April 1, 2023

Merkel Stresses Limits to Germany’s Ability to Rescue Euro Zone

“Germany’s strength is not infinite,” Ms. Merkel told the Bundestag on Thursday. “Germany’s powers, too, are not unlimited. Consequently, our special responsibility as the leading economy in Europe means we must be able to realistically size up our powers, so we can use them for Germany and Europe with full force.”

The most important actor in the European drama, Ms. Merkel said that she would resist any outside attempts to force Germany to consent to what she called “simple” and “counterproductive” quick fixes. Once again, she rejected jointly issued euro bonds or other forms of shared debt, which several leaders, including President François Hollande of France, have called for.

“I know that it is arduous, that it is painful, that it is a drawn-out task,” Ms. Merkel said. “It is a herculean task, but it is unavoidable.”

Behind the scenes, however, Ms. Merkel is pressing allies in Paris, Rome and elsewhere to cede more power to Brussels over their national budgets before Germany would agree to provide further backing for joint efforts to bolster the euro zone. In her speech, Ms. Merkel hinted at this approach by emphasizing her view that the only way for Europe to recover fully from the crisis is to strengthen political and fiscal unity to support its monetary union.

But that is a long-term strategy. And given Ms. Merkel’s firm stance, coupled with Germany’s longstanding reluctance to make more aggressive moves to shore up the euro, Europe faces a more immediate question: If the Continent’s largest economy cannot or will not stop the euro zone from falling apart, who will?

“Merkel still thinks it’s all about introducing new rules, making countries stick by the rules, and if they stick by the rules the situation will stabilize,” said Philip Whyte, a senior research fellow at the Center for European Reform in London. “She seems to think that she has a lot more time than the markets seem to think.”

Ms. Merkel delivered her pessimistic message as she prepared to fly to Mexico for a two-day summit meeting beginning on Monday, right after a critical vote in Greece on Sunday that could determine whether the country remains in the euro zone. Investors, meanwhile, briefly pushed Spanish bond yields over the key threshold of 7 percent on Thursday, a level that had previously prompted international bailouts for Greece and two other members of the 17-nation euro zone.

With larger economies like Spain and Italy teetering, Ms. Merkel’s stern warning was not just posturing for a domestic audience opposed to bailouts, or tactical positioning before a summit meeting. Her statements reflected a growing fear in Germany that too many guarantees and payouts could threaten its own top credit rating.

That, in turn, would undermine the euro zone’s rescue efforts, which are predicated on Germany’s low borrowing costs and high standing in the markets. Indeed, German bond yields, which have been at historically low levels as investors have sought havens, have begun to creep upward in recent days.

At the Group of 20 meeting next week in Los Cabos, Mexico, the pressure for Ms. Merkel to find a way to contain financial instability and encourage growth is likely to be fierce. But far from turning toward stimulus or agreeing to some form of jointly issued debt, Ms. Merkel’s advisers say that she will remind fellow leaders of their pledges to cut budget deficits in half by next year, as Germany has done.

Ms. Merkel has found herself in a difficult political balancing act. Anger in Germany over the rising price tag for bailouts continues to grow, with more than two-thirds of those surveyed in a recent poll saying that they wanted Greece to leave the euro. But business leaders in this export-driven economy are pressing her to salvage the currency that has served them so well.

Nicholas Kulish reported from Berlin, and Paul Geitner from Brussels. Melissa Eddy contributed reporting from Berlin, and David Jolly from Paris.

Article source: http://www.nytimes.com/2012/06/15/world/europe/merkel-says-germanys-ability-to-rescue-euro-zone-is-limited.html?partner=rss&emc=rss

Small Investors Recalibrate After Market Gyrations

After the market rout of 2008 that drastically shrank their retirement nest eggs, small investors withdrew hundreds of billions of dollars from American stock funds, and they kept bolting as the market rebounded sharply for much of last year.

But earlier this year, having missed out on last year’s gains, some investors began to tiptoe back in. The timing for those people was off, and now they are being buffeted by the steep drops on Wall Street or bailing altogether. Still others who have been holding on in recent years have had enough.

Lin Hersh, a 61-year-old small-business owner in Bearsville, N.Y., about two hours north of New York City, called up her stock broker two weeks ago and gave the order to sell everything.

She dumped nearly all of her individual equities and her stock mutual funds, moving almost completely into cash. Ms. Hersh is haunted by the market plunge of 2008, when her $432,000 in savings dwindled to $150,000.

“What I’ve got left after the last downturn is about a third of what I started out with and I’m not in the mood to play anymore,” she said. Pointing to the weak American economy and concerns about Europe, Ms. Hersh said she would most likely steer clear of stocks through the end of this year.

“I don’t think there’s a reason to buy on the dip because the dip isn’t done,” she added.

Small investors provide the bedrock for the United States stock market through their mutual funds, 401(k) plans and other company-sponsored retirement programs. Many have called their stock brokers and financial advisers in recent days, seeking advice or reassurance that their retirements and savings would survive the dives.

The vast majority of small investors have a long-term strategy and are sitting tight. They are not dumping their stocks or mutual funds and, in many cases, continue to pump money into their retirement accounts through employer-sponsored investment plans.

But even before the latest market turmoil, some investors began to look for the exit doors. More than $10 billion was pulled from domestic stock funds in the week that ended Aug. 3, according to the Investment Company Institute. Those levels are double what they were in early July.

And Charles Biderman, the chief executive of TrimTabs Investment Research, estimated that investors probably pulled out another $9 billion this week while the market gyrated wildly.

Just in the last six trading sessions, the whiplash in the Dow Jones industrial average has included three days of either 500-plus or 600-plus dives and two leaps of more than 400 points. Since the beginning of August, the broader Standard Poor’s 500-index has lost 8.8 percent.

Many investors expect continued troubles for stocks. An online survey of investor sentiment this week by the American Association of Individual Investors said that 44 percent of respondents were bearish, expecting the stock market to fall further over the next six months. While that was actually improved from the prior week, it remains well above the survey’s historical bearish readings of about 30 percent.

When it comes to domestic stock funds, which manage $4.4 trillion in assets, there have been many more bears than bulls. Those mutual funds have had four consecutive years of outflows, with investors redeeming $448 billion and putting in $104 billion, according to the Investment Company Institute.

In contrast with these longer-term investors, rapid traders have been keen on gambling as Wall Street gyrates.

TD Ameritrade, the online brokerage firm, reported that trading volumes soared into record territory this week as investors clattered and clicked away on their computers. On Monday, when the stock market fell over 600 points, TD Ameritrade processed 900,000 trades, up from an average of 365,000.

“We’re seeing a lot of new accounts opening and new asset inflows. People are looking for a bottom,” said Nicole Sherrod, a managing director of the trader group at TD Ameritrade. “But for people who stayed in the markets and stayed long, are we seeing some of them exit some positions? Yes. Absolutely.”

After years of underperformance or losses, some investors are questioning whether the long-term outlook that has been drilled into them by Wall Street financial advisers and professionals is really the best advice.

“My wife followed the advice of a financial adviser and she would have been better off putting her money under the mattress. They did nothing but lose money for her over 20 years,” said Adam Corson-Finnerty, a 67-year-old fund-raiser for the New Jersey Audubon.

Mr. Corson-Finnerty pulled his entire $500,000 retirement account out of the stock market at its peak in 2007 and put it into United States Treasuries and money-market funds.

Article source: http://www.nytimes.com/2011/08/12/business/small-investors-recalibrate-after-market-gyrations.html?partner=rss&emc=rss

I.M.F. Urges Debt Limit Action in U.S.

The debt limit is the amount the government can borrow to help finance its operations. The United States reached its $14.3 trillion borrowing limit in May. It is at risk of defaulting on its debt if it does not raise that limit by Aug. 2. President Obama and Republican lawmakers have been at odds on a plan to raise it.

The I.M.F. also warned in its annual report on the American economy that rising budget deficits posed a risk to the economy. But it advocated a long-term strategy for reducing those deficits, not steep immediate cuts or tax increases. Cutting the deficit too quickly could slow the weak recovery, the fund said.

The American economy will grow this year and next but at a weak pace, the I.M.F. forecast. The fund projected that the economy would expand 2.5 percent this year and 2.7 percent in 2012. Consumers are still paying off debts, which will reduce their buying power, and budget cuts at the federal, state and local levels would also reduce demand.

The I.M.F.’s forecast is below recent projections by the Federal Reserve. The Fed expects the economy will grow by as much as 3.3 percent next year. Many private forecasters, however, are more pessimistic and closer to the I.M.F.’s view.

The I.M.F. has 187 member nations and lends money to countries with troubled finances. It also regularly reviews major national economies to look for signs of trouble that could affect the world economy.

Article source: http://feeds.nytimes.com/click.phdo?i=39a9b0955973ab79017103be83aed07c

Stuff Piled in the Aisle? It’s There to Get You to Spend More

That’s a given. But it turns out that lots and lots of stuff piled onto shelves or stacked in the middle of store aisles can coax a shopper to buy more.

After the recessionary years of shedding inventory and clearing store lanes for a cleaner, appealing look, retailers are reversing course and redesigning their spaces to add clutter.

Dollar General is raising the height of its standard shelves to more than six feet; J. C. Penney is turning its empty walls into jewelry and accessory displays; Old Navy is adding lanes lined with items like water bottles, candy and lunchboxes; and Best Buy is testing wheeling in bigger items, like Segways and bicycles, to suck up the space created by thinner TVs and smaller speakers.

Wal-Mart Stores may provide the marquee example of a failed makeover. Two years ago, it remodeled, trying to hang on to Target shoppers who traded down to Wal-Mart during the recession.

Out went the pallets of items like juice boxes or sweatshirts stacked in the centers of aisles. Merchandise on “end caps,” displays at the ends of aisles, slimmed down. Shelves got shorter, and Wal-Mart whittled the number of items it carried by about 9 percent, so as not to overwhelm shoppers. Customer satisfaction scores soared.

Despite those ratings, Wal-Mart has been encountering one of the longest slides in domestic same-store sales in its history

“They loved the experience,” William S. Simon, the chief executive of Wal-Mart’s United States division, said at a recent conference. “They just bought less. And that generally is not a good long-term strategy.” 

So after remodeling a large percentage of its stores, Wal-Mart is now re-remodeling them, adding back inventory, plopping stacks of stuff into aisles and stacking shelves with a dizzying array of merchandise. 

As it turns out, the messier and more confusing a store looks, the better the deals it projects. 

“Historically, the more a store is packed, the more people think of it as value — just as when you walk into a store and there are fewer things on the floor, you tend to think they’re expensive,” said Paco Underhill, founder and chief executive of Envirosell, who studies shopper behavior. 

Retailers are crowding shelves for a couple of strategic reasons.

After years of expansion, many retailers are halting building plans and closing stores as sales and traffic shift to the Web. That means the main way to increase revenue is by selling more stuff at the existing stores. 

“All the retailers are stuck with less traffic going to the stores, and leases that are 15 to 20 years long,” said Fiona Dias, executive vice president of strategy and marketing at GSI Commerce, which provides e-commerce technology for retailers like Toys “R” Us. “What do you do with all the extra space that you’re paying for?” 

Also, same-store sales are getting stronger, so retailers are adding back merchandise. At Wal-Mart, for instance, inventory at the end of January was 11 percent higher than a year earlier. 

Best Buy, which had big stores to begin with, recently was faced with “bowling alleys’ worth of space because the product has all shrunk or gone digital,” Ms. Dias said, noting the switchover to music sold on MP3s rather than racks and racks of CDs.  

J. C. Penney is also trying to maximize its existing spaces. 

Old Navy has added “fast lanes” where shoppers can pick up Nantucket Nectars, toys and other impulse items. About 100 stores now have the lanes, and about 200 more are being added this year. It is meant to maximize sales per square foot around the checkout area, a spokeswoman, Louise Callagy, said in an e-mail, especially important as many Old Navys have been or will be remodeled into smaller spaces.

“One of the ways to improve the productivity is to get more things out on the floor and to show the product in a better way,” said Jan Hodges, senior vice president and general merchandise manager of women’s accessories at J. C. Penney. The retailer has turned empty back walls into accessory displays, added coordinating jewelry and handbags to tables of clothes, and later this year will switch from flat tables to ones with pegs that can carry loads of hanging socks or underwear. 

At Dollar General, the tops of the shelves have been raised to a standard 78 inches. Some were as short as 62 inches.

“Think of the shelf heights as air rights, if you will — it’s easier to raise the shelf height than expand the footprint” of the store, said a spokeswoman, Mary Winn Gordon.  

Raising the shelf height, she said, raised sales per square foot from to about $201 in 2010 from $165 in 2007. 

Article source: http://feeds.nytimes.com/click.phdo?i=b6c6333395505479aeb5ae1b1d26a199