Financial bonanza

OTTAWA–Ottawa is moving forward on plans for a national securities regulator but will let provinces opt out if they oppose the scheme.

In yesterday’s throne speech, the federal Conservatives echoed their pledge to institute a single national stock market watchdog in a bid to replace the patchwork of provincial regulators in place now.

Finance Minister Jim Flaherty cited the economic volatility and instability as one justification to move ahead with the idea.

"Canada’s system is held out and looked on as a model around the world but the flaw we have in our system is the fact that we still have 13 securities regulators. So we are going to go ahead and create a Canadian securities regulator," Flaherty said.

However, the finance minister noted the opposition to the plan from Quebec, which wants to maintain its own independent regulator fast cash in one hour.

"We’re going to do this with our willing partners … Those who do not choose to, will not join," he said.

Ontario is one of the provinces supporting the idea of a single regulator.

Flaherty said he will consult with the provinces on establishing a Canadian securities regulator early next year after a report from Tom Hockin, a former minister in the Mulroney government who was asked to head a panel on how a national stock market regulator would work.

Flaherty has made creation of a single regulator a priority since becoming finance minister in January 2006.

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Wal-Mart is highlighting flat screen TVs, Blu-ray players, Xbox 360 consoles and home computers in its much-anticipated Black Friday deals this year, according to a copy of the retailer’s circular obtained by CNNMoney.com.

Black Friday - the day after Thanksgiving - is one of the busiest shopping days for the nation’s retailers. Black Friday is of particular interest this year because the country is experiencing a sharp slowdown in consumer spending.

Wal-Mart (WMT, Fortune 500) is not expected to officially unveil its Black Friday deals until Nov. 24. But as more Americans cut their holiday gift budgets this year, many will likely turn to discounters such as Wal-Mart in search of bargains.

According to the circular, Wal-Mart’s so-called doorbuster deals offered between 5 a.m. and 10 a.m. ET will include a 50-inch Samsung plasma HDTV ($798), Magnavox Blu-ray player ($128), Xbox 360 ($199) sold with free Guitar Hero III Legends of Rock game and wireless guitar, HP Pavilion desktop computer ($398) and a UniFlame gas grill ($175).

In addition, Wal-Mart’s Black Friday ad shows a GE microwave for $25, children’s clothing priced between $4 and $8 and a variety of toys, including a Hannah Montana doll for $10 or less.

Wal-Mart spokeswoman Melissa O’Brien declined to address the leaks from the Black Friday sales circular, saying only that "we plan to share the facts directly with customers on Monday, Nov creditscores. 24th."

Still, the retailer in recent days has made no secret of its intention to aggressively court this year’s budget-conscious holiday shoppers.

Last week, the retailer said it would offer more discounts on thousands of products over the next seven weeks.

Judging from other leaked Black Friday ads, additional retailers are also readying huge discounts in a bid to tempt reluctant shoppers.

Sears’ leaked Black Friday circular, which appeared last month on Gottadeal.com, a Web site that markets itself as one of many "official" Black Friday deals sites, showed the retailer would offer deals on washer-dryers, a category that Sears’ hasn’t heavily promoted in the past.

One of Sears’ standout deals for Black Friday is a Kenmore high efficiency front-load washer-dryer set for $599.99. That’s as much as 50% off the price of the individual washer and dryer.

"This really is an incredible deal, and it indicates how nervous retailers are about the season," said Britt Beemer, retail analyst and chairman of America’s Research Group.  

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North American stock markets plunged deep into the red on Wednesday morning as commodities prices and overall confidence lost ground even as governments announced new measures to calm fears.

Toronto's S&P/TSX composite index accelerated its earlier losses and fell 352.31 points in morning trading to 9,071.69.

The TSX energy sector slipped 4.3 per cent as the price of crude oil continued to fall. Light sweet crude for December delivery was down $2.39 at US$56.94 a barrel on the Nymex.

The gold sector was down 4.6 per cent as the price of bullion fell $15.80 to US$717 an ounce on the New York Mercantile Exchange.

On Wall Street, the Dow industrials were down 280.68 to 8,413.28. The Nasdaq composite index lost 40.39 to 1,540.51, while the S&P 500 declined 27.60 to 871.35.

The TSX diversified metals sector slid 8.8 per cent. Teck Cominco Ltd. (TSX: TCK.B) dropped another 16 per cent, or $1.44, to $7.31. On Tuesday, Teck said that contrary to rumours, it is not planning a stock offering to raise money to pay debt.

The Canadian dollar dropped to 81.41 cents, down 2.17 cents, after the Bank of Canada said it will inject an additional $8 billion into the country's tight money markets under new liberal terms.

The bank says the new Canadian-dollar term loan facility will be conducted in four auctions of $2 billion each over the next few weeks.

Finance Minister Jim Flaherty also announced that the federal government will purchase another $50 billion in residential mortgages to ease the credit crunch facing Canadian banks. It follows a similar move last month to purchase up to $25 billion in mortgages.

Retailers continued to erode optimism around the start of the holiday shopping season. Consumer electronics seller Best Buy Co. says it is cutting its 2009 guidance on fears that consumer spending will erode even further.

Department store operator Macy's Inc. says it lost $44 million in the third quarter. U.S. investors are worrying that a severe pullback in consumer spending – which drives more than two-thirds of the U short term cash loans.S. economy – will prolong a global economic slump.

ING Canada Inc. (TSX: IIC) reported a third-quarter profit drop to $57 million from year-earlier $92 million due to stock market volatility. Shares were down 80 cents to $31.03.

ATS Automation Tooling Systems Inc. (TSX: ATA) shares rose 10 cents to $3.89 after the company said it plans to trim five per cent of its workforce – or about 170 jobs – by next spring after reporting a quarterly net profit of $9.3 million, up from a year-ago loss of $18.8 million.

Research in Motion (TSX: RIM) debuted its latest challenge to Apple Inc.'s iPhone – the BlackBerry Curve 8900 smart phone. Its shares dropped 94 cents to $53.98.

The future of the country's top automakers remained a major concern on the Street. House Speaker Nancy Pelosi wants Congress to support a financial bailout for the troubled U.S. auto industry, which is suffering under the weight of poor sales, tight credit and a sputtering economy.

President-elect Barack Obama, when he met with President George W. Bush at the White House on Monday, urged Bush to support aid for the auto industry, and Democrats in Congress have begun drafting legislation that would give General Motors, Ford and Chrysler access to $25 billion of the rescue funds.

Overseas, London's FTSE 100 index was down 1.3 per cent in afternoon trading in London. The German DAX fell three per cent and the Paris CAC-40 lost three per cent.

The Bank of England predicted inflation will fall below the government's target of two per cent next year as the economy contracts. This raised expectations that the British central bank will lower its benchmark rate – possibly to the lowest level ever.

Japan's Nikkei index closed down 1.3 per cent and Hong Kong's Hang Seng declined 0.7 per cent.

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Canadian cultural policy has long relied on two levers to promote Canadian content. First, regulators require broadcasters and cable companies to allocate a portion of their revenues to help support the creation of new Canadian content. Second, that content is granted preferential treatment through minimum "CanCon" requirements for both television and radio broadcasting.

While these approaches may have worked for conventional broadcasting, the big question in the Canadian Radio-television and Telecommunications Commission’s forthcoming hearings on new media is whether they can be applied to the Internet.

Canadian cultural groups, the biggest proponents (and beneficiaries) of this policy approach argue that similar mechanisms can be adapted to the Internet by requiring Internet service providers to hand over a portion of their subscriber revenues for the creation of new media content. ISPs unsurprisingly opposed, arguing an Internet tax is unfair since it forces all subscribers to fund content in which they may have little interest. Moreover, they note such a scheme may also be illegal since it applies the Broadcasting Act to telecommunications activities.

The CRTC adopted a new CanCon approach for the introduction of satellite radio in Canada and similar creative thinking is needed for the online environment.

One possibility would be to provide new media creators – whether independent filmmakers, digital photographers, musicians, podcasters, or bloggers – with the assurance of equal access to online audiences by mandating that Canadian ISPs treat all similar content in an equivalent or neutral fashion.

In recent months, many Canadian ISPs have engaged in "network management practices" that degrades the bandwidth allocated to certain applications and content. While the ISPs argue such practices are essential to ensure quality of service for the majority of their users, similar activities in the United States have drawn a rebuke from the Federal Communications Commission and a promise from President-elect Barack Obama to address the issue.

This issue has been typically treated as telecom matter, yet there would be considerable benefits in assessing it through the lens of Canadian cultural policy. Granting preferential treatment for Canadian content may have made sense in a world of scarcity when there were limited channels and bandwidth, however, it no longer applies in a world of abundance in which the Internet offers virtually unlimited choice pay advance in 24 hour.

Canadian creators, therefore, do not need guaranteed space since there is room on the Internet for everyone. Rather, they need guaranteed access – the assurance that their content can find an audience by being treated like any other video or cultural programming. As ISPs move toward tiered access that grants preferential treatment (such as faster speeds) to their own content or to premium content promoted by deep-pocketed interests, an equal approach to new media content would bring CanCon into the Internet era by asking for nothing more than a fair shake.

This approach would also address the funding side of cultural policy. Many ISPs object to the equal treatment principle by maintaining that new media creators should pay for equal access and avoid using technologies such as BitTorrent that are viewed as transferring the cost of distribution from the creator to the network provider. From their perspective, if a new media creator (or a public broadcaster like the CBC) wishes to use an application to distribute content subject to reduced speeds, a requirement to grant unimpeded access should be regarded as a subsidy from the network provider to the content creator.

If so, such a subsidy could be seen as the Internet equivalent of cultural funding. Rather than adopting an ill-suited ISP tax, the costs associated with providing Canadian content with equal treatment could be treated as the financial contribution, thereby eliminating the legal concerns associated with an ISP tax and allowing the CRTC to extract support from network providers for the benefit of Canadian cultural production.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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NEW YORK – Toy maker Mattel Inc. said Thursday it is cutting about 1,000 positions worldwide in response to the economic downturn.

The El Segundo, Calif.-based company, which makes Barbie, American Girl and Fisher Price products, among others, said the positions amount to 3 percent of its worldwide work force and will reduce its professional and management staff by 8 percent. About 70 jobs cuts are at the company's Fisher Price unit, based in East Aurora, Ill.

Mattel said the cuts will come from a combination of layoffs, attrition and retirements.

The company said the move was part of an attempt to analyze its cost structure and make changes to boost productivity. The recent economic slowdown "amplified" the need to address the company's structure and streamline its global work force, Mattel representative Lisa Marie Bongiovanni said in a statement.

Toy makers have been battling high costs for commodities such as resin and have had to pass some of the costs on to consumers via higher selling prices same day cash advance.

Last month, Mattel reported fiscal third-quarter profit edged up less than 1 per cent to $238.1 million (dollar figures U.S.), falling short of analyst expectations. Sales rose 6 per cent to $1.95 billion.

Expenses for advertising, promotions and other selling and administrative expenses all rose during the quarter.

Needham & Co. analyst Sean McGowan said Thursday that Mattel's move is not that surprising considering toy makers have been facing higher costs for about two years.

"I don't think its a sign that things are suddenly worse," he said. "Companies have to do things like this. I'm not reading much into it.''

Mattel shares fell 40 cents, or 2.7 percent, to $14.58 in afternoon trading, amid a broader market tumble.

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NEW YORK – The nation's retailers saw their sales plummet last month to what is likely the weakest October level in decades, as the financial crisis and mounting layoffs left shoppers too scared to shop.

The stunning drop-off from an already weak September performance is further darkening the outlook for the holiday season and dimming hopes for any industry recovery until at least the second half of next year.

As merchants reported their dismal sales figures Thursday, Wal-Mart Stores Inc., the world's largest retailer, proved to be among the only bright spots as it benefits from shoppers focusing on buying basics at discounters.

However, most other stores, from luxury merchants to teen retailers, suffered steep sales declines. Even warehouse club operator Costco Wholesale Corp., which sells items like TVs along with basics, posted disappointing results.

"Wal-Mart's solid performance is reflective of the weakness in consumer spending," said Ken Perkins, president of research company RetailMetrics LLC. "As soon as the financial crisis hit, consumers spending dropped dramatically. … Consumer spending ground to a halt in October.''

According to Thomson Reuters' preliminary sales tally for October, five retailers beat estimates and one merchant met expectations, while nine missed projections payday advance loan. The tally is based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer's health.

Wal-Mart posted a 2.4 per cent gain in same-store sales, beating Wall Street projections for a 1.6 per cent gain.

But Costco Wholesale Corp., hurt by unfavourable foreign exchange rates, reported a 1 per cent decline in October. Analysts surveyed by Thomson Reuters expected a gain of 3.6 per cent. Excluding the negative effect of foreign exchange – particularly in Canada, Britain and Korea, international same-store sales would have increased by 3 per cent for the month, still well below its usual hefty gains.

Wet Seal Inc. reported a 6.2 per cent drop in same-store sales, less than the 8.6 per cent decline expected by Wall Street. The teen retailer said that it now expects third-quarter profits to be at the high end of its guidance.

Limited Brands Inc. reported a 9 per cent same-store sales drop in October, a bigger decline than the 7.2 per cent analysts were expecting.

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NEW YORK–Finance company GMAC LLC lost $2.52 billion in the third quarter, hurt by the housing slump and vehicle lease writedowns, and said its mortgage unit, one of the nation's largest home loan providers, may not survive.

The fifth straight quarterly loss compared with a loss of $1.6 billion a year earlier and brought GMAC's losses since the middle of 2007 to $7.9 billion.

Its mortgage lending unit, Residential Capital LLC, lost $1.91 billion in the quarter, its eighth straight quarterly loss. It has lost $9.1 billion over that two-year period.

"Economic and market conditions created an unrelenting environment for our business," GMAC Chief Executive Alvaro de Molina said in a statement. "In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity."

GMAC said the deteriorating housing market has made it tough for ResCap to maintain sufficient capital and liquidity quick pay day loan. "Absent economic support from GMAC, substantial doubt exists regarding ResCap's ability to continue as a going concern," it said.

GMAC's results will hurt General Motors Corp, which still owns 49 per cent of Detroit-based GMAC after selling the rest in 2006 to private equity firm Cerberus Capital Management LP.

GMAC has slashed its lending after losses soared because of the U.S. housing slump, tight credit markets, mounting customer defaults and falling vehicle sales.

It is seeking to become a bank holding company, and this week said it plans to restructure much of its debt, less than five months after completing a $60 billion refinancing.

Insurance was GMAC's only profitable unit, with earnings of $97 million.

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Most of the area’s union glazier workers went on strike Saturday after they rejected a labor agreement offered by a group of local contractors.

The strike involves most of the 330 members of Glaziers, Architectural Metals & Glassworkers Local 513.

The union’s five-year labor contract with the St. Louis Glass and Architectural Metal Association expired Friday, said Dennis Stegman, a business representative for the local union.

Contract negotiations began a month ago and have continued. The Glass and Architectural Metal Association is composed of nine area contractors.

Many of the workers who voted against the contract said they were unhappy with provisions in the wage structure for cost-of-living increases, Stegman said. The workers are seeking a three- to five-year contract extension.

It was unclear Monday how many construction projects in the area have been interrupted by the strike emergency cash loans. Among the largest projects that have been affected is the SSM St. Clare Health Center being built by Alberici Corp. near Fenton.

Some project owners have standing agreements with the union to continue working through strike situations against a particular company. The glazier workers are honoring all such agreements, Stegman said.

Also, 11 smaller contractors have kept their union members working by agreeing to sign a future contract. These contractors follow the terms of the standard contract between the union and the association.

Stegman said he did not know the exact number of union members still working.

cboyce@post-dispatch.com

314-340-8345

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A deal to merge General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC has hit an impasse after the Bush administration ruled out funding for it, three people with direct knowledge of the talks said.

This puts any merger of the struggling automakers on hold until after the U.S. presidential election, the sources said.

The development adds a new element of uncertainty for the embattled U.S. auto industry as Detroit’s political allies warn the sector faces a deepening financial crisis that threatens tens of thousands of jobs.

It also opens the door for Cerberus Capital Management, which owns Chrysler, to restart talks with the Nissan-Renault alliance run by Carlos Ghosn. The private equity firm has seen that option as a backstop to an outright acquisition of Chrysler by GM, one of the sources said.

The sources declined to be named as they were not authorized to discuss the private talks. GM and Cerberus declined comment.

This week, Ghosn said he sees any deals among automakers involving a cash element as unlikely unless the cash came from outside, such as from the government.

Discussions with Nissan-Renault (7201.T: Quote, Profile, Research, Stock Buzz) (RENA.PA: Quote, Profile, Research, Stock Buzz) would likely start with consideration of an expanded product-based tie-up building on an existing deal between Chrysler and Nissan, the source familiar with those talks said.

A merged GM-Chrysler would be the largest automaker by sales, but analysts have cautioned it would struggle to turn around the overlapping Detroit-based operations of two firms that have seen mounting losses tied to a global downturn free creditreport.

Chrysler, which has seen its sales fall 25 percent this year, said it was moving ahead with a cost-cutting plan and with plans for new vehicles, including a plug-in hybrid.

“We are taking the tough but necessary decisions to stabilize the business in the short-term and making the viable long-term business decisions to restructure the company for the future,” Chrysler spokeswoman Lori McTavish said.

GM and Cerberus have been in talks since September, according to sources.

GM had approached the U.S. Treasury in recent days about support for the merger through some $10 billion in new funding that would have included taking an ownership stake in the merged company, people familiar with the talks have said.

TREASURY STAYS AWAY

But a Bush administration official said on Thursday the Treasury Department was not negotiating direct aid for the merger.

Instead, the official told Reuters, the administration was working to speed the distribution of $25 billion in low-cost loans for automakers to retool factories, a move that was authorized by Congress last month. 

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Asset managers who bought into the bombed-out mortgage-backed securities (MBS) market after the subprime implosion are hoping that their patience will be rewarded now that the U.S. Treasury’s Troubled Asset Relief Program (TARP) has put a floor under prices.

MBS prices fell rapidly when banks and hedge funds deleveraged, leaving specialist bond managers to sort the wheat from the chaff. Although not all MBS will experience heavy defaults, managers have found new buyers hard to come by while the sector has remained in turmoil. But the passing of the TARP is expected to help stabilize the market.

According to Lipper data, some MBS funds have made a positive return this month, implying that on some assets at least, mortgage payments are holding up. SGAM’s US MBS Fund is up 2.52 percent in the three weeks since the TARP was passed, while Vanguard’s US MBS Institutional Fund saw a modest 0.43 percent return.

But it is the next 12 months that will truly determine whether managers who acquired bargains during the fire-sales will have their courage rewarded.

Global bond managers BlackRock (BLK.N: Quote, Profile, Research, Stock Buzz) and Legg Mason’s (LM.N: Quote, Profile, Research, Stock Buzz) Western Asset Management are among those that looked to add through the period of distressed selling and are hopeful that good quality assets will pay off as the market improves.

BlackRock’s Scott Thiel, head of European fixed income, said he was still seeking bargains in the U.S. commercial MBS market and in the non-agency market where prices have stabilized.

“When you have forced selling, high quality and low quality securities are sold down at the same price because the seller needs the money. We’ve spent a lot of time looking at those credits where we think the markdown is not warranted,” he said one hour loans.

ATTRACTIVE

Some U.S. MBS are thought to offer value for long-term investors, particularly those written pre-2006, which should be of better credit quality than the toxic 2006 to 2007 vintages.

“The commercial MBS market (CMBS) still looks very attractive, particularly if you take historic default levels into account,” Thiel said. The CMBS market is currently trading at about 560 basis points over swaps, depending on the vintage. Adding to portfolios has been difficult, as liquidity is poor, but the U.S. Treasury’s attempts to put a floor in the sector has encouraged asset managers who picked up quality MBS at fire-sale prices.

Mike Zelouf, a senior product specialist at Western Asset Management, said the bulk of Western’s portfolio is in agency mortgages.

Unlike non-agency mortgages, which are issued by private institutions like banks, agency mortgages originate from U.S. government-sponsored mortgage enterprises (GSEs) such as Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz).

Since these GSEs were bailed out in September, agency mortgages now have an explicit guarantee from the U.S. government. Yields on all agency MBS have been pushed higher in the wake of the Lehman LEH.N bankruptcy.

All the non-agency mortgage paper has suffered mark-to-market losses since the credit crunch began, but the passing of the TARP and the associated recapitalisation measures are expected to help stabilize the sector.

RECOVERY 

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