Seven To Ten

The mammoth pay and disastrous performance of Countrywide Financial’s Angelo Mozilo, Citigroup’s Chuck Prince, and Merrill Lynch’s Stan O’Neal should be enough to make the public furious. Each CEO departed with $100-million-plus compensation after misadventures with subprime mortgages.

Now add the economic slowdown to the mix; ordinary Americans are worried about making ends meet while failed pooh-bahs rake it in.

The problem is that corporate boards can always find a way to pay the boss whatever they like. Over the past 25 years CEO pay has risen regardless of the economic or political climate. It rises faster than corporate profits, economic growth, or average workforce compensation.

A recent study by the compensation consulting firm DolmatConnell & Partners found that CEO pay in the companies of the Dow Jones industrials increased at a blowout 15.1% annual rate over the past decade.

A more sensible alternative to the current compensation system would require CEOs to own a lot of company stock. If the stock is given to the boss, his salary and bonus should be docked to reflect its value.

As for bonuses, they should be based on improving a company’s cash earnings relative to its cost of capital, not to more easily manipulated measures like earnings per share. They should not be capped, but they should be banked - unavailable to the CEO for some period of years - to prevent short-term gaming.

Oil hit another record high but has since pulled back. The dollar showed some strength and corporate earnings were pretty good.

Boeing blew away earnings estimates. Ford posted a surprise profit. And even though investors were disappointed by Microsoft’s quarterly forecast, they issued a healthy outlook for its next fiscal year. The worst of the credit crunch may finally be behind us. No more major bombshells from financial institutions, a sign that the Fed’s six rate cuts since last September and massive injections of liquidity into the banking system may be working.

In fact, Merrill Lynch indicated yesterday that it would pay its dividend this quarter, relieving investors who were anticipating a cut. There seems to be cause for optimism about the markets. The Dow is active again and the bond market is not acting as if it is in recession anymore.

Bonds have fallen in recent weeks, raising the yields. Bond prices and yields move in opposite directions and lower yields are usually associated as a sign of economic weakness. And for consumers, even though it’s still a painful time because of rising food and gas prices, the first of the government’s tax rebate has hit mailboxes.

Of course, it still is a rough economic environment. The surging price of food threatens to disrupt U.S. consumer spending patterns and the global economy. That’s where the Federal Reserve will hopefully step in. Many fear that more rate cuts could lead to a further weakening of the dollar, which in turn, could fuel more speculation in the commodities markets and drive food and gas prices even higher.

So higher interest rates, not more cuts, might be exactly what this market and economy needs. Hopefully, the Fed will send a strong signal to investors Wednesday that it is getting ready to sit tight.

Stocks futures rose as investors eyed a possible $22 billion deal for chewing gum giant Wrigley, an investor’s $170 million bid for more shares of Ford, and turned their focus to this week’s Federal Reserve meeting.

Investors are expecting the Fed to lower rates yet again at the end of its two-day meeting on Wednesday. Many economists expect the central bank will hold rates steady after that cut in a bid to keep inflation in check.

A slew of high-profile economic reports will come out this week - Tuesday (consumer confidence report), Thursday (Inflation issues for personal and income spending report) and Friday (government’s monthly jobs report).

Oil prices hit another record trading high near $120 a barrel after a refinery strike in the U.K. Shares of automaker Ford soared in pre-market trading after billionaire investor Kirk Kerkorian’s Tracinda Corp. said it would make a bid for 20 million shares valued at $170 million. The $8.50 a share offer represents a 13.3% premium to Friday’s close. Kerkorian, who already owns 4.7% of Ford, is looking to control more than 5% of the company.

Verizon posted first-quarter earnings results that met Wall Street’s expectations. Sales were up 5.5%, but shares were flat in pre-market trading.

In major deal news, Mars and Warren Buffett’s Berkshire Hathaway are near a deal to buy chewing gum giant Wm. Wrigley Jr. for more than $22 billion. Microsoft’s deadline for Yahoo to respond to its takeover passed on Saturday, which means the three-month battle for Yahoo may soon turn hostile.

Also over the weekend, Continental Airlines said it would not pursue a merger with another carrier. Media conglomerate Walt Disney could be hurt by a controversial photo of 15-year old singing and acting superstar Miley Cyrus which appears in an upcoming June issue of Vanity Fair.

The photo which shows her posing topless, although with her chest covered by a bedsheet, was seen as too racy for the wholesome “Hannah Montana” franchise, which produced $1 billion in sales for Disney last year. Disney shares were up nearly 1% in early trading in Frankfurt despite the news of the photo over the weekend.

In global trade, Asian markets headed mostly higher. European shares also rose in early trading.

Under the government’s economic stimulus plan, 130 million people will receive tax rebate checks for $300 and up, starting April 28.

What do you plan to do with your check?

How do you think the stimulus plan will affect the economy?

My blog focuses on economy and businesses but from time to time, I do have certain posts on fashion targeted at women. I mean, I can’t help but notice the latest fashion trends and bargain buys from my wife’s shopping activities, given that I am the one who always have to settle the credit card bills at the end of the month. I figure what is good for my wife must be good for women at large.

Economy and fashion actually goes hand in hand. Our economy is in the doldrums right now and jobs are at stake, so lots of retail stores are suffering. But since Mother’s Day is near, I believe my wife deserves some rewards and I don’t really begrudge her excessive spending during this period.

I notice some purchases from her on this website, Bandlet, so I checked it out and and found they sell lots of women’s authentic brand name apparel, BCBG, Dolce & Gabanna, Ralph Lauren, INC, Charter House, Tahari, etc.

Besides clothing, they also offer designer bags, sunglasses, shoes, and accessories. I am impressed at their amazing prices which are kind to my budget. Click on the Dress category and you will find lots of summer dresses that are as cute as can be. I chanced upon a pretty dress at only $20 - Belle du Jour (a green floral faux wrap dress) which will definitely look fabulous on my wife and this will be my little surprise for her.

Even if you aren’t into fashion, I think it is a good idea to check out this site. Dress to kill at only $20.00 and under. My wife is obsessed with Dolce & Gabanna and I think all girls love to stock their closet with this brand. Brandlet will offer you free shipping for orders exceeding $99. There is also a 30 Day money back guarantee if the products do not meet your satisfaction.

Seven out of 10 seriously delinquent subprime mortgage borrowers are still not getting the help they need to keep their homes, according to a report released Tuesday by state officials working to stem the foreclosure crisis.

“We’re still way behind,” said Iowa Attorney General Tom Miller, who helped form the State Foreclosure Prevention Working Group, a coalition formed last year by 11 state attorneys general and bank regulators.

The coalition is working with lenders and companies that service mortgages to try to keep people from losing their homes. It drew its statistics from 13 of the 20 major servicer companies, which handle about 58% of all subprime loans.

More than 1 million of those loans, or nearly 25% of the total, were delinquent as of Jan. 31. And foreclosure proceedings have begun on 300,000 of them - an 8% increase since October.

Mortgage servicing companies, which manage accounts and process payments, play a key role in efforts to help delinquent borrowers work out affordable mortgages. Workouts can take the form of simple repayment plans or more comprehensive loan modifications that involve reductions in balances or interest rates.

Many subprime loans are adjustable rate mortgages, meaning their interest rates jump after an introductory period. Borrowers who had not fallen behind on their payments before their rates reset can benefit from a simple freeze of their rates. Many subprime borrowers took out loans they could not really afford - making workouts more complicated.

The report showed that 28.5% of subprime adjustable rate mortgages that won’t reset until spring 2009 are already delinquent. About 21% of these same loans were delinquent in October.

Motorola continues to struggle as they posted a first-quarter continuing operations loss of $194 million, or 9 cents a share, compared with a year-ago loss of $218 million. Excluding costs tied to recent job cuts, Motorola lost 5 cents a share, 2 cents better than the Wall Street analyst estimate.

But if the company’s bottom-line performance was slightly better than expected, the rest of its report wasn’t terribly upbeat. Motorola posted sales of $7.45 billion, down 21% from a year ago. Sales in the hard-hit handset unit slumped 39% from a year ago, as Motorola sold 27 million handsets for the quarter.

The drastic decline at that operation prompted Motorola to agree earlier this year to split off its handset and broadband businesses in a new company, as well as to give some board seats to dissident investor Carl Icahn, who has been criticizing Motorola for more than a year and who has called repeatedly for a splitup.

Motorola is also bleeding cash, posting an operating cash outflow of $343 million in the first quarter. The company said it expects to lose 2 to 4 cents a share for the second quarter, excluding costs related to job cuts.

Analysts were looking for a penny-a-share loss. Shares of Motorola, which have lost more than half their value over the past year during the handset unit’s implosion, dropped 35 cents in early trading Thursday to $9.20.

Ford Motor Co. surprised Wall Street with a $100 million profit in the first quarter as strong results from Europe and South America helped offset the impact of a slumping U.S. economy that cut car and truck sales in its main market.

The company also said Thursday its latest round of early retirement and buyout offers netted 4,200 hourly workers, fewer than Ford had targeted.

Ford says it earned 5 cents per share compared to a loss of 15 cents a share in the same period last year.
Excluding special items, the company said it made $525 million after taxes, or 20 cents per share. That beat Wall Street’s expectations. The profit came despite a $45 million pretax loss in Ford’s core North American automotive market.

It was Ford’s first profitable quarter since the second quarter of 2007 when it made $750 million. Ford reported a full-year loss of $2.7 billion last year, and it cautioned that the rest of this year will be tough. Ford also lowered its industrywide U.S. vehicle sales forecast for the full year.

The number of newly laid off workers filing unemployment benefits claims increased, according to the Labor Department. Aside from the period in the fall of 2005 after Hurricane Katrina hit, the four-week average for claims has risen to levels last seen in 2003 when the country was mired in a long jobless recovery after the 2001 recession.

Analysts said that claims have been difficult to read because of the government is trying to adjust the figures for seasonal changes to reflect this year’s unusually early Easter and also because of the impact of a strike at a key parts supplier for General Motors.

The unemployment rate jumped to 5.1% in March as businesses cut 80,000 jobs, the biggest drop in payrolls in five years. Many economists believe that was the most dramatic indication to date that the country has fallen into a recession.

Economists believe that the downturn should be short and mild, ending this summer with the help of the economic stimulus package that will send rebate checks to 130 million households. Still, they are looking for the unemployment rate to rise to 6% before stronger economic growth starts generating renewed hiring.

For the week of April 5, 31 states and territories reported increases in claims while 22 states had declines. The state with the biggest increase was Georgia, where claims rose by 4,306, reflecting higher layoffs in textile plants, carpet and rug factories and in service industries. Michigan was next in line, reflecting higher layoffs in the auto industry, followed by Texas with an increase of 2,377.

The states with the biggest declines in claims applications were New Jersey, down 2,737; New York, down 2,465; and Wisconsin, down 2,075

Citigroup delivered another quarter of devastating results, losing more than $5 billion due to troubles in its fixed-income business and higher consumer credit costs, adding it would cut an additional 9,000 jobs.

The New York-based company also recorded more than $15 billion in writedowns, with the lion’s share coming from subprime-related direct exposures. But investors cheered the news, sending shares of Citigroup more than 6% in early trading, as the results were not as bad as some had feared.

Citi, however, did surprise analysts by delivering better-than-expected top line growth. The company said revenue rose sharply to $13.22 billion from the previous quarter, still it remained at just about half of what it was a year ago.

At the same time, Friday’s results paled in comparison to the eye-popping $9.83 billion quarterly loss the company suffered three months ago - the worst ever recorded in the 196-year history of the firm and its predecessors.

Citigroup CEO Vikram Pandit said he was not happy about the results, but noted that he believed that efforts to cut costs, sell non-core businesses and beef up risk management would pay off.

“I think you will see we are taking all the action you’d want us to take to maximize the value of this franchise,” said Pandit.

Since Pandit’s ascension to the CEO post in December, management has made great strides in shaping up what some critics have called the company’s bloated corporate structure.

On Thursday, Citi announced it would sell its commercial lending and leasing business to General Electric for an undisclosed amount. The company has also announced other major moves including the sale of Diners Club International and its stake in Brazilian credit card company Redecard SA.

Citigroup’s results wrap up what has been a particularly tough week of results for the nation’s largest financial firms. Merrill Lynch recorded a loss of $1.96 billion, after about $6.6 billion in new writedowns. The company also said it planned to cut about 3,000 more jobs.

Wachovia Corp. surprised Wall Street Monday with a first-quarter loss of $350 million, while Washington Mutual reported a loss of $1.1 billion, or $1.40 a share, on Tuesday. JPMorgan Chase topped Wall Street expectations after reporting earnings of $2.4 billion. Still the results were just half of what they were a year ago.