Tuesday November 3 Housing and Economic stories

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TOP STORIES:

Price War Over Books Worries Industry - (www.nytimes.com) A tit-for-tat price war between Wal-Mart and Amazon accelerated late on Friday afternoon when Wal-Mart shaved another cent off its already rock-bottom prices for hardcover editions of some of the coming holiday season’s biggest potential best sellers, offering them online for $8.99 apiece. Publishers, booksellers, agents and authors, meanwhile, fretted that the battle was taking prices for certain hardcover titles so low that it could fundamentally damage the industry and the ability of future authors to write or publish new works. The price cutting began on Thursday when Wal-Mart announced that it would take pre-orders for 10 yet-to-be-published hardcovers for $10 apiece on its Web site, Walmart.com. Later that day Amazon quietly began cutting the prices of those same titles to the very same $10, prompting Wal-Mart to lower its price to $9, a markdown of 59 to 74 percent off the list price of the books. Amazon had matched the $9 price by Friday morning, and Wal-Mart had lowered its price again, to $8.99, by late afternoon. The titles affected include Sarah Palin’s memoir, “Going Rogue”; John Grisham’s short-story collection, “Ford County”; Stephen King’s “Under the Dome”; Barbara Kingsolver’s new novel, “The Lacuna”; and the latest installment in the Alex Cross thriller series by James Patterson, “I, Alex Cross.” Although Wal-Mart, Amazon and other retailers like Costco, Target and even pure bookstore chains like Barnes & Noble typically discount best sellers, they usually don’t take more than 50 percent off the list price. Wal-Mart’s move, and Amazon’s reaction, signaled a new threshold in price cutting for books and left publishing insiders wondering how low it would go when the beleaguered industry is already worried about the effect of $9.99 e-books and a slowdown in book sales over all.

U.S. Savings Bind - (www.nytimes.com) In his Labor Day weekend address on the American worker, President Obama, with little fanfare, announced some initiatives to help Americans save more money. One such step will allow employees to receive their tax refunds in the form of U.S. Savings Bonds instead of in cash. Another will promote automatic enrollment in retirement funds for workers at medium and small firms so that employees will have to opt out of saving, rather than opt in. Studies show that this results in more saving. All these steps should add to the national savings rate. It is a goal Obama campaigned on — and one that policy wonks and pundits have been screaming about for years. The United States is staring at frightening retirement deficits, infrastructure needs and health care liabilities. How else to meet them but to start saving and stop borrowing money? Here’s the funny part. The American consumer kicked the borrowing habit more than a year ago. The country, you may have noticed, is in an economic crisis, and most economists say the only way out is for consumers to start spending money. Spending is the opposite of saving. Since consumer spending accounts for 71 percent of the gross domestic product, an enduring rise in personal saving would make for a weaker recovery, with fewer jobs. One main purpose of the $787 billion government stimulus was to provide a buffer until private spending revived. Usually, saving recedes when recessions end. Some economists think the current financial crisis was such a shock — on a par, psychologically, with the Great Depression — that people will feel the need to save even after it is over. If their predictions are right, the United States would need to enact a stimulus every year to get the economy back to where it was. That is why the federal government enacted the cash-for-clunkers program; it wants people who have been accumulating savings to buy automobiles. The government’s mixed message may sound grossly inconsistent, but it isn’t. Economists often give different answers for the short term and the long term. What is unusual is that the financial crisis has brought these divergent agendas into such sharp relief. The prescription that we should save more isn’t wrong. Household saving is the total of what people earn less what they spend. If you want to describe the history of the U.S. economy over the last 50 years, in shorthand, you could do worse than this: Americans saved. Then they didn’t. For the 35 years after World War II, Americans dutifully set aside about 9 percent of their income. Their savings were plowed into stocks and bonds and formed a pool of capital for investments and new technologies (and a couple of wars, not to mention the space program). They begat a golden era of productivity and growth and, eventually, the 1990s boom. But by then, habits were changing. Starting in the mid-1980s, the personal-savings rate declined. Credit became more available, and people became used to borrowing what they needed. (The commonplace phrase “saving up” — as in “I’m saving up for a washing machine” — all but disappeared.) Also, bubbles in stocks and real estate convinced people they didn’t need to save much for the future, since even a small nest egg would grow into a big one. By the late 2000s, the savings rate plunged to less than 1 percent.

Obama looking at all options for creating jobs - (finance.yahoo.com) President Barack Obama is considering all options to create jobs, including another stimulus package, while trying to pull the economy out of a deep recession and deal with a record deficit, White House advisers said Sunday. With more than half of the $787 billion recovery package yet to be spent, Obama aides said the administration is not ready to commit to additional measures. "Everything is on the table," senior adviser Valerie Jarrett said. "You've got this huge national deficit and we've got to do what we can to bring that down. At the same time, it's important to stimulate the economy," Jarrett said. "Let's wait and see. Let's let the recovery bill do its job." Unemployment stands at 9.8 percent, with more than 4 million jobs lost this year. The deficit has reached $1.4 trillion and the national debt $11.9 trillion. Adviser David Axelrod cited progress on reviving the economy, with expectations for growth in the third quarter this year. But he warned that the government should not make the mistake of ending its recovery initiatives too early at the risk of sending the economy back into recession. "That doesn't mean that we don't look to the mid- and long-term for deficit reduction," Axelrod said. "We have a stimulus program in place, an economic recovery program in place, that is not even 50 percent through. We have to see that through. And we'll see what other measures we need to take." In appearances on the Sunday news programs, the advisers criticized those Wall Street firms that are paying huge amounts in compensation and benefits after accepting taxpayer assistance. Goldman Sachs, for example, has said it has set aside $16.7 billion for compensation so far this year, more than $500,000 per employee. Citigroup is paying $5.3 billion in bonuses to its employees and Bank of America $3.3 billion. "I think the American people have a right to be frustrated and angry," said Rahm Emanuel, the White House chief of staff. Emanuel and the chairman of the Senate Banking, Housing and Urban Affairs Committee, Sen. Chris Dodd of Connecticut, said the compensation issue comes as banks and other financial institutions oppose efforts by the president and Congress to put in place regulations designed to prevent the kind of financial meltdown that began last year. "They have a responsibility to the whole system," Emanuel said. "And it starts with not fighting the financial regulatory system and the reforms that are necessary to protect consumers, homeowners and others." Dodd criticized banks for failing to make more credit available to small businesses and others.

California job losses keep climbing - (www.latimes.com) California lost more than five times as many jobs in September as it did the month before, signaling that the state's employment woes continue despite a budding economic recovery. Employers cut 39,300 workers from their payrolls last month, according to figures released Friday by the state Employment Development Department, led by cuts in construction and government. A separate survey of joblessness showed that California's unemployment rate was 12.2% in September, down from a revised 12.3% in August. But that decline wasn't a reflection of a stronger job market. The rate fell only because thousands of jobless Californians gave up searching for work last month and were no longer counted as unemployed. "It is discouraging," said Esmael Adibi, an economist at Chapman University. "We want to see job losses go down and the pace slow down, but we didn't see it." The state's unemployment rate has climbed dramatically over the last year, up from 7.8% in September 2008. It's also significantly higher than the national rate of 9.7%. Despite the disappointing job numbers, economists said California was in the early stages of a comeback, albeit an uneven one. Southern California, which has been hobbled by the collapse in housing and construction, is projected to lag behind the Bay Area, whose bellwether tech industry is gearing up to supply growing global demand for computers, software and mobile devices. Intel Corp. of Santa Clara and Google Inc. of Mountain View reported encouraging earnings this week. Northern California's exports of semiconductors and electronics climbed. In August, loaded containers sailing from the Port of Oakland were up 12.8% from the same period last year, while tonnage at San Francisco International Airport was up 5.2%, according to Jock O'Connell, international trade and economics advisor at the University of California Center Sacramento.

States suing federal government for unclaimed war bonds – (www.latimes.com) $16.7 billion in certificates has yet to be cashed in. Six states now say that Treasury officials haven't tried to find the bondholders or their descendants, and that states have a right to the money. Nearly 70 years ago, the federal government began issuing hundreds of billions of dollars in savings bonds to finance the greatest war effort in the nation's history, with President Franklin D. Roosevelt buying the very first one. But the bonds came with a catch: They wouldn't be paid off for 40 years. As the decades passed after World War II, $16.7 billion worth of bond certificates were either forgotten in dusty attics or thrown out in the trash. That treasure has remained unclaimed, but a lawsuit could change that. Six states have sued the federal government to get that money, contending that the Treasury Department has done nothing to find the original bondholders or their descendants -- not even send out a letter when it came time for the government to repay the bonds. Moreover, the states say, they have laws that empower them to take unclaimed property for themselves, which would be a welcome infusion of cash at a time of economic distress. Oral arguments are expected to begin in the coming weeks in U.S. District Court in New Jersey, where the lawsuit was originally filed. "It's daunting," said Randall Berger, a partner at Kirby McInerney who is representing the states -- Kentucky, Missouri, Montana, New Jersey, North Carolina and Oklahoma. "But the states are doing it because they need the money and because they have these statutes that clearly lay out what happens . . . to unclaimed property." Representatives for the Treasury Department and the U.S. attorney's office, which represents the department, declined to comment. The case will largely turn on the issue of where the boundaries are between federal and state power, lawyers for the states say. If the court rules in favor of the U.S. government, the Treasury Department could keep money it owes to ordinary Americans.

Southern California's vast desolation indoors – (www.latimes.com) Almost 51 million square feet of office space is vacant in Southland, and that number is expected to continue growing well into next year. Though Wall Street investors are showing some enthusiasm about the direction of the economy, shell-shocked business owners in Southern California are still more inclined to shrink than grow their companies. ¶ Problems at white-collar firms are bleeding the region's enormous office rental industry. Almost 51 million square feet of office space in Los Angeles County, Orange County and the Inland Empire is now empty -- more than 17% of the total. ¶ The exodus from office buildings that started in late 2007 accelerated during the third quarter as the anemic business climate took its toll on the real estate rental industry, according to the Cushman & Wakefield real estate brokerage. ¶ "These vacancies are a direct reflection on unemployment," said Joe Vargas, an executive vice president at Cushman & Wakefield. "Companies continue to reduce their workforce, or they are not hiring." Troubled business owners facing expiring leases often choose to downsize these days and take less office space, even though rents are falling, he said. Real estate rentals are a lagging indicator of the economy, so the shrinking-space trend is expected to persist well into next year even if the nation's financial outlook continues to improve. Industry observers were divided in their assessments about whether tenants at least showed signs of interest in renting new office space. "There was a dramatic drop-off in leasing velocity last quarter," said John McAniff, managing director of brokerage Jones Lang LaSalle. "Apparently the rebound on Wall Street did not translate to a rebound in tenant commitments. That tells me there is a lot of uncertainty out there."

OTHER STORIES:

Don’t Let Exceptions Kill the Rule - (www.nytimes.com)

Dollar Touches 14-Month Low on Outlook for Fed’s Target Rate - (www.bloomberg.com)

The Proof Will Be in the Profits - (www.nytimes.com)

Hedge Fund Chief Is Charged With Fraud - (www.nytimes.com)

VIX Posts Worst Losing Streak in Four Years as Dow Tops 10,000 - (www.bloomberg.com)

In Britain, a Soaring Deficit Lifts a Hawk - (www.nytimes.com)

U.S., China Yuan Dealings May Turn ‘Contentious,’ Roach Says - (www.bloomberg.com)

Trichet, Juncker to Go to China to Discuss Yuan Rate - (www.bloomberg.com)

Sagging consumer view tempers output optimism - (www.reuters.com)

US budget deficit hit a record $1,400bn - (www.ft.com)

U.S. must live within its means: Geithner - (www.reuters.com)

Calif. bank becomes 99th in US to be shut in 2009 - (finance.yahoo.com)

Forecast for Microsoft: Partly Cloudy - (www.nytimes.com)