefits, which provide people with about $50 billion a year to spend, would not be available either.

JPMorgan Chase economists have estimated that if the stimulus expires, the economy will go from a 3 percent annual growth rate this quarter to a 1.5 percent growth rate in the second quarter of next year as households encounter a ’sharp hit” to their after-tax income. The economists expect “consumer spending to stagnate.”

The stock market has slid the last couple of days as investors have envisioned ongoing paralysis, a recessionary threat and the potential of a negative credit rating for U.S. debt. Investors were shaken in August, when Standard & Poor’s responded to government inaction on the nation’s debt by knocking the U.S. credit rating down a half a notch, but the agencies have suggested recently that no further downgrades are planned.

That should be a relief to investors, because downgrades can inflict higher borrowing costs on countries, making it difficult to operate. But instead of U.S. Treasury yields rising, as they would based on fear of a downgrade, the 10-year bond dipped below 2 percent this week based on a different concern: Moody’s economist John Lonski said investors were worried that automatic cuts in government spending and further federal deficit trimming would slow the economy. Investors move money to safety in bonds, and consequently, yields fall.

Besides the $110 billion payroll tax cuts and $50 billion in unemployment help that could disappear, there are trillions in additional measures that will arise over the next year that could interfere with consumer spending and be a drag on the economy. If the “Bush tax cuts,” enacted in 2001 and 2003, expire according to schedule at the end of 2012, consumers will have about $4 trillion less to spend over the next 10 years.

For middle-income people, the tax cuts that could expire include a $1,000 child tax credit for parents. But it will decline to $500 without congressional action. Low-income taxpayers also now have a 10 percent tax bracket, but that will escalate to 15 percent if the deadline for an extension runs out. For middle-income and affluent people, the current tax structure will allow about 33 million people to escape the higher alternative minimum tax, if Congress keeps it going. For the rich, the expiration of an estate tax break will mean paying taxes on assets over $1 million, compared with protecting $5 million now.

Meanwhile, as investors worry that a wrong move on taxes and spending could hurt consumers and undermine the economy, trouble in European banks is starting to affect distant areas. Fearful banks are holding on to capital instead of lending, and strategist Ed Yardeni notes that’s interfering with lending in emerging markets.

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UPDATED at 7:15 a.m. with more stories from early morning shoppers.

HAZELWOOD

As protests erupted in Rome and other cities, Italy’s new premier unveiled his economic plan Thursday, vowing to spur growth yet fairly spread the sacrifices Italians must accept to save their country from bankruptcy and the eurozone from a disastrous collapse.

As Mario Monti spoke, riot police clashed with anti-austerity protesters in Milan, signaling the depths of resistance the economist-turned-premier will have to overcome if his plan is to succeed.

“The end of the euro would cause the disintegration of the united market,” the former European Union competition commissioner told the Senate ahead of a confidence vote on his one-day-old government. “The future of the euro also depends on what Italy will do in the next weeks. Also, not only.”

Monti formed his new government Wednesday, shunning politicians and turning to fellow professors, bankers and business executives to fill key cabinet posts.

A day later he revealed plans to fight tax evasion, lower costs for companies so they can hire more and possibly lower taxes rates for women, to encourage their increased participation in the work place. Hee warned Italians they must brace for more “sacrifices,” including the probable return of a property tax on primary residences.

“We must convince the markets we have started going down the road of a lasting reduction in the ratio of public debt to GDP. And to reach this objective we have three priorities: budgetary rigor, growth and fairness,” Monti said.

He said he would quickly work on lowering Italy’s staggering public debt, which now stands euro1.9 trillion ($2.6 trillion), about 120 percent of its GDP.

“But we won’t be credible if we don’t start to grow,” Monti said.

His administration must restore confidence in the country’s financial future and avoid contagion that would worsen the eurozone’s debt crisis. Italy’s spiraling financial crisis helped bring down media mogul Silvio Berlusconi’s 3 1/2 year-old government last week, after months of squabbling over how to save Italy from financial ruin.

Monti’s choice of unelected experts for his Cabinet and the prospect of tough reforms have fueled unrest. In cities from north to south, students clashed with police in protests against feared budget cuts Thursday, while previously planned transport strikes idled buses and trains.

Police in riot gear scuffled with students in Milan, as they tried to march to Bocconi University, which educates Italy’s business elite. Monti is Bocconi’s president.

“The government of the banks,” read one placard held by a youth in Milan.

In Palermo, Sicily, demonstrators hurled eggs and smoke bombs at a bank, and protesters threw rocks at police who battled back with pepper spray, the Italian news agency ANSA reported. One protester was injured in the head in Palermo, where police charged demonstrators who were trying to occupy another bank.

In Rome, hundreds of students gathered outside Sapienza University, while others assembled near the main train station. They marched toward the Senate, where lawmakers were holding a confidence vote in the evening on the new government.

Riot police in Turin reported several police injuries as they held back protesters trying to break through barriers in three locations.

Last week, parliament gave final approval to a package that will reform pensions, slash state spending and open up the economy. But Monti strongly suggested that much harsher medicine was needed to heal Italy’s finances and revive the stubbornly stagnant economy direct payday lenders.

He indicated Italians would be paying new taxes. Italy’s lack of a property tax on primary residences _ a move backed by Berlusconi_ is “a peculiarity, if not an anomaly” in Europe, Monti said.

Monti, who also is serving as finance and economy minister, said if Italy fails to grow and does not stay united, “the spontaneous evolution of the financial crisis will subject us all, above all the weakest, to far harsher conditions.”

He pledged to tackle chronic and widespread tax evasion to increase revenue, but also to further his goal of social fairness. Hiding or underreporting income by the self-employed is rampant in Italy, and workers with paychecks have long complained they bear an unfair share of the nation’s high taxes.

Monti said his government would consider reforms to lower Italy’s “elevated” tax rates. Employers say high payroll taxes discourage them from hiring.

In the workplace, Monti called for structural reforms but added “we must avoid the anguish which accompanies it.”

The question of how long Monti’s government will last has sparked intense debate among Italy’s political parties.

Some, like Berlusconi’s longtime ally the Northern League, refuse to back Monti’s government. Monti has said he intends to govern until the legislative period expires in the spring 2013. The League, which is strong in the affluent north, wants elections earlier.

Holding both thumbs down _ in a sign of rejection _ at the end of Monti’s speech was Senator Roberto Calderoli, a Northern League leader.

Pro-Catholic parties have said they would give “carte blanche” to the Monti government.

Some in Berlusconi’s conservative People of Freedom Party have called for early elections, but top party officials have said they will support Monti in parliament to achieve anti-crisis measures.

Monti indicated he was looking for wide support among Italians.

To encourage more women in jobs _ at 40 percent, the rate of Italian women in the workforce is one of Europe’s lowest _ he said he would consider lower tax rates for them.

In Rome, protester Titti Mazzacane said she was skeptical about the new government. While Monti chose “decent and competent people,” the government … “is a little bit too free-market liberal. I am a bit scared,” said the 53-year-old elementary school teacher.

Public schools have been hard hit by budget cuts from previous Italian governments.

Antonio Romano, who was distributing leaflets to protesters, said the government’s strategy is “make the workers and retired people pay for the crisis, not those who provoked the crisis. I mean big business, bankers.”

A transit strike of several hours idled the subway system and many buses in Rome. Milan was hit by a similar transit walkout.

State railways said a 24-hour nationwide train strike, called by one small union, affected only 5 percent of the train rains.

Alitalia reduced flights Thursday, warning that a four-hour afternoon strike in the air travel sector could cause flight delays. The walkout mainly involved air traffic controllers and airport workers, not Alitalia personnel.

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U.S. stock futures are edging lower ahead of a full day of economic reports.

Investors will receive reports Wednesday on consumer prices, factory production, foreign demand for U.S. debt and a measure of homebuilder confidence. Positive reports could be further evidence that the U.S. economy is not in danger of slipping back into another recession.

Concerns linger about Europe’s debt crisis. Greece’s new prime minister Lucas Papademos’ government will face a confidence vote later in the day. The government must pass austerity measures to receive additional financial assistance.

Dow Jones industrial average futures were down 40 points, or 0.3 percent, to 11,998 two hours ahead of the opening bell. S&P 500 futures fell 7, or 0.5 percent, to 1,247. Nasdaq 100 futures shed 4, or 0.2 percent, to 2,356.

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Airbus on Monday fattened an order for its new A320neo jets and Boeing snagged another customer for the 787 at the Dubai Airshow as Mideast buyers showed they remain bullish despite the uncertain global economy.

The deals, which followed a record $18 billion airplane order from Dubai airline Emirates the day before, added ammunition to forecasts from the two major aircraft manufacturers that predicted the region will continue to generate hundreds of billions of dollars in demand for new planes for years to come.

European manufacturer Airbus predicted Monday that the Middle East will require some 1,920 new planes worth more than $347 billion through 2030. It estimates Mideast passenger numbers will grow 6.4 percent annually _ well above the predicted world average increase of 4.8 percent.

Boeing thinks the potential market is even bigger. Its own forecast, released shortly after its rival’s, puts Mideast demand at 2,520 planes worth $450 billion by the end of next decade.

Much of the growth is driven by fast-growing Gulf airlines, which have boomed in recent years by funneling long-haul travelers through expanding global hubs like Dubai and the Qatari capital Doha.

In terms of deals, Airbus scored the biggest prize of the day, boosting an existing commitment from Kuwait’s Aviation Lease and Finance Co. for the A320neo to 50 planes. The leasing firm, known as ALAFCO, also took options to buy another 30 of the planes.

The deal extends an initial agreement signed by ALAFCO at this summer’s Paris Le Bourget show, when it agreed to buy 30 of the narrow-body planes.

The A320neo offers a new engine option and other features designed to use 15 percent less fuel than older models of the single-aisle A320. It is scheduled to enter service in 2015.

The deal, before options, is worth about $4.6 billion at list prices, though buyers typically negotiate discounts.

Leasing companies like ALAFCO rent out planes to airlines, so the carriers don’t have to assume the costs and risks of owning all the planes in their fleets. It leases planes mainly to regional airlines in the Middle East and Asia.

Boeing Co., meanwhile, picked up a new regional customer for its much-hyped 787.

It and Oman Air said the carrier ordered six Boeing 787-8 aircraft, though the twin-engine planes won’t translate into additional business for the Chicago-based plane maker. That’s because Oman Air is taking over orders previously placed by ALAFCO.

Each 787-8 costs $193.5 million at list prices.

ALAFCO Chairman Ahmed al-Zabin said the decision to shift the 787 orders to Oman Air represented an extension of the company’s view that it is a “strategic partner” for Boeing in the region. It previously announced plans to lease the planes to the Omani carrier.

“Whatever is good for us and Boeing and the customer, we just do it, and that’s what you’re seeing,” he said when asked about the Oman Air deal.

Japan’s All Nippon Airways operated the first commercial flight of the 787 late last month following a series of manufacturing delays. The plane is made of lightweight composite materials and promises to be 20 percent more fuel-efficient than similar planes.

Long lines of curious spectators have lined up in Dubai to step aboard a 787 display model, which is making its debut at the Mideast airshow.

Oman Air is the flagship carrier of the Sultanate of Oman, located on the southeastern tip of the Arabian Peninsula. The airline, set up in 1993, is far smaller than Gulf behemoths such as Dubai’s Emirates and Qatar Airways.

Qatar Airways is among the regional carriers that have already signed up for the Dreamliner. It has ordered 30 of the planes and has options for 30 more. The carrier is expected to announce additional aircraft orders at this week’s show.

Its Dubai-based rival Emirates, the region’s biggest carrier, on Sunday placed an unexpectedly large order for 50 more Boeing 777s, signaling it remains optimistic about its ambitious growth plans despite the shaky global economy.

Boeing said the deal, worth $18 billion at list prices, was its biggest-ever single order by value.

In an interview Monday, Emirates airline President Tim Clark said the carrier would have “no problem” filling those new planes and the nearly 190 other aircraft it has ordered. It helps that the latest batch of 777s won’t begin to be delivered until 2015, giving the world economy time to recover.

“We’ve always been fairly bullish, and that is reflected in the size of the order and the value of the order. We’ve always taken a long-term view in regards to what is happening in the global economy. And we still take that view,” Clark said.

Clark said Emirates needs the extra planes to keep up with passenger demand and cope with marathon flights that can last more than 14 hours, as it pursues its strategy of linking far-flung cities through Dubai.

The carrier is increasingly focusing on emerging markets in Asia, Africa and Latin America, which Clark said older airlines have long shied away from. Over time, he expects bilateral ties between those regions to grow, producing even more business for carriers like Emirates.

At the same time, Clark said Emirates plans to expand its presence in Europe and the U.S. even further. The carrier already flies to Los Angeles, San Francisco, New York and Houston, and it recently announced plans to add service to Dallas and Seattle.

Other cities on Emirates’ radar for possible future expansion are Chicago, Washington, Detroit and Atlanta, Clark said.

“There’s more coming,” he noted. “It’s just a question of timing.”

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