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Amid losses at AIG and Berkshire Hathaway, what Wall Street strategists and economists are saying about the markets and the good husbandry

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Traders work steady the knock down of the New York Stock Exchange in New York City. Mario Tama/Getty Images

By BW staff

If stock market action on the first and foremost day of the month is some indication, March isn’t looking any better than February. A recent batch of bad news brutalized U.S. stock indexes on Mar. 2, with the Dow Jones industrial mean proportion falling in the regions of the dead 7,000 with a view to the at the outset time because that 1997. News of a massive loss at pupil of the state American International Group (AIG)—a record $61 billion in red ink in the fourth quarter—and setbacks for the time of the quarter despite investing icon Warren Buffett’s Berkshire Hathaway (BRKA) put already rough investors in an even worse vein.

To offer an exclamation point adhering things, the Oracle of Omaha in his annual note to Berkshire shareholders said the thrift is in "meat market."

And while reports released Mar. 2 on exterior income and spending for January came in ahead of Street expectations, as did the Institute in favor of Supply Management’s February public recital on the freedom from disease of the manufacturing sector, the advice wasn’t enough to put a dent in the bearish sentiment.

What are Wall Street strategists and economists statement about the current market and economic situation? Here, BusinessWeek presents a selection of comments published Mar. 2:

Phil Roth, Miller Tabak

The DJIA and the S&P 500 closed at unused lows for the cycle [on Feb. 27], but there were a number of positive divergences. The Nasdaq Composite and the Russell 2000 did not break their fourth-quarter 2008 lows, nor did the continually increasing advance/decline lines for the S&P 500 public funds and for the NYSE operating companies. However, all those measures are close to their lows, likewise the only way to convert those divergences to important bullish signals is for a strong rally perpendicular away. A few bad days, without interjacent strength, will likely result in liberal confirmations on the downside. Similarly, momentum indicators, including measures of price, generosity, and volume momentum, have not reached the negative extremes recorded in October-November 2008, only the same caveat applies.

In any case, even if an exploitable ship is made around current levels, months pleasure be needed to establish a base for a broad, sustained recovery. At by most propriety, we believe 2009 can be a transition year even if the lows are in.

Sam Stovall, Standard & Poor’s

All 15 uphold markets considering 1929 declined a median 34%, over 18 months. They retraced 60% of the prior bull emporium’session advance and took 17 months for the S&P 500 to get back to break-even. For mega-meltdowns, or declines in undue amount of 40%, the numbers were more severe: They declined an average 51%, retraced more than 100% of the prior bull market, and lasted longer than two years. The worst decline occurred in the Great Crash from 1929-32, when the S&P 500 pitiless 86%. The longest undergo lasted 42 months, from 1938 to 1942, while the greatest give-back occurred during the 1937-38 bear, in which the S&P 500 retraced nearly 120% of what it gained in the 1935-37 bull. Therefore, when this bear emporium is finally over, nothing says it couldn’t have experienced the worst of all levels.

Richard Dickson, Paul Desmond, Lowry’s Reports

If equities were not low enough on Nov. 20 or on Feb. 23 to entice aggressive buying, therefore even lower prices are likely before the start of a sustained place of traffic advance. As long for example the current patterns of increasing supply and weakening demand persist, investors should take advantage of periods of rally to sell into stay and connect to defensive positions.

Michael Englund, Action Economics

Today’s U.S. economic reports revealed upside surprises to January income and spending that suggest a less dire outlook for the consumer [in the first quarter], though this "lost weakness" appeared later this morning in the January construction spending report. It now appears that construction activity will advertise its ugliest quarter of the down-cycle in Q1 by a considerable limit, and we now draw massive 23% rates of decline for nonresidential fixed investment in both Q4 and Q1 that leave businesses leading the charge appear gloomy for the economy as we entered 2009. Today’s ISM [manufacturing] report was a tad stronger than expected, but the employment component set a new all-time low (as did the import component), leaving a cheerless outlook for Friday’s jobs report. As it stands, we now expect fourth-quarter GDP to be revised to -6.5% from -6.2%, with a 5.0% avoid still likely in favor of the first locality.

Standard & Poor’s Ratings Services

Through a combination of actions, AIG will reduce its obligations under the current $60 billion lending facility from the Federal Reserve Bank of New York (FRBNY). We expect that this will provide the company with the flexibility to be steadfast its asset-disposition lay out at a more measured pace.

Although in our view the actions of the U.S. government have largely eliminated the risks of further rapid degeneracy in the company’s creditworthiness, intermediate-term concerns about the company’s ability to retain key bat and market remunerative new business remain. AIG expects that the planned sale of the life operations, which we believe likely, order be necessary longer than originally planned, in some degree because of the lack of liquidness in the capital markets. As a result of these medium-term risks, the outlook is negative…[which reflects] our view that increased pressure put on the performance of AIG’s insurance businesses is suitable. We believe AIG is particularly susceptible to these broader market trends given its somewhat weakened predication. Although at this point we be the subject of not seen clear evidence of long-term damage to AIG’s franchise, there have been widespread reports that competitors are actively pursuing AIG’s accounts and key underwriting personnel.

Original text: http://www.businessweek.com/investor/content/mar2009/pi2009032_938312.htm?campaign_id=rss_null

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Microsoft continues to build out its online services offering for businesses with an upcoming expansion into Europe and Asia and a new lightweight package for workers who aren’t currently using corporate e-mail and collaboration systems. The company is announcing today that Microsoft Online Services, versions of the company’s lucrative business software for e-mail, collaboration and online meetings, will be available for trial in 19 countries in Europe and Asia, beginning in April.

The countries are: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

In November, Microsoft opened the offering to businesses in the U.S. The applications are run on servers in Microsoft-operated data centers, delivered to corporate end-users via Internet and sold on a subscription basis.

Microsoft first articulated its online strategy towards the vast, highly profitable Business Division in October 2007. More freshly, it announced plans to move pieces of its Office suite online.

Eron Kelly, senior director in Microsoft’session Business Online Services Group, said the company expects 50 percent of its Exchange and SharePoint customary use to be delivered online.

“We do see this taken in the character of a greater trend for Microsoft and the industry,” he said.

Also in April, Microsoft choose introduce online services for “deskless workers,” who don’face to face be in possession of regular access to incorporated e-mail. The package elect include access to Exchange and SharePoint online during $3 for user, per month. The replete online services suite includes those programs, as well as Office Communications Server on the side of incorporated instant-messaging and presence and Office Live Meeting. It costs $15 per user, per month.

Microsoft also sells subscriptions to each service individually, but it gives companies that purchase the whole package a substantial discount. The company also landed another major purchaser for Microsoft Online Services: drug giant GlaxoSmithKline. With more than 100,000 employees, Glaxo will be the largest customer so far for this online offering. A Glaxo executive said in a blog brand the concourse expects “to overpower our IT operational costs by roughly 30% of what we’re spending now and introduce a variable cost subscription image for these technologies that allows us to more rapidly scale or unclothe our investing. as necessary as we be exposed to a transformational change in the pharmaceutical industry.” Microsoft has said it expects companies to save between 10 and 50 percent by using Microsoft Online, depending on whether they switch from running the like Microsoft software on their own servers (less savings) or granting that they replace legacy systems (additional savings).

Glaxo previously used Lotus Notes from IBM and Postini from Google, Kelly reported.

Original text: http://blog.seattletimes.nwsource.com/techtracks/2009/03/02/microsoft_online_services_expands_adds_new_package.html

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New research sheds light on the reasons high-skilled Chinese and Indian workers are returning to their home countries. The researchers cite anecdotal evidence that suggests immigrants are returning home in greater poetry.

Researcher Vivek Wadhwa, of the Labor & Worklife Program at Harvard Law School and an executive in residence at Duke University, wrote about the research today in BusinessWeek. He partnered with AnnaLee Saxenian of the University of California at Berkeley and Richard Freeman at Harvard on the effort.

“[H]uman resources directors in India and China told us that what was a trickle of returnees a decade since had turn to a flood,” he wrote. “Job applications from the U.S. had increased tenfold over the be unconsumed few years, they said.”

The researchers used LinkedIn to track down “1,203 Indian and Chinese immigrants who had worked or believed education in the U.S. and had returned to their home countries.” From that people, the researchers determined that the high-skilled workers returning to their home countries were generally young and well-educated. The majority had master’s degrees or higher.

Their reasons for returning are particularly interesting, given the outsize role immigrants have played in launching new companies in the U.S. They wanted to exist closer to lineage and friends, and had some difficulty with language and cultural assimilation. Trouble getting visas was a constitutive element for a third of the Indians in the survey and and a fifth of the Chinese.

A major factor for many greater degree of those surveyed was a sense of greater suitable in their home countries. Growing demand for their skills at domestic circle drove the decisions of 87 percent of the Chinese and 79 percent of the Indians. In addition to seeing better long-term career prospects and access to more senior positions, “nearly moiety were making allowance for launching businesses and uttered entrepreneurial opportunities were better in their close countries than in the U.S.”

An abstract of the inquiry paper can be found in the present life.

Original text: http://blog.seattletimes.nwsource.com/techtracks/2009/03/02/study_high-skilled_indian_and_chinese_immigrants_r.html

NEW YORK —

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Genentech Inc. on Monday touted its culture of innovative research and offered detailed long-term sales projections as it made its instance to Wall Street on what it considers a abject buyout bid from drugmaker Roche.

In its yearly publication meeting with analysts, the company tried to diffuse on its point the latest $86.50 per share, or $42 billion, hostile wish is too low. The South San Francisco, Calif.-based biotechnology company said as much hindmost week in a regulatory filing when it revealed it believes it could fetch in the manner that a great deal of while $112 by means of share.

Switzerland-based Roche’s initial $89-per-share bid was rejected in July. It then surprised Genentech and Wall Street with the lower $86.50-per-share bid Jan. 30. The hostile tender offer is scheduled to expire March 12.

“We do not believe the offer adequately reflects the value and future potential of Genentech’s business,” Chief Executive Arthur D. Levinson said.

Roche owns 56 percent of Genentech, but that needs support from a majority of the other shareholders to complete any deal. In trying to reinforce its argument for a more valuable offer, Genentech said it expects profit of $12.86 through share by 2018 on income of $26.9 billion, a marked increase from 2008’sitting profit of $3.21 per share on revenue of $13.42 billion.

It plans on making that long stride on a mix of sales of cancer treatment Avastin and eventual new products reaching the emporium. U.S. sales of Avastin, which reached $2.69 billion in 2008, could exceed $10 billion by 2015, Genentech declared. The drug even now is approved for lung, colon, and breast cancer, with the possibility for 15 indications by 2014, including prostate and ovarian cancer.

Meanwhile, sales of the physic Lucentis, which treats the eye condition macular degeneration, could expanse a peak in U.S. sales of $2.1 billion by 2018 with additional approvals, Genentech said.

Aside from the revenue boost, Genentech estimates that yearly report pretax savings could consort from $750 million to $2 billion if a Roche deal occurred, along with reduce tax expenses, while Roche gets the added commercialization rights to lock opener cancer drugs beyond 2015. The current commercialization deal, which gives Roche sales utmost the U.S., is set to expire after 2015.

More near term, the company expects profit of $3.85 for share on revenue of $14.12 billion in 2009. Analysts polled through the agency of Thomson Reuters expect return of $3.79 through share on revenue of $14.11 billion.

In his direction Levinson also stressed the role scientific culture and a commitment to research play in the company’s viewpoint of its future.

“We are obsessed about the prolonged term,” he said. “We recognize we can’t regard as unknown the direct term, but we will continually, always make a commitment to the a long time designate.”

Genentech shares lost $2.35, or 2.7 percent, to $83.20 in afternoon trading as the broader place of traffic declined.

Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008802457_apgenentechmeeting.html?syndication=rss

WASHINGTON —

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The utmost height charged with execution of Freddie Mac is quitting after less than six months on the job as the company continues to hemorrhage from pledge losses and plans to ask the government for up to $35 billion in additional speed.

Freddie Mac said Monday that David Moffett will step down as grand executive and leave the company’s board of directors by the agency of March 13. Moffett, a former vice chair of US Bancorp, has been CEO inasmuch as September, when the government seized control of the mortgage finance company and its sibling Fannie Mae.

Together, Fannie and Freddie hold or guarantee almost 31 million fireside loans price well-nigh $5.5 trillion. That’s more than half of totality U.S home mortgages.

So in a great degree, the debt markets that Freddie Mac and Fannie Mae rely on to keep the U.S. pledge market rolling have reacted calmly to the government’s role. But investors could obtain nervous if the companies are unable to commemorate top managers.

“It’s never a positive sign when you see someone leave after six months,” said debt analyst Jim Vogel of FTN Financial in Memphis, Tenn.

Freddie Mac said its committee is working with the Federal Housing Finance Agency to appoint a successor to Moffett, who indicated in his letter of resignation that he wanted to return to the financial services sector.

The company’sitting board chairman, John Koskinen, said in a statement that the concourse expects to pick an interim top executive by Moffett’s departure date, adding that “we are actual sorry to see David go.”

Sharon McHale, a spokeswoman according to Freddie Mac, said the exit was Moffett’s decision and “wasn’t requested or suggested by FHFA or anybody in the conduct” of President Barack Obama.

The announcement comes just days after Fannie Mae uttered it needs $15.2 billion in government assistance and that it lost nearly $59 billion last year in the same manner with the foreclosure crisis mushroomed.

Fannie Mae also said that although its access to debt markets has improved under government control, it may need short-term loans from the Treasury Department, less than an agreement that expires at the cessation of the year.

Freddie Mac, based in McLean, Va., is expected to report its fourth quarter earnings early this month, and has before that time tapped almost $14 billion in sway aid. The Treasury Department last month doubled its lifeline for Fannie Mae and Freddie Mac to $200 billion each.

Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008802096_apfreddiemacceoresigns.html?syndication=rss

TOKYO —

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Japanese auto sales plunged 32.4 percent in February, the biggest monthly drop because that 1974 on sinking demand as the global household downturn deepens, an industry group said Monday.

Japanese consumers bought 218,212 vehicles for the month, the Japan Automobile Dealers Association reported in a statement. That’s the seventh consecutive month of year-on-year declines.

“Consumers be permanent to shy away from buying cars in the face of an economic slump. Auto ask productions depressed, and it is very difficult to predict any upturn in the market right now,” said Kentaro Nakata, a spokesman for the toil group.

The dismal domestic sales figure, which follows a 27.9 percent drop in January, is the latest bad news for Toyota, Honda, Nissan and Japan’s other automakers, that own been battered by slumping sales encompassing the nature, particularly in the vital U.S. car market.

Japan’s auto market has contracted steadily since peaking in 1990 partly because young people generally have less enthusiasm as antidote to owning a car. Parking and gasoline can be expensive and many opt to use Japan’s efficient train system. Cars also seem to be less of a status symbol than they were in opposition to their parents.

In 2008, Japanese auto sales fell to their lowest in 34 years at 3.21 million vehicles, down about 6 percent from a year earlier, according to the association. In 1990, annual sales peaked at more than double that figure, reaching 7.78 million vehicles.

That degeneracy in their home place of traffic is creating headaches beneficial to Japan’session automakers, which have launched various marketing campaigns to appeal to junior buyers. Toyota, beneficial to case in point, has hosted test-drive events, taken part in fashion shows and even developed its own suburban shopping pleading-house that houses a dealership.

Hit by plunging sales on every side of the world, Toyota Motor Corp., Japan’s biggest automaker, and Nissan Motor Co., the country’sitting third-biggest, are both forecasting annual net losses for the financial year throught March.

Nissan has said it is slashing 20,000 jobs globally by nearest March, while Toyota and Honda Motor Co. have also announced job cuts. All three are clouded production in response to the drop-off in global sales.

Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008801837_apasjapanautosales.html?syndication=rss

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Microsoft continues to make out its online services sacrifice for businesses with an distension into Europe and Asia and a new lightweight package for workers who aren’t currently using corporate e-mail and collaboration systems.

The company is announcing today that Microsoft Online Services, versions of the company’s lucrative business software by reason of e-mail, collaboration and online meetings, will be available for trial in April in 19 countries in Europe and Asia.

In November, Microsoft opened the oblation to businesses in the U.S. The applications are run on servers in Microsoft-operated data centers, delivered to corporate end-users via Internet and sold on a subscription basis.

Eron Kelly, senior adviser in Microsoft’sitting Business Online Services Group, said the company expects 50 percent of its Exchange and SharePoint usage to be delivered online.

“We do penetrate this in the same manner with a greater trend for Microsoft and the industry,” he said.

Also in April, Microsoft will present online services for “deskless workers,” who don’t have regular onset to corporate e-mail. The parcel will include access to Exchange and SharePoint online for $3 per user, per month. The full online-services suite includes those programs, as well as Office Communications Server in spite of corporate instant-messaging and presence-chamber and Office Live Meeting. It costs $15 per user, for month.

The company also landed a greater purchaser during Microsoft Online Services: drug giant GlaxoSmithKline. With more than 100,000 employees, Glaxo will be the largest customer so far for this online offering. A Glaxo executive said the company expects to save 30 percent through the move.

Glaxo previously used Lotus Notes from IBM and Postini from Google, Kelly uttered.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Original text: http://seattletimes.nwsource.com/html/microsoft/2008800799_btmsftservices02.html?syndication=rss

WASHINGTON —

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Consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of aliment and other nondurable items. But the increase is expected to be fleeting given all the problems facing the economy.

A batch of new reports Monday showed little signs of an economic rebound, through nonresidential interpretation spending falling to its lowest level in other than a decade and manufacturing activity contracting for a 13th straight month.

On Wall Street, the Dow Jones industrial average plunged below 7,000 for the first time because that Oct. 28, 1997, considered in the state of investors grew pessimistic about the health of banks and the economy. The Dow - which lost hind part before 230 points in afternoon trading and was heading toward 6,800 - last closed in this world 7,000 without ceasing May 1, 1997.

The Commerce Department report on consumers showed spending rose 0.6 percent in January, even better than the 0.4 percent gain that economists expected.

Personal incomes rose 0.4 percent in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was in a superior manner than the 0.2 percent decline economists expected.

The exterior savings rate surged to 5 percent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.

The goverment calculates the savings rate as a percentage of after-tax incomes. The advancement from from 3.9 percent in December in part reflected that while overall incomes rose 0.4 percent, after-tax incomes shot up 1.7 percent, providing potentially more riches in favor of savings.

The 0.6 percent ascend in spending followed a record six straight declines, including a 1 percent drop in December when retailers endured their worst holiday shopping season in at minutest four decades.

The January increase was driven by a sharp 1.3 percent rise in purchases of nondurable goods led by much higher spending onward food. Durable goods well-informed a tiny 0.1 percent increase, as Americans again avoided expenditure on cars and other large items.

While the 0.6 percent grow in consumer expenditure was the largest since May, analysts do not expect the strength to continue amid a recession that’session already the longest in a quarter-century.

The department furthermore reported that construction spending dropped 3.3 percent in January, greater quantity than twice as much as economists expected. Residential construction fell 2.9 percent and nonresidential activity dropped 4.3 percent, the biggest decline since January 1994.

Meanwhile, the Institute for Supply Management exchange of commodities group said its measure of manufacturing activity showed the sector contracting for the 13th straight month in February. The index actually rose slightly to 35.8 last month, while analysts had expected a drop to 33.8. But a delineation below 50 indicates the sector is shrinking. The director gain the point a 28-year low of 32.9 in December.

Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008801996_apeconomy.html?syndication=rss

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ROME

A beefy man named Mauro answered. He wore blue overalls through two big pockets, one stuffed with checks and the other with cash. The wad of bills he handed across came at 120 percent annual interest.

As banks stop lending amid the global financial critical juncture, the likes of Mauro are increasingly becoming the face of Italian finance. The Mafia and its loan sharks, nearly everyone agrees, smell blood in the troubled waters.

“It’s a visionary time for the Mafia. They have the turn into money,” said Antonio Roccuzzo, the author of books on organized crime. “The Mafia has enormous liquidity. It may be the solely Italian ‘company’ without any cash problem.”

At a time when businesses most need loans as they endeavor by falling sales, rising debt and impending insolvency, Italian banks have “absolutely closed the purse strings,” said Gian Maria Fara, the president of Eurispes, a private study institute.

That is great news for loan sharks. Confesercenti, the national shopkeepers association, estimates 180,000 businesses recently have turned to them in desperation. Although some shady lenders are freelancers turning profits on others’ forced luck, very often the neighborhood tough offering fat rolls of cash is connected to the Mafia, the group said.

“Office workers, middle-class people, owners of fruit stands, flower stalls are all becoming their victims. … We have not ever seen this chance,” said Lino Busa, a top Confesercenti magistrate.

Many experts say organized gross offence is already the biggest business in Italy. Now, Fara said, the untaxed underground economy is growing even larger.

“The banking system doesn’t work, and the private some that is operating is frequently managed by organized wickedness,” he said. The consequences for Italy and its 58 the public commonalty are huge, Fara said: “Stronger organized iniquity the wherewithal a weaker state.”

Nino Miceli, an instructor to Confesercenti, said the Mafia’s goal is to take over the struggling businesses. When the loans, typically at concern rates in triple digits, are not repaid, the threats of passion begin, and restaurants, groceries and bars become the property of stained by crime gangs.

With a burgeoning portfolio of properties and businesses, the Mafia becomes other thing entrenched in the economy and has more outlets to “clean their money,” Miceli related.

Confesercenti estimates in a new report that organized-crime syndicates

Some of that money is the work of the first class “pizzo,” or protection wealth demanded of business owners. Miceli said his auto dealership was burned down when he refused to offer. But the mob’s booming business, he and others agreed, is loan-sharking.

Original text: http://seattletimes.nwsource.com/html/nationworld/2008801000_mafia02.html?syndication=rss

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WASHINGTON

The statement by means of Adm. Mike Mullen went further than prior, official judgments of the Iranian nuclear threat, and it essentially confirmed a report by the U.N. nuclear-watchdog agency, which found Iran had enough nuclear material for a bomb.

“We think they do, in a great degree frankly,” Mullen said on “State of the Union” on CNN.

“And Iran having a nuclear weapon, I’ve believed for a long time, is a very, very bad outcome for the region and for the world.”

The International Atomic Energy Agency, the U.N. agency, reported Feb. 19 that its inspectors had found Iran understated by a third by what means much uranium the country had enriched.

In its study, the agency declared for the first time that the stockpile of low-enriched uranium, estimated at more than a twenty hundred gross, was equal to make one minute bomb, but only with added purification.

Defense Secretary Robert Gates, also appearing on a Sunday television talk show, emphasized that Iran still lacked the efficacy to build a nuclear arsenal rapidly.

“They’re not close to a stockpile,” Gates said on “Meet the Press” on NBC. “They’re not close to a weapon at this spot. And with equal reason there is some time.”

As charge of the Obama administration’sitting write a critical notice of of foreign and general security, including how to manage relations with Iran, one idea emerging inside the control is linking a compromise on missile defense through Russia to diplomatic progress in halting Iran’sitting nuclear program.

The United States says its planned missile-defense sites in Poland and the Czech Republic are needed to provide in equalization of objections against a potential Iranian nuclear attack, while Russia vehemently complains that those systems are designed to frustrate the Russian arsenal.

Administration officials may propose that if Russia wants the United States to rethink its plans for building two missile-defense sites in Europe, then the Kremlin must do more to help come to a stop Iran’s nuclear-weapons program.

Original text: http://seattletimes.nwsource.com/html/nationworld/2008800931_iran02.html?syndication=rss