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Stocks & Bonds: Wall Street Indexes End the Week on the Upside

April 30, 2011 by Leave a Comment

The market’s three main indexes have been climbing steadily in recent weeks as quarterly results trickled out and proved better than expected in many cases.

While the one-day gains on Friday were minimal, they were enough to build on past advances and to push the broader market and the Dow to their best monthly performances this year.

The dollar, on the other hand, declined against its index of six currencies to a three-year low, said Brian Dolan, the chief currency strategist at Forex.com.

The euro was at $1.4839 on Friday, up from  $1.4821 on Thursday.

“It is weak across the board,” said Mr. Dolan of the dollar. “U.S. interest rates are low and going to stay low, and other central banks are tightening. There is very little on the fundamental horizon to alter that downtrend.”

But corporate results have surpassed many forecasts.

About 300 of the companies in the Standard Poor’s 500-stock index have reported quarterly results so far, and nearly 80 percent have said sales and operating earnings were higher in the first quarter than they were in the quarter a year ago, according to a survey compiled by Howard Silverblatt, the senior index analyst at Standard Poor’s.

Russell T. Price, the senior economist for Ameriprise Financial, said the first quarter had suffered some economic and financial shocks from the disaster in Japan and the higher oil prices fueled by turmoil in the Middle East and North Africa.

But he said quarterly results were “coming out so much better than expected.” He added, “It is a pretty good indication that corporate America is able to deal with the headwinds.”

Some companies benefited from the higher oil prices. Energy shares in S. P. were up more than 1 percent on Friday.

Exxon Mobil released results on Thursday that reflected an increase in higher oil prices in the first quarter, reporting a 69 percent rise in net income to $10.7 billion, or $2.14 a share. Its shares rose less than 1 percent to $87.98.

Occidental Petroleum rose 8.71 percent to $114.29 after it reported on Thursday that profit rose to $1.55 billion, beating forecasts.

Industrial shares were also up.

Caterpillar, the heavy equipment maker, climbed more than 2.4 percent to $115.41 after its first-quarter income of $1.23 billion a share topped Wall Street’s expectations.

The Goodyear Tire and Rubber Company was 12.04 percent higher at $18.15 after reporting a profit that was four times greater than forecast.

The markets were also partly lifted this week by the Federal Reserve statement on Wednesday that it would continue to stimulate growth with low interest rates.

The Dow Jones industrial average closed up 47.23 points, or 0.37 percent, at 12,810.54, a nearly 4 percent rise in the month and its best close since May 2008. Eighteen of the 30 components rose.

The S. P. was 0.23 percent, or 3.13 points higher, at 1,363.61, in its highest close since June 5, 2008. It rose 2.85 percent in April, its best monthly advance this year.

The Nasdaq was 1.01 points higher at 2,873.54, weighed down by Microsoft, which reported that its third-quarter profit was up 31 percent, but that revenue from the division that includes the Windows operating system fell 4 percent.

Microsoft was down by 2.96 percent at $25.92. Research in Motion, the maker of the BlackBerry, was down by about 14 percent at $48.65 after it lowered its forecast for the current quarter.

The market has also been assessing the latest indicators of growth and spending this week. The government reported on Thursday that the economy grew at a rate of 1.8 percent in the first quarter. Consumer spending increased 0.6 percent in March.

Interest rates were lower. The Treasury’s benchmark 10-year note rose 7/32, to 102 26/32, and the yield fell to 3.29 percent from 3.31 percent late Thursday.

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Gift to M.I.T. from Bose Founder Raises Tax Questions

April 30, 2011 by Leave a Comment

But Amar G. Bose, who received his bachelor’s, master’s and doctoral degrees from M.I.T. and was a professor there from 1956 to 2001, placed some unusual restrictions on the Bose shares he donated to the university.

While the shares give the university majority ownership, they are nonvoting and thus confer no control over the company and its operations. Nor can M.I.T. sell the shares. It will receive dividends from Bose, which Nathaniel W. Nickerson, a spokesman for the university, said in an e-mail would be “used broadly to sustain and advance M.I.T.’s education and research mission.”

While Mr. Nickerson said it was “a very significant gift,” he would not discuss the financial details, including the potential value, saying that Dr. Bose and the Bose Corporation want to “keep details of financial matters confidential.”

M.I.T. officials, in announcing the donation, praised Dr. Bose’s teaching and research. “Amar Bose gives us a great gift today, but he also serves as a superb example for M.I.T. graduates who yearn to cut their own path,” Susan Hockfield, the university’s president, said in an article on its Web site.

Dr. Bose could not be reached for comment.

But some tax experts said the gift and the lack of detail about it raised questions. “We don’t know much about the terms of this gift, but it seems like it clearly falls into a gray area that has been of concern to Congress,” said Dean Zerbe, national managing director of the tax consulting firm Alliantgroup. “The university needs to be more forthcoming about the arrangements behind this donation so we can get a clear picture of what’s going on.”

Roger Colinvaux, an associate law professor at Catholic University and previously a staff member of the Congressional Joint Committee on Taxation, also said the gift raised questions for him. “If the shares truly can’t be sold so that there is some restriction on the university’s ability to transfer stock, then it would suggest it is a contribution of partial interest only, which would not be deductible as a charitable contribution,” said Mr. Colinvaux, who recently published an article in The Florida Tax Review that argues that the laws governing charity are outdated and inadequate. But Erik Dryburgh, a nonprofit lawyer, said he did not see a problem with the gift. “On its face, I don’t see the abuse or potential abuses that were present in some of the more abusive gift transactions we saw in the past,” Mr. Dryburgh said.

Mr. Zerbe and Mr. Colinvaux, though, said the gift brought to mind various tax shelters involving charities that came under scrutiny during the time they worked in Congress.

Mr. Nickerson, however, denied that Dr. Bose’s gift was similar to those tax strategies. “Further, it would not be appropriate for us to discuss the taxes of any of M.I.T.’s donors,” he said.

Most of the tax shelters cited by Mr. Zerbe and Mr. Colinvaux involved an elaborate strategy where privately held companies gave nonvoting shares to a charity and then, after a period of time, bought them back. The transactions attracted the attention of regulators puzzled by why donors would give nonprofit groups nonvoting shares, whose value — and thus potential for tax deduction — is limited by their nonvoting nature.

In 2003, the Senate Permanent Subcommittee on Investigations looked into such transactions and found that in some cases, they were an elaborate way of using a charity’s tax-exempt status to erase tax liabilities for the other shareholders of the company involved.

A charity involved in such a tax strategy would receive income from the company in proportion to the size of its holdings of nonvoting stock. But while that income was taxable, it was not distributed to the charity and stayed at the company to be reinvested.

The charity did not owe taxes on the income, anyway, because it was tax-exempt.

Later, the charity would sell the nonvoting shares back to the company at fair market value, and the company would distribute the income, tax-free, that had been associated with those shares among its other shareholders.

In other, similar cases, charities that received nonvoting stakes in privately held companies through gifts of stock used large losses they had incurred on unrelated businesses to offset taxes for other shareholders. Mr. Dryburgh wrote a paper on that type of tax shelter.

In 2004, the I.R.S. listed as “restricted” such transactions and denied deductions associated with them.

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Massachusetts House Seeks to Limit Collective Bargaining

April 30, 2011 by Leave a Comment

The bill, passed late Tuesday night in advance of planned labor protests, would let local officials unilaterally set health insurance co-payments and deductibles for their employees after a monthlong discussion period with unions. Leaders of the House said it would save cities and towns $100 million in the budget year that starts in July.

While Republican-controlled legislatures in Wisconsin and Ohio this year have weakened the ability of public-sector unions to bargain collectively, and Republicans in other states have pushed for a variety of curbs on unions, Massachusetts is the first state where a Democratic-led chamber has voted to limit bargaining rights.

“Everybody’s pretty upset,” said Robert J. Haynes, president of the Massachusetts A.F.L.-C.I.O. “It’s hard for me to understand how my good friends in the Massachusetts House, that have told me they support collective bargaining, could do this.”

But the bill faces uncertain prospects in the Senate, which is also controlled by Democrats. Senate President Therese Murray said Wednesday that she was pleased the House had “moved the needle” on the contentious issue of health care costs, but she has not endorsed the plan.

Dave Falcone, a Senate spokesman, said Friday that Ms. Murray “has been consistent in her message that something has to be done, that there has to be savings, and that everyone should have a seat at the table.”

While Gov. Deval Patrick, a Democrat, has not pledged to sign the bill if it reaches his desk, he proposed a similar plan early this year and praised the House this week for its “important” vote. He also raised concerns about a provision of the House plan allowing towns and cities to opt out of it and said unions must not have veto power over municipal health plans.

On Friday, Mr. Patrick said through a spokesman that labor must have “a meaningful role” in determining how to control health care costs, though he did not elaborate.

The House voted 111-42 in favor of the plan, with 81 Democrats approving it.

Representative Brian Dempsey, the Democratic chairman of the House Ways and Means Committee, said he supported it — and in fact helped create it — after seeing no other way of avoiding disastrous cuts to local public safety and education budgets. The legislature had urged municipalities and their unions to curb rising health costs for several years, he said, but with no success.

“We have to get a handle on this,” he said. “The fact of the matter is costs are going up and the money is not going to the areas we desperately need it to.”

He acknowledged, though, that it was “certainly difficult” to hear labor’s angry response.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan watchdog group that supported the plan, said the health care costs for cities and towns had been growing by about 11 percent a year and “cannibalizing” local budgets.

“Yes, it’s a small curtailment of their collective bargaining powers,” Mr. Widmer said of municipal unions, “but with the corollary that it will save lots of their members’ jobs.”

Under the House plan, co-payments and deductibles for municipal workers would have to be at least equal to those of state employees. And unions would retain the right to negotiate what portion of premiums their members paid.

Mr. Patrick and House leaders have sought to head off comparisons with the legislation that Gov. Scott Walker of Wisconsin signed earlier this year, saying the Massachusetts plan does not go nearly as far. That did not stop the Republican Party of Wisconsin from proclaiming Mr. Patrick “an ally” on Friday and congratulating him on the bill. Mr. Patrick is to speak at a Democratic Party dinner in Wisconsin on Saturday.

“It’s refreshing to see that even a liberal Democrat from Massachusetts recognizes the importance of collective bargaining reform,” Mark Jefferson, the Wisconsin Republican Party’s executive director, said in a statement.

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In Florida, G.O.P. Help for Unions

April 30, 2011 by Leave a Comment

But now it looks as if the bill could falter before the legislative session ends next week. Unions representing teachers, firefighters, the police and other public employees say they have persuaded nearly half of the Senate’s Republicans to oppose the bill by reminding them that in Florida, far more than in most states, organized labor has supported Republicans.

“We have traditionally been a Republican-based organization,” said James Preston, president of the Florida Fraternal Order of Police. “How much more conservative can you get than the police officers? Who wants to go against the cops and firefighters on these matters?”

Still, the unions’ success is surprising, especially since Republican lawmakers in traditionally labor-friendly states like Wisconsin and Ohio have passed far tougher antiunion legislation this year. In Florida, just one in 20 of workers in the state belongs to a union.

By some counts, 12 of the 28 Republican senators are against the latest version of Mr. Thrasher’s bill, which would require public employee unions to get each member’s permission each year before they could use that person’s dues for political purposes. Senate Democrats are unified in opposition to the bill. Republican and business leaders — noting that Florida’s state employees contribute nothing toward their pensions — have praised Mr. Thrasher’s bill because it would reduce unions’ leverage over health coverage and pensions.

“These are government unions that are negotiating oftentimes against the taxpayers,” said Mark Wilson, president of the Florida Chamber of Commerce. “It’s not fair that the taxpayer-funded payroll system is collecting union dues that are used politically against the taxpayer.”

But Senator Miguel Diaz de la Portilla, a Republican representing Miami, said the bill was too punitive. “I don’t think it’s necessary legislation,” he said. “It doesn’t do anything to create jobs. It creates a lot of discord unnecessarily.”

He said the fact that unions in Florida were weak had forced them to be bipartisan. Using Wisconsin as an example, he said, “You just don’t have the animus between union and antiunion here that you have in some other places.”

Indeed, some of the bill’s Republican opponents have enjoyed labor’s campaign support and worked with unions on numerous issues.

Mr. Thrasher’s bill originally had two main provisions. In addition to requiring members’ permission for using dues money for politics, the legislation would have barred the state or any community from deducting union dues from workers’ paychecks and forwarding that money to unions.

Union lobbyists repeatedly said the bill would cripple the payroll deductions that fuel labor’s political efforts while continuing to allow similar deductions at 360 organizations and private companies, including insurers, that spend money on politics.

Unions also said they were being scapegoated for Florida’s budget problems. They argued that the recession and Wall Street, not union-negotiated pay and benefits, caused Florida’s $3.6 billion deficit.

Those arguments resonated with lawmakers.

Rene Garcia, a Republican senator who represents Hialeah, said he saw little need for the bill because Florida’s public employees were already not required to join the unions that represent them or to pay dues. “I don’t like this bill because it’s not fair when you single out one group,” he said.

Mr. Thrasher, former chairman of the Florida Republican Party, saw that he did not have the votes for his original legislation even though the House had already passed a similar bill. So he dropped the provision eliminating the dues check-off.

Mr. Thrasher did not respond to interview requests. But Senator Don Gaetz, a Republican from Destin, said the bill was revised to make clear that it did not intend to cripple unions.

“There’s no intent to stop unions from using funds for other very legitimate purposes,” he said. “The issue is, should the taxpayers of Florida be collecting money from public employees to be used by a union for direct partisan purposes? And the answer to that is no.”

Unions continue to fight the watered-down bill. “It could make unions in Florida a toothless tiger in politics,” said Rich Templin, chief lobbyist for the state A.F.L.-C.I.O.

In a sign that the bill is in trouble, Governor Rick Scott, a Republican, personally lobbied four Republican senators on Wednesday to back it, according to Mr. Diaz de la Portilla.

Gary Rainey, president of the Florida Professional Firefighters, said there was not enough Senate support to pass the bill in an up-or-down vote. But he feared that Republican leaders would secure passage by attaching it to another bill.

“It’s been a continuous battle shoring up support,” he said. “It’s not over until the fat lady sings.”

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Parties Seeking to Blame Each Other’s Policies for Gas Prices

April 30, 2011 by Leave a Comment

President Obama touched off the latest flurry with a letter to Congressional leaders last week calling for the repeal of $4 billion a year in tax incentives for domestic oil and gas production, saying the industry was doing very well, thank you, and needed no help from the government. Republicans responded that the president’s proposal would only raise the cost of production and the price of gasoline, which now tops $4 a gallon in many parts of the country.

Both parties are planning legislative maneuvers this week to try to caricature their opponents as either in the pockets of the oil companies or hostile to domestic energy production.

The debate may generate a fair amount of noise that provides one side or the other with a temporary political advantage but is unlikely in the end to have an appreciable impact on gasoline prices.

“Every time Americans have to shell out $60 or $80 to fill their tanks, they mutter under their breaths about government and it puts pressure on Congress and the White House to do something,” said Byron L. Dorgan, the former Democratic senator from North Dakota who is now co-chairman of an energy project at the Bipartisan Policy Center in Washington. “But it’s just howling at the moon. The basic laws of supply and demand haven’t changed.”

House Speaker John Boehner unwittingly gave the Democrats a political opening to pile on the oil companies by saying in an interview with ABC News last week that oil companies should “pay their fair share in taxes” and that Congress ought to reconsider some of the tax incentives they enjoy. He has since walked away from those remarks and said that raising any taxes would choke off the economic recovery and lead to higher prices of gasoline and other goods.

His comments came as lawmakers from both parties were home on recess, hearing a torrent of constituent complaints about the high cost of gasoline at the same time major oil companies were reporting near-record quarterly profits. Exxon Mobil, the world’s largest oil company, said it earned $10.7 billion in the first three months of the year, and other companies reported similarly robust earnings.

Mr. Obama seized on the opportunity to try to deflect some of the heat he has been feeling as gas prices have steadily climbed. He noted wryly at a political fund-raiser last weekend that his poll numbers tend to go up and down with pump prices, even as he admitted he had no “silver bullet” to bring those prices down in the short term. But he found ammunition in the tax breaks the oil industry has enjoyed for decades, portraying the industry as undeserving of them at a time when government needs all the revenue it can get.

“As we work together to reduce our deficits,” Mr. Obama said in a letter to Congressional leaders last week, “we simply can’t afford these wasteful subsidies.” Mr. Obama says the money saved should be used to finance more research into clean energy alternatives — a proposal he has made in his last two budget requests that has largely been ignored.

“The odds are low that the tax repeal goes through as a stand-alone measure, but you might see it as part of a broader deal,” said Michael A. Levi, an energy and environment specialist at the Council on Foreign Relations. He said it was in Mr. Obama’s interest to keep the issue alive both to align Republicans with the unpopular oil companies and to use as leverage as new budget negotiations begin.

Harry Reid, the Senate Democratic leader, said he would press for a vote as early as next week on repealing the tax subsidies. Democrats hope to paint Republicans who vote against the plan as tools of the industry.

“Now is not the time to stand idly by while large oil and gas companies get billions of dollars in tax breaks,” said Senator Max Baucus, Democrat of Montana and chairman of the finance committee. “Now is the time to take concrete steps toward cleaner, more affordable, domestically produced energy.”

The measure could well pass in the Democratic Senate, although some Democrats from oil-producing states, like Mary Landrieu of Louisiana and Mark Begich of Alaska, are likely to oppose it.

But it has little chance of even coming to a vote in the Republican-run House, where Speaker Boehner is orchestrating a fresh chorus of “drill, baby, drill” with a series of votes on bills to allow new oil and gas exploration in the Gulf of Mexico and off the coast of Virginia.

“Our goal is to expand the supply of American energy to lower gas prices and create jobs,” said Michael Steel, spokesman for Mr. Boehner. “Raising taxes would have the opposite effect.”

Neither the Senate tax measure nor the House drilling bills is likely to become law because of the fierce partisan calculus of the current Congress. But some Republicans, including Representative Paul Ryan of Wisconsin, the party’s leader on budget matters, have left open the door for rethinking a range of government tax breaks as part of an agreement on the federal budget and deficit ceiling.

Some conservatives oppose energy subsidies of all sorts — including those for ethanol, wind, nuclear and solar power — and would be willing to see them all repealed as part of a reform of the business tax code.

Oil industry tax breaks — some of them dating back a century — have been debated for years but have survived every elimination attempt. According to a breakdown by the nonpartisan Joint Committee on Taxation, oil companies receive about $4 billion a year in federal subsidies and can avail themselves of tax breaks at virtually every stage of the prospecting and drilling process.

One lingering provision from the Tariff Act of 1913 — enacted to encourage exploration at a time when drilling often led to dry holes — allows many small and midsize oil companies to claim deductions for tapped oil fields far beyond the amount the companies actually paid for them.

Another subsidy, devised by the State Department in the 1950s, allows U.S.-based oil companies to reclassify the royalties they are charged by foreign governments as taxes — which can be deducted dollar-for-dollar from their domestic tax bill. That provision alone will cost the federal government $8.2 billion over the next decade, according to the Treasury department.

David Kocieniewski contributed reporting from New York.

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E.U. Decides to Leave Restrictions on Liquids in Place

April 30, 2011 by Leave a Comment

PARIS — In the face of mounting resistance from governments, airports and airlines, the European Union backed down from a Friday deadline for member states to partly lift nearly five-year-old restrictions on liquids in air passenger hand luggage, saying it wanted to avoid potential confusion and disruption for passengers.

Under the expected rule change, passengers transiting through an E.U. airport from outside the Union would have been allowed to carry liquids, aerosols and gels purchased either at an airport duty-free shop or aboard a non-E.U. airline, provided they were sealed in tamperproof bags and screened before boarding by specialized scanners. The move was planned as a first step toward eliminating all cabin restrictions on such goods on European flights from 2013.

But in recent weeks, several member states representing a significant share of the region’s air traffic — including Britain, France and Italy — had informed Siim Kallas, the E.U. transport commissioner, that they would not ease the restrictions, citing security concerns.

As of Friday morning, when the change was due to take effect, the situation remained as before. According to aviation industry and government officials, as many as half of the bloc’s 27 member states had indicated they would maintain the restrictions.

“It is clear that a situation at European airports which leads to confusion for air passengers as to whether they can travel with ‘duty-free liquids,’ in particular for connecting flights to the United States, should be avoided,” Mr. Kallas said in a statement. “Therefore, the restrictions on carrying ‘duty-free’ liquids purchased outside the E.U. through European airports should remain in place until passengers can travel with certainty.”

The restrictions — which allow liquids only in amounts below 100 milliliters, or about 3 ounces — were introduced after the British authorities uncovered a plot in August 2006 to bomb U.S.-bound passenger planes using liquid explosives.

Three British citizens were convicted in 2009 of planning to blow up at least seven trans-Atlantic airliners on a single day with explosives smuggled aboard in soft-drink bottles and detonated by devices powered with AA batteries.

Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines, welcomed the delay, calling it the “least worst” solution under the circumstances. He also noted a lack of clarity on how the United States would have treated liquids that had been screened at E.U. airports under the change.

The U.S. Transportation Security Administration said U.S. and E.U. officials were scheduled to meet next week to discuss the issues created by relaxing existing restrictions in Europe. Dale Kidd, a European Commission spokesman, said those talks were part of an ongoing dialogue “to ensure passengers on trans-Atlantic flights face compatible rules.”

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Wealth Matters: Putting Your Doctor, or a Whole Team of Them, on Retainer

April 30, 2011 by Leave a Comment

With that he entered the world of concierge medicine, a growing subset of medicine where patients pay doctors anywhere from $1,500 to $25,000 a year to receive personalized attention and care. (Dr. Glazer said he was paid toward the top of this range.) In most cases, patients presume that in an emergency their concierge doctor will push them to the front of the line to see a top specialist.

Even as more people are struggling to pay medical bills and being rushed through office visits with their doctors, an elite group with money has another option: exclusive medical care, around the clock and anywhere in the world, including on a yacht or private plane.

One of Dr. Glazer’s clients, for instance, has had his yacht outfitted with a system from Guardian 24/7, a company in Leesburg, Va., founded by former White House doctors that advertises itself as offering “medical protection previously available only to the president of the United States.” The company’s “ready room” will allow a doctor trained in the system to perform basic medical care remotely if something should go wrong while the patient is on the high seas.

“There is very little that we can’t do with the triage room on their yacht,” he said.

The cost of Guardian 24/7’s services ranges from $6,000 to $12,000 a month, plus an additional $700,000 for one of the company’s top-of-the-line “ready rooms” installed in a client’s home, yacht or airplane, said Jonathan Frye, chief executive.

While it is difficult to determine how many people are served by this more personalized care, the number of doctors who have moved to this new model has risen fivefold in the last five years. And that raises questions about medical care in America. For those who can afford it, what do they get for their money? Is it worth it? And for the rest of us, who cannot afford this level of care, is it fair and ethical for doctors to be doing this? Or is concierge care contributing to the growing gulf between the wealthy and everyone else?

COSTS AND BENEFITS Concierge medical care is nothing new. In places like Florida, with a high concentration of Medicare patients, some upper-middle-class retirees pay extra fees so they can see a doctor when they need to.

MDVIP, which has 450 concierge doctors in 34 states, charges patients $1,500 to $1,800 a year. Their doctors are each limited to 600 patients, whereas, the company says, most primary care physicians serve at least 2,000 patients. It says appointments with doctors “start on time and last as long as necessary” and can usually be made the same day or the next one. The company’s fee is for the extended care and comprehensive annual physical and wellness plan, but its doctors still bill the patient’s insurance company for procedures.

The international, around-the-clock programs take concierge medicine to a different level. Their primary goal is to offer an extra level of oversight to make sure that participants are getting the proper level of care whenever they need it.

Dr. Miles J. Varn, chief medical officer at PinnacleCare Private Health Advisory, which charges annual fees of $1,500 to $25,000, said the starting point for all patients was a complete review of all health records with an emphasis on finding gaps in care.

“We have physicians who look for omissions of care or deviations from standard care,” Dr. Varn said. “That record travels with them around the world.”

In promoting themselves, the plans say their doctors know each patient’s health conditions intimately and are able to discuss it with another doctor anywhere in the world.

Dr. Daniel Carlin, founder and chief executive of World Clinic, which charges $20,000 to $75,000 a year on average, said he recently had to intervene and stop a patient from getting the wrong procedure. The client was at a hospital in Florida where the doctors wanted to do bypass surgery for a blocked vessel. Dr. Carlin said the proper care was putting in a stent, and the difference was months of pain and recovery for the patient and tens of thousands of dollars for the hospital.

“You’re holding up a shield and saying, ‘We’ll weigh everything before we move forward,’ ” Dr. Carlin said. “With the primary care guy gone, the average patient isn’t being treated.”

IS IT WORTH IT? Despite reports about the decline in the number of family physicians and the increase in the hours the remaining ones work, many wealthy people are reluctant to pay extra for health care.

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Off the Charts: A Reversal for Real Estate After Some Mild Gains

April 30, 2011 by Leave a Comment

Indexes of the two markets showed this week that the latest declines had almost wiped out the mild gains the two markets had shown after prices appeared to have hit bottom.

The Standard Poor’s/Case-Shiller index of home prices ended February 3.3 percent below where it was a year earlier, and just 0.5 percent above the low reached in May 2009. The Moody’s/REAL Commercial Property Price Index was reported to be down 4.9 percent over the last 12 months, but still 0.8 percent above its low, reached last August.

In both cases, sales volumes are far below what they were when the markets were booming, and a large proportion of the properties that are being sold were in trouble before the sale. The National Association of Realtors estimates that about 40 percent of existing homes that changed hands in March were either in foreclosure or were so-called short sales in which the house was sold for less than was owed on the existing mortgage.

The commercial property index, which is based on data collected by Real Capital Analytics, shows that 29 percent of transactions in February involved distressed properties — including those already in foreclosure or default, as well as those whose owners had filed for bankruptcy.

“Only when the share of distressed sales meaningfully drops off will we be able to enter the recovery phase,” said Tad Philipp, Moody’s director of commercial real estate research.

As can be seen from the accompanying charts, home prices nationally peaked in 2006 but did not begin to plunge until 2007.

At first, that was widely viewed as a result of problems in the subprime mortgage market. Commercial real estate prices rose until early 2008, but then declined rapidly. The latest values for the indexes show national home prices down 31 percent from peak levels, while the commercial real estate index shows a fall of 45 percent.

The charts show the trend of prices since December 2000. Home prices are about 27 percent higher than they were then, but commercial real estate is up just 6 percent. Meanwhile, in a tortoise-versus-hare tale, home rental rates are higher than they ever were even though they failed to boom when real estate prices soared.

Both indexes are based on repeat sales of the same property, and the relative lack of commercial property transactions — the index counted only 107 in February for more than $2.5 million each — means that the figures are far from exact. But they do show trends.

According to data from Moody’s, hotels and apartments are in the most distress, with about 16 percent of loans in each category classified as delinquent. About 10 percent of loans on industrial property are in trouble, while the figures for offices and retail properties are lower, at around 7 percent.

Over all, the proportion of commercial loans in distress climbed from under 1 percent at the end of 2008 to over 9 percent now. But it has been stable in recent months, providing some hope that the market is no longer deteriorating.

On a regional basis, the same markets tend to have problems in both commercial and residential real estate. The three states with the highest proportion of commercial loans in distress, according to Moody’s, are Nevada, Arizona and Michigan. In Nevada, more than 30 percent of loans are classified as being in trouble, nearly double Arizona’s 16 percent figure.

Floyd Norris comments on finance and the economy on his blog at nytimes.com/norris.

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Consumer Spending Rises, But Inflation Picks Up, too

April 30, 2011 by Leave a Comment

WASHINGTON (Reuters) — Consumers increased spending for a ninth consecutive month in March as they stretched to cover higher costs for food and gasoline, with inflation posting its biggest year-on-year gain in 10 months.

Despite the rising cost of living, Americans grew a bit more optimistic about the economy this month and even lowered their expectations for inflation over the medium to long term, another report showed Friday.

Consumer spending, which drives 70 percent of the economy, rose 0.6 percent last month after advancing 0.9 percent in February, the Commerce Department said. But prices rose 0.4 percent month on month, leaving spending up just 0.2 percent after adjusting for inflation.

While commodity prices have reduced purchasing power, consumers entered the second quarter with a slightly upbeat outlook.

The Thomson Reuters/University of Michigan’s consumer sentiment index rose to 69.8, from 67.5 in March. The survey’s one-year inflation expectation was unchanged at 4.6 percent, but the five-to-10-year inflation outlook slipped to 2.9 percent, from 3.2 percent in March.

A third report showed factory activity in the Midwest slowed, although it remained at a strong level. The data did little to shake economists’ convictions that growth would pick up in the current quarter.

Economists said tepid demand in the first quarter had left businesses with less of a need to rebuild inventories.

“The need for new orders and production to beef up inventories is greatly reduced and as a consequence, we are seeing the factory sector slow down somewhat,” said Richard DeKaser, an economist at the Parthenon Group.

“Manufacturing is coming off a sprint earlier this year and still moving ahead at a healthy clip.”

The spending report showed consumer prices up 1.8 percent from a year ago — the largest 12-month gain since last May.

An index of core prices, which strips out food and energy costs, rose just 0.1 percent from February, keeping its year-on-year gain at 0.9 percent.

A separate report from the Labor Department showed wages grew at a 0.4 percent rate in the first quarter, and were up only 1.6 percent from a year ago.

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In Washington, Sound and Fury Over Gas Prices

April 30, 2011 by Leave a Comment

President Obama touched off the latest flurry with a letter to Congressional leaders last week calling for the repeal of $4 billion a year in tax incentives for domestic oil and gas production, saying the industry was doing very well, thank you, and needed no help from the government. Republicans responded that the president’s proposal would only raise the cost of production and the price of gasoline, which now tops $4 a gallon in many parts of the country.

Both parties are planning legislative maneuvers this week to try to caricature their opponents as either in the pockets of the oil companies or hostile to domestic energy production.

The debate may generate a fair amount of noise that provides one side or the other with a temporary political advantage but is unlikely in the end to have an appreciable impact on gasoline prices.

“Every time Americans have to shell out $60 or $80 to fill their tanks, they mutter under their breaths about government and it puts pressure on Congress and the White House to do something,” said Byron L. Dorgan, the former Democratic senator from North Dakota who is now co-chairman of an energy project at the Bipartisan Policy Center in Washington. “But it’s just howling at the moon. The basic laws of supply and demand haven’t changed.”

House Speaker John Boehner unwittingly gave the Democrats a political opening to pile on the oil companies by saying in an interview with ABC News last week that oil companies should “pay their fair share in taxes” and that Congress ought to reconsider some of the tax incentives they enjoy. He has since walked away from those remarks and said that raising any taxes would choke off the economic recovery and lead to higher prices of gasoline and other goods.

His comments came as lawmakers from both parties were home on recess, hearing a torrent of constituent complaints about the high cost of gasoline at the same time major oil companies were reporting near-record quarterly profits. Exxon Mobil, the world’s largest oil company, said it earned $10.7 billion in the first three months of the year, and other companies reported similarly robust earnings.

Mr. Obama seized on the opportunity to try to deflect some of the heat he has been feeling as gas prices have steadily climbed. He noted wryly at a political fund-raiser last weekend that his poll numbers tend to go up and down with pump prices, even as he admitted he had no “silver bullet” to bring those prices down in the short term. But he found ammunition in the tax breaks the oil industry has enjoyed for decades, portraying the industry as undeserving of them at a time when government needs all the revenue it can get.

“As we work together to reduce our deficits,” Mr. Obama said in a letter to Congressional leaders last week, “we simply can’t afford these wasteful subsidies.” Mr. Obama says the money saved should be used to finance more research into clean energy alternatives to replace fossil fuels — a proposal he has made in his last two budget requests that has largely been ignored.

“The odds are low that the tax repeal goes through as a stand-alone measure, but you might see it as part of a broader deal,” said Michael A. Levi, an energy and environment specialist at the Council on Foreign Relations. He said it was in Mr. Obama’s interest to keep the issue alive both to align Republicans with the unpopular oil companies and to use as leverage as new budget negotiations begin.

Harry Reid, the Senate Democratic leader, said he would press for a vote as early as next week on repealing the tax subsidies. Democrats hope to paint Republicans who vote against the plan as tools of the industry.

“Now is not the time to stand idly by while large oil and gas companies get billions of dollars in tax breaks,” said Senator Max Baucus, Democrat of Montana and chairman of the finance committee. “Now is the time to take concrete steps toward cleaner, more affordable, domestically produced energy.”

The measure could well pass in the Democratic Senate, although some Democrats from oil-producing states, like Mary Landrieu of Louisiana and Mark Begich of Alaska, are likely to oppose it.

But it has little chance of even coming to a vote in the Republican-run House, where Speaker Boehner is orchestrating a fresh chorus of “drill, baby, drill” with a series of votes on bills to allow new oil and gas exploration in the Gulf of Mexico and off the coast of Virginia.

“Our goal is to expand the supply of American energy to lower gas prices and create jobs,” said Michael Steel, spokesman for Mr. Boehner. “Raising taxes would have the opposite effect.”

Neither the Senate tax measure nor the House drilling bills is likely to become law because of the fierce partisan calculus of the current Congress. But some Republicans, including Representative Paul Ryan of Wisconsin, the party’s leader on budget matters, have left open the door for rethinking a range of government tax breaks as part of an agreement on the federal budget and deficit ceiling.

Some conservatives oppose energy subsidies of all sorts — including those for ethanol, wind, nuclear and solar power — and would be willing to see them all repealed as part of a reform of the business tax code.

Oil industry tax breaks — some of them dating back a century — have been debated for years but have survived every elimination attempt.

According to a breakdown by the nonpartisan Joint Committee on Taxation, oil companies receive about $4 billion a year in federal subsidies and can avail themselves of tax breaks at virtually every stage of the prospecting and drilling process.

One lingering provision from the Tariff Act of 1913 — enacted to encourage exploration at a time when drilling often led to dry holes — allows many small and midsize oil companies to claim deductions for tapped oil fields far beyond the amount the companies actually paid for them.

Another subsidy, devised by the State Department in the 1950s, allows U.S.-based oil companies to reclassify the royalties they are charged by foreign governments as taxes — which can be deducted dollar-for-dollar from their domestic tax bill. That provision alone will cost the federal government $8.2 billion over the next decade, according to the Treasury department.

David Kocieniewski contributed reporting from New York.

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