Sears and Kmart roll out virtual shopping walls for toys

This holiday season, Sears and Kmart are testing out shopping walls to empower smartphone owners to buy toys on the go.

The walls, which feature pictures of toys for sale from Sears and Kmart along with a quick response bar code for each item, will be located temporarily at malls, bus shelters, subway stations, airports and movie theaters. While waiting for a bus or browsing the mall this season, shoppers scan a QR code with their smartphone to buy a particular toy right on their device.

"Our goal is to make holiday shopping so simple that customers can find the perfect gift while they are traveling or going about their daily lives," said Julia Fitzgerald, chief digital engagement officer of toys and sporting goods for Sears.

The walls will be available at several movie theaters in the Los Angeles area, including the Regal Long Beach 26, AMC Burbank 16 and the Regal Irvine Spectrum 20.

Virtual shopping walls have already been tested overseas. British grocery giant Tesco has rolled out similar walls virtually stocked with more than 500 popular items at a busy subway station in Seoul, South Korea. On their phones, shoppers can scan and order groceries and other products to be delivered to their doorstep.

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--Shan Li

Photo: Denise Vazquez with her son Matthew, 1 at the Sears toys department in the Sears store in Torrance on Oct. 29, 2010. Credit: Lawrence K. Ho / Los Angeles Times

 

Gold once again pushing $1,800 an ounce

Eurozone instability has the price of gold back to flirting with $1,800 an ounce, with the spot price closing at $1,797.60 on Monday.

After more than six weeks below the mark, the metal’s sudden resurgence last week has analysts once again on the lookout for possible momentum toward $2,000 an ounce.

But $2,000 is “a big psychological number,” said James Steel, chief commodities analyst for HSBC. The closest gold’s gotten to breaking through is when it soared to $1,88.70 an ounce Aug. 22.

Since then, the metal’s price flattened as stocks plummeted, reaching $1,592.70 an ounce Sept. 26. Analysts suspected that investors were selling as much as they could to raise cash.

October and the first week of November brought a steady stream of concerns over the debt crisis in Greece and Italy, causing gold to shift back to its classic role as a haven in times of turmoil.

With pressure on Italian Prime Minister Silvio Berlusconi to resign and Greek Prime Minister George Papandreou’s weekend ouster, analysts believe gold will hold above $1,800 for months.

“It’s going to last for some time and be the driving force for the market for the rest of the year,” Steel said. “Gold’s gone back to behaving more normally.”

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-- Tiffany Hsu

Photo: Reuters / Mike Segar

Amgen to buy back $5 billion in shares

Thousand Oaks biotech giant Amgen Inc. said it will buy back up to $5 billion of its common stock, causing its share price to jump in morning trading.

The drug maker said it would purchase the shares for between $54 and $60 each in a buyback program known as a modified Dutch auction tender offer. Using the model, shareholders will say how many shares they want to tender and the amount within Amgen’s range they’re willing to pay. 

The company then will set a price, paying the same amount for all shares.

The auction will start Tuesday and end Dec. 7. Amgen also said it would raise debt to fund the tender offer and “for general corporate purposes.”

"Our strong balance sheet and cash flow enable us to complete this transaction in an attractive interest rate environment while also preserving the flexibility to further accelerate the growth of our business through focused, strategic acquisitions," Chief Executive Kevin W. Sharer said in a statement.

The announcement, part of Amgen’s $10-billion buyback program, sent the company’s stock up to $58.35 early Monday before it slipped back to $57.60 midday. The stock closed Friday at $55.17.

But credit ratings agencies Moody’s Investor Service and Fitch Ratings both downgraded the company’s debt. Moody’s pushed down the rating to Baa1 from A3, while Fitch sent its rating to BBB from A-.

Standard & Poor’s kept Amgen at it’s A+ rating.

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-- Tiffany Hsu

Photo: Paul Sakuma / Associated Press

U.S., California fuel prices may reach record highs in 2012

A combination of burgeoning global demand and rising U.S. exports will leave California and national gasoline and diesel prices at such a high level by the end of the year that they could rise to all-time record highs in 2012, analysts said Monday.

Americans are currently on pace to spend a record $489 billion on gasoline in 2011 because prices have remained at high levels all year. The only year that came close to the current situation was 2008, when U.S. motorists spent about $448 billion on gasoline. But even though oil and refined fuel prices climbed to record highs in 2008, they quickly fell afterward. That is not the case this year.

"We are at the highest fuel prices ever for this time of year, even though they have dropped a bit in recent weeks," said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, who made the $489-billion projection. "I think we will see prices in 2012 that will break the records set in 2008."

In the summer of 2008, the national average for a gallon of regular gasoline reached $4.114, according to the U.S. Energy Department. In California, a gallon of regular gasoline reached $4.588.

The current national average is $3.407 for a gallon of regular, down from $3.443 last week, according to the AAA Fuel Gauge Report, which tracks closely with the Energy Department numbers. That shattered the old record for this week of the year: $3.013 a gallon, set in 2007.

In California, a gallon of regular gasoline is averaging $3.838, down slightly from $3.841 a week ago. Again, that is substantially higher than the old record for this week of the year of $3.231 a gallon set in 2007.

The primary reason for the stubbornly high prices is demand in Latin and South America, which is driving record U.S. exports of fuel to those parts of the world, particularly in the form of diesel. U.S. refiners are also making more diesel at the expense of gasoline production, Kloza said.

"Demand for gasoline is down in the U.S. by 4% compared to last year, but global demand has more than made up for that," Kloza said. "If you want to blame someone for the high prices, blame South America."

Another expert said that gasoline prices could be even worse than they are right now, given that world oil prices are again on the rise.

The European commodities trading benchmark, Brent North Sea crude, was up $2.14 during trading to $114.11 a barrel, its highest since Sept. 15. The U.S. benchmark, West Texas Intermediate crude, was up 77 cents to $95.03 a barrel on the New York Mercantile Exchange.

"The national average is just one penny away from being the lowest we've seen since the start of March, even as crude oil prices have risen," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. "So it does remain surprising that average prices have moved very little."

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-- Ronald D. White

Chart: The AAA's rolling 12-month average for regular gasoline prices in the U.S. and California is well above 2010 levels. Prices may hit new highs in 2012, experts say. Credit: AAA Fuel Gauge Report

Jefferies suffers as investors look for the next MF Global

As investors wonder which Wall Street firm might be the next to catch the cold that brought down MF Global last week, most of the suspicion has fallen on one originally founded in Los Angeles, Jefferies.

Investors have sent Jefferies stock down nearly 20% from before MF Global's bankruptcy, leading the firm to spend much of the last week beating off rumors that it may soon suffer from the same problems with European sovereign debt that brought down MF Global.

MF Global took a series of ultimately fatal bets on the bonds of struggling European nations, causing clients to worry that MF Global would find itself unable to sell those bonds and unable to carry out other customer business. That fear proved contagious and ultimately sunk MF Global, according to industry experts.

Just this morning, Jefferies announced that it took the highly unusual step over the weekend of selling off 50% of its holdings of European bonds, just to show that it could.

"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book,” Jefferies Chief Executive Richard Handler said in a statement explaining the move. 

The big bets on European bonds at MF Global were part of a strategy -- initiated by its recently hired chief executive, Jon Corzine -- to expand the firm through risky bets made with the company's own funds.

Jefferies has had a similar business model to MF Global's -- at least before Corzine took over -- but Jefferies executives have been trying to convince investors that they did not take the kind of bets that Corzine pushed for at MF Global.

Last week, Handler released a full accounting of Jefferies' holdings of European bonds. 

"We decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed," Handler said in a statement on Nov. 4.

That was not enough to calm worried investors. The stock price continued to sink, leading to the unusual moves over the weekend. This morning, those moves gave Jefferies stock an initial boost, but it has recently sunk down again almost to the level where it closed Friday afternoon. It is currently trading up 1.6%, or 19 cents, to $12.26.

A columnist at the Wall Street Journal this morning wrote evocatively that Jefferies is "being strip-searched at gunpoint by the markets."

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-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Consumer Confidential: MyFord upgrade, wealth gap widens

Here's your I-melt-with-you Monday roundup of consumer news from around the Web:

— Ford is getting some upgrades. Ford Motor, stung by falling quality ratings because of its glitch-prone MyFord Touch system, is planning a major fix that it hopes will fix the problems. Early next year, Ford is sending flash drives with a software upgrade to approximately 250,000 U.S. customers with MyFord Touch and MyLincoln Touch, the equivalent system in Ford's luxury Lincoln brand. Owners can do the upgrade themselves in about 45 minutes, or dealers will do it for free. Ford is still deciding how it will offer the upgrade to 200,000 buyers outside of the U.S. MyFord Touch, which debuted last year on the Ford Edge, replaces traditional dashboard knobs and buttons with a touch screen. Drivers control climate, navigation, entertainment, phone calls and other functions using touch or voice commands.

— The wealth gap between young and old is widening. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data. Although people typically accumulate assets as they age, that ratio is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago. The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. More are pursuing college or advanced degrees, taking on debt as they wait for the job market to recover.

— David Lazarus

 

Italy on the brink as yields soar past point of no return

The eurozone debt crisis has again conformed to pattern this morning; just as one fire abates, temporarily at least – with news of the formation of a government of national unity in Greece – another lights up. Lamentably, this one – Italy – may be too big to douse.

The yield on ten year Italian debt rose to 6.59pc this morning, widening the spread on German bunds to an unprecedented 4.81pc. These are the sort of levels at which Greece, Ireland and Portugal began to find themselves shut out of markets.

Yet this time, there appears nothing there to offer support. The "enlarged" European Financial Stability Facility is not yet up and running. Few seem prepared to offer it the "leverage" required for the mooted €1 trillion of fire power. The European Central Bank under its new president, Mario Draghi, has said it's not its job to act as "lender of last resort" to governments. And the new funds that would allow the International Monetary Fund to step into the breach have not yet been agreed.

Internationally, moreover, there is growing resentment at being called apon to support further EFSF and IMF bailouts. Christine Lagarde, managing director of the IMF, could soon have a full scale rebellion on her hands. From China to Brazil, the now openly spoken mantra is that Europe should sort out its own problems. By what right does one of the world's richest regions call on poorer, and sometimes even more indebted, nations to lend support?

As my colleague, Ambrose Evans-Pritchard, points out in this morning's Daily Telegraph, the problem with Italy is not really one of contagion from the rest of the eurozone periphery. It's much more to do with the fact that Italy is sliding into deep recession, further undermining already stressed debt dynamics.

There's a vicious circle at work, whereby more austerity equals less demand, equals negative growth, equals an even bigger debt burden. Unlike Britain, there is no monetary policy and devaluation to counter the economically debilitating effect of the fiscal squeeze. With growing lack of competitiveness, Italy is in the wrong currency.

At his first press conference last week as ECB president, Mr Draghi said that further bond purchases would be "temporary", "limited" and "justified on the basis of restoring the functioning of meonetary policy transmission channels". At Jefferies International, chief economist David Owen takes the view that whatever Mr Draghi said last week, in practice he'll be forced to change tack and make the promise of "unlimited" buying explicit. But even if he did, would it really do the trick?

Mr Draghi would have preferred to exhaust conventional measures first, in particular cutting interest rates all the way down to 0.5pc, but conditions in the Italian bond market are deteriorating with such speed that he may not be allowed that luxury. When a fiscal crisis developes, it tends to happen very fast, with the rapid ebbing away of what remains of market confidence. That's the place Italy now finds itself in.

Eurozone policymakers think they are already moving at a speed which is only barely compatible with continued democratic support. Yet they are going to have to move even more swiftly towards the introduction of eurobonds and a centralised eurozone treasury function if they are to save the project. Germany and other rich, creditor eurozone nations are going to have to make up their minds; they wanted the euro, but are they prepared to do what it takes to sustain it?

Britain ranks below Peru in new ‘sovereign risk’ world order

Peru: not as risky as Britain

Britain ranks below Peru in a new analysis by one of the world’s biggest fund managers of the risk to investors who buy government bonds. Norway, Sweden and Switzerland are the least risky bond issuers among 44 countries analysed in the BlackRock Sovereign Risk Index. At the other end of the scale, also in descending order, Egypt, Portugal and Greece are reckoned to be the most risky.

Britain falls near the middle of this new world order, ranking directly below Russia, China, Czech Republic, Israel and Peru. Some small comfort may be taken from the fact that gilts issued by the British Government are reckoned to be a better bet than bonds issued by France, the Philipines and Poland; which rank directly below Britain.

Dissatisfaction with credit rating agencies such as Standard & Poor’s, Fitch and Moody’s – which have issued nearly 100 sovereign risk downgrades since the global credit crisis began – prompted BlackRock to begin collating its own analysts’ views earlier this year. It claims back-testing of this analysis suggests it is more accurate than the credit rating agencies’ and that the current crisis will continue with more government’s getting into trouble with excess debt.

Benjamin Brodsky, managing director of fixed interest at BlackRock said: “Our initial analysis was judgmentally based, and contemporaneously validated by a high correlation with sovereign credit default swap (CDS) market spreads. Over recent months we have constructed the back history of this approach running from, taking care to use ‘real-time’ data.

“In this quarterly update for the index, we complement our earlier analysis, showing how the BlackRock Sovereign Risk Index (BSRI) has outperformed both ratings agencies and sovereign credit default swap spreads in highlighting downgrade risks.

“Considering heightened activity within the Eurozone periphery in recent years, we present a case study that focuses on Greece, Ireland, Italy, Spain, and Portugal. We show how the BSRI would have led agency activity over the span of these countries, while leading markets in their shift from complacency.”

As independent analysis from the Centre for Economics and Business Research suggests Britain might be better off if the eurozone breaks up, Ewen Cameron Watt, managing director of investment strategy at BlackRock, said: “Driven by multiple fundamental insights to the nature of sovereign credit risk, the BSRI presents a useful tool for profiling the strengths and weaknesses of countries against one another.

“Our research suggests these insights can lead rating agency activity, with an excellent track record at preceding downgrades, and historically would have highlighted areas of market complacency.

“As a backdrop for the future, we believe the multi-decade compilation of sovereign and banking crises by Reinhart and Rogoff presents a compelling case that in recent years financial markets have been complacent about risks that have always been present and, as more countries approach their upper limits of sustainable leverage, a return to a higher incidence of crises seems likely.”

A fundamental shift of economic wealth from West to East is underway and relative valuations of international bonds reflect that transition. Mark Dampier of wealth managers Hargreaves Lansdown put it most succinctly: “The emerging markets have the savings; the developed world has the debt. Sooner or later, prices will reflect those facts.”