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Economix Blog: Staying Ahead of the Tax Man

January 31, 2013 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

The one bright spot in Wednesday’s dim gross domestic product report was a large jump in household income, welcome news given that incomes have been relatively flat in recent months after falling sharply in the previous few years.

As was confirmed Thursday in a release on December personal income, though, the boost to consumers’ pocketbooks is likely to be short-lived.

Most of the 2.6 percent increase in incomes last month involved companies that accelerated dividends, bonuses and other payments into 2012 before higher tax rates kicked in for 2013. Personal dividend income, for example, rose at a seasonally adjusted monthly rate of 34.3 percent in December versus 4.5 percent in November.

That’s the second-fastest monthly personal dividend income growth on record, after a huge spike of 54.8 percent in December 2004 (when Microsoft threw the whole trend out of whack by offering a one-time special dividend totaling $32 billion):

The Bureau of Economic Analysis estimated that in the quarter companies paid special or accelerated dividends of $39.5 billion, of which $26.4 billion was paid to individuals and so is included in personal income. The bureau also estimated that accelerated bonuses and “other types of irregular pay” probably gave a one-time boost to wages and salaries in the quarter totaling about $3.75 billion (or $15 billion at an annual rate).

We’ll almost certainly see a payback for that accelerated income last month in the form of lower dividend and bonus payments early this year. Additionally, households will be receiving less in their employee paychecks this month than they did last year because payroll taxes rose at the start of 2013.

None of this is good for consumer spending.

On the bright side, though, the sell-off of various kinds of assets in December will probably be good for the government’s coffers.

As my colleague Floyd Norris has written, the increase in tax rates in 2013 will likely result in higher tax receipts (and a lower budget deficit) for the current fiscal year than would have otherwise been expected.

Article source: http://economix.blogs.nytimes.com/2013/01/31/staying-ahead-of-the-tax-man/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

High & Low Finance: Court Case Offers a Peek Into Mortgage Security Pricing

January 31, 2013 by Leave a Comment

The private mortgage-backed securities market grew to be a virtually inscrutable giant. Each securitization contained thousands of mortgages and as many as dozens of different securities, some of which could emerge unscathed even if others produced total losses for investors.

Five years after it began to blow up, that market can be seen as having failed twice — once before the housing crisis began and again when the crisis was at its peak. Investors put money into deals that never should have been financed, then they panicked when the credit crisis arrived and dumped securities that really were likely to pay off. A market that had been full of foolish buyers had no buyers. The banks loudly proclaimed that prices were irrationally low, but few if any of them were willing to buy.

It was the government that stepped in and saved the market, in a program — called PPIP, for Legacy Securities Public-Private Investment Program — that has turned out to be a success. The government put up most of the money to enable money managers to buy distressed merchandise. This week the Treasury Department reported that it had recovered all of the money it invested, with much more likely to come.

That report came a couple of days after the Justice Department and the Securities and Exchange Commission filed criminal and civil charges against a former securities salesman who was accused of defrauding the institutional investors who invested their own and the government’s money in the PPIP program. He did that, the government said, by lying to them.

Mortgage-backed securities “are generally illiquid and discovering a market price for them is difficult,” the S.E.C. said in its civil case against the broker, Jesse Litvak, who formerly worked for Jefferies Company. “Participants trading in the M.B.S. market must rely on informal sources, including their broker, for this information.”

How, I wondered, can that be? The corporate bond market used to be like that. But after Arthur Levitt, the S.E.C. chairman in the 1990s, complained, steps were taken to rectify the situation. Now you can learn from the Trace system operated by Finra, the Financial Industry Regulatory Authority, about trades in any bond.

But no one at Finra seems to have given the mortgage-backed securities market even a moment’s worth of attention until 2009, when the market crashed. Even then, it was not until 2011 that Finra began to require brokers to submit every trade. Now if the S.E.C. wants to see every trade in a particular security, it can do so.

But you and I cannot.

Starting in July, more information about trading in mortgage securities guaranteed by Fannie Mae and Freddie Mac will become available, which is good but not nearly as important. We already have a pretty good idea of how those securities trade. But private-label securities — backed only by the mortgages in each securitization — are different from one another, and it is not as easy to estimate the value of one based on trading in a different one.

Had trading data on such securities been public, institutional investors such as the ones that the government claims were defrauded would have been able to see the trades Jefferies made when it acquired the bonds it marked up and sold to them. Any lies, like those Mr. Litvak is accused of telling, would have been unmasked immediately.

The Dodd-Frank law, by the way, requires more disclosure of trades in all kinds of swaps, including swaps based on mortgage-backed securities, and those disclosures are starting to appear as the Commodity Futures Trading Commission writes rules. But that law completely ignored the mortgage-backed securities themselves, so trading in them remains secret.

Now that the S.E.C. and the Justice Department have officially asserted that investors in such securities are at the mercy of their brokers, perhaps they will press Finra to require release of the information.

Doing so would be almost costless, since the data is already being gathered.

But such a move would be fiercely resisted both by Wall Street and by some of the institutional investors that would be protected. The opposition from brokers is easy to understand: profit margins always fall when the customers have better information. The brokers have also persuaded some money managers to oppose release, on the ground that their strategies would be revealed if everyone could see that there was more activity in a particular type of security.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/02/01/business/court-case-offers-a-peek-into-mortgage-security-pricing.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Gérard de Villiers, the Spy Novelist Who Knows Too Much

January 31, 2013 by Leave a Comment

The book was the latest by Gérard de Villiers, an 83-year-old Frenchman who has been turning out the S.A.S. espionage series at the rate of four or five books a year for nearly 50 years. The books are strange hybrids: top-selling pulp-fiction vehicles that also serve as intelligence drop boxes for spy agencies around the world. De Villiers has spent most of his life cultivating spies and diplomats, who seem to enjoy seeing themselves and their secrets transfigured into pop fiction (with their own names carefully disguised), and his books regularly contain information about terror plots, espionage and wars that has never appeared elsewhere. Other pop novelists, like John le Carré and Tom Clancy, may flavor their work with a few real-world scenarios and some spy lingo, but de Villiers’s books are ahead of the news and sometimes even ahead of events themselves. Nearly a year ago he published a novel about the threat of Islamist groups in post-revolutionary Libya that focused on jihadis in Benghazi and on the role of the C.I.A. in fighting them. The novel, “Les Fous de Benghazi,” came out six months before the death of the American ambassador, J. Christopher Stevens, and included descriptions of the C.I.A. command center in Benghazi (a closely held secret at that time), which was to become central in the controversy over Stevens’s death. Other de Villiers books have included even more striking auguries. In 1980, he wrote a novel in which militant Islamists murder the Egyptian president, Anwar Sadat, a year before the actual assassination took place. When I asked him about it, de Villiers responded with a Gallic shrug. “The Israelis knew it was going to happen,” he said, “and did nothing.”

Though he is almost unknown in the United States, de Villiers’s publishers estimate that the S.A.S. series has sold about 100 million copies worldwide, which would make it one of the top-selling series in history, on a par with Ian Fleming’s James Bond books. S.A.S. may be the longest-running fiction series ever written by a single author. The first book, “S.A.S. in Istanbul,” appeared in March 1965; de Villiers is now working on No. 197.

For all their geopolitical acumen, de Villiers’s books tend to provoke smirks from the French literati. (“Sorry, monsieur, we do not carry that sort of thing here,” I was told by the manager at one upscale Paris bookstore.) It’s not hard to see why. Randomly flip open any S.A.S. and there’s a good chance you’ll find Malko (he is Son Altesse Sérénissime, or His Serene Highness), the aristocratic spy-hero with a penchant for sodomy, in very explicit flagrante. In one recent novel, he meets a Saudi princess (based on a real person who made Beirut her sexual playground) who is both a dominatrix and a nymphomaniac; their first sexual encounter begins with her watching gay porn until Malko distracts her with a medley of acrobatic sex positions. The sex lives of the villains receive almost equal time. Brutal rapes are described in excruciating physiological detail. In another recent novel, the girlfriend of a notorious Syrian general is submitting to his Viagra-fueled brutality when she recalls that this is the man who has terrorized the people of Lebanon for years. “And it was that idea that set off her orgasm,” de Villiers writes.

Article source: http://www.nytimes.com/2013/02/03/magazine/gerard-de-villiers-the-spy-novelist-who-knows-too-much.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Media Decoder Blog: Ratings Shortfall at Nickelodeon Hurts Viacom Revenue

January 31, 2013 by Leave a Comment

1:34 p.m. | Updated Hampered by ratings shortfalls at Nickelodeon and an unfavorable film release schedule, Viacom on Thursday reported a 16 percent decrease in revenue in the fourth quarter of 2012, a somewhat steeper drop than analysts anticipated.

But the company’s profits came in slightly ahead of expectations, and the chief executive, Philippe Dauman, pleased Wall Street with positive news about progress at Nickelodeon and Viacom’s other cable networks.

Mr. Dauman said the company was making an “unprecedented investment in content” that was paying off for Nickelodeon. The dramatic ratings declines that began to be visible in late 2011 are moderating, and new shows are premiering. Mr. Dauman said the ratings momentum “confirms our view that our significant and sustained investment in fresh, original content is working, and will continue to drive future ratings growth and revenue improvement.”

Viacom reported revenue in the fourth quarter of 2012, its fiscal first quarter, of $3.3 billion, down from $3.95 billion in the same quarter a year ago. Analysts had forecast $3.48 billion in revenue.

Profits rose to $470 million, or 92 cents a share, compared with $212 million, or 38 cents a share, in the same quarter a year ago. But the year-ago quarter was hurt by a settlement with the original shareholders of Harmonix Music Systems, the makers of the “Rock Band” video game series. After adjustments, Viacom earned 91 cents a share in the quarter, a penny higher than analysts had predicted, from $1.06 in the same quarter a year ago.

The damage done by Nickelodeon’s ratings drop was evident in the total revenues for Viacom’s cable networks, by far the biggest part of its business. Revenue dipped 2 percent at the networks overall, largely because advertising revenue decreased 6 percent, even as affiliate fees paid by cable and satellite distributors grew.

Mr. Dauman said on a conference call with analysts that the “lingering effects of the ratings softness” at Nickelodeon masked growth elsewhere at the cable networks. Excluding its children’s channels, Viacom’s networks group “returned to positive ad growth in the quarter,” he said.

David Bank, a media analyst for RBC Capital Markets, said Nickelodeon’s ratings for the last few months were showing recovery after a rocky 2012. “All they need to do is continue to deliver the audience they are already delivering — without growth — and the year-over-year comparisons virtually assure growth,” he said.

Nickelodeon will pitch a slate of new animated and live-action series to advertisers at a presentation in late February. One of the areas of focus is preschool programming — the idea being that very young viewers will stick with Nickelodeon throughout their childhood.

Mr. Dauman says Viacom has found that its viewers of all ages want more new shows, and they want more episodes of those shows on “faster cycles,” so it has sped up the development and production processes at Nickelodeon and elsewhere.

Mr. Dauman spent some time on Thursday’s earnings call praising MTV, another one of its flagship networks, which he said had started to answer the question “What comes after ‘Jersey Shore?’” That infamous reality show had its series finale earlier this winter.

“‘Jersey Shore’ was a game-changing hit,” he said, “but it also precipitated an overemphasis on one night,” which was Thursday. MTV is trying to spread its new shows — “Catfish,” “Washington Heights,” “Buckwild” — across the weekly schedule.

Viacom’s film studio, Paramount, saw revenue drop 37 percent in the quarter, to $975 million. The company attributed this to the fact that its films in the quarter weren’t as successful as year-ago hits like “Mission: Impossible – Ghost Protocol” and “Puss in Boots.” The company also had one fewer release in the home video marketplace this time around.

Article source: http://mediadecoder.blogs.nytimes.com/2013/01/31/ratings-shortfall-at-nickelodeon-hurts-viacom-revenue/?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Media Decoder Blog: Lena Dunham to Create New Comedy Show

January 31, 2013 by Leave a Comment

With a series that she stars in, produces, writes and occasionally directs, and a book she is contracted to deliver, Lena Dunham clearly does not have enough to do.

Now she has a new deal with HBO, the network that for her series “Girls,” to create yet another comedy show. Ms. Dunham is teaming with Jenni Konner, an executive producer on “Girls,” to write the pilot for a show about the life and work of a personal shopper in New York.

HBO has not officially announced the show but the network confirmed Ms. Dunham’s participation Thursday. The show will be based on a memoir by Betty Halbreich, “All Dressed Up and Everywhere to Go,” that told of her career working as a shopper for the Bergdorf Goodman department store, buying merchandise for the rich and famous of Manhattan. HBO had previously purchased the rights to the book.

News of the new series was first reported on the Web site Deadline Hollywood.

Article source: http://mediadecoder.blogs.nytimes.com/2013/01/31/lena-dunham-to-create-new-comedy-show/?partner=rss&emc=rss

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Media Decoder Blog: Christie Gets His Chance for Revenge on Letterman

January 31, 2013 by Leave a Comment

Correction Appended

4:14 p.m. | Updated Chris Christie has been a favorite target for David Letterman over the last few years, and on Monday night he will get his chance to strike back.

The New Jersey governor, whose plus-size figure has been the subject of a seemingly endless string of jokes from Mr. Letterman on his CBS show, will make his first appearance on “Late Show With David Letterman” next Monday.

Mr. Letterman has frequently offered his favorite targets the opportunity to come back at him face to face, including Oprah Winfrey (who took him up on it) and Sarah Palin (who didn’t.)

Most recently during last year’s presidential campaign, Mr. Letterman went to great lengths to try to induce Mitt Romney, whom he had satirized with relish, to be a guest before the election. Mr. Romney declined.

Mr. Christie has already appeared with other late-night hosts, like Jon Stewart, and has said in the past that he accepts the fact that comedians will make fun of his weight – as long as they are genuinely funny doing it.

Correction: January 31, 2013

An earlier version of this article misstated the name of David Letterman’s television show. It is “Late Show With David Lettterman,” not “Late Night.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/01/31/christie-gets-his-chance-for-revenge-on-letterman/?partner=rss&emc=rss

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Bucks Blog: A Cheat Sheet for Airline Fees

January 31, 2013 by Leave a Comment

2:39 p.m. Updated / To correct the name of the airline charging $10 for blankets and pillows to Virgin America (instead of Virgin Atlantic).

 

The airlines seem to have come up with a fee for almost everything these days. Wouldn’t it be nice to have a cheat sheet, listing the various fees charged by the major airlines, all in one place?

Airfarewatchdog is offering just that on its Web site. Its new “comprehensive airline fees guide” lists 14 major fees charged by 14 big domestic airlines. Most of them you’ve seen before: booking fees, change fees, checked bag fees. They’re all depressingly familiar.

Then, there are the fees for blankets and pillows ($7 on Air Canada and US Airways; $10 on Virgin America).

And remind me never to bring my dog with me if I ever fly Hawaiian Airlines. The carrier charges a steep $175 to have pets fly with you in the cabin, if you’re traveling from the mainland.

The chart also lets you know just what size bag each airline considers oversized, and how much that will cost you.

If nothing else, the chart, available in PDF format, may help you plan the actual cost of trip.

Would this information be helpful to you?

Article source: http://bucks.blogs.nytimes.com/2013/01/31/a-cheat-sheet-for-airline-fees/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

Bucks Blog: Campus Banking Practices Come Under Scrutiny

January 31, 2013 by Leave a Comment

College students are much sought after as banking customers, since young people are likely to stick with the institutions they choose for their first accounts.

On Thursday, the Consumer Financial Protection Bureau said it was opening an inquiry into bank accounts and debit cards marketed to students through colleges and universities to determine if such arrangements are in the best interest of students.

“The bureau wants to find out whether students using college-endorsed banking products are getting a good deal,” Richard Cordray, the agency’s director, said in a prepared statement.

The Credit CARD Act of 2009 barred banks from aggressive marketing of credit cards on campus, and required that agreements between credit card issuers and colleges be made public.

But, the agency said, less is known about deals for other financial products, including college-affiliated bank accounts, and contracts between schools and banks to disburse financial aid to students. Students, including those attending community colleges, often receive financial aid in excess of tuition, and can use the extra money to pay for textbooks and other costs. The banks often provide a debit card, linked to an account, to distribute the funds, and students sometimes think they are required to use the bank promoted by the school to obtain their scholarship or loan money. Some colleges even issue college-branded student identification cards that double as debit cards.

In some cases, companies providing the debit cards for financial aid have come under fire for charging excessive fees. Higher One, a big marketer of student debit cards, last summer settled allegations by the Federal Deposit Insurance Corporation that it had charged excessive fees to students who overdrew their accounts.

Now, the bureau said it is seeking information from students, colleges and banks on what information colleges share with banks when they enter such agreements; how accounts and cards are marketed to students; what fees students are charged; and how students use the cards and accounts in their day-to-day lives.

Comments will be accepted until March 18.

Rohit Chopra, the agency’s student loan ombudsman, said in a telephone interview that students are already under financial pressure from borrowing money to finance their educations. So it’s important, he said, that they aren’t also subject to excessive fees that can chip away at their finances.

Colleges, he said, also need better information, so they can negotiate agreements with banks that contain appropriate protections for students, who often trust that any college-endorsed product must be beneficial to them.

The agency offers a tool on its Web site to help educate students about the best way to select a bank account.

“We want students to know they can, and should, shop around,” he said. The account promoted by their college isn’t necessarily the best deal for them.

Have you used a college-endorsed debit card? How has that worked out for you?

Article source: http://bucks.blogs.nytimes.com/2013/01/31/campus-banking-practices-come-under-scrutiny/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

Royal Dutch Shell Posts $5.6 Billion Profit

January 31, 2013 by Leave a Comment

The results were 15 percent above the previous year but well below analysts’ expectation of around $6.3 billion.

Stuart Joyner, an analyst at Investec Securities in London, described the results as “a substantial miss.” Shell’s stock price was down about 1 percent in morning trading in London.

The company’s earnings for the year were $25.1 billion, up 2 percent over 2011.

The disappointment was largely due to lower earnings in Shell’s core exploration and production business, mainly because of weak performance in the Americas, where Shell’s multibillion Alaska drilling program has encountered multiple snafus and delays.

Exploration and production earnings were $4.4 billion compared to $5.1 billion the previous year, with the U.S. exploration and production business reporting a $69 million loss, partly due to low natural gas prices.

In another disappointment Shell estimated that it only replaced 44 percent of the reserves of oil and gas that it produced in 2012. That indicated that the company’s exploration effort, despite increased emphasis and spending in recent years, is still not performing well.

The capital investment forecast for 2013 was increased by 10 percent to $33 billion — another worry for the markets, as it suggests that Shell may be having trouble controlling costs.

On the positive side, Shell’s huge Pearl gas-to-liquids plant in Qatar is now fully operational and adding a hefty 235,000 barrels per day of oil equivalent to Shell’s production for the quarter.

Shell said that it was likely to increase its dividend in the first quarter of 2013 to 45 cents a share, a 4.7 percent increase over the first quarter of 2012.

“Shell is competitive and innovative,” the company’s chief executive, Peter Voser, said in a statement. “We are delivering on a strategy that others can’t easily repeat.”

Shell also had cause for relief on Wednesday when a court in The Hague dismissed most aspects of lawsuits brought against it by Nigerian farmers and fishermen seeking damages for pollution from oil spills in the Niger Delta.

Article source: http://www.nytimes.com/2013/02/01/business/global/royal-dutch-shell-posts-5-6-billion-profit.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

South Korean Executive Imprisoned for Embezzlement

January 31, 2013 by Leave a Comment

SEOUL — The head of SK, one of the largest South Korean conglomerates and owner of the largest mobile carrier and biggest oil refiner in the country, was arrested in a Seoul courtroom Thursday after he was sentenced to four years in prison for embezzlement.

The court’s decision to have Chey Tae-won, 53, detained and dispatched to prison from the courtroom, pending his appeal, was highly unusual in South Korea, where judges have a reputation for being lenient toward powerful tycoons convicted of white-collar crimes.

Until recently, such tycoons rarely spent any time in prison, as courts most often not only did not arrest them but also suspended their prison terms, citing their “contribution to the economy” and fears that their absence from management might hurt their corporate empires, and by extension, the national economy.

Mr. Chey was convicted of embezzling 49.7 billion won, or $45.6 million, from the mobile phone company SK Telecom and another SK subsidiary, SK CC, in 2008. SK is the third-largest South Korean corporation by assets, after Samsung and Hyundai.

“I didn’t do it,” Mr. Chey said in the courtroom. “I only learned about this in 2010, and that’s all I can say.”

South Korean courts’ attitude toward white-collar crimes has begun changing recently amid mounting public calls for “economic democratization.” During the presidential election campaign in December, all major candidates, including Park Geun-hye, who is now president-elect, championed the political catchphrase. They vowed to stop the country’s conglomerates from squeezing smaller businesses through unfair business practices, fight a widening income disparity and ensure that tycoons convicted of corruption will be punished properly.

In February last year, Lee Ho-jin, the chairman of a relatively minor conglomerate called Taekwang, was sentenced to four and a half years in prison for embezzlement and was immediately jailed. In August, a Seoul court sentenced Kim Seung-youn, head of the Hanwha conglomerate, to four years in prison for embezzlement and also sent him directly to prison from the courtroom. (Mr. Kim was paroled this month when a court ruled his illness was serious enough for hospitalization.)

Mr. Chey is the highest-profile tycoon yet to have faced the tougher sentences being imposed by courts.

This is the second time he has been ordered imprisoned for corruption. In 2003, he was arrested on charges of bookkeeping fraud, but his prison term was suspended, and he was released.

“He used the subsidiaries under his control as a tool for his crime,” the presiding judge, Lee Won-beom, said Thursday. “We had to face our duty to deal sternly with his crime before considering leniency.”

Former President Park Chung-hee, the father of Ms. Park, the president-elect, nurtured a handful of family-controlled businesses with easy credit, subsidies, tax benefits and protection from foreign competitors during his rule in the 1960s and ’70s.

They soon grew into the conglomerates, known locally as chaebol, and led the rapid economic growth of South Korea. Today, the country’s 10 biggest conglomerates, mostly in the third generation of familial control, make up more than half the total value of the companies traded on the Korea Stock Exchange.

But the corporate behemoths have also faced repeated accusations of bribery, poor corporate governance and shady business deals, often to help the families of their chairmen accumulate wealth. The heads of seven of the country’s top 10 conglomerates, including Lee Kun-hee, chairman of Samsung Electronics, and Chung Mong-koo, the chairman of Hyundai Automotive, have been convicted of crimes like bribery, embezzlement and tax evasion. But none has spent more than a few months behind bars, as their sentences, usually three years in prison, were quickly suspended by judges and their criminal records erased in presidential pardons.

“We fear that the guilty verdict against Chairman Chey Tae-won may further stoke the anti-business sentiment widespread in parts of our society,” the Federation of Korean Industries, which speaks for big businesses, said in a news release Thursday.

Solidarity for Economic Reform, a civic chaebol watchdog, noted that four years in prison for Mr. Chey was hardly a tough punishment. Acknowledging widespread discontent, the Supreme Court recently recommended that a businessman convicted of embezzling about 30 billion won be sentenced to at least four years in prison. By law, a prison term of more than three years cannot be suspended.

“Today’s verdict is positive in that it broke the old pattern of giving a suspended three years’ prison term, but it still is the minimum punishment under the current guidelines by the Supreme Court,” the civic group said in a statement. “Our courts have two faces when it comes to punishing chaebol.”

Article source: http://www.nytimes.com/2013/02/01/business/global/01iht-embezzle01.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
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