News Analysis for the Investor on January 27, 2012

EU, IMF pushing Greece on implementing reforms

The European Union and the International Monetary Fund are insisting that Greece implement a series of agreed upon austerity measures prior to receiving the bailout money that is needed to avoid default, according to Reuters.  The EU and IMF are pressing Greece to adopt reform to its pensions, adopt large spending cuts to its defense and health spending, reduce duplicative agencies, and improve wage flexibility and liberalize product and service markets.  There is an upcoming election that is causing delays to reform implementation.  These demands are on top of the tight negotiations currently happening with the private Greek bondholders.

Despite strong earnings reports, Dow slips

Thursday started with strong earnings reports from Caterpillar and 3M as well as positive economic news.  According to the Wall Street Journal, the Commerce Department said that orders for long lasting goods surged 3 percent in December. Jobless claims rose by 21,000 to 377,000, but this was in line with expectations.  But later in the day the Commerce Department said that new home sales fell 2.2 percent, above the 1.9 percent that was anticipated.  Additionally, the Conference Board indicated that its leading economic index rose 0.4 percent, below the anticipated 0.7 percent.  In the end, the Dow closed down 22 points, closing at 12,734.  European markets are falling on Friday, according to Reuters, due to concerns over Portugal. Asian markets were mostly positive.

Costa offers $14,500 to shipwreck victims

In addition to a return of the cost of the cruise, transportation and lost items, Costa Cruises is offering $14,500 to passengers for emotional damage, if they sign a release and take the money this week.  The Costa Concordia is the cruise ship that sunk off of the coast of Italy after hitting a rock.  Reuters reports that an Italian consumer group, Codacons, is recommending that passengers should not sign the agreement.

Taxpayers still owed $132.9 billion from financial bailout

A government watchdog says the US taxpayers are still owed $132.9 billion, according to Fox News.  In a report issued by Christy   Romero, the acting special inspector general for the $700 billion bailout, it was noted that repayment has slowed due to the gyrating stock market.  The Treasury has tried to sell its stake in 458 bailed out companies, including AIG, but the markets have been difficult to manage.  The TARP program was authorized to pay $700 billion and $413.4 billion was actually used.  About $318 billion has been recovered.

Europeans try to limit data mining done by Facebook and Google

New laws are being considered by the European Union that would fine Google and Facebook up to 2 percent of annual revenue for systematically tracking and profiling internet users.  According to USA Today, the laws are scheduled to become effective in 2013.  Facebook indicates that the laws would disrupt the global economy. New privacy laws are also being considered in the U.S.

Starbucks increases profits by 10 percent

Starbucks announced its corporate earnings after market close on Thursday, indicating that profits were up 10 percent and revenues up 16 percent to $3.44 billion, according to USAToday.  The company benefited from its new instant coffee as well as Starbucks ice cream and other grocery store items.  Additionally it opened 241 new stores increasing total stores to 17, 244.  The company plans to open 800 new stores in 2012 (if it can find any empty corners that don’t already have a Starbucks!).

Obama backed electric car battery maker fails

Ener1, a manufacturer of electric car batteries, has filed for Chapter 11 bankruptcy, according to the WashingtonPost.  The company received a $118 million stimulus package a year ago to expand its operations.  This is the third company to seek bankruptcy protection among those backed by the Energy Department to promote the President’s Clean Energy program.

Brazilian prosecutors to indict Chevron execs for oil spill

Brazilian prosecutors plan to indict the head of Chevron Brazil and several other executives for damages from an oil spill in November of last year on the sea floor off the coast of Brazil, according to Reuters.  The indictment will seek damages of $11 billion as well as potential prison sentences.  The oil spilled by BP in the US Gulf of Mexico was 1,000 times larger than the Brazilian spill, but US prosecutors have been much slower to consider any criminal charges against BP.  Brazilian legal experts indicate that these cases rarely result in convictions; however, the oil companies may spend many years and numerous dollars defending the lawsuits.