Fed to keep interest rate near zero for 2 years

WASHINGTON (AP) -- The Federal Reserve said Tuesday that it will likely keep interest rates at record lows for the next two years after acknowledging that the economy is weaker than it had thought and faces increasing risks.

The Fed announced that it expects to keep its key interest rate near zero through mid-2013. It has been at that record low since December 2008. The Fed had previously only said that it would keep it low for "an extended period."

Fed policymakers used significantly more downbeat language to describe current economic conditions. It said so far this year the economy has grown "considerably slower" than the Fed had expected. They also said that temporary factors, such as high energy prices and the Japan crisis, only accounted for "some of the recent weakness" in economic activity.

The more explicit time frame is aimed at calming nervous investors. It offered them a clearer picture of how long they will be able to obtain ultra-cheap credit, and was at least a year longer than many economists had expected.

But it didn't seem to help on Tuesday. Stocks initially fell after the statement was released, possibly reflecting disappointment that the Fed did not announce another round of bond buying.

Fed officials met against a backdrop of speculation that they would say or do something new to address a darkening economic picture. The stock market has plunged and government data have signaled a weaker economy in the four weeks since Chairman Ben Bernanke told Congress that the Fed was ready to act if conditions worsened.

The economy grew at an annual rate of just 0.8 percent in the first six months of the year. Consumers have cut spending for the first time in 20 months. Wages are barely rising. Manufacturing is growing only slightly. And service companies are expanding at the slowest pace in 17 months.

Employers hired more in July than during the previous two months. But the number of jobs added was far fewer than needed to significantly dent the unemployment rate, now at 9.1 percent. The rate has exceeded 9 percent in all but two months since the recession officially ended in June 2009.

Fear that another recession is unavoidable, along with worries that Europe may be unable to contain its debt crisis, has rattled stock markets. The Dow Jones industrial average has lost nearly 15 percent of its value since July 21. On Monday, it fell 634 points - its worst day since 2008 and sixth-worst drop in history.

The tailspin on Wall Street was further fueled by Standard & Poor's decision to downgrade long-term U.S. debt.

Bernanke didn't speak publicly after Tuesday's Fed meeting. The chairman this year made a historic change by scheduling news conferences after four of the Fed's eight policy meetings each year, but Tuesday's wasn't one of them.

Later this month at the Fed's annual retreat in Jackson Hole, Wyo., Bernanke will likely address the weakening economy, the S&P downgrade and the market turmoil.

Earlier this summer, the Fed ended a $600 billion Treasury bond-buying program. The bond purchases were intended to keep rates low to encourage spending and borrowing and lift stock prices.

Cenovus profits more than triple

Planned maintenance work cut into production from Cenovus Energy's Foster Creek plant in northeast Alberta in the second quarter. (Canadian Press/Cenovus )

Oilsands operator Cenovus Energy Inc. reported its second-quarter profits more than tripled Tuesday, thanks to robust oil prices and strength in its refining operations.
But wet weather and wildfires throughout Western Canada this spring took a toll on the Calgary-based company's production during the quarter.
"Through these adverse conditions, our teams demonstrated resilience. We have continued to deliver on our oil growth plans," chief executive Brian Ferguson told a conference call with analysts.
Before markets opened, Cenovus said its net profits soared to $655 million, or 85 cents per share in the three months ended June 30.
That compared with $183 million, or 24 cents a year earlier. That beat the average analyst estimate of 44 cents per share, according to a survey by Thomson Reuters.
Revenues in the quarter jumped to $4 billion from $3.1 billion a year earlier. Cash flow jumped to $939 million from $537 million.
Production at the company's Foster Creek and Christina Lake oilsands projects in northern Alberta was more than 58,000 barrels per day, net to the company. That was slightly less than the same period a year earlier due to planned maintenance work.
"Our manufacturing approach to developing these oilsands assets has been instrumental in bringing on expansions at industry-leading capital efficiencies while controlling quality, cost and safety," Ferguson said.
"We expect that this formula will allow us to advance our development plans through the next decade."
He added Cenovus is well on its way to meeting its goal of producing 400,000 barrels per day from the oilsands by the end of 2021.
Cenovus 3-month chart
Cenovus is a relatively new name in the oilpatch, having split off from natural gas producer Encana Corp. in late 2009.
Shares in the company dropped 2.4 per cent, or 90 cents, to $37.02 in mid-day trading on the Toronto Stock Exchange.
In response to out-of-control forest fires in northern Alberta in May, Cenovus was forced to cut production from its Pelican Lake oil pool in northern Alberta. Production was curtailed for about two weeks, including one week with no output at all.
That site itself was never in peril, but a pipeline that carries crude from the region was out of commission as the fires knocked out its power supply.
Pelican Lake production is now back to its normal level of between 20,000 and 22,000 barrels of oil per day.
Flooding in Saskatchewan has also caused problems for Cenovus and its peers. At its Weyburn oilfield, production declined by 1,750 barrels per day. In the Lower Shaunavon and Bakken regions of the province, production was down about 3,100 barrels per day.
The company expects production will recover during the third quarter.
"We fully expect to meet our overall production guidance and exit- rate volume expectations for each of our operating areas," chief operating officer John Brannan told the conference call.
In June, the Calgary-based company announced it aims to produce about 500,000 barrels of oil per day by the end of the decade. The steep increase from its current daily output of around 135,000 barrels will be largely driven by a six-fold jump in oilsands production by the end of 2021

RIM TO CUT 2000 JOBS WORLDWIDE

Research In Motion will slash about 2,000 jobs from its operations worldwide in an effort to cut costs, but the impact on employees at its Bedford office will be "relatively small," the company said Monday.

The BlackBerry maker announced the "cost optimization program" in a news release Monday, calling the layoffs a "prudent and necessary step for the long-term success of the company."

A spokesman said Monday in an email to The Chronicle Herald that "although RIM is looking to achieve efficiencies across its global operations, the impact of the workforce reduction announced today is relatively small in Halifax."

If employees at RIM’s customer support centre in Bedford had any inkling of impending job losses at their office, they were keeping mum Monday.

"Actually, I don’t know anything about it," one man said outside the Innovation Drive office.

A woman declined comment, saying, "It’s not worth the risk."

RIM said it would notify affected employees at its North American operations this week. The company, based in Waterloo, Ont., has about 19,000 employees worldwide.

Bedford councillor Tim Outhit said he isn’t privy to any of the company’s plans for layoffs in his community, but he expressed concern for the workers.

"Obviously, I’m hoping for the best for them. I like to see good-paying, knowledge economy jobs in Nova Scotia, and I was very pleased when RIM came here. They’re good-paying jobs, and we’d like to see them be here."

RIM’s arrival in Nova Scotia was announced with fanfare in November 2005. With the expected gain of hundreds of jobs in the area, the province pulled out all the stops to woo the company.

The former Office of Economic Development gave $5 million to RIM in 2005 to cover training and recruitment, and the provincial business development agency, Nova Scotia Business Inc., contributed an additional $5.3 million in payroll rebates. Under the rebate program, companies receive money each year after they meet predetermined hiring targets.

Neither RIM nor the business development agency would specify how many people the company now employs in Bedford, but Percy Paris, the minister of economic and rural development and tourism, said the number is about 540.

That is far below the estimated job growth touted in Nova Scotia Business Inc.’s 2005-06 annual report.

"The company already has more than 100 employees in place in Halifax and will continue to create one job every business day for the next five years," the report said.

Despite falling short of job estimates, the company has been a boon to the province, said Stephen Lund, the agency’s president and chief executive officer.

Name recognition alone has allowed Nova Scotia’s business jet-setters to market the province to potential clients overseas.

"This is a critical part of the IT sector," Lund said. "Having RIM has allowed us to leverage that name around the world. When we’re talking to companies in London, New York, China, it’s a great selling tool for us."

The province’s financial investment of $10.3 million has paid off, he said.

"This is a strong positive return on investment for us. If you take just the tax revenue alone that those employees would generate, it far exceeds what we paid out."

The dip in the company’s workforce comes as RIM squares off against fierce competition in the smartphone market, including Apple’s iPhone and phones with Google’s Android operating system. RIM’s BlackBerry PlayBook tablet has also received lukewarm reviews compared with Apple’s popular iPad.

Lund said RIM’s challenges are no reason to lose faith in the company.

"They’re still showing strong numbers; they’re just not meeting the numbers analysts have expected. Halifax has been a great operation. We have great confidence in the company."

Speculators seen leading commodities crash

By Sarah Turner and Michael Kitchen, MarketWatch

SYDNEY (MarketWatch) — Analysts offered a wide variety of reasons for Thursday’s plunge in commodities, but some agreed the main force behind the drop might simply be a matter of stampeding speculators.

“It all began with silver, which started falling sharply late last week when CME Group increased margin requirements on trades,” said BMO Financial Group Chief Economist Sherry Cooper, in a note Thursday.

Indeed, the CME’s repeated hikes to the silver-margin requirements sent the metal, which as of April 29 had risen nearly 60% for the year, tumbling, with benchmark silver futures losing more than 25% since then.
But a variety of other news, including a Wall Street Journal report that billionaire financier George Soros was selling off his holdings, helped the losses snowball, and on Thursday, silver fell 8% on the Comex division of the New York Mercantile Exchange, its largest one-day percentage drop since Dec. 1, 2008.

This touched off massive selling across the commodities complex.

“Silver really just burnt off in a big way and that fed through to other commodities,” said Michael Turner, strategist at RBC Capital Markets.

Oil (NEW:CLM11) was especially hard hit by Thursday’s follow-on crash, dropping as low as $99.35 during the North American session, its heaviest drop in percentage terms since April 2009. Crude futures continued to decline on Friday and were recently off over 4%. Read more on oil’s Friday drop.

Turner says that the dollar’s rise after the European Central Bank failed to signal further near-term interest-rate hikes early Thursday helped turn silver’s drop into a stampede out of almost all commodities. Read more about the European Central Bank


Independent oil trader and author Dan Dicker agreed, saying crude’s reaction to the drop was “great proof of just how much speculative money there was in the oil market.”

Noting that much of the drop included a large volume of margin selling, he added that the fall also showed “just how much stupid money there is in the oil game.”

But despite the speculative nature of the drop, analysts at Lloyds Bank said Friday that some economic fundamentals actually point to even lower prices for some commodities.

“Many of them have looked frothy for a while and have perhaps accelerated beyond the pace justified by the global recovery,” they said in a research note.

But they also added that “some perspective is required,” citing the fact that the Thomson Reuters/Jefferies CRB Index, which tracks global commodities prices, is “actually marginally below the levels of five years ago, so it’s hard to argue that commodity prices are headed for a massive decline given that global [gross

Ron Paul says Bernanke ducks the issue

Rep. Ron Paul, the Federal Reserve’s most powerful critic, reacts to Ben Bernanke’s press conference. Here’s a lightly edited transcript of his remarks to the MarketWatch Radio Network. Paul is the chairman of the House monetary policy subcommittee, and is thinking of running for president again in 2012.

WASHINGTON (MarketWatch) — I found the press conference to be enlightening in the fact that we heard one, and he held one, and that’s a sign that the Fed knows that they have to be a little more responding to the demand for transparency. When I listened to what had to be said, I wasn’t too enthralled. I’ve heard it all before. Read more on Bernanke's press conference.

It’s smooth talking, to make current policy sound reasonable, and let it go at that. Because they never admit anything. When it comes to prices, it’s never their fault. I mean, how many different things did he mention about why prices go up, why we have inflation? He never admits it’s the inflation of the money supply that’s the problem.
When he was asked about the dollar, he said, “Well you know, the person in charge for the value of the dollar is the secretary of the Treasury.” Well, Bernanke can triple the money supply, and then he wants to duck the issue that he’s responsible.
He says, “Our position is a strong dollar” ... with constant devaluation, even while he spoke it was devaluing. Against gold, it went down 1.5%. It doesn’t make any sense.

It was more justification for a policy that doesn’t work. There was no explanation on how he’s going to get out of this. He did recognize, though, that price increases are significant and could be a problem in the future. It could be a significant problem for unemployment. He said it softly, but there were some words in there that convinced me that he knows that when inflation is admitted – I think it’s already here – but when he really admits it’s here, he’s really in a box. Because what he’ll have to do is raise interest rates, cut back on all the monetization of all this debt, buying all these securities, and then, in a weak economy, he’s in a mess
He works on the Keynesian assumption that prices go up for other reasons than the monetary reasons.
“It’s the supply and demand...Well, third-world nations are starting to buy more oil, that’s why the price of oil goes up.” And it has nothing to do with the inflation of the monetary system.
So, I think he does a good job for what he has to do, and that is try desperately to make a very, very failed system sound plausible. But from my viewpoint, it isn’t plausible, it’s not workable.
And I so strongly oppose centralized economic planning through monetary policy, especially in a small little group that can manipulate interest rates and the money supply and bail out privileged companies that are too big to fail at the same time the little people suffer. They lose their jobs and their mortgages and their houses.
So, to me, we have to have major monetary reform, and a bit of transparency. A pretense of transparency won’t suffice.

MORE MONEY MOTIVATION

Gold sends Canada stocks higher

Canadian stocks bounce back into the black; gold hits $1,500 mark

CHICAGO (MarketWatch) — Canadian gold miners helped lift the broader market into the black Tuesday as bullion futures advanced into record territory, hitting the key mark of $1,500 an ounce.
The S&P/TSX Composite Index   edged up 0.2%, or 28.9 points, to 13,731.3, swinging back into positive territory after a weak start incited by rising inflation worries.
Toronto’s main metals and mining index  advanced 1.8%, fueled by a 6% jump in shares of base-metals miner Teck Resources Limited . The Vancouver-based company on Monday reported better-than-expected revenue for the first quarter.

 

Also advancing, Canadian gold-mining giant Goldcorp Inc.’s   stock rose 0.5%. Gold for June delivery added $2.20, or 0.2%, to trade at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange. 

Canada’s energy sector also made a late-day comeback as oil futures turned higher after protests erupted in Nigeria, weakening the U.S. dollar. Toronto’s main energy index   rose 0.1%, adding to the broader market’s gains.
Leading the pack, Calgary-based Suncor Energy’s stock added 0.8%, offsetting declines in shares of Canadian Natural Resources Limited   and Connacher Oil and Gas Limited , which posted losses of 0.3% and 1.4%, respectively.
Concerns of rising inflation pressured Canadian stocks at the market’s open, after Statistics Canada reported a 3.3% rise in inflation in the 12 months to March. The climb puts the country’s year-over-year inflation increase at its highest since September 2008.
The Canadian dollar   strengthened against its U.S. counterpart, rising 0.8% from Monday’s close. In early April, the Canadian loonie reached its three-year best against the U.S. greenback. On Tuesday, one U.S. dollar purchased 95.5 Canadian cents, down from 96.4 cents at Monday’s close.
The jump in the country’s Consumer Price Index, which is used as a gauge of inflation, rose from 2.2% in the 12 months to February.
Among other notable movers, Toronto shares of Research In Motion Limited    fell 2.2%. The Ontario-based BlackBerry maker released its new PlayBook tablet computer on Tuesday

Gold hits record at $1,500 an ounce

Gold futures hit the psychological mark of $1,500 an ounce on Tuesday, shaking off early weakness as the dollar sunk further. Gold for June delivery  GCM11 +0.24% wavered between small gains and losses earlier, but recently added $6.40, or 0.5%, to trade at $1,499.30 an ounce on the Comex division of the New York Mercantile Exchange. It earlier traded as high as $1,500, according to CME, an intraday record for the metal

Search for share prices Search for share prices Sun Apr 17, 2011 7:54AM EDT - Canadian Markets closed RIM says any new smartphone curbs in UAE would apply to others too

DUBAI, United Arab Emirates - The maker of BlackBerry devices says it has been told that any new restrictions imposed by authorities in the United Arab Emirates would apply to other smartphones too.
The UAE telecom regulator has said it may limit access to the highly secure Blackberry Enterprise Server, a system used by many international companies.
Individual customers and organizations with fewer than 20 users wouldn't have access.
Device maker Research in Motion Ltd. (TSX:RIM) said in an emailed statement today that it has been in direct contact with the Telecommunications Regulatory Authority.
It says it's been told any policy change would apply to the whole industry and affect "all enterprise solution providers" — a reference to phones tied to corporate email accounts.
The TRA said Saturday that "all BlackBerry services" would continue for companies and individual subscribers.

Car Payments 101: What to do when the car you bought costs too much

Ever since James Bond first roared around the curves of Europe in his Aston Martin DB5, luxury sports cars have been stuck in the imaginations of men.  But these days, you're just as likely to find women having love affairs with their cars.
Take China, for example. China is producing more female millionaires than anywhere else in the world right now. And what are these ladies doing with their newfound riches? Buying cars! According to Maserati, 30 per cent of its Chinese sales are to women, versus 10 per cent in Europe. Women account for 20 per cent of Ferrari sales in China, which is twice the average elsewhere.
Sadly, we are not all millionaires (yet!). And whether you drive a Maserati or a Toyota, the price of that little purse-extender can take a massive toll on your monthly finances. Between the price of gas, maintenance and financing, all too often the car you thought you could afford turns out to be way more expensive than planned.
According to Stephanie Holmes-Winton, president and CEO of The Money Finder in Halifax, vehicle debt is one of the hardest to alter once you've signed on the dotted line. For one thing, new cars depreciate in value rapidly, so trying to get the seller to change the terms later on will not likely work in your favour. Second, most people choose a car based on the monthly payment, rather than the total purchase price.
"Car dealers are skilled at finding creative ways to make almost any car work into your budget. The reason for this is that's what we as buyers are fixated on," says Ms. Holmes-Winton. "However, just because the purchase looks doable on paper, this does not mean it's truly affordable!"
The golden rule of car buying, according to Ms. Holmes-Winton, is this: Buy your vehicle over a 36-month term and no more. If you can't afford the monthly cost to pay it off within 36 months, then you can't afford the car!
Ms. Holmes-Winton says that leasing is ideal for business owners only when you have a legitimate ability to write off at least 50 per cent of the cost of the car. When choosing a car to lease, you should still select a car that you could afford to purchase outright over 36 months. Take the difference between the lease payment and the would-be loan payment and bank this (cottage money!) or apply it to your family's second vehicle if that is a necessity.
But what if the deed is done? What do you do if you find yourself driving around in the car of your dreams while stressing about the financial pickle you find yourself in?
"Depending on the size of your payment, the condition of the vehicle and its present value, you may be able to trade down," says Ms. Holmes-Winton. She suggests these options:
Option 1 — Return to the dealer from whom you purchased the car and find out if you can downsize. More than likely, the value of your car has dropped to less than what you owe. If that is the case, you will have to transfer the difference between what you owe and what the car is worth onto a much less expensive car, which might be tricky or darn near impossible. But take heart - it has been done.
Here's an example: You bought that sweet little SUV at $35,000 and now it's worth $19,000. You still owe $28,000. That is a $9,000 difference that the car dealer still expects you to pay. Even if you can trade down to a cheaper car, this $9,000 will get tacked onto the price.
Option 2 - Sell the car for its current value and then pay back your outstanding loan. However, because the loan is attached to the car value, you may not always be allowed to do this.
Option 3 — Try another dealer. Sometimes you can get a better trade and reduce your payments by going to a competitor.
Option 4 — Find someone willing to take over the contract and take the car off your hands. LeaseBusters, Craigslist and eBay Motors are just a few places that provide a marketplace for people in the same position as you, along with people hoping to pick up a car without paying the new car premium. Just be aware of the fees involved and make sure you understand what this option will actually cost you!

Remember the day you took the keys to your first car? Freedom! Keep that in mind as you consider a new car today. No matter what you drive, a car should feel like a luxury - don't let it own you!

TSX ends 2-day slide as energy and banks gain

Toronto's main stock index eked out a modest gain on Wednesday, following losses, as energy and financial issues advanced, but continued uncertainty over commodity prices investors cautious.
Financial shares, up 0.6 percent, led the pack, boosted by better-than-expected results from U.S. Among the top gainers, Royal Bank of Canada climbed 1 percent to C$60.42.
The index's energy group pushed up 0.1 percent as U.S. crude oil prices ended a two-session slide, data showing U.S. gasoline stockpiles plunged last week and by continued worries about the Libyan Suncor Energy was up 0.1 percent at C$42.09, Canadian Oil Sands Trust rose 0.3 percent to C$31.12, 0.4 percent higher at C$31.73.
Base-metals miners fell 1.1 percent, tracking weaker copper prices after data showed U.S. auto sales China would make further efforts to quell inflation.
Diversified miner Teck Resources was down 1.9 percent at C$50.90, while First Quantum Minerals
C$121.30.
"The very fact that the miners are down says something about what's going on in terms of
The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> ended up 32.24 p
Eight of its 10 main sectors were higher. The gold-mining sub-sector was off 0.4 percent
of bullion.
Earlier in the day, the index rose more than 1 percent as oil prices gained.
"The fact that we opened strongly and gave back some, and (then) coming back, to me it
Nakamoto said. "If everyone was on the same page we probably would have regained yesterday's Market watchers said bargain-hunting was in play after the index lost more than 400 points on Monday "Today, bargain hunters are trying to nibble in the markets, but (without) conviction just yet," said broker at MF Global Canada, in Montreal.
Shaw Communications dropped 3.4 percent to C$19.80 after investors reacted to delays in its
service and troubles in keeping cable subscribers as it eases off promotions.
Gildan Activewear rallied 3 percent to C$33.80, after Scotia Capital became the latest brokerage to target on the T-shirt maker. The company built on gains made after announcing earlier this week based sock maker Gold Toe Moretz Holdings.
($1=$0.96 Canadian)

Loonie up slightly as Bank of Canada says economy slowing, oil prices rise

The Canadian Press, On Wednesday April 13, 2011, 11:43 am EDT
By Malcolm Morrison, The Canadian Press
 

TORONTO - The Canadian dollar was slightly higher against the American currency Wednesday at midday as the Bank of Canada warned the
economy is slowing while oil reversed two days of big slides.
The loonie was up 0.04 of a cent to 103.87 cents US.
The dollar was off early highs after the Bank of Canada said the economy likely grew by a robust 4.2 per cent in the first three months of 2011,
but is already braking sharply. The central bank says in its new Monetary Policy Report that the current second quarter ending June 30 will see
growth slow to two per cent, in part because of supply disruptions in the aftermath of the natural disasters in Japan .
But the disruptions will be temporary, the bank said, and the economy should pick up momentum to 2.7 per cent in the third and fourth
quarters.
The central bank also said exports will come under increasing pressure going forward due to the strong Canadian dollar. It added that the
Canadian dollar is assumed to hold at US$1.03, up from the January assumption of $1.
The monetary report was released a day after the Bank of Canada announced it was leaving its key interest rate unchanged at one per cent. The
Canadian dollar lost about 3/4 of a cent on Tuesday as demand concerns pushed oil down more than US$6 over the last two days.
On Wednesday, the May crude contract on the New York Mercantile Exchange was up 63 cents to US$106.88 a barrel.
Crude had jumped as much as 30 per cent from mid-February as markets quickly applied a high risk premium to oil amid a civil war in Libya
and a wave of unrest that swept across several Mideast countries. But after rising to almost US$113 a barrel last Friday, there were worries
about the degree to which high oil prices would impact demand and a general global recovery. Also, Goldman Sachs warned investors Monday
that crude oil prices were due for a "substantial pullback."
Other commodities were mixed as bullion prices also advanced with the June contract on the Nymex up $6.80 to US$1,460.40 an ounce while
copper prices fell for a third day. The May copper contract in New York dipped five cents to US$4.33 a pound.

Obama stakes out deficit-cutting vision