Finance and Economic

Sony Corp. said Tuesday its April-June profit plunged to $326.9 million - about half that recorded a year ago - as a strong yen, the absence of "Spider-Man 3" revenue and faltering results at its cell phone operations battered earnings.

The Japanese electronics and entertainment company, which makes the Walkman player and the PlayStation 3 game machine, had recorded about $620 million in profit for the fiscal first quarter the previous year.

Price competition in its core electronics sector also led to Sony’s worse-than-expected quarterly performance. Analysts surveyed by Thomson Financial had forecast a $486 million profit.

Sony also lowered its full year profit forecast Tuesday to $2.24 billion from an earlier $2.71 billion, blaming expected poor results at its Sony Ericsson mobile joint venture and a pessimistic outlook in electronics.

The results for the latest quarter were also hurt by the absence of a blockbuster like "Spider-Man 3," which lifted the performance of Sony’s movie division in the same period a year earlier, according to the company.

In a bit of bright news, the Tokyo-based manufacturer marked a continued recovery in its long struggling video game section, which was profitable in the latest quarter in contrast to losses the previous year.

Sony sold 1.56 million PlayStation 3 machines in April-June, more than double the 700,000 machines sold the same period a year ago. It kept unchanged its forecast for selling 10 million PS3 consoles the fiscal year through March 2009.

The PS3 has been struggling against the hit Wii from rival Nintendo Co payday advance. Sony said it has now sold a cumulative 14.4 million PS3 machines worldwide since it went on sale late 2006. Nintendo reports earnings Wednesday.

Sony’s quarterly sales were just about unchanged at $18.5 billion compared with $18.37 billion a year ago.

If currency rates had remained the same, sales would have jumped 8% on year, but the yen rose against the dollar by nearly 16% from the previous year, Sony said.

In its electronics business, the unfavorable exchange rate erased $133.6 million from Sony’s operating profit for the fiscal first quarter.

Sony raised its sales forecast for the year ending March 2009, to $85.98 billion, up from an earlier $84.1 billion, citing in part a more favorable exchange rate. Sony had assumed the dollar would trade at 93 cents but now expects it to hold at 98 cents.

Price competition, unpopular products and higher research investments hammered results at Sony Ericsson, Sony’s joint venture with Ericsson (ERIC) of Sweden, for the quarter ended June 30.

In other equity-related income, Sony’s music business Sony BMG deteriorated into losses from a year earlier, reflecting an overall decline in the worldwide market and restructuring costs.

Best-sellers during the quarter included Usher’s "Here I Stand" and Neil Diamond’s "Home Before Dark," Sony said.

Sony (SNE) shares fell 3.2% to $39. Trading ended in Tokyo before Sony’s earnings were announced. 

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Sales of previously owned U.S. homes fell in June to the lowest level in a decade as tumbling real- estate prices and consumer confidence signaled no end in sight to a housing recession now in its third year.

Resales dropped 2.6 percent to a lower-than-forecast 4.86 million annual rate from a 4.99 million pace the prior month, the National Association of Realtors said today in Washington. The median home price dropped 6.1 percent from June 2007.

The housing slump may deepen further after mortgage rates climbed to the highest in a year this month and turmoil engulfed Fannie Mae and Freddie Mac, which account for more than two- thirds of new home-loan financing. A record 18.6 million houses, apartments and condominiums stood empty in the last three months as the industry's recession reverberated through communities, separate figures showed today.

The NAR report “is, unfortunately, not telling us about an end'' to the slide, said David Resler, chief economist at Nomura Securities International Inc. in New York. “Housing is going to be a non-contributor, if not a drag, on the overall economy.''

The Standard & Poor's Supercomposite Homebuilding Index dropped 7.2 percent to 273.96 at 11:49 a.m. in New York. By comparison, the Standard & Poor's 500 Stock Index lost 1.1 percent, to 1,267.74.

Economists forecast home resales would fall to a 4.94 million pace, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from a 4.79 million pace to 5.1 million rate.

Jobless Claims

The Labor Department earlier today reported that first-time claims for unemployment benefits rose last week to the highest in almost four months, a sign the slowing economy is weakening the labor market. Applications increased by 34,000 to 406,000 in the week ended July 19.

Compared with a year earlier, existing home sales were down 16 percent in June. Purchases are down by about a third from a record of 7.25 million reached in September 2005.

The number of previously owned unsold homes on the market at the end of June rose to 4.49 million from 4.482 million in May. The total represented 11.1 months' supply at the current sales pace. The agents' group has said that a five-to-six month's supply reflects a balanced market.

“The biggest problem is that we've not yet seen inventories come down,'' Paul Puryear, managing director of Raymond James & Associates Inc. in St. Petersburg, Florida, said in an interview with Bloomberg Radio yesterday. The housing market isn't likely to recover until at least 2009 or 2010, he said.

Property Types

Sales of existing single-family homes declined 3.2 percent to an annual rate of 4.27 million. Purchases of condos and co- ops increased 1.7 percent to a 590,000 pace.

The median sales price fell to $215,100 from $229,000 in June 2007 http://abc-cashadvance.com. The median cost of a single-family home decreased 6.7 percent to $213,800, while that of condominiums and co-ops fell 2.2 percent to $224,200.

Purchases decreased in three of four regions, led by a 6.6 percent decline in the Northeast. Sales rose 1 percent in the West, which also showed a 17 percent drop in the median price, the biggest of any region.

The glut of homes may be even greater because not all foreclosed properties are counted by the Realtors group. The group only includes foreclosures that have been listed on the multiple listings service.

Vacant Properties

The number of vacant houses hit an all-time high in the second quarter as more properties were pushed into foreclosure. A total of 18.6 million U.S. houses, apartments and condominiums stood empty, more than at any time in history, as lenders seized a record number of properties. The figure was 6.9 percent higher than a year earlier, the U.S. Census Bureau said in a report today.

More Americans are walking away from their homes as property values slump and borrowing costs on adjustable-rate mortgages reset higher. Bank seizures increased a record 171 percent in June from a year ago and foreclosure filings rose 53 percent, RealtyTrac Inc., a seller of default data, reported this month.

Home prices nationwide have fallen 18 percent on average from their July 2006 peak, according to the S&P/Case-Shiller index of 20 metropolitan areas. The drop in values may be giving those buyers still able to get financing reason to hesitate.

Consumer sentiment dropped in June to the lowest level in 28 years, according to the Reuters/University of Michigan survey, and the economy lost jobs for a sixth straight month, adding to reasons home buyers are sidelined.

Fannie, Freddie

Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to survive the meltdown in subprime lending has heightened the credit crisis and may further curtail access to loans.

There is “no sign of a recovery in housing'' this year, Caterpillar Inc., the world's largest maker of earthmoving equipment, said in a statement this week. The company said second-quarter profit climbed 34 percent, exceeding analysts' estimates, on demand for backhoes and mining tools in China and the Middle East.

Caterpillar's Chief Executive Officer Jim Owens said he expects the U.S. economy, including the housing market, to begin recovering next year.

“We will get this problem behind us,'' Owens said in a July 22 interview with Bloomberg Television. “It will probably take another six months to a year, but it will come back.''

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The U.S. consumer is feeling pinched - and to listen to American Express, the pain is only going to get worse.

Shareholders agreed. The financial services giant’s stock dropped 11% in after-hours trading.

American Express (AXP, Fortune 500) delivered some ugly news after the market closed Monday, posting a smaller-than-expected second-quarter profit and withdrawing its 2008 earnings guidance, saying the economic environment "has weakened significantly" since it offered up its financial projections back in January.

The deterioration was notable "particularly during the month of June," the company said. And American Express says that while loan write-offs spiked last month, it expects loan losses to rise even from those levels in the second half of 2008, as the consumer pullback feeds through to businesses and the rest of the economy.

"Over the past few months, we have seen clear signs the U.S. economy is weakening," chief executive Ken Chenault said, noting falling house prices and rising unemployment. As a result, he said, "Cardmember spending slowed sharply in the last half of the quarter," even among the company’s best customers.

Chenault said on a postclose conference call Monday that he was "disappointed" in the numbers, which fell far short of Wall Street analysts’ estimates. American Express abandoned its earlier forecast of 4%-6% earnings growth for the year, citing rising charge-offs on past-due loans. The company also said it would accelerate "re-engineering efforts" in the second half, meaning more jobs are likely on the way.

American Express made $653 million, or 56 cents per share, for the quarter, down from the year-ago $1.06 billion, or 88 cents per share. Analysts surveyed by Thomson Financial were looking for an 82-cent profit. American Express said the latest quarter reflected a $374 million addition to its credit loss reserves, as the effect of falling house prices and rising unemployment "was evident even among our longer term, superprime cardmembers."

The comments strike a much more pessimistic tone than those heard earlier from Bank of America (BAC, Fortune 500) chairman and CEO Ken Lewis, who said on a conference call earlier Monday that he views BofA’s consumer exposure as "manageable."

Michael Taiano, an analyst at Sandler O’Neill in New York who has a "Hold" rating on American Express said the company is paying the price for its rapid loan growth in recent years http://easy-quick-payday-loans.com. Now, with the effect of falling house prices and job loss rippling through the economy, American Express faces rising losses as more loans go sour - at a time when the company holds a substantial portfolio of younger loans that are by their nature more likely to go bad.

Indeed, the company’s earnings presentation indicates that the biggest deterioration in credit performance came among customers who have had American Express cards for between two and four years. Accounts 30 days past due jumped 62% from a year ago among U.S. customers holding cards for 24 to 36 months and 58% for customers of 36 to 48 months, the company said.

Taiano cut his rating on the stock to "Hold" from "Buy" earlier this year, reasoning that an economic slowdown and falling house prices would combine to slow earnings growth at American Express.

Even so, he said he was surprised by "the degree of acceleration" in credit losses in the latest quarter. "They’re in for a challenging few quarters ahead," he said.  

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Bank of England Governor Mervyn King said he wanted the central bank to have more authority in decisions on when to rescue a troubled lender, in legislation proposed to fix Britain's financial stability rules.

The run on Northern Rock Plc last year and its nationalization in February sparked a debate about who decides whether and when a bank should be rescued. The government has proposed that the power should go to the Financial Services Authority regulator rather than the central bank.

“I would have preferred an outcome in which either the FSA or the Bank of England could have initiated the trigger,'' King told lawmakers in testimony at the Treasury Select Committee in London today. “`We will not have the right to initiate the trigger. We will have a right to make a written recommendation.''

Prime Minister Gordon Brown's government has put off plans to introduce new legislation this month. King said lawmakers shouldn't hurry new rules through parliament.

“It's more important to get it right than to rush it to a fixed timetable,'' King said freecreditscore. “There is a lot of detail still to be discussed. But in the broad intentions of the document, the bank has been granted the powers to manage that regime.''

King said that the lack of rules for how to rescue banks was the reason why the problems with Northern Rock “dragged on and on.'' He welcomed plans for the government to insure savers' deposits at banks.

The Treasury, the Bank of England and the FSA are devising what they call a “special resolution regime'' that aims to limit the impact of a banking crisis on the rest of the economy. It would also give the Treasury powers similar to those of U.S. regulators to appoint an administrator and a “bridge bank'' to handle the assets of financial institutions in danger of bankruptcy, the Treasury said yesterday.

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The federal takeover of IndyMac Bank last week left many Americans wondering whether their bank was safe. It put a spotlight on a relatively obscure list published quarterly by the FDIC called the "problem list."

There were 90 banks on the problem list in the first quarter of 2008, up from 76 at the end of last year. The number has been increasing since the third quarter of 2006, when it hit a historic low of 47. Total assets at the problem institutions stand at $26.3 billion.

Problem banks have serious deficiencies in their finances, operations or management that threaten their continued viability. The Federal Deposit Insurance Corp. publishes the number of banks in this condition in its Quarterly Banking Profile report.

The agency doesn’t reveal the banks’ names, but it does give the total assets of these institutions.

Each bank in the country is examined at least every 12 to 18 months. Regulators rate the banks on a scale of 1 to 5, with 1 being the best. Factors that go into the ratings include: management controls, earnings, quality of assets, capital levels (which cushion against loan losses) and liquidity (which allows banks to meet their obligations, such as withdrawals by depositors).

Examiners are looking for problems such as an abundance of delinquent loans without sufficient reserves to cover the losses, weak risk management policies or a lack of cash to cover withdrawals.

Regulators then give the banks a report card, assigning a composite rating based on the bank’s performance in each category. Those that receive a rating of 4 or 5 are put on the list.

The bank’s executives see a lot of regulators during this time free credit report without a credit card. Bank officials are told what steps they have to take to shore up their business.

"The management of the bank has to address the problems that got them into the penalty box in the first place," said Christopher Whalen, managing director of Institutional Risk Analytics.

If the bank can’t correct the problems, it either sells itself to another institution or it is taken over by the FDIC.

Only 13% on average. So far this year, five banks have failed - a far cry from the turbulent times of the savings and loan crisis of the early 1990s, when more than a thousand institutions shut down.

Since most banks on the list don’t fail, the agency wants to prevent making things worse by scaring customers, vendors and other players in the financial system while regulators are working with a problem bank.

"Regulators can give banks frank evaluations of their condition without threatening their stability," said Chip MacDonald, partner in the capital markets group at Jones Day, a law firm.

Considering there are about 8,500 banks in the United States, 90 problem banks is not that large a number, said L. William Seidman, a former FDIC chairman. During the S&L crisis in the late 1980s and early 1990s, about 1,500 banks were on the problem list.

"Just because a bank is on the list doesn’t mean it’s going to fail," Seidman said. "If customers have deposits of under $100,000, they don’t have to worry. They will get their money." 

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European bankers and some of their U.S. clients can expect a grilling from a Senate panel looking into offshore tax abuses that investigators believe are costing American taxpayers about $100 billion a year.

The questioning, expected at a hearing Thursday, follows the release of a report by the Senate panel accusing the banks of helping commit massive tax evasion and urging tougher laws to combat offshore tax havens around the world.

The 109-page report by the Senate Homeland Security and Governmental Affairs investigations subcommittee took aim specifically at Switzerland’s UBS AG (UBS), among the world’s largest wealth managers, and Liechtenstein’s LGT group, owned by the principality’s royal family.

Representatives from UBS and LGT were scheduled to testify, along with some of LGT’s U.S. clients.

A federal judge ruled this month that the Internal Revenue Service could serve legal papers on UBS in an expanding probe of U.S. taxpayers who may have used overseas accounts to hide assets and avoid taxes. UBS has said it is cooperating with Swiss and American investigations and will disclose records involving U.S. clients who might have broken tax laws. It also has banned its Swiss bankers from traveling to the United States.

Investigations linked to LGT have been launched in a number of countries since German authorities in February obtained a CD-ROM of some 1,400 alleged tax cheats with accounts at the bank. Germany has since passed the file to other countries, including the United States.

U.S cash til payday loan. taxpayers are required to report all their foreign financial accounts if the total value exceeds $10,000 at any point during the tax year. Failure to report the accounts can result in penalties of up to 50 percent of the amount in the accounts.

The subcommittee report said "UBS Swiss bankers targeted U.S. clients, traveled across the country in search of wealthy individuals and aggressively marketed their services to U.S. taxpayers who might otherwise never have opened Swiss accounts."

It said the bank’s practices resulted in billions of dollars of U.S. taxpayer money in undeclared accounts that were not disclosed to the IRS. The report said UBS has estimated that it has 1,000 declared accounts in Switzerland for U.S. clients against 19,000 undeclared, with a combined value of $17.9 billion.

While UBS did not technically violate U.S. reporting requirements under the 2001 "qualified intermediary program," it actively assisted clients in structuring their Swiss accounts to avoid disclosure responsibilities with the IRS and thus aided tax evasion, the report said.

In Liechtenstein, the report said the royal family’s LGT Group contributed to a "culture of secrecy and deception" that enabled clients to "evade U.S. taxes, dodge creditors and ignore court orders." 

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Viacom has agreed to let Google strip identifying information from YouTube viewers’ data before complying with a judge’s order to hand over the records as part of a copyright infringement lawsuit.

Viacom and other parties to the litigation agreed to allow YouTube to remove user names and computer Internet protocol (IP) addresses from the data to ensure protection of users’ privacy, YouTube said in a blog posting late Monday night. YouTube is a Google subsidiary.

"We remain committed to protecting your privacy and we’ll continue to fight for your right to share and broadcast your work on YouTube," reads the posting.

Instead of providing Viacom the user names and IP addresses for everyone who has viewed a video on YouTube, Google will provide a random, anonymous code number, a spokesman for the company told CNN.

Viacom Vice President Jeremy Zweig responded to the agreement by saying, "We trust that Google will comply fully with the court’s order and promptly produce the remaining information about their own activities."

The two companies have been negotiating over the potentially sensitive data since U.S payday advance low fees. District Judge Louis L. Stanton earlier this month ordered Google to give Viacom the YouTube viewing data.

Viacom filed the lawsuit in March 2007, seeking $1 billion for alleged copyright infringement.

In the lawsuit, Viacom said that "almost 160,000 unauthorized clips of Viacom’s programming have been available on YouTube and that these clips had been viewed more than 1.5 billion times."

In addition to seeking damages, Viacom said it wants an injunction prohibiting Google (GOOG, Fortune 500) and YouTube from further copyright infringement.

Viacom (VIA), which was spun off from what is now CBS Corp. (CBS, Fortune 500) in December 2005, includes film studios, such as Paramount Pictures and DreamWorks; television networks, such as Comedy Central, BET and MTV; and other companies. 

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General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) will be able to invest more to develop cars and crossover vehicles even after $10 billion in cost cuts under a rushed restructuring that the U.S. automaker sees as the last of its kind, the company’s president said on Tuesday.

“In an uncertain market we need to be in as much in control of our own fate as possible,” GM President and Chief Operating Officer Fritz Henderson told Reuters.

Henderson, GM’s No. 2 executive, was charged by Chief Executive Rick Wagoner in June with pulling together a plan to address deepening concerns about the automaker’s ability to outlast a downturn in U.S. auto sales analysts saw as testing its $24 billion in cash reserves.

Facing high gas prices and a rush away from trucks and SUVs, GM surprised Wall Street with a plan that relies more heavily on cost-cutting than new borrowing or asset sales.

In fact, the central element of GM’s plan to shore up liquidity by $15 billion through 2009 is cutting $10 billion in additional costs payday loans. That will come through the elimination of thousands of white-collar jobs, including engineers, and a $1.5 billion cut in capital spending.

Most of the cuts stem from GM’s decision to suspend development of a new-generation of full-size trucks — a line of once highly profitable vehicles including the Chevrolet Silverado and GMC Yukon.

Although analysts credited GM with addressing the threat that it could run short on cash, some questioned whether the cost-cutting could hamstring its ability to compete in the market for more fuel efficient small cars.

“In the medium term, the primary risk for GM will be that the cash-economizing measures implemented as part of this program will compromise product offerings for years to come,” said Calyon Securities analyst Mark Warnsman. 

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Most Americans still think the economy is in a recession, but the number who feel that way has declined, according to a CNN/Opinion Research Corporation poll released Monday.

In a telephone poll of over 1,000 adult Americans, 75% said they believe the nation is now in a recession. That figure fell from 79% in April. In March 74% believed the U.S was in a recession.

This decline is the first time the number - which had been steadily rising since October - has fallen. Then, the poll showed only 46% thought the economy was in a recession.

"From a consumers’s perspective, the economy is bad, and the environment is going to be tough for a while," said Wachovia economist Mark Vitner. "That’s pretty accurate."

The traditional definition of a recession is two consecutive quarters of negative GDP growth. Though growth was sluggish in the last quarter of 2007 and the first quarter of 2008, the U.S. economy has not yet shown retraction in the current slowdown. The advance GDP numbers for the second quarter of 2008 are due to be released on July 31.

"Whether the economy technically meets the definition of a recession matters more for economists and policy makers than it does for consumers," said Vitner. "Consumers’ frame of mind is pretty simple: it’s a bad economy."

It’s evident that times are tough: More than 324,000 jobs have been lost so far in 2008, and the mortgage and credit crises have crushed consumer confidence faxless payday loan. Also, rising food and energy costs are hurting Americans in the pocketbooks.

Of those who think the economy is in a recession, 27% said they believe we are in a serious recession, down from 29% who said so in March. Slightly more people -19% - believe the economy is in a mild recession than the 16% who said so in March.

Americans are less confident in the future of the economy than the were in March. The poll showed that 23% believe the downturn will last more than two years, up from 19% in March. Only 2% think it will end in six months.

Economists also think the economy is due for a long rebound. Though the economy in second and third quarters of 2008 are expected to grow due to a boost from the stimulus checks, experts expect consumer spending and the economy to decline in the fourth quarter.

In a section of the poll released last week, 93% of voters say the economy is "extremely" or "very" important to their vote for president this November, edging out the war in Iraq as the biggest issue on voters’ minds. (More at CNNPolitics.com.)

The poll was conducted between June 26 and June 29. 

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The Washington Post has named Marcus Brauchli, the former top editor of The Wall Street Journal, as its new executive editor, The Washington Post Co said on Monday.

Brauchli, 47, will oversee the operations of the Post and washingtonpost.com, a sign that the newspaper may be assuming more control over the website, which has been separately run. James Brady, executive editor of washingtonpost.com, will report to Brauchli, the Post said in a statement.

Brady was on vacation and not available for comment.

The newspaper, one of the largest dailies in the United States, has traditionally favored insiders who came up through the editorial ranks for its top editorial positions.

“Marcus has the ability to think strategically about our newsroom, about how to realign our resources in a way that is consistent with what readers want and expect and maintain the Post’s first-rate journalism,” Washington Post Publisher Katharine Weymouth, 42, said in the statement.

Weymouth took over as publisher in February and is a likely successor to her uncle, Post company Chairman Donald Graham cash advance today. Picking Brauchli is a clear sign that Weymouth is putting her own imprint on the Post as it strives to meet the needs of readers who are increasingly getting free news online.

Brauchli was managing editor of The Wall Street Journal until he resigned earlier this year to make way for new owner Rupert Murdoch’s candidate. Murdoch’s News Corp bought the Journal and parent company Dow Jones & Co last year.

In the past month, Post and Journal employees said that Brauchli was up for consideration as the Post’s executive editor once Leonard Downie, Jr., the current executive editor at The Washington Post, retired. 

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