Oil prices rebounded Friday on supply concern following strikes at French refineries, and after a report showed a dip in U.S. inflation.
What prices are doing: Crude oil for March delivery rose 75 cents to settle at $79.81 a barrel on Friday. Prices had fallen as low as $77.76 earlier in the session.
On Thursday, oil rose to its highest level in five weeks after an inventory report showed a larger-than-expected inventory drop in supplies of some refined products.
The oil market was closed Monday in the United States in observance of Presidents Day, but prices rose steadily throughout the remainder of the week. From Tuesday to Friday, crude prices gained 3.6%.
What’s driving prices: A stronger dollar kept oil prices in check early Friday, a day after the Federal Reserve raised the discount rate by a quarter percentage point to 0.75%.
But later in the session, reports surfaced about an intensifying strike at French oil giant Total SA, which began shutting operations and warned of fuel shortages. Workers have been on strike for three days to protest Total’s permanent closure of oil processing at a plant in Flanders.
A Friday morning economic report also helped put a floor under prices. The Consumer Price Index, the government’s key inflation reading, showed prices rose just 0.2% in January. The core inflation rate fell a seasonally adjusted 0.1%.
Gas prices: The national average price for a gallon of regular unleaded gasoline rose to $2.623, up 0.9 cents from the previous day’s price of $2.614, according to motorist group AAA.
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JetBlue inaugurated new service between Orlando and Montego Bay, Jamaica, on Feb. 8 with a daily round-trip flight out of Orlando International Airport.
Montego Bay is the 23rd nonstop destination served by JetBlue from Central Florida. The airline offers flights to six other destinations in the Caribbean and Latin America: Bogota, Colombia; Cancun, Mexico; Nassau, Bahamas; San Jose, Costa Rica; Santo Domingo, Dominican Republic; and Aguadilla, Ponce and San Juan, Puerto Rico.
JetBlue Airways (Nasdaq: JBLU) currently serves 60 cities with 600 daily flights.
Kinder Morgan Energy Partners LP, one of the nation’s largest pipeline companies, agreed to buy four terminals from St. Louis-based Slay Industries for $98 million.
The assets include a river terminal in Sauget, a liquid bulk terminal and a warehousing distribution center in St. Louis and a terminal in Muscatine, Iowa.
The purchase gives Kinder Morgan a toehold in the St. Louis terminal market and "unparalleled access to major markets via rail and waterway," Jeff Armstrong, president of the company’s terminals business, said Wednesday in a statement.
Houston-based Kinder Morgan and Slay Industries also formed a joint venture at Slay’s Kellogg Dock coal terminal in Modoc, Ill., and new North Cahokia terminal in Sauget, which includes 175 acres for development.
Slay Industries was founded 90 years ago as Slay Motor Freight and generates annual revenue exceeding $125 million, according to the company’s website.
Bennett Goldworth thought he was set for life when he retired three years ago at age 50. He bought a waterfront apartment at the high-end Four Seasons Condominium in Fort Lauderdale, and said goodbye to New York and his job selling real estate.
"I felt I had everything I wanted in life, which was great," said Goldworth.
A decade of investing with Bernard Madoff had given Goldworth the financial security to enjoy the "good life" in Florida, until Madoff’s arrest last Dec. 11. "I didn’t just have money stolen, I had my whole life stolen," he said.
Today the condominium is in contract to be sold. Goldworth is living with his father in Manhattan and grateful to be back at the Corcoran Group selling homes again.
He’s also among the first to receive a full half-million dollar insurance settlement from the Securities Investor Protection Corporation (SIPC), which insured direct accounts of Bernard L. Madoff Investment Securities. "I’m one of the fortunate ones," said Goldworth at his office where fellow realtors all were trying to sell million-dollar apartments. "I was very happy, very pleased."
But, other Madoff victims — like Judy and Don Rafferty, senior citizens who’ve had to come out of retirement — have gotten nothing.
"I felt as though we were cheated. I felt violated," said 67-year old Judy who now works as a legal assistant.
The Raffertys for years had withdrawn what they believed were earnings from their Madoff account. The trustee overseeing restitution, Irving Picard, says the Raffertys withdrew more than they invested and are therefore entitled to nothing, even though their account also was insured by SIPC for up to $500,000 payday loans.
"They changed the rules in the middle of the game which I don’t think is fair at all," complained Rafferty.
It is fair, argues Goldworth who maintains, "The net winners should be in the back of the line. First thing that should be addressed is that everyone get back everything they invested."
Rafferty counters, "He got his money back, why wouldn’t he feel comfortable? It’s the people who haven’t gotten their money back that are not happy."
The majority of Madoff investors are not happy. More than 16,000 investor claims have been filed, SIPC President Stephen Harbeck said Thursday. So far, Picard and his staff have reviewed 11,563 of them and approved only 1,647 — just 14%.
Even for those victims whose requests have received an ‘OK’, the bulk of the funds are not guaranteed: only $561 million — 12% of the allowed claims — is being funded by SIPC.
Some Madoff investors are suing Picard, charging him with breach of fiduciary trust for denying them a SIPC insurance payment.
Those lawsuits are especially troubling to Goldworth who believes legal battles will further delay the Trustee paying out claims. "It’s very counterproductive," he said.
Google said Thursday the worst of the recession has passed, as it reported quarterly profit and sales that rose from year-earlier results and easily trounced Wall Street’s forecasts.
"Google had a strong quarter — we saw 7% year-over-year revenue growth despite the tough economic conditions," said Eric Schmidt, Google’s chief executive, on a conference call with investors. "While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future."
Google’s strong third quarter could be a good sign for the economy, as the company’s ad clicks serve as a kind of barometer of consumers’ willingness to spend. The more people click on ads, the more willing they are to buy things.
"It’s all good news from our perspective," said Schmidt. "I’m very proud of our management team in what could have been a very significant downturn for Google."
By the numbers: The Mountain View, Calif.-based search giant’s net income was $1.64 billion, or $5.13 per share, in the third quarter, up 27% from the same period last year.
Excluding one-time charges, including $95 million from a Google Books settlement with the Authors Guild, Google reported earnings of $1.88 billion, or $5.89 per share. Analysts polled by Thomson Reuters, who typically exclude one-time charges from their forecasts, expected earnings of $5.42 per share.
Sales rose 7% to $5.94 billion. Excluding advertising sales that Google shares with partners, a figure also known as traffic acquisition costs, the company reported revenue of $4.38 billion, which beat analysts’ forecast of $4.24 billion.
Google makes the vast majority of its sales from online advertising, a market that has struggled over the past year. But two important indicators of advertising market health improved: The number of paid clicks, which include clicks on ads served on Google sites and its partners, rose 4% from the previous quarter and 14% from the same period last year.
The average amount paid to Google per click also increased about 5% from last quarter. That figure was down about 6% from the same period a year ago, but the company said that much of that discrepancy had to do with currency fluctuations.
Both measures improved from the second quarter, when paid clicks were down sequentially and cost-per-click was down by a double-digit percentage from a year earlier.
Shares of Google (GOOG, Fortune 500) rose more than 2% in after-hours trading.
Looking ahead: Schmidt said the companies new investment would come in the form of "people and innovation." He reiterated a statement that he made last week, saying that the advertising recession had ended, and the company has ramped up its hiring as a result. Last quarter, the company shed 121 employees.
The company hasn’t quite returned to its typical purchase rate of about one company a month. But Schmidt said Google has many small, innovative companies in its sights, and the company plans on increasing the number of acquisitions it makes in the coming months.
The company also said another encouraging sign is that advertisers have expressed a desire to spend more money with Google. As a result, Google is continuing to develop new products to assist with that interest.
For instance, the company said its new DoubleClick Ad Exchange will improve advertisers’ ability to put display ads onto Web sites. Google also said it is making improvements to Google Maps, making it easier for companies to connect with customers online on a local level.
John, Paul, George and Ringo are getting the band back together, in a manner of speaking, with a new Beatles-themed video game and digital upgrade of the group’s entire catalog both released Wednesday.
"The Beatles: Rock Band," which was produced by MTV Games and Harmonix, allows players to sing and play along with 45 of band’s songs using simulated guitars, drums and a microphone.
Also out Wednesday are digitally re-mastered versions of all 15 Beatles albums. The entire catalog will be available as a 16-disk set with special features including album art, liner notes, rare photographs and short documentary films. Re-mastered versions of each album will also be sold individually.
Not that The Beatles, nearly four decades removed from their last performance together, need the exposure. According to Apple Corps Ltd., which markets the Beatles worldwide, the Fab Four has sold more than 600 million records, tapes and CDs since they exploded on the scene in the early 1960s.
But the new products will help "bring the band into the 21st century," said Bruce Burch, director of the University of Georgia’s music business program.
"Great music is great music," Burch said. "But the ways of introducing it to a younger audience are different now, and this will help expose the Beatles to a whole new generation."
Downloads?
The buzz surrounding Wednesday’s releases had many industry watchers convinced that the Beatles’ music would be available on iTunes imminently. Especially since Apple, iTunes parent, had scheduled a special "music" event on Wednesday.
But the speculation ultimately proved false. Apple made no mention of Lennon and Co. coming to the music site.
The Beatles are one of the few bands whose catalogue has never been approved for sale as digital downloads on iTunes. That could be part of a "conscious strategy to maintain some level of exclusivity," said Sonal Gandhi, a media industry analyst at Forrester Research.
Gandhi acknowledge that CD sales have been slipping for years, but she said the new Beatles set would be a hit with die-hard Beatles fans who are willing to pay extra for the special features.
Indeed, the $260 set was sold out on Amazon.com (AMZN, Fortune 500) even before the official release.
"The set is really targeted at heavy Beatles fans who have the money to spend on a collectors item," Gandhi said. "The video game is more for people who aren’t that familiar with the Beatles."
"The Beatles: Rock Band" builds on the already popular Rock Band format, which has sold 13 million units since coming out in 2007.
In the new game, players choose from a variety of Beatles songs ranging from the early hit "A Hard Day’s Night" to the later "Lucy in the Sky with Diamonds." Players can also select one of several famous venues from the band’s career, including its two most famous American venues — the Ed Sullivan Theater and Shea Stadium in New York.
The game software retails for $59.99, but a "limited edition premium bundle," which includes a full set of instruments designed to resemble those played by the Beatles, is available for $249.99.
"There’s no doubt this game will be successful," said Jesse Divinich, an analyst for the video game research firm Electronic Entertainment Design & Research. He said the game would have to sell 1.2 million units to break even, which he expects to happen within one month.
All rights reserved
For the game to come to fruition, MTV Games/Harmonix had to tap a complex consortium of entities that own rights to the various songs, as well as the images of John Lennon, Paul McCartney, George Harrison and Ringo Starr.
Paul DeGooyer, MTV’s vice president of home entertainment, said the deal required the cooperation of EMI Music for all of the songs. Rights to the intellectual property — the words and music of the composers –required the participation of a variety of owners, he added.
The bulk of the songbook of Lennon and McCartney, who are responsible for most of the band’s hits, is owned by Sony/ATV Music. That’s a consortium which includes Sony Corp. and the estate of Michael Jackson, who died on June 25.
Most of the Beatles’ songs composed by Harrison, including "Something" and "While My Guitar Gently Weeps," are controlled by Harrisongs Ltd. Ringo Starr, one of two surviving Beatles along with McCartney, controls his own work.
Lastly, the Beatles’ likeness is owned by Apple Corps, which was formed by the band in 1968 to market its recordings and other related material.
MTV Networks is a unit of Viacom Inc. (VIA)
British inflation will be well below the 2% target in two years if interest rates rise in the first quarter, the Bank of England said on Wednesday, suggesting markets are pricing in rate hikes too early.
In its quarterly Inflation Report, BoE projections showed CPI inflation at around 1.4% in two years’ time if rates follow the path implied by market expectations — rising to 0.7% in the first quarter of 2010 and going up thereafter.
But assuming interest rates stay at a record low of 0.5% and the BoE reaches its 175 billion pound quantitative easing target, "the risks of inflation being above or below the 2% target at the two year horizon are broadly balanced, albeit that the path of inflation is rising."
The latest forecasts are likely to raise expectations that the Bank will keep interest rates where they are for some time to come or even have to further expand its quantitative easing program to get the economy growing strongly again fast cash personal loans.
While the inflation profile was similar to that published in May, the outlook for growth was "somewhat stronger" given the extra stimulus penciled in.
The BoE charts show growth returning at the turn of the year and getting close to a rate of 3% in two years’ time.
"The stimulus should lead to a slow recovery in economic activity, but the timing and strength of that recovery remains highly uncertain," the BoE said.
Oil prices plunged 6% Wednesday after the government reported a surprise increase in oil stockpiles, U.S. and Asian stock markets fell, and a report on durable goods came in much weaker than expected.
"We had the perfect storm happen to the bulls today," said James Cordier, founder of OptionSellers.com. "People are betting on future demand for energy and a lot of investors came to the realization that this demand is not right around the corner by any means."
U.S. light crude for September delivery settled down $3.88 to $63.35 a barrel, after dipping as low as $62.76. Tuesday, oil shaved off $1.15 after a report showed consumer confidence fell more than expected in July.
Supply report: In its weekly inventory report, the Energy Information Administration said that crude stocks jumped by 5.1 million barrels to 347.8 million barrels in the week ended July 24. Analysts were looking for a more modest build up of 1.1 million barrels, according to a consensus estimate from Platts, an energy research firm.
Oil inventories are above the upper boundary of the average range for this time of year, according to the report.
"Today’s report continues to show that demand by the U.S. — which by far is world’s largest consumer of oil — is just so stagnant," said Cordier. The low season for demand is ahead, too. Demand typically dips in the coming months, between the summer driving season and the winter heating season.
Distillates, used to make heating oil and diesel fuel, increased by 2.1 million barrels and are also above the upper boundary of the average range for this time of year online cash advance. Analysts were looking the supply to be 1 million barrels.
Gasoline supplies, meanwhile, decreased by 2.3 million barrels last week, according to the report. Analysts were looking for a decline in gasoline stockpiles of 1.1 million barrels. Even as gasoline stocks decreased in the most recent week, the level of inventories remain in the upper half of the average range for this time of year, according to the report.
Overall, the amount of product supplied in the past month is 4.1% lower than the same time last year.
Stock markets: A down day on Wall Street also pushed oil prices lower because investors read a stock sell-off as an indication of a weakening economy, which demands less oil.
U.S. durable goods orders plunged 2.5% in June, a much bigger decline than economists were expecting. The drop was another sign that the economy is not stabilizing as quickly as expected.
Chinese stock markets tumbled, too, adding to pessimism in the oil market. The Hong Kong Hang Seng fell 2.4% and the Hong Kong HSCC Red Chip fell 2.7%.
Hopes for a recovery in the oil market have been partially based on a recovery in Asian developing markets. "Especially in Asia, the stock markets have been on a tear and people are pointing towards that for future demand of energy," said Cordier.
However, if the rally in emerging markets doesn’t pick back up, the price of oil could have further to fall, he said.
A key index of consumer confidence fell more than expected in July as the dismal job market continued to darken the outlook for household spending.
The Conference Board, a New York-based business research group, said Tuesday its Consumer Confidence Index fell to 46.6 in July from a reading of 49.3 in June.
Economists had expected the index to decline to 49, according to a consensus forecast gathered by Briefing.com.
The measure’s present situation index fell to 23.4 from 25 last month. The expectations index slipped to 62 from 65.5.
The overall index, which fell to an all-time low in February, had recovered earlier this year as consumers were heartened by a rally on Wall Street, lower energy prices and new government programs to aid the economy.
But that optimism was premature and has given way to concerns about the weak job market, according to Adam York, an economist at Wells Fargo Economics Group.
"Now it seems we have a renewed sinking feeling," York said in a research report.
In June, the economy lost 467,000 jobs and the unemployment rate rose to 9 business
Ken Lewis should get out his checkbook. The Bank of America boss never signed the deal he cut in January for the U.S. to backstop some $118 billion in Merrill Lynch assets. But that didn’t become known until May, when the firm announced it wouldn’t be taking the guarantee.
In the interim, BofA (BAC, Fortune 500) benefited from investors’ belief that it had government backing. It owes U.S. taxpayers something for that.
The question is, how much? The bank is trying to wriggle out of paying anything, saying the deal was never consummated, according to Bloomberg. But the widely held understanding that the backstop was in effect probably had a calming influence on investors that helped the Charlotte, N.C.-based bank weather the worst of the first-quarter tumult.
So the government is pushing back, arguing that it is owed at least some of the $4 billion fee that the bank had provisionally agreed to pay in preferred stock and warrants.
Some have argued that BofA should pay a third of the original fee, or $1.3 billion, since the bank benefited from the arrangement for a third of the year online cash advance. That may be too steep - not least since the preferreds and warrants were to pay for 10 years’ coverage.
There are a couple of other options: One would be to charge BofA an M&A-like break fee of, say, 5% of the consideration that would have changed hands — or $200 million. Another would be to charge the bank a fee for having what was effectively a $100 billion undrawn line of credit.
At the full annual rate of around 20 basis points, that too would put the bill at $200 million. That seems a tad cheap for what might have been life-saving U.S. government help. Perhaps a better answer for the government is to split the difference, sending BofA a bill for nearer $750 million.
That would let the bank off relatively easily, provide some compensation for the risk shouldered by taxpayers — and send a message that Uncle Sam’s warm embrace comes with a price.
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