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NEW YORK: Microsoft and Yahoo have finally come to a search deal and will announce the details of the agreement in the next 24 hours, according to a report.It is not clear whether the two companies have signed any official papers, but the negotiations of the deal, which also includes advertising, have finally come to a close, The Wall Street Journal said Tuesday. Yahoo (YHOO, Fortune 500) and Microsoft (MSFT, Fortune 500) have been in talks for some time to join forces on Internet search and advertising technology. Together, the two could stand a better chance to gain market share from rival Google (GOOG, Fortune 500). 0:00
/5:11Tech earnings strengthMicrosoft launched its own Internet search portal, Bing, in early June. While Bing met with initial success, Microsoft has still been unable to post a profit in its online advertising business.Microsoft and Yahoo would share revenues on the deal, and Yahoo would not get any money up front, according to the Journal.

Source:CNN

WASHINGTON (Fortune) — Business legend Jack Welch has already hailed Ben Bernanke as “a national hero” for the Federal Reserve chief’s aggressive moves to pump up the economy, but Bernanke’s work is not nearly finished. One of the factors that will influence the decision whether to reappoint him when his term ends in January is the nature of the next task facing him or his successor: to wean the economy off the 1 trillion of new money created by the Fed when disaster loomed last fall.Like much of what the Fed has had to accomplish recently, it’s a scenario without precedent since the Great Depression. And that time, the delicate operation was botched.”Your timing has to be perfect,” says David Jones, former Fed economist and president and CEO of DMJ Advisors LLC in Denver. “If you do it too soon, you keep us in a deep recession. And if you do it too late, you get inflation.”To make the best decision about whom to appoint, President Obama will have to consider not only who has the best command of monetary policy, but also who has the most mettle. Any decision to raise short-term interest rates can make the Fed chair very unpopular. “Your next act is not to refill the punch bowl,” says Rob Parenteau, an economic consultant who owns the firm MacroStrategy Edge. “You’re going to be taking it away, and you’re going to be making a lot of enemies as you do that.”The argument for Bernanke goes like this: he’s already on the job, and he also happens to be one of the greatest living scholars of the Great Depression, which is basically a road map for how a central bank should not run monetary policy. One of the lessons of that crisis is that shutting off the monetary spigot too soon can stop a recovery in its tracks. In 1936-37, the central bank started withdrawing excess reserves. This, combined with FDR’s decision to raise taxes and cut spending, sent the economy into another tailspin.Bernanke has indicated that he understands the art of timing. During testimony before Congress’s Joint Economic Committee in May, he explained, “I just want to assure the American people that we are very focused, like a laser beam … on this issue of the exit and of making sure that we have price stability in the medium term.”He added, “It’s very important for us to provide a lot of support for this economy right now because it needs support, but at the same time we understand the necessity of winding this down in an orderly way at the appropriate moment so that we will not have inflation problems on the other side.”Bernanke and others at the Federal Reserve are saying inflation will not be a problem in the near future. But investors are already signaling their concern. Ten-year Treasury bond yields hit an eight-month peak in June.”[The Fed's] models may tell them inflation’s not a headache for two or three years but it doesn’t matter if investors think it could be a nearer term problem,” says Parenteau. “If commodity prices begin to reflect that, you’ve got a problem on your hands”The question is whether Wall Street trusts Bernanke to do whatever it takes to avoid the inflation problem. Larry Summers, Obama’s top economic adviser and former Treasury secretary, is often floated as another possible Fed chair. People who like that idea view his reputation for a strong will as an asset in a situation like this.”People may view Summers as more able and willing to execute whatever tightening needs to be done on the Fed funds rate,” says Parenteau, “whereas they’re used to thinking of Bernanke as ‘Helicopter Ben,’ where he comes along with the helicopter and opens the suitcase and lets the money fly.”On the other hand, Summers’ close ties to the White House could create the impression that political pressure would be brought to bear on him to err on the side of economic growth, rather than inflation-fighting.0:00
/2:17Buffett praises BernankeRegardless who gets appointed, one thing is certain: this unelected corner of government has never had more power. The Obama administration’s proposal to give the Fed more authority to regulate big financial institutions comes at the same time its monetary decisions will decide the economy’s fate. And yet all the authority in the world may not be enough to stop the after-effects of injecting such a megadose of money into the system. Some think inflation is inevitable.”It doesn’t matter who you appoint. It doesn’t change the fact you’re sitting there with a trillion dollars in excess reserves,” says Thomas Saving, an economics professor at Texas A&M University and director of the Private Enterprise Research Center. “An appointment doesn’t change any of that. That’s reality.”

Source:CNN

NEW YORK: Despite Exxon Mobil Corp.’s well-publicized stance in support of fossil fuels, the oil giant said on Tuesday that it is sponsoring a program to bring a zero-emission electric vehicle to Baltimore. The car, called the Maya 300, is a partnership between the oil company and electric-vehicle maker Electrovaya. Exxon (XOM, Fortune 500) is providing parts for the Electrovaya’s lithium-ion battery.The Maya 300 is slated to be available for sale in 2011, but visitors to the Maryland Science Center can test-drive it for free beginning on Tuesday on a track inside the building. The test program ends August 1, when a car-sharing program will become available for a membership fee. Through the car-sharing program, drivers may rent the Maya 300 vehicles for 14.50 an hour, at a minimum of 2 hours.A standard rental program will also be available “in the coming months,” a press release said. Further details were unclear. The environmental conundrum. Exxon president and chief executive Rex Tillerson has been resistant to pegging his company’s future on alternative energy.In August 2008, Tillerson told ABC News, “I cannot say we’re going to opt for an alternative elsewhere at the expense of oil and natural gas, because oil and natural gas are going to take us to [the] future.”That same year, influential Exxon shareholders the Rockefeller family made an attempt to separate Tillerson’s CEO and chairman positions, saying they wanted Exxon to invest more in alternative energy. Later, four large British investors joined the family’s effort, which ultimately failed.Because of Tillerson’s stance, this foray into the electric vehicle market comes as a surprise to some even though Exxon has been researching alternative energy for years.”My initial reaction is that this is PR more than anything else,” said Paul Weiss, analyst at Argus Research Company.But Robert Kessler, an analyst at Simmons & Company International, disagreed that Exxon’s move was a public-relations grab.”I think there’s a genuine interest to increase energy efficiency,” Kessler said. “They’re interested in all options, especially any investment that generates an attractive return.”Exxon is “one of the slower-moving, more conservative” energy companies in terms of investing in renewable energy, and that approach has paid off thus far, Kessler said. “With the benefit of hindsight, we see that investing in [alternative energy] a year ago looks to have been early relative to the opportunities available today,” he said. Exxon’s caution has helped its bottom line, said Kessler.0:00
/1:39Making a battery to replace oilJust a timely investment? The move could also be part of a larger motive to invest in Electrovaya or other small alternative-energy firms, as Exxon enjoys strong balance sheets and a large amount of cash, Argus’ Weiss said.”Exxon is in a position to take on some risk,” Weiss said. “If a company they invest in does well, it would be a great move for them to have equity in it.”Electrovaya said the Maya 300 is zero-emission and low-speed, offered with the option of a standard battery pack that can drive for up to 60 miles on a single charge for about 25,000. Another version with the extended 120 mile-range battery will sell for about 35,000. Tuesday’s event will also feature the opening of an Exxon-sponsored energy efficiency exhibit at the Maryland Science Center. Exxon has invested more than 500,000 in the car-sharing program and exhibit.

Source:CNN

NEW YORK: Should the Federal Reserve be more worried about the threat of inflation on the long-term horizon, or deflation in the short-term? It’s an important question to ask as the Fed’s policy-making committee prepares to release a statement about the economy on Wednesday.Those who fear inflation argue that the recent rise in oil prices, the dollar’s loss of value and the recent rise in yields on U.S. Treasurys are all signs that consumers could soon be grappling with higher prices for lots of goods and services. These economists say the seeds for inflation have been sown by the Fed’s extraordinary efforts to keep the economy afloat over the past year. Many believe the central bank needs to pull back quickly on the various programs it has created to pump cash into the economy, even if the U.S. economy is still struggling. If the Fed doesn’t act, it could risk even worse problems down the road — especially if long-term bond yields and the lending rates tied to them continue to rise. “There’s no doubt that what the Fed is doing today is inflationary,” said Brian Wesbury, chief economist at First Trust Portfolios. “The real sign of that is the increase of commodity prices since early this year.”But others argue the economy is still so weak that deflation, or a drop in prices, is the more serious threat. The Consumer Price Index, the government’s key inflation measure, posted its largest 12-month drop since 1950 in May.This year-over-year decline in prices, coupled with rising unemployment and low factory utilization, could be signs that prices are likely to keep falling. And while lower prices might sound like a positive to consumers with budgets stretched to the breaking point, economists are in general agreement that deflation is far more destructive to the economy than inflation.Businesses unable to make a profit in an environment of declining prices will likely cut production and lay off more workers. That could cause a deflationary spiral. The Great Depression and Japan’s so-called Lost Decade of economic stagnation are both well-documented examples of the damage that deflation can cause.”I think the predominant risk in the next 6 to 12 months is deflation,” said Mark Zandi, chief economist at Moody’s Economy.com. “There’s excess capacity everywhere. There’s vacant real estate across all property types. Unemployment continues to rise. I don’t see how businesses can raise prices in this environment.”0:00
/3:53Behind oil’s steady riseZandi said one reason people don’t need to fear inflation is because the Fed knows how to fight inflation — with higher interest rates and tighter money supply.”But if you get into a deflationary trap, it’s very difficult to get out of. Japan is a good case in point,” he said.Rich Yamarone, director of economic research at Argus Research, said he’s not concerned about such a trap. But he agreed with Zandi that people shouldn’t worry about the prospect of runaway inflation either since the Fed can easily put the brakes on the economy if it has to. “The next problem coming down the pipe will be inflation, not deflation. I just don’t think it’ll be happening any time soon,” Yamarone said. “And I suspect the guys who control the spigots are on top of this.” What will the Fed say?Investors looking for clues about how the Fed views the threat of inflation or deflation won’t have to wait much longer.When the Fed wraps up its two day policy meeting Wednesday, it is virtually certain that it will leave its key interest rate near zero. What will be watched more closely is whether its statement has language warning of greater risk from rising or falling prices in the future.In its last statement, the Fed said it “expects that inflation will remain subdued.” It also rang a deflationary warning bell, indicating that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”But the so-called inflation hawks at the Fed have become more vocal since that April meeting about what they see as the growing threat of inflation.Philadelphia Fed President Charles Plosser argued in a speech last month that unless the Fed soon becomes aggressive in raising rates and disposing of assets it bought during the financial crisis, it could spark the kind of high inflation levels seen in the late 1970s.Wesbury agrees that the Fed has to be more vigilant about fighting inflation and added that the Fed may soon need to raise rates. He said low inflation today is only a result of oil prices falling from last year’s record highs. Core price readings, which strip out food and energy, have remained stubbornly high despite the weak economy.”In order to fight [inflation], you have to start tightening now,” said Wesbury. “By the end of this year it’ll be too late to stop the inflation that will be happening in 2011.”But Zandi believes Fed chairman Ben Bernanke and other central bank policymakers that he refers to as “deflation hawks” are still concerned enough about the risk of deflation that he does not think the Fed will rein in its stimulative programs anytime soon just because of long-term inflation fears. “If they do bow to that view, then I think the risk will rise that we’ll have outright deflation,” said Zandi.

NEW YORK (Reuters) — Intel Corp., the world’s biggest chip maker, and cellphone market leader Nokia, said they would work together on a new class of mobile computing device.Under the agreement announced on Tuesday, Intel will buy intellectual property from Nokia related to high-speed wireless technology and the companies also said they plan to collaborate on open-source mobile Linux software projects.They did not give a specific timeline for the development of products but said they expect “many innovations to result from this collaboration over time.”The companies said they aimed to define “a new mobile platform beyond today’s smartphones, notebooks and netbooks” for hardware, software and mobile Internet services.Intel (INTC, Fortune 500) already sells chips for netbooks, a type of no-frills laptop computer, and Nokia (NOK) has said it would look into the possibly of expanding beyond phones to develop netbooks.

Source:CNN

NEW YORK: Exxon Mobil Corp. said it will unveil an electric car Tuesday through a test-drive and car-sharing program in Baltimore.Though it’s an oil company, Exxon (XOM, Fortune 500) has been working on an electric battery in partnership with electric-vehicle company Electrovaya. The two companies partnered with the Maryland Science Center for a one-month program that will offer free test drives of Maya 300 vehicles to Baltimore-area drivers, according to a spokeswoman for the Maryland Science Center. A rental and car-sharing program is also available, for a fee.Electrovaya is the maker of the Maya 300, an all-electric vehicle slated for release in 2011. In January, Electrovaya said the Maya 300 will be a zero-emission, low-speed electric vehicle with a range of up to 120 miles on a single battery charge.0:00
/1:39Making a battery to replace oilThe car, which is being released first through these test programs, uses Electrovaya’s lithium ion battery — which includes parts manufactured by Exxon.In recent months, Exxon has been “working to improve energy efficiency and reduce greenhouse gas emissions” associated with its products, according to a press release.The Maya 300 will be offered with the option of a standard battery pack that can drive for up to 60 miles on a single charge for about 25,000. The version with the extended 120 mile-range battery will sell for about 35,000. Tuesday’s event will also feature the opening of an Exxon-sponsored energy efficiency exhibit at the Maryland Science Center.Exxon’s research into electric vehicles may be a surprise to some, as president and chief executive Rex Tillerson has appeared more resistant to exploring alternative energy.In August 2008, Tillerson told ABC News he “cannot say we’re going to opt for an alternative elsewhere at the expense of oil and natural gas, because oil and natural gas are going to take us to [the] future.”In 2008, Exxon shareholders the Rockefeller family attempted — unsuccessfully — to separate Tillerson’s CEO and chairman positions. Four large British investors joined the family, saying they also wanted Exxon to invest more in alternative energy.

Source:CNN

LSE and 3i may rejoin FTSE 100
The London Stock Exchange (LSE) and private-equity firm 3i are expected to rejoin the benchmark FTSE 100 index.Plumbing firm Woleseley may also return to the index of the UK’s 100 largest companies by market capitalisation on Wednesday. FTSE reviews the index every quarter, with companies getting promoted based on certain criteria, such as becoming one of the 90 largest firms. The final calculations are based on Tuesday’s closing share prices. The LSE, the company which runs the London stock market, and 3i both benefited from renewed optimism that the worst of the financial crisis is over, which has pushed stocks worldwide higher.
Source:BBC

GM and Citigroup drop out of Dow
General Motors and Citigroup have been replaced in the Dow Jones Industrial Average by Cisco Systems and Travelers.Their relegation from the 30 members of the blue-chip index adds insult to injury following the fall from grace of the two once-powerful corporations. GM filed for bankruptcy on 1 June while Citigroup has been laid low by the global financial crisis. Ironically, the insurance giant Travelers was part of Citigroup before it was spun-off in 2002. Cisco is the company responsible for the infrastructure that drives the internet. The change was effective from the start of trading on Monday.
Source:BBC

WASHINGTON: The Obama administration plans to release updated details in the coming weeks to guide Congress on the best way to reshape the nation’s financial regulatory system and prevent future collapses.It promises to be controversial and even politically dicey.In fact, the administration is already shelving one idea, because it’s just too messy.Treasury Secretary Tim Geithner has spoken of the need to consolidate agencies in the patchwork world of financial regulations to prevent companies from shopping for the easiest overseers. But the Obama administration has now decided to keep separate two similar regulatory agencies whose duties often overlap.Both the Securities and Exchange Commission and the Commodity Futures Trading Commission regulate complicated financial products. Many experts have long argued that their consolidation would result in stronger oversight. But combining them could have created a power struggle between their congressional overseers, pitting farm state lawmakers who speak the language of pork bellies and corn bushels against East Coast senators who talk stocks and bonds.By sidestepping the merger issue, the administration avoids a political turf war that threatened to slow efforts to regulate the kind of financial products that caused the collapse of American International Group (AIG, Fortune 500).However, the decision provides a window into the kinds of fights and compromises to come with bigger tougher turf wars between regulators like the Federal Reserve and the Federal Deposit Insurance Corp.Both the Fed and FDIC stand to gain or lose power as officials grapple with which gets new powers to decide when the government needs to shut down or prune troubled companies that threaten the greater financial system.”This becomes a big political dance,” said Robert Litan, an economist and attorney at the Brookings Institution. “It’s very difficult to merge these activities, because some people gain power and some people lose power. But if you don’t do it now, you are probably never going to do it.”A tale of two regulators0:00
/2:53The derivatives disasterThe division of labor between the SEC and CFTC works like this: The SEC oversees securities — which include shares of companies, like stocks and bonds, that can be invested or traded. The CFTC oversees trading of bets made on the future price of things like oil or corn and even currencies.But there’s still a lot of overlap between the two, especially with new kinds of financial products that could fall into either category. For example, it took years to figure out who should keep an eye on a product called a “single stock future,” which is a contract that allows traders to bet on the future position of a stock without actually owning it. (Both agencies regulate single stock futures.)Such overlap is why former Treasury Secretary Henry Paulson suggested combining the two regulators in his March 2008 blueprint for “modernized regulatory structure.” He warned that globalization and “market linkages” make maintaining two separate agencies “potentially harmful and inefficient.”A lot of people agree with that idea. Among them: SEC Chairwoman Mary Schapiro, who told lawmakers on Tuesday that “there is a logic and an efficiency that can be achieved through the merger of the two agencies.” But politics comes into play when you look beyond the two agencies and consider the congressional committees that control and fund them.The SEC answers to the House Financial Services and Senate Banking committees.The CFTC, originally created to regulate agricultural financial products, answers to the agricultural committees on Capitol Hill — even though agricultural futures are less than 15% of what the CFTC now deals with.Most veteran congressional watchers say a merger would give the banking committees more power, while the agricultural committees would lose power. The agricultural panels don’t like that idea much. Their chiefs have espoused the importance of maintaining the CFTC, saying its expertise would get lost at the SEC. They’ve even filed bills that bulk up the CFTC’s power to regulate.In addition, lawmakers who lose jurisdiction over the CFTC could lose lucrative campaign contributions from banks and investment firms. During the 2008 election cycle, House agricultural committee members collected 8.6 million and Senate agricultural committee members collected 28.4 million from the financial services sector, according to the Center for Responsive Politics.What’s next?For the past few weeks, Geithner has been talking more and more about streamlining and combining agencies without giving any details as to how he planned to do it. During a dinner Wednesday for key lawmakers who sit on both the banking and agricultural committees, Geithner indicated he would not pursue a merger of CFTC and SEC, according to an industry official familiar with the conversation.On Thursday, newly-appointed CFTC Chairman Gary Gensler told the Senate Agricultural Committee that a “merger for merger’s sake” wouldn’t address any of the “lessons learned from the crisis.” “While it will always be out there in the ether, and will be debated and discussed,” Gensler said, “we have an heavy agenda here for Congress. I don’t see it really in the lead here.” House Financial Services Chairman Barney Frank, D-Mass., had never been a vocal proponent of such a merger and has recently said he’s more interested in “filling in the gaps in the financial regulatory structure” rather than “moving boxes,” spokesman Steven Adamaske said.Frank’s committee has begun trying to figure out what full-blown regulatory reform should look like, starting with oversight of the kinds of products that the CFTC currently doesn’t oversee. Gensler suggested that the SEC and CFTC should share such oversight.

Source:CNN

NEW YORK: Users spend more time on Facebook than any other social network site. Much more. But other sites are growing quickly, and experts say no social network is safely on top of the market.According to a report released Tuesday by Nielsen, Facebook users logged 13.9 billion minutes on the site in April. That compares to 5 billion minutes on MySpace, 300 million on Twitter, and 202.4 million minutes on LinkedIn.Time spent on Facebook soared 699% since April 2008, compared to a 31% drop in time spent on MySpace, which is owned by media mogul Rupert Murchoch’s NewsCorp (NWS, Fortune 500). LinkedIn’s minutes grew 69%.Changing of the guard: MySpace was once the dominant social network. In April 2008, 73% of the total time spent on social networks was spent on MySpace, according to Nielsen. The scene has rapidly changed in the past year. Social network users spent just 23% of their time on MySpace in April 2009, compared to nearly 66% for Facebook. “MySpace is not firing on all cylinders like Facebook,” said Ray Valdes, social networking expert at Gartner. “Their effort to improve the site seems to be fragmented. They need to get on track or they will continue to slide.”Still, most users spend their time on Facebook on MySpace. The third largest social networking company is Google’s Blogger, which with just 3% of the total time is way behind. Users spent 1.4% of their time on Twitter and 1% on LinkedIn.April marked the fourth consecutive month in which Facebook held the most unique visitors and total minutes of any social network.”Facebook continues to improve their user experience on their site, adding capabilities,” said Valdes. “They’re executing well, and it’s showing up in their numbers.”A fickle audience: But the fastest-growing social network, by far, is Twitter, according to the report. Time spent on the micro-blogging Web site soared a whopping 3712% since April of last year. That soundly beat Tagged, which saw its minutes grow 998%. Facebook’s year-over-year growth was third on the list.0:00
/2:58Facebook struggles to grow upJon Gibs, vice president of Nielsen Online, said Twitter’s 140-character-per-blog limit could change the landscape for social networking. But he warned that users are fickle, and it is too soon to call Facebook and Twitter’s strong growth as a long-term trend.”The one thing that is clear about social networking is that regardless of how fast a site is growing or how big it is, it can quickly fall out of favor with consumers,” Gibs said in a statement. “Neither Facebook nor Twitter are immune.”MySpace remains the leader in online video streams, with 120.8 million in April, compared to 41.5 million on Facebook. Users spent 384 million minutes viewing videos on MySpace, or 38.8 minutes per viewer, according to the report. That trumped Facebook’s 113.5 million minutes, or 11.2 minutes per viewer.