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NEW YORK: After sparking an initial rush to showrooms, the Cash for Clunkers program seems to be running out of fuel.Interest in Cash for Clunkers has fallen 15% since its peak, and car purchase intent could fall to pre-Clunkers levels by next week, an auto research group said Tuesday.Under the Clunkers program, which launched July 27, vehicles purchased after July 1 are eligible for refund vouchers worth 3,500 to 4,500 on traded-in cars with a fuel economy rating of 18 miles per gallon or less. The program proved wildly popular, running through its initial 1 billion in its first week and leading lawmakers to approve an additional 2 billion in funding on August 7.But interest in the program peaked on July 29, and demand has waned, according to the report from Edmunds.com. The report, which cited Internet shopping data, said if current trends continue auto purchase intent will fall back to pre-Cash for Clunker levels by August 20.The original money set aside for Clunkers “was very low in relation to the size of the auto market,” said Michelle Krebs, senior analyst at Edmunds.com, in a prepared statement. “This created a Gold Rush mentality where consumers hurried to take advantage before funding ran out.”The additional 2 billion in funding removed the urgency to participate, Krebs said.Still, the report predicted auto sales will improve over the summer as customers bargain-hunt before new models hit the showroom.”The real risk is this fall,” said Jessica Caldwell, a director at Edmunds.com, adding that that economy will have to “have picked up to keep sales at current levels. ”

Source:CNN

NEW YORK (Fortune) — For retail investors who want to put money into the hedge-fund-like vehicles, the options continue to grow.Back in March, Fortune reported that AQR Capital Management — one of the industry’s biggest names — offered its first mutual fund: the Diversified Arbitrage Fund. In May, investment manager Turner Investment Partners launched the Turner Spectrum Fund (TSPCX), which invests in six different long/short equity pools (also managed by Turner Investment Partners) following a mix of strategies: market neutral, long/short, small-cap, global health care, global macro, and consumer discretionary.Investor class shares require a 2,500 minimum initial investment and have an expense ratio capped at 2.20%.The latest entrant is Bull Path Capital Management. In June, it converted one of its long-short hedge funds into a long-short equity mutual fund, the Bull Path Long Short Fund (BPFCX).”We wanted to offer our product to the mutual fund community, which is a bigger pool of assets with more demand,” says Rob Kaimowitz, portfolio manager of the fund.And he thinks that the hedge fund business model, especially for funds that use a long-short equity strategy, needed to be improved. “There is no reason fund managers can’t provide daily liquidity and daily net asset value, rather than the monthly data that hedge funds provide. And the fees for a mutual fund are much lower, so investors get more of the upside.”0:00
/3:49Tracking TARPThe A Class shares require a 1,000 minimum investment. Fees are capped at 1.7%. This is a far cry from the 2% that hedge funds charge to manage your money and the 20% cut they take on all profits.Since this mutual fund is simply a converted hedge fund (in fact, many investors were former hedge fund limited partners), there is a performance history for investors to look at. According to Lipper, it has outperformed the S&P 500 since inception. Its five-year annualized total return ending March 31, 2009 is 3.32% vs. -4.76% for the S&P.Even with the new entrants, the field is still small: Alternative investment strategies account for only 59 million of the 6 trillion mutual fund market.And Lipper research manager Jeff Tjornhoj cautions that they should not account for a big portion of your assets, either. “These funds capture parts of the market that a traditional mutual fund cannot,” he says. “Investors should use these strategies to reduce volatility in a portfolio, not to be 100% invested in them.”

Source:CNN

NEW YORK (Reuters) — CIT Group Inc. is in talks with JPMorgan Chase & Co. and Goldman Sachs Group Inc. about short-term financing as it looks for ways to avoid bankruptcy, a source close to the company said on Friday, sending the lender’s shares and bonds up.CIT (CIT, Fortune 500) — a 101-year-old lender that services nearly one million small and mid-sized businesses — is in search of 2 billion to 3 billion of financing, according to the source, who declined to be identified because the talks were private.The company is also in talks with bondholders about a debt for equity swap, the source said. However, another source familiar with the negotiations who also declined to be identified told Reuters that many bondholders were pursuing a “debt for new debt” exchange, and that a debt for equity exchange was not a real consideration.The first source added one potential scenario is also a sale of some assets to raise capital.Bankruptcy, however, is still possible over the next few days, and CIT is maintaining an ongoing dialogue with regulators about the situation, the first source said. The lender had wanted regulators’ permission to transfer assets to its bank unit, but that did not happen, the source said.”They haven’t thrown the towel, and they still are trying to work very hard to get some sort of funding, but at the end of the day I still think that there is a very high risk of a bankruptcy event,” said Sameer Gokhale, an analyst at KBW.Shares were up 48 cents, or 117%, to 89 cents, after losing 75% of their market value on Thursday as government talks for financing collapsed and investors feared the company would have to file for bankruptcy.The price of CIT’s floating-rate notes due in August rose to 66.5 cents on the dollar in busy trading, from about 61 cents late on Thursday, according to MarketAxess.Asset sales?The New York Post reported Friday that JPMorgan Chase & Co. (JPM, Fortune 500) could acquire CIT’s factoring unit, which finances more than 50 billion of wholesale inventory, at a time of the year when the collapse of the lender could disrupt retailers holidays plans.CIT declined to comment and JPMorgan was not available for comment.But Gokhale cooled expectations of an asset sale.”It has some valuable franchises, but if they sell the assets in a distressed situation, they don’t even get the par value for the assets. They will have to take losses and those losses will further weaken the balance sheet, so that doesn’t seem to be a viable strategy,” he said.0:00
/3:14Strong earnings? So what.The company sought new help even after gaining the status of bank holding company in December so it could draw 2.33 billion of taxpayer money from the Treasury’s Troubled Asset Relief Program.But the Obama administration declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.The impact of CIT’s demise would likely pale by comparison with the collapse of investment bank Lehman Brothers Inc. last September, analysts said.Still, the ripples of a collapse could be widespread and worsen the effects of the economic downturn for some firms.CIT has about 40 billion of long-term debt, according to independent research firm CreditSights. About 1.1 billion of debt will come due in August, followed by about 2.5 billion by year end.

Source:CNN

(Fortune Magazine) — As the U.S. stock market tosses and turns, sustainable growth — both in corporate profits and economic output — seems far off. In China, on the other hand, recovery already seems to be a reality: Real estate, auto, and industrial sales have all bounced back this year, driving stocks on the Shanghai exchange up 50% since February. The velocity of the Chinese rebound surprised the World Bank, which recently increased its estimate for the country’s GDP growth this year from 6.5% to 7.2%. Jing Ulrich, J.P. Morgan’s Chinese equities strategist, thinks that figure is still too low. “China can still achieve 8% growth,” she says. “Everything is happening very fast there.” Achieving even the World Bank target would be impressive indeed, considering that most other big economies are shrinking. But China isn’t immune from the rest of the world’s woes, because it still depends heavily on exports. The main reason growth is down from the double-digit levels of recent years is that China’s manufacturers and shipping companies have been suffering from the global slowdown. Other industries have found a surprising new source of demand: the Chinese consumer. “The rebound has been driven by the domestic economy,” Ulrich says. “The consumer proved resilient — and the government acted as a catalyst.” By lowering taxes and issuing subsidies as part of a 4-trillion-yuan (585 billion) stimulus, the state stepped up its efforts to turn a nation of savers into spenders. As a result, says Ulrich, growth is still spreading across the country despite the decline in exports. For example, in Sichuan province, the region in central China that was hit by a massive earthquake last year, the economy grew by nearly 11% last quarter. Nationwide, retail sales grew 15% in May, to 1 trillion yuan, with rural consumption outpacing demand in cities. 0:00
/0:54Ericsson scores in ChinaBecause shares of many Chinese companies are not readily available to foreign individuals, the most convenient way to invest in the rebound is through mutual funds and exchange-traded funds (ETFs). The biggest ETF, with 9.5 billion in assets, is iShares FTSE/Xinhua China 25 Index (FXI), which tracks the 25 largest Chinese companies traded in Hong Kong. Shares have climbed 31% this year (through June 25), but are still down 25% from June of last year. If you want a fund manager picking stocks for you, Morningstar’s Bill Rocco recommends Matthews China (MCHFX). Matthews China is up 39% this year, and has returned 20% annually over the past three years, vs. 4% for the average China fund. (Rocco adds the caveat that you should commit only a small portion of your portfolio to any single-country fund.) The fund carries an expense ration of 1.23%, below average for funds with large China holdings. If you’re hunting for individual stocks, there are now 72 Chinese companies trading on major U.S. exchanges, according to Bank of New York Mellon. Here’s a look at three reasonably priced companies in different industries, all of which are benefiting from China’s domestic boom. All are available as American depositary receipts — ADRs — on the New York Stock Exchange. Despite its name, American Dairy (ADY) is a Chinese company, based in Beijing, that makes infant formula and other milk products. Hao Hong, an analyst at Brean Murray Carret, a New York City investment bank, says the market for formula is growing in China, where fewer mothers are breast-feeding their children. American Dairy was not among the several Chinese companies implicated in 2008 in selling melamine-tainted milk and infant formula. “Since then they’ve been taking market share from their competitors,” says Hong. “Their products are flying off of the shelf.” The stock has nearly tripled this year, but it still trades at just eight times estimated earnings for the next four quarters, compared with an industry average of 22, and analysts think profits will soar at an astounding 115% annual rate for the next five years. Richard Gao, who manages the Matthews China Fund, says China’s insurance industry will profit from the ascent of the middle class, as well as the aging of the population. “China is undergoing a structural change,” he says. “It used to be socialist, with insurance coming from the government, but it’s becoming more of a market-driven economy.” Gao owns shares of China Life (LFC), which is the country’s biggest insurer. China Life’s profits fell 45% last year because of the Sichuan earthquake and investment losses, but the company’s conservative portfolio of mostly bonds shielded it from the devastation its Western counterparts suffered in the global stock market meltdown. While China’s insurance industry is still in its early stages, China Life already has a vast sales force of 716,000, which enabled it to boost premium income 17% in 2008 and increase market share to 40%. Despite the company’s leading position, the stock trades at a slight discount to its main competitors’. China Mobile (CHL), the world’s biggest telecom, commands a 72% share of China’s fast-growing market. That position gives it negotiating clout with phonemakers. (It already has a deal with BlackBerry-maker Research in Motion (RIMM) and is launching a phone equipped with Google’s Android browser.) Yet its stock is slightly down from a year ago, in part because the government has reorganized the telecom industry to spur competition, merging a number of smaller firms to create two large rivals to China Mobile. Rusty Johnson, manager of the Harding Loevner Emerging Markets fund, says that the giant company can still expand both its margins and its customer base. It is adding 5 million customers a month and, he says, “it can sell value-added products, like mobile broadband, to existing customers.”

Source:CNN

LONDON (CNN) — More than 1 in 6 British Airways staff have agreed to work for free, take unpaid leave or work part-time, the airline said Thursday after the announcement of cost-cutting measures last week.”This is a fantastic first response. I want to thank everyone who has volunteered to help us pull through this difficult period,” Willie Walsh, British Airways’ chief executive, said in a statement.Of the 40,000-strong workforce, 6,940 employees had volunteered for unpaid leave, part-time working or unpaid work by June 24. Their actions will save the company up to 16 million.

Source:CNN

EL CAJON, CALIF.(Fortune Small Business) — Wearing an antique leather flight suit and sneakers, Bill Allen inserts a steel crank into the cowling of his 1930 Stearman biplane and leans his weight against the handle. The machine emits a faint whirling sound that grows in pitch until it blares like an air-raid siren. Allen steps back and dashes around the double wingtip. Clambering up the steps to the fuselage, he swings into the tiny cockpit. “Clear prop!” he shouts, and the great radial engine answers: Clacketa-clacketa-clacketa. The prop spins, and the engine clatters and clangs until, finally, the ignition catches. The whole plane rocks, sending a gust of wind coursing through the wing struts as Allen sits in the cockpit, a mad grin on his face. For a half-century this 62-year-old real estate investor has pursued his obsession with the earliest days of manned flight. Allen’s Stearman, winner of a dozen gold medals at historical-aircraft shows around the country, is one highlight of a collection that fills a 17,000-foot custom-built hangar at San Diego’s Gillespie Field. Allen’s trove includes early aviation posters, weather-beaten propellers and even a mangled fragment of the Hindenburg — the latter a poignant reminder that his passion is not without risk. “I do worry about him, believe me,” says his wife, Claudia. Allen’s devotion is remarkable, but it’s hardly unusual in the rarefied subculture of aeronautical enthusiasts. Like all collectors, aviation fanatics revel in arcana, but they differ from, say, automobile collectors in that few people can operate vintage planes. Active licensed pilots make up just 0.2% of the American public; even fewer are wealthy enough to collect and fly such historical artifacts.”They’re all the same type of spirit,” says Steve Hinton, president of the Planes of Fame aircraft museum in Chino, Calif. “They love history, machinery and airplanes. And they love to fly.” The high point of the aviation community’s year is a fly-in hosted every July by the Experimental Aircraft Association in Oshkosh, Wis., when more than 10,000 planes converge for a weeklong festival. The flying bug struck Allen early. His family owned two luxurious Southern California resorts, La Valencia Hotel in La Jolla and the Crystal Pier Hotel in Pacific Beach. The Allens had strong ties to the aviation industry. Friends included Jimmy Doolittle, leader of the first WWII air raid against Japan, and Charlie Willard, the fourth person ever to be issued a pilot’s license in the United States. Allen’s uncle, Captain Frederick M. Trapnell, was founding director of the Navy’s test pilot school in Patuxent River, Md. Allen first flew at the age of nine, when a family friend took him for a spin in a Cessna 170. As a child he collected models, propellers and aviation books. He became a collector in earnest as an Arizona State University undergraduate in the mid-1960s, after a fellow student sold him a set of aviation medals for 600. He bought his first airplane in 1973 and gradually amassed a seven-plane fleet that now includes a 1941 Stearman PT-17 (once owned by Steve McQueen) and the world’s only airworthy F4B-1, a 1929 model that happens to be the last biplane the U.S. Navy ever commissioned for combat. Allen’s collection doubles as his personal museum. Vintage flight helmets fill a glass case near a wall covered with antique wooden propellers. He owns a pilot’s license signed by Orville Wright and a flight bag that belonged to Howard Hughes. He even displays a gas can used to refill the Spirit of St. Louis, the legendary plane Charles Lindbergh flew across the Atlantic in 1927. When Allen started collecting, few saw much value in the artifacts he craved, but their prices have soared with the passage of time. “The market has just gone crazy,” he says. “Posters that I paid a thousand bucks for in the early ’80s are now selling for 12,000.” Allen has logged more than 5,500 hours in the air, including more than 2,000 in antique planes. Since 1982 he has made several cross-country barnstorming trips, touching down in farmers’ fields and giving short rides for a small fee. Once he set off on a flight in a 1929 Travel Air that had belonged to pioneering aviatrix Louise Thaden. A few days later the phone rang at the Allen residence in San Diego. Claudia answered. It was her husband; he needed a red-tagged carburetor. “Why?” she asked. “Where are you?” “I’m in Oklahoma,” he replied. “The engine stopped, but I managed to land at an airport.” Recalls Claudia: “I about had a cow.” Such scrapes are far from rare. A few years ago Allen was hand-propping an airplane — starting the engine by turning the propeller — when the plane broke free of the rope that held it in place. As it lurched forward, the spinning prop knocked Allen out, then struck a companion, breaking his sternum. Compared with some of his friends, though, Allen feels lucky. “We’ve had so many friends killed,” he says. “We lost seven in one year.” The incident that shook him up the most, however, wasn’t an accident at all. In 2004 a stranger contacted Allen and asked him to take his 88-year-old father, a former Stearman instructor and WWII veteran who had terminal cancer, on a biplane ride. Allen reluctantly agreed and gave the retired pilot a brief tour up the Pacific Coast in his Stearman. During the descent, the old man tried to jump out. With one hand on the controls, Allen struggled to stop him. It was no use. The man plummeted 400 feet and hit a high-voltage line, cutting his body in half and knocking out power to 4,000 homes. Back on the ground, his son informed Allen that the suicide had been planned. Though Allen didn’t face any legal repercussions, the incident continues to haunt him. “It’s one of those little nightmares,” he says. While Allen no longer gives rides to strangers, he still flies frequently. These days he often takes his new Cessna 210 down to Mexico, where he and Claudia recently bought a vacation home. About once a month they head south for a three-hour flight across the Sonoran Desert, along the Sea of Cortez. Flying low at 9,500 feet, they cruise over blue waters and arid mountains that rise above a rugged landscape of arroyos and canyons. As the panorama unfolds to the droning of the engine, Allen is at peace with himself and the world. “I love to be with him when he’s in the plane,” Claudia says, “because that’s when he’s happiest — flying.”

Source:CNN

NEW YORK: Ah, summer: Time to enjoy a quiet vacation. Kick back with a good book. Walk on the beach.Not Douglas Elmendorf. He’ll spend the next two months suffering voodoo-eyes from powerful people on Capitol Hill.Elmendorf is director of the Congressional Budget Office, the ordinarily low-profile federal agency that will estimate how much money health reform will cost or save.The CBO’s estimates, the first set of which are due next week, carry a lot of weight because Congress uses them in making legislative decisions. In an age of trillion-dollar budget deficits, the numbers will carry even more weight than usual.”Strictly speaking, the CBO advises the budget committees, and the committees can override what CBO recommends. But they rarely do,” said Robert Reischauer, who headed the CBO during the infamous health care debate during the Clinton administration.That’s because CBO is known for providing objective analysis in a partisan town.That doesn’t mean there won’t be serious griping and spinning on the part of lawmakers, lobbyists or the White House budget office, which makes its own estimates.During the debate over the Clinton plan in the early 1990s, the Washington Post called Reischauer “the most powerful umpire in Washington.”Reischauer, who is now president of the Urban Institute, believed the Clinton plan would have cost more than the White House estimated. And he also would have accounted for it in such a way that it would have expanded government spending as a percentage of GDP. That was exactly what the White House didn’t want since government expansion was catnip for Republican opponents of the plan.Spiral in health costsElmendorf in some ways is under even greater pressure than Reischauer, under whom he worked during the Clinton era.0:00
/2:18Boosting health reformThe CBO today is scoring proposals in the face of a federal balance sheet with eye-popping deficits that health care reform aims to curb. The agency estimates that the amount of money the government, businesses and individuals spend on health care this year will be about 18% of GDP. It’s on track to top 20% by 2018. And federal spending on Medicare and Medicaid will have doubled by 2019 from where it is today.By 2035, the Government Accountability Office estimates that all federal revenue will be consumed by Medicare, Medicaid and interest on the public debt.When Reischauer headed the CBO, “the health care challenge was ‘Don’t make the [budget] situation worse.’ Now, it’s ‘Do health care reform so we can make the budget situation better,’ ” he said.Indeed, he added, “some of the biggest pressures [Elmendorf] will face are being asserted by advocates of health reform, not opponents. They desperately want reform to succeed and their proposals to pay for it to be sufficient to cover its costs.”More art than scienceFiguring out whether they can is a job the CBO will perform with more health analysts on board and more data than was at its disposal in 1994. Despite that, the task at hand is difficult because the agency will be forecasting the effects on individuals and businesses of unprecedented changes in the health care system.”There are a lot of proposals that we think should reduce health care costs over time. The evidence is uncertain. The impact will depend very much on details yet to be specified, and on our ability to implement them in a smooth, efficient way,” Reischauer said.Elmendorf told the National Journal his goal is to find the middle ground — neither too pessimistic nor too optimistic about how much a proposal will cost or raise.”Our job is to be in the middle of the distribution of possible outcomes,” he said.In addition, the agency’s preliminary estimates may well have some holes in them if lawmakers don’t supply sufficient information about a measure for the CBO to score. The biggest case in point: the proposal to add a government-funded insurance plan to compete alongside private insurers. So far, its supporters haven’t specified a definitive framework for one in a bill.Nevertheless, Democrats are still aiming to have a bipartisan health reform bill voted through both chambers by August and President Obama has said he wants a bill on his desk by October.Whether that’s realistic or not is anyone’s guess. But one thing is certain: CBO will be running fast between now and then to keep up with every twist and turn in the legislation along the way.

Source:CNN

Interest in property ‘up again’
Rising interest from potential buyers coupled with falling numbers of sellers is stabilising UK house prices, according to surveyors.New buyer inquiries increased for the seventh month in a row in May – at the fastest rate since 1999, said the Royal Institution of Chartered Surveyors. But there were fewer sellers, continuing a trend of the last two years, the survey found. Two other surveys recently reported a rise in house prices in May. SurveyThe Rics survey, which has been running since 1978, takes a snapshot of the degree of confidence in the market from surveyors and estate agents across the UK.
They reported that average sales were at their highest level since August last year. However, at 11.8 properties sold per surveyor in the last three months, this remained 31% down on the same period a year earlier. The Rics members did again suggest a further increase in potential new buyers window shopping for property, most notably in Scotland, London and the South East of England. Alongside this, there were fewer people asking agents to sell their homes in May, which was having a logical effect on house prices. “On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilising,” said Rics spokesman Ian Perry. “However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand.” ‘Obstacles’Some 11% more surveyors were now expecting property prices to fall rather than rise, the survey found. In addition, 40% more were predicting sales to increase than fall. Yet, Mr Perry stressed that the troubled state of the economy could still constrain any housing market recovery. “With the economic backdrop still quite uncertain, unemployment is set to continue increasing sharply and finance for first time buyers is still in short supply, there are a number of significant obstacles for the market to overcome over the coming months,” he said. Some surveyors pointed to the seasonal nature of property sales. “[There are] definite signs of early recovery but we are hoping the usual summer seasonal downturn does not now occur,” said Ian Shaw, who operates in Lincolnshire. On 4 June, a survey by the Halifax said that UK house prices rose by 2.6% in May compared with April but activity remained low in the market. This came shortly after the Nationwide building society reported a 1.2% rise in prices in May compared with April – the second rise in three months.
Source:BBC

Barclays in fund management talks
Barclays has said that it is in talks with “a number of parties” about the sale of its Barclays Global Investors (BGI) fund management business.Blackrock, a US money management firm, are among those interested, Barclays said, adding talks were continuing. Earlier this year, Barclays got rid of a crucial part of BGI’s business when it sold iShares, to CVC Capital Partners for 4.4bn (2.7bn). But it can scrap the deal, if it gets a better offer before 18 June. If this was to happen, it would pay a 175m break-fee to CVC. Ishares is a unit of BGI, which specializes in exchange-traded funds. Barclays did not comment on media reports that New York-based BlackRock’s bid would value BGI at about 13bn – and that it would pay the UK bank in a mixture of cash and shares. Unlike Lloyds Banking Group and RBS, Barclays has shunned government help, instead choosing to raise money privately, to help it weather the financial crisis.
Source:BBC

Hornby in talks on top Boots job
The UK High Street’s biggest chemist chain, Alliance Boots, is in talks with former HBOS boss Andy Hornby as it seeks to appoint a new chief executive.Mr Hornby, in charge of HBOS at the time of the bank’s near-collapse last autumn, is among several candidates for the post. Before moving to HBOS he spent time in senior posts at supermarket giant Asda. Boots and Alliance Unichem merged in 2006 to form Alliance Boots, later taken over by private equity firm KKR. Alliance Boots is Europe’s largest wholesale and retail player in the pharmaceutical industry and employs 115,000 people. It is currently run by the Italian billionaire Stefano Pessina, who holds the post of executive chairman. BBC business correspondent Joe Lynam said an announcement on the chief executive role should be made within two weeks, but may be brought forward. In May Boots reported a pre-tax profit of 13m for the year to 31 March, with its UK sales boosted by its No7 cosmetics range. Mr Hornby is a non-executive director of Home Retail Group, which owns Argos and Homebase. He led led HBOS up to the end of 2008 when the company posted banking losses of 11bn – before being swallowed up by rivals Lloyds TSB. Mr Hornby had been the youngest-ever boss of a main British bank when he became HBOS chief executive three years ago.
Source:BBC