Finance and Economic

South Korea may revive a 14 percent tax on domestic Treasury and central bank bonds held by foreigners as early as January to curb foreign-exchange volatility, a ruling party lawmaker said.

“If we don’t do it right now and the situation worsens, we may have to set up higher barricades,” Kim Song Sik, a member of the Grand National Party and the legislature’s financial committee, said in an interview yesterday in Seoul. He also called on the central bank to raise interest rates to head off asset-price bubbles.

The bonds initiative is part of a series of measures across Asia aimed at defusing the danger of hot money, or inflows of capital that push up currency and asset values in the search for short-term gains. Taiwan yesterday said it will restore curbs on foreign investment in its debt, only allowing offshore funds to have as much as 30 percent of their portfolios invested in all types of government bonds and money-market products.

Kim said that a bill to resurrect South Korea’s levy will be submitted to parliament this weekend or early next week, and predicted passage by the end of the year.

“What I’m proposing is a predictable and reasonable hurdle for capital flows in and out of the nation,” Kim said.

Won’s Gain

The won has advanced more than 9 percent against the dollar since June, the second-best performer in Asia outside Japan, after Thailand’s baht. It was little changed today at 1,113.75 per dollar as of 12:10 p.m. in Seoul, according to data compiled by Bloomberg. An appreciating currency threatens trade gains in the export-led economy.

Thailand is ending foreigners’ 15 percent tax exemption on income from domestic bonds, while Brazil last month tripled a tax on purchases of local fixed-income assets by overseas investors. Nations from China to South Africa have also strived to limit currency gains as near-zero borrowing costs in advanced economies spur demand for higher-yielding emerging-market assets.

Asian economies may need capital controls as U.S. quantitative easing threatens to stoke asset bubbles in their stock, currency and property markets, the World Bank said yesterday.

The risk is that the restrictions diminish the appetite of foreign investors on a more lasting basis, said strategist Christian Carrillo.

Long-Term Risk

“The re-imposing of the withholding tax could weaken the Korean won temporarily but damage to foreign confidence on KTB investments will be long-lasting,” Carrillo, head of Asia- Pacific rates strategy at Societe Generale SA, said in Tokyo yesterday, using the acronym for Korean Treasury Bonds no teletrack payday loan.

Overseas investors currently don’t have to pay the 14 percent tax applied to domestic buyers. South Korea will “seriously consider” whether to withdraw the exemptions, Finance Minister Yoon Jeung Hyun said on Oct. 19.

“I’m pretty confident about the possibility of the bill passing” this year, Kim said. “If approved, the bill will take effect in January.” The tax on interest income and capital gains would apply only to new purchases from that month.

The ruling Grand National Party controls 171 seats in the 299-member legislature. Kim said that opposition Democratic Party lawmakers want even tougher capital control measures such as a transaction tax.

‘Lot of Discussion’

“If the proposal is submitted to parliament I expect a lot of discussion on it,” said Hae Yung Woo, director of the government bond policy division at the Ministry of Strategy and Finance.

South Korean regulators began an audit of banks handling foreign-currency derivatives on Oct. 19 to tackle speculation. Financial Supervisory Service Governor Kim Jong Chang said this week the country may tighten curbs on bank trades of the derivatives and penalize institutions acting improperly.

Overseas investors held 79 trillion won ($71 billion) of South Korean debt in October, data from the Financial Supervisory Service this month showed. Foreigners owned 7.1 percent of the country’s outstanding bonds.

The Grand National Party’s Kim also called on the Bank of Korea to take prompt action on monetary policy to avoid asset bubbles.

“If I were a central bank board member, I would raise interest rates next week,” Kim said. “We need to normalize the rates as we’re getting out of the crisis and secure some policy tools to counter another possible crisis. It is critical to send a clear signal of normalization and regain the market trust.”

The central bank kept the benchmark interest rate unchanged at 2.25 percent after raising it by 25 basis points, the first advance since the global financial crisis. The board meets next week to decide interest rates.

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Maple Leaf Foods Inc. (TSX: MFI) says it has decided to sell its Ontario pork processing business for $20 million.

The Toronto-based food processing company said that Sun Capital Partners Inc. bought the operations in a transaction that???s expected to close ???within the next few days.???

Maple Leaf had announced in May that it was putting the pork processing business up for sale again after a failed attempt to unload the facility at the height of the credit crunch in 2008.

The Burlington, Ont.-based pork operation is one of the largest pork processing facilities in Canada.

The plant currently employs 1,000 people and processes about 1.6 million hogs a year.

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Pressure continues to mount on President Obama to select Elizabeth Warren as the nation’s first consumer financial protection regulator.

Warren, 61, has become something of a cause célèbre as the administration’s top pick to run the new agency charged with protecting consumers from abusive mortgage and credit card practices.

There’s even a Hollywood-produced Elizabeth Warren rap video circulating online called "Got a New Sheriff," featuring a rapping cowboy singing the Harvard professor’s praises.

Last week, 43 House Democrats sent a letter to President Obama, asking him to nominate Warren and requesting a meeting at the White House to discuss Warren’s appointment.

"You have an opportunity to appoint to head this body a true visionary — not the usual Washington careerist. You have an opportunity to appoint to this body the single best-qualified choice," said the letter, signed by Rep. Barney Frank, D-Mass., and Rep. Carolyn Maloney, D-N.Y., among others.

Last week, Warren sat down with the head of a large and influential banking lobbying group, the Financial Services Roundtable. The group declined to comment on the meeting.

Warren, who has repeatedly declined interview requests on this topic, has also been meeting with various key administration players, including a meeting with senior White House advisers on Aug. 12th.

The public groundswell for Warren puts the White House in a tough spot. It’s not clear when President Obama will make his decision, but an announcement is isn’t expected this week.

"The administration is hesitating because they’re faced with the traditional problem that Obama has faced," said Julian Zelizer, a professor of history and public affairs at Princeton University.

If the White House passes Warren over, Zelizer says, they disappoint liberals whose support has been key throughout the administration business card templates. If Warren gets the nod, the White House must deal with "political difficulties on Capitol Hill where centrists have quite a lot of power and Republicans are becoming quite obstinate," Zelizer said.

Warren teaches contract and bankruptcy law as a Harvard University professor and she’s also written a number of personal finance books. More publicly, she chairs a congressional oversight panel that has garnered attention for its critical reviews of government spending to bail out Wall Street banks under the Troubled Asset Relief Program.

Treasury is in the planning stages of creating the consumer financial protection bureau, which will be housed inside the Federal Reserve, thanks to the new law cracking down on Wall Street banks.

Warren is not the only candidate under consideration to run the bureau. But she is the most polarizing. Senate banking chief, Seen. Chris Dodd, D-Conan., has warned her nomination would cause a protracted and lengthy battle in the Senate, adding he isn’t sure she could secure a Senate confirmation.

Banking groups and conservatives paint her as too liberal for a regulator job. They say an aggressive regulator would undermine bank safety by crafting rules that force banks to make risky loans. They’ve also accused her of lacking the chops to be a regulator.

Supporters say the consumer regulator job was written for her. Warren came up with the idea for the consumer financial protection agency and has spent her career championing consumers duped by "tricks and traps" of the financial industry, she often says.

Other candidates rumored to be in contention for the job are Michael Barr, Assistant Treasury Secretary for Financial Institutions, as well as Deputy Assistant Attorney General Gene Kimmelman. 

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Salem Hospital has agreed to pay $6 million for the campus formerly used by the Oregon School for the Blind. The state announced the sale of the 8.37-acre site in Salem on Tuesday.

The Legislature voted in 2009 to close the school and sell the property. Proceeds from the sale will be split equally between a fund to provide resources and educational services to visually impaired students and the School for the Deaf payday loan.

Pending the results of Salem Hospital's 60-day due diligence period, the sale could close by mid-October.

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The amount of foreclosures initiated by lenders in Massachusetts in June has dipped from June of last year according to a new report from The Warren Group.

June marks the second straight month that petitions to foreclose have gone down year over year, per the Warren Group. State lenders filed 2,220 petitions for foreclose — the first step in the foreclosure process — a 21.7 percent drop from 2,835 last June.

June’s foreclosure petitions were up 5.2 percent from the 2,110 filed in May.

A total of 13,338 foreclosure petitions have been filed so far this year statewide, down 3.4 percent from 13,813 during the same period last year.

“The foreclosure picture in Massachusetts hasn’t really improved that much. The level of foreclosure starts for the first half of the year is only slightly lower than a year ago. We have been averaging just over 2,200 foreclosure petitions a month this year compared to about 2,300 a month last year,” Warren Group CEO Timothy M. Warren said in a statement.

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Temperatures of 100 degrees-plus will spread across the Baltimore-area Tuesday and continue through the middle of the week.

The National Weather Service expects temperatures to reach 103 degrees Tuesday, with the heat index reaching as high as 107. On Wednesday, temperatures are expected to again eclipse 100, according to the NWS.

The service has issued a heat advisory for the Baltimore/Washington, D.C., region, meaning the duo of hot temperatures and high humidity “will combine to create a situation in which heat illnesses are possible payday loans guaranteed no fax.” The NWS advises people drink plenty of fluids, stay in air-conditioned rooms and stay out of the sun.

The record-high temperature for downtown Baltimore on July 6 is 104 degrees, according to Weather.com. The average is 90 degrees.

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Facebook unveiled a host of changes at its f8 developers conference that are already ruffling some users’ feathers.

Many of the changes take advantage of big revisions that Facebook made to its privacy settings in late March. Those changes opened the door to allow select third-party Web sites the ability to access and store some users’ personal information. (See correction below)

Those sites can use that information to show what a user’s Facebook friends have been doing on their sites. CNN, IMDB.com and ESPN.com are among the first sites signing up to use the technology. So if you’re a Facebook user reading CNN.com, you’ll be able to see what all your Facebook friends are looking at, view recommended stories and see which friends liked which stories.

Users will be able to share more of the outside Web with their social network.

"This is the most transformative thing we’ve ever done for the Web," said Facebook Chief Executive Mark Zuckerberg in his keynote address Wednesday. "These new technologies will help create instantly social and personalized experiences on the Web."

But even before the announcement, critics expressed concern about the privacy implications of such a service. A similar program called Beacon, unveiled in 2007, caused such a stir among users that the company canned it last year.

Some experts say Facebook learned from its mistakes with Beacon, but it still needs to frame the argument better to get its customers on board. Instead of waiting until Wednesday, Facebook somewhat covertly made the proposed change to its privacy policy late last month and opened it up for public comment.

"It’s not a surprise that the feedback has been quite negative so far," said Augie Ray, social networking analyst for Forrester Research. "Facebook needs to start framing these issues in ways that make the benefits to consumers clear. They’re being much more transparent, but there’s still a lot of room for improvement."

Despite some pushback from users, the move is part of a big effort from Facebook to continue to grow beyond facebook.com.

"It’s evident that Facebook wishes to expand its reach," said Ray. "Facebook has created a very effective and valuable destination site that eats up enormous amounts of users’ time, but for the most part, users have to go to facebook.com to get that value."

Big changes

Universal "like" button: One of the major new items that users will see is a "like" button displayed on Web sites outside of Facebook. The social network will collect that data to better understand and map its users preferences.

The "like" button on Facebook broadcasts what photos, comments or posts a user likes. Facebook announced Wednesday that "like" buttons will start to show up across the Internet, enabling users to share items with friends even when they’re not physically on facebook.com.

For instance, liking "The Godfather" on IMDB.com will put that movie in a user’s movie interests section of their Facebook page. Liking a baseball player on ESPN.com will put up-to-date information about that player in a user’s news feed.

To compliment the universal "like" button, Facebook has changed its internal "Become a Fan" button to "like" as well.

Facebook also will provide a Facebook "social bar" tool that third-party Web sites can display at the bottom of a page, which will let users access some Facebook features without leaving the site, including chat, and activity streams. Similarly, Facebook said third-party Web sites will soon be able to host a number of Facebook features on their sites.

New profiles, new pages: Facebook is changing users’ profile pages so that the "pages" section will no longer appear in a separate section on the bottom of the "info" page. Those pages will be brought up to the "interests" section.

Users will be asked to convert their interests into fan pages: Is one of your interests "The Beatles?" Well, now you can become a fan of The Beatles in a single click. By default, users will receive notifications from their fan pages in their news feed.

Facebook also added new privacy settings that allow a user to control who sees all of those connections.

Community pages: So what about interests like "hiking," "napping" or "cooking," which don’t have Facebook pages? Now they do.

Facebook unveiled about 6.5 million "community pages" this week, which take the "fan page" concept and apply them to ideas, locations or interests.

Currently, community pages are pretty rudimentary. A user can see posts from friends related to that topic as well as what the overall public is saying about it. There is also a link to a Wikipedia article on the subject. Users can’t yet add any content to these pages, but that ability will come soon.

Real-time search: Also among the biggest announcements is real-time search on third-party search sites, similar to Twitter’s service. Facebook announced that users’ public posts will be available for search on sites like Google and Bing.

"It remains to be seen how consumers would adopt real-time search of Facebook feeds," said Ray. "It’s a different kind of search from Google and Twitter — would you want to search on Google to see what your friends say?"

Correction: An earlier version of this story failed to state when the privacy changes were made. They were made on March 26. 

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Running with the herd is the most popular way to invest, because everyone will commend you for heading in the right direction.

Taking a contrarian view, on the other hand, opens you to ridicule from your peers. You may seem out of step, as if you missed getting the proper message or aren’t smart enough to grasp the obvious.

"Contrarian investing is basically going against the grain and doing the opposite of what the majority is doing," explained Paul Merriman, editor of www.fundadvice.com in Seattle. "Most people are emotional market timers, and this is indicated by their huge commitment right now to bonds."

Stock investing in general has probably been the most significant contrarian investment of the past year because investors have been so wary, Merriman believes. Many stock gains were missed as a result.

"The approach to contrarian investing is to look for companies in situations that are misunderstood and out of favor," said David Decker, manager of Janus Contrarian Fund, which used the market downturn of 2008 and early 2009 to snap up stocks such as Apple Inc.

"Just keep in mind that the market is right quite often, so being a ‘knee-jerk’ contrarian is dangerous because a good return shouldn’t be dependent on the future unfolding in the perfect fashion you envision."

Decker’s Janus Contrarian Fund is up 64 percent over the past 12 months with a three-year annualized decline of 4 percent. This "no-load" (no sales charge) fund requires a $2,500 initial investment and has an annual expense ratio of 1 percent.

His largest stock holding, the Florida-based St. Joe Corp. real estate development firm, is an out-of-favor investment he researched well. The stock had fallen 33 percent in 2007 and 32 percent in 2008, but gained 19 percent last year and is up 15 percent in 2010.

Although the company still isn’t making money, usually a bad sign, it owns land worth considerably more than its current stock price, he believes. With the Northwest Florida Beaches International Airport opening near Panama City, the economic development in the region is going to expand. The fact that St. Joe owns the land around the airport has yet to be reflected in its stock price, he noted.

Investors interested in a contrarian approach either invest in a fund that is truly contrarian; find an advisor with that mindset; or research, on their own, good companies with temporary woes.

"A lot of statistical work has shown that if you bought out-of-favor stocks you would have done significantly better than the market in almost every decade since they started measuring it," said David Dreman, chairman and chief investment officer for Dreman Value Management LLC in Jersey City, N.J. "Contrarian investing is a form of value investing with a powerful research background that has worked well for 40 years."

His Dreman Contrarian Small Cap Value Fund "R" is up 65 percent over the past 12 months and has a five-year annualized return of 5 percent. This no-load fund requires a $2,500 initial investment and annual expense ratio of 1.38 percent.

An indication that Dreman is a true believer in contrarian philosophy: He invests a considerable portion of his own net worth in the fund.

He prefers companies with strong cash flow, accelerating returns on invested capital and smart management — putting money in them when their stock price is temporarily cheap. He invests across all types of industries as well as overseas markets.

"There are two possible problems with contrarian investing," cautioned Merriman. "First, value can underperform growth for a decade and you give up on it; or, second, in a depression the contrarian choices are likely the first ones to go under because they already have their own problems."

Contrarian is nonetheless a philosophy espoused by some of the best investors.

Bill Gates and Warren Buffett bought into Republic Services Inc., the second-largest waste collection firm, last November. They didn’t expect high growth, but rather consistent growth and an eventual return to favor, Merriman said. The firm’s ownership of landfills is impressive, and new competitors in the field are limited.

"If the fundamentals of a company are pretty good but for some reason or another it is out of favor, it should do well over the long run," said Dreman.

At the beginning of 2009 Dreman was buying unwanted financial stocks such as JPMorgan Chase & Co., PNC Financial Services and Wells Fargo, as well as out-of-favor oil service companies such as Devon Energy Corp., Apache Corp. and Chesapeake Energy Corp. The future of both groups was too bright to overlook, he believed.

"We look for an asymmetrically positive risk/reward in which the downside is relatively limited and the upside disproportionately large, then build a portfolio around those companies," said Decker. "As long as the company isn’t about to go bankrupt, the question is how much the market has priced in bad news and whether the price is attractive enough."

Major holdings in Janus Contrarian besides St. Joe include Kinder Morgan Management LLC, British American Tobacco Plc., DIRECTV Group Inc., CB Richard Ellis Group Inc. and Japan Tobacco Inc.

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European Central Bank council member Yves Mersch said the economic recovery in the 16 nations that share the euro will probably be uneven.

“Available data suggest the economic recovery process in the euro zone has started, though the upswing will most likely remain erratic,” Mersch said in a report from Luxembourg’s central bank, which he heads. “Risks to this outlook are balanced in a climate that continues to be marked by uncertainty.”

The ECB on March 4 left its benchmark interest rate unchanged at a record low of 1 percent and said it will tighten the terms of some long-term loans to banks as it gradually withdraws emergency lending measures used to fight the financial crisis. Mersch today reiterated ECB President Jean-Claude Trichet’s statement that the key rate remains “appropriate free 3-in-1 credit report.”

The ECB’s Governing Council “will continue to gradually unwind non-standard measures” and “absorb liquidity over time to effectively counter any remaining risks to price stability in the medium to long term,” Mersch said.

Turning to Greece’s budget crisis, Mersch said the conditional support pledged by the European Union together with the measures announced by the Greek government “should succeed in calming the concerns of the markets.”

The fiscal situation in some euro-area nations has “clearly” contributed to the euro’s decline against the dollar, he said.

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U.S. airline passenger revenue rose in January for the first time in more than a year as ticket prices increased, according to a trade group.

Revenue based on a sample of U.S. carriers was up 1.4% in January compared to the same month in 2009, following 14 consecutive months of declines, the Air Transport Association (ATA) said Tuesday.

The boost in sales came as the average ticket price to fly one mile jumped 0.6%, the first rise since November 2008, offsetting the 0 guaranteed approval cash loans.4% drop in passengers.

Revenue was also boosted by a 3.4% increase in passenger sales on trans-Atlantic routes in January, the ATA said.

In December, cargo traffic surged 17% year-over-year amid growth in international trade. That compares to an 11% decline for the full year of 2009. January 2010 cargo data were not yet available. 

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