AIG decides not to join Greenberg suit against government: WSJ

(Reuters) - American International Group Inc will not join a lawsuit against the U.S. government challenging the terms of the insurer's 2008 bailout, the Wall Street Journal reported on Wednesday, citing unnamed sources.
AIG had said its board was meeting Wednesday to consider the possibility of joining the suit filed by former CEO Hank Greenberg.

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Morgan Stanley cuts 1,600 jobs as business languishes

 Morgan Stanley plans to cut 1,600 employees starting this week, two people familiar with the matter said on Wednesday, in the latest sign of a pullback on Wall Street as revenue from trading and deal-making remains in the doldrums.
The staff reduction pertains to Morgan Stanley's institutional securities unit - which includes sales, trading and investment banking, and whose staff will be reduced 6 percent - as well as related support staff who work in areas like technology, said the sources, who were not authorized to speak publicly about the matter.
Morgan Stanley Chief Executive James Gorman has pledged to reduce costs, and said in July that he planned to reduce overall staff 7 percent in 2012. The new job cuts are in addition to that plan, the sources said.
The cuts represent roughly 6 percent of the securities unit's staff, the sources said. They represent less than 3 percent of Morgan Stanley's entire estimated workforce at year-end, following other staff reductions in 2012.
"This continues the steady drumbeat of negative news from banks," said Greg Cresci, a Wall Street recruiter with New York-based Odyssey Search Partners. "It's hard to tell where the bottom is, given how many banks have made similar announcements."
The staff cuts are notable because, unlike its chief rival Goldman Sachs Group Inc , which culls the bottom 5 percent of its workforce each year to improve performance, Morgan Stanley does not have such a staff reduction program. But the staff cuts are a symptom of the current ailing business environment in which Wall Street banks are operating, with few areas of revenue growth to improve profits.
For the last two years, trading and investment banking volumes have been on a broad decline, particularly in once-lucrative trading areas. New regulations that ban certain kinds of activity, like proprietary trading, or force banks to hold burdensome amounts of capital, are also prodding banks to exit businesses and reduce staff.
JPMorgan analyst Kian Abouhossein said on Wednesday that he expects Wall Street banks to report a 10 percent decline in revenue for the fourth quarter, compared with the previous period, with double-digit declines in fixed-income and equity trading revenue and a 1 percent uptick in investment banking revenue.
Morgan Stanley's latest job cuts come just a week after Colm Kelleher took full control of the unit on January 1, and add to layoffs across the entire industry that have recently affected tens of thousands of employees.
Morgan Stanley's main rival, Goldman Sachs Group Inc , cut 700 jobs during the first nine months of 2012 as part of a plan to reduce annual expenses by $1.9 billion. Analysts expect the firm's compensation pool to be much lower in the fourth quarter.
Citigroup Inc announced plans last month to cut 11,000 jobs, including some in investment banking and trading, to save $1.1 billion in annual expenses. Credit Suisse Group AG is also cutting securities jobs to reach an annual cost-savings target of 1 billion Swiss francs, while UBS AG said it would cut 10,000 jobs and exit the fixed-income trading business amid losses and new regulations.
Bank of America Corp is also in the process of cutting 30,000 jobs across the firm in a plan unveiled in 2011 aimed at saving $5 billion in annual expenses.
Banks have largely been cutting staff since the subprime housing crisis began to seize markets in late-2007. There was a brief uptick in hiring in 2009 and 2010, when conditions improved temporarily, but since then there has been an almost steady stream of layoff announcements.
On a net basis, U.S. financial companies including lenders, investment banks, insurers and real-estate firms, have cut 5 percent of their staff, or 50,900 employees since the end of 2007, according to U.S. Department of Labor data. The most recent data available run though November.
"We are seeing a redrawing and restructuring of the industry," said John Challenger, chief executive officer of the employment consulting firm Challenger, Gray & Christmas. "The map continues to be redrawn in terms of regulation, who the competitors are, and the resources banks are willing to commit to the investment banking business."
Although Morgan Stanley's layoffs will affect all staff levels, the likely targets will be more senior employees who take in the biggest paychecks, said one of the sources.
About half of the job cuts will occur in the United States, with the rest affecting international units, said the source.
Morgan Stanley does not regularly disclose the number of employees in its institutional securities business, but it had 57,726 employees worldwide as of September 30. The company is expected to report year-end figures in the coming weeks when it discloses fourth-quarter earnings.

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Wall Street gains as earnings flow in; Boeing up

NEW YORK (AP) — Stocks rose on Wall Street Wednesday after U.S. corporate earnings reports got off to a good start.
The Dow Jones industrial average climbed 61.66 points to 13,390.51, its first gain of the week. The Standard & Poor's 500 index gained 3.87 points to 1,461.02, and the Nasdaq composite rose 14 to 3,105.81.
Having rallied after a last-minute resolution stopped the U.S. from going over the "fiscal cliff," stocks are facing their first big challenge of the year as companies start to report earnings for the fourth quarter of 2012. Throughout last year, analysts cut their outlook for earnings growth in the period and now expect them to rise by 3.21 percent, according to data from S&P Capital IQ.
"Maybe earnings expectations were a little too low," said Ryan Detrick, a strategist at Schaeffer's Investment Research. "You don't need to have great earnings, you just need to beat those expectations" for stocks to rally, Detrick said.
Early indications were decent. Aluminum maker Alcoa reported late Tuesday that it swung to a profit for the fourth quarter, with earnings that met Wall Street's expectations. The company brought in more revenue than analysts had expected, and the company also predicted rising demand for aluminum this year as the aerospace industry gains strength. Alcoa is usually the first Dow component to report earnings every quarter.
Despite the better revenue number, Alcoa's stock performance Wednesday was lackluster. It traded higher for part of the day then ended down 2 cents at $9.08.
Other companies fared better after reporting earnings. Helen of Troy, which sells personal care products under brands including Dr. Scholl's and Vidal Sassoon, rose 2.7 percent, up 90 cents to $34.43 after reporting a 15 percent increase in quarterly net income.
Boeing was the biggest gainer of the 30 stocks in the Dow. It jumped 3.5 percent, up $2.63 to $76.76, following two days of sharp declines triggered by new problems for its 787 Dreamliner. Boeing said it has "extreme confidence" in the plane even as federal investigators try to determine the cause of a fire Monday aboard an empty Japan Airlines plane in Boston and a fuel leak at another JAL 787 on Tuesday.
The yield on the 10-year Treasury note edged down to 1.86 percent from 1.87 percent.
Among other stocks making big moves:
— Wireless network operator Clearwire jumped 7.2 percent, or 21 cents, to $3.13, after Dish network made an unsolicited offer to buy the company, which has already agreed to sell itself to Sprint. Dish rose 88 cents to $36.85, and Sprint fell 9 cents to $5.88.
— Online education company Apollo Group plunged 7.8 percent after reporting a sharp decline in fall-term student sign-ups at the University of Phoenix. The stock fell $1.63 to $19.32.
— Seagate Technology, a maker of hard-disk drives, jumped 6.6 percent, up $2.09 to $33.48, after predicting revenue for its fiscal second quarter that topped Wall Street expectations late Tuesday.
— Bank of America fell 4.6 percent, down 55 cents to $11.43, after Credit Suisse analysts lowered their outlook on the bank to "neutral" for "outperform," saying the current stock price overestimates the improvement in cost reduction that the bank can achieve this year.

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Japan PM: Will pursue bold monetary policy, big fiscal spending

 Japanese Prime Minister Shinzo Abe reiterated on Monday his call for bold monetary easing by the central bank, big fiscal spending and an economic growth strategy as steps towards conquering deflation.
"Above all, the urgent task is to beat deflation," Abe told a meeting of officials from the government and ruling parties.
"A bold monetary policy, a flexible fiscal policy and a growth strategy are aimed at stimulating private investment. With these three pillars, we must aim to beat deflation."
Abe also said the government would do its utmost to quickly enact an extra budget for the current fiscal year and a budget for the next fiscal year to shore up the economy.

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Google executive chairman heading to NKorea

BEIJING (AP) — The Google chairman wants a first-hand look at North Korea's economy and social media in his private visit Monday to the communist nation, his delegation said, despite misgivings in Washington over the timing of the trip.
Eric Schmidt, executive chairman of one of the world's biggest Internet companies, is the highest-profile U.S. executive to visit North Korea — a country with notoriously restrictive online policies — since young leader Kim Jong Un took power a year ago.
Schmidt departed Beijing on Monday aboard a flight to Pyongyang with a delegation led by former New Mexico Gov. Bill Richardson, who has traveled more than a half-dozen times to North Korea over the past 20 years. Richardson called the trip a private, humanitarian mission.
"This is not a Google trip, but I'm sure he's interested in some of the economic issues there, the social media aspect. So this is why we are teamed up on this," Richardson said without elaborating on what he meant by the "social media aspect."
"We'll meet with North Korean political leaders. We'll meet with North Korean economic leaders, military. We'll visit some universities. We don't control the visit. They will let us know what the schedule is when we get there," he said.
Richardson also said the delegation plans to inquire about a Korean-American U.S. citizen detained in North Korea.
"We're going to try to inquire the status, see if we can see him, possibly lay the groundwork for him coming home," Richardson said. "I heard from his son who lives in Washington state, who asked me to bring him back. I doubt we can do it on this trip."
The four-day trip, which is taking place just weeks after North Korea fired a satellite into space using a long-range rocket, has drawn criticism from U.S. officials. Washington condemned the Dec. 12 launch, which it considers a test of ballistic missile technology, as a violation of U.N. Security Council resolutions barring Pyongyang from developing its nuclear and missile programs. The Security Council is deliberating whether to take further action.
"We don't think the timing of the visit is helpful, and they are well aware of our views," U.S. State Department spokeswoman Victoria Nuland told reporters last week.
The trip was planned well before North Korea announced its plans to send a satellite into space, two people with knowledge of the delegation's plans told The Associated Press. AP first reported the group's plans last Thursday. Schmidt, a staunch proponent of Internet connectivity and openness, is expected to make a donation during the visit, members of the delegation told AP. They spoke on condition of anonymity, saying they were not authorized to divulge details of the delegation's plans to the media.
The visit is the first by a Google executive to North Korea and comes just days after Kim, who took power following the Dec. 17, 2011, death of his father, Kim Jong Il, laid out a series of policy goals for North Korea in a lengthy New Year's speech. He cited expanding science and technology as a means to improving the country's economy as a key goal for 2013.
Computer and cellphone use is gaining ground in North Korea's larger cities.
However, most North Koreans only have access to a domestic Intranet system, not the World Wide Web. For North Koreans, Internet use is still strictly regulated and allowed only with approval.
Schmidt, who oversaw Google's expansion into a global giant, speaks frequently about the importance of providing people around the world with Internet access and technology.
Google now has offices in more than 40 countries, including all three of North Korea's neighbors: Russia, South Korea and China, another country criticized for systematic Internet censorship.
Accompanying Schmidt is Jared Cohen, a former U.S. State Department policy and planning adviser who heads Google's New York-based think tank. The two collaborated on a book about the Internet's role in shaping society called "The New Digital Age," which comes out in April.

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Global economy: U.S. and China leave feeble Europe in their wake

The economies of the United States, China and much of the developing world have decoupled from Europe, leaving it to wallow in various stages of recession and fiscal disarray.
That is one reason why the key economic event of the coming week will be a European Central Bank meeting almost totally focused on how far policymakers will go to boost growth.
Although there are some signs that a bottom may have been reached in the euro zone's recent economic decline, the pattern of moderate U.S. and Asian growth book-ending feeble Europe is firmly in place for the moment.
Manufacturing surveys published just a few days into 2013 laid out the divide starkly.
The United States and China both came in above the 50 index level that designates growth while the euro zone languished in recessionary territory for the 17th month in a row.
The December U.S. jobs report last Friday also did nothing to dispel the idea of recovery, although the prospect of more wrangling over the U.S. budget still casts a shadow. The dollar has even begun to rise on the distant prospect of an exit from years of stimulus.
"From a growth outlook, it is quite hard for Europe to disappoint," said Michael Metcalfe, responsible for global macro strategy at State Street Global Markets.
He argues that one of the main risks to the current global economic consensus is that there is too much gloom attached to Europe.
ECB MEETS
Most discussion about what the ECB will do at its meeting on Thursday centers on whether it will cut interest rates, something the bank's policymakers discussed last month before opting to hold the refi benchmark at a record low 0.75 percent.
It is an open question among economists about how much use a cut in the refi rate would be. Cutting the deposit rate from zero, meanwhile, would effectively mean charging banks for parking their money.
Part of this refi rate cut talk is because inflation expectations are seen fairly well anchored and because the ECB's own forecasts suggest the euro zone economy will shrink 0.3 percent this year.
"The economic data would support a rate cut," said Sarah Hewin, head of Europe research at Standard Chartered Bank.
The consensus of a Reuters poll in December, however, was for no cut in the first quarter. ECB Executive Board members Yves Mersch and Peter Praet have both dampened expectations of a cut in the main refi rate.
Joerg Asmussen, another ECB board member, also said late last month he would be "very reluctant" about the ECB cutting its deposit rate - now at zero - any further.
Berenberg Bank economist Christian Schulz argues that those against cutting rates have an upper hand at ECB at the moment because ECB President Mario Draghi needs support for his new bond-purchase programme, a backstop to deter investors from selling off debt in countries such as Spain and Italy.
"The commitment to potentially unlimited bond purchases is the key policy tool of the ECB," Schulz wrote in a note.
"To ensure its credibility ... Draghi will have to ensure maximum support for it in the Governing Council, which gives hawks a disproportionate weight and will probably prevent another rate cut to support the economy."
PRICING CHINA
Friday brings China's latest inflation data, once a clear worry for the authorities and financial markets, both of whom feared the economy was growing too fast.
The fact that it is no longer cause for undue concern reflects both the impact of slowing global demand and steady efforts by Beijing to cool things down without a "hard landing" that would have rippled across the world.
Japanese bank Nomura reckons that year-on-year Chinese consumer prices rose 2.2 percent in December, slightly higher than November's 2.0 percent, but way below the peak of 6.5 percent in August 2011.
This would sit well with growth expectations of around 7.7 to 7.8 percent for the year, two full percentage points below growth around two years ago. A soft landing, if you like.
"You had inflation taking off, overheating in real estate and the authorities tightening policy," said Standard Chartered's Hewin.
"(Now) inflation has essentially bottomed out. (The Chinese) authorities are not worried about overheating, nor are they concerned about a hard landing."
"MINI-CLIFF" AHEAD
There is relatively little due from the United States in terms of economic releases, but plenty of issues to chew on.
One is just how widespread the belief is at the Federal Reserve that stimulus should be coming to an end - a surprising discovery in last week's minutes.
The other is the budget. Potential economic disaster was averted at the start of the year with an agreement between the White House and Congress over taxes, avoiding the "fiscal cliff" that threatened huge automatic budget austerity.
But the agreement left many things to be dealt with later.
"In our view, it leaves the door wide open for another debt ceiling fiasco in a matter of weeks, and installed a new "mini-cliff" for government spending in two months," Credit Suisse said in a research note.

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Fed's Plosser: U.S. unemployment to fall under 7 percent by end - 2013

SAN DIEGO (Reuters) - Philadelphia Federal Reserve President Charles Plosser said on Friday that he expected U.S. unemployment to decline to between 6.8 percent and 7.0 percent by the end of this year, helped by economic growth of around 3 percent in both 2013 and 2014.
Plosser also told reporters on the sidelines of the annual meeting of the American Economic Association that he hoped the U.S. central bank would stop buying bonds if the jobless rate indeed fell at this pace, which would bring the level of unemployment close to the Fed's threshold of 6.5 percent.
"Hopefully, if you're getting that close, you will have stopped asset purchases before you get to 6.5 (percent). Otherwise you have really got another problem on your hands," he said. Data released earlier on Friday showed the U.S. unemployment rate held steady at 7.8 percent in December.

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Italy PM Monti says not eyeing role of finance minister in next government

ROME (Reuters) - Outgoing Italian Prime Minister Mario Monti said on Friday he was aiming to lead the next government and he was unlikely to agree to be economy minister in another premier's cabinet after February elections.
"I do not think I would have the motivation to commit myself to serve a government that did not agree with me on at least 98 percent of policy," he said when asked whether he would consider the role of economy minister in an interview on La 7 television.

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Fed's Plosser: U.S. potential growth rate has likely been lowered

SAN DIEGO (Reuters) - Philadelphia Federal Reserve President Charles Plosser said on Friday that the United States had likely suffered a lasting decline in the trend potential growth rate of its economy as a result of the severe 2007-2009 U.S. recession.
"It certainly looks like we've had a permanent shock," he told a panel discussion on the real business cycle during the annual meeting of the American Economics Association. However, he said that it would take a considerable period of time before the data would be able to verify that trend growth had declined.

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Fed becoming worried about stimulus side effects

 Federal Reserve officials are increasingly concerned about the potential risks of the U.S. central bank's asset purchases on financial markets, even if they look set to continue an open-ended stimulus program for now.
In a surprise to Wall Street, minutes from the Fed's December policy meeting, published on Thursday, showed a growing reticence about further increases in the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.
"Several (officials) thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet," the minutes said, referring to the narrower group of voting Fed members.
Investors picked up on the report's hawkish tone, with stock prices drifting lower after the announcement, while the U.S. dollar extended gains against the euro. Yields on the 30-year Treasury bond hit 3.12 percent, their highest levels since May.
"The minutes of the Federal Reserve's December monetary policy meeting revealed a somewhat surprising level of concern among the ranks of central bankers regarding the long-term impact of the bank's asset purchase program, or quantitative easing," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C.
Still, the Fed appeared likely to continue buying assets for the foreseeable future, having announced in December it was extending monthly purchases of $40 billion in mortgage securities and also buying $45 billion in Treasuries each month.
A few of the voting members on the central bank's policy-setting Federal Open Market Committee thought asset buying would be warranted until about the end of 2013. A few others highlighted the need for further large-scale stimulus but did not specify an amount or time frame.
Fed officials generally agreed that the labor market outlook was not likely to improve without further nudging from the monetary authorities.
QE "HEEBIE-JEEBIES"
The U.S. economy expanded a respectable 3.1 percent in the third quarter on an annualized basis, but growth is believed to have slowed sharply to barely above 1.0 percent in the last three months of the year.
Data on Thursday showed a solid gain of 215,000 new private sector jobs for December, while analysts polled by Reuters last week were looking for a rise of 150,000 new jobs in the Labor Department's official survey, due out on Friday.
Still, the minutes indicated worries about quantitative easing policies were spreading beyond the usual regional Fed hawks who, like Richmond Fed President Jeffrey Lacker, have opposed additional Fed easing.
"What's clear from these minutes is that there is little consensus among the members of the FOMC on how long asset purchases should carry on," said Jason Conibear, trading director at Cambridge Mercantile.
"Some members want more accommodation for as long as it takes, some want more but to start winding it down while others have got the heebie-jeebies about the size of the balance sheet."
In the December meeting, the Fed also launched a new framework of policy thresholds, numerical guideposts that are supposed to give markets and the public a clearer idea of how policymakers will react to incoming economic data.
Officials say they will keep interest rates near zero until the unemployment rate falls to 6.5 percent for as long as estimates of medium-run inflation do not exceed 2.5 percent.
The minutes suggested it took officials some time to build a consensus around the idea.
"A few participants expressed a preference for using a qualitative description of the economic indicators influencing the Committee's thinking," the minutes said.
U.S. unemployment has come down steadily after hitting a peak of 10 percent in late 2009, but remains elevated at 7.7 percent.
Fed officials noted worries about the looming "fiscal cliff," which was dealt with only partly in an agreement earlier this week, were hurting the confidence of businesses and households.

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Stocks fade after Fed discloses split on stimulus

A two-day rally in the stock market came to an end Thursday afternoon when an account of the Federal Reserve's last meeting revealed a split between bank officials over how long the Fed should keep buying bonds to support the economy.
The Dow Jones industrial average and the Standard & Poor's 500 index treaded water for much of the day, then slid into the red around 2 p.m. Eastern, after the Fed released the minutes from its December meeting.
The Dow ended with a loss of 21.19 points at 13,391.36.
The S&P 500 lost 3.05 points to 1,459.37 and the Nasdaq composite fell 11.70 to 3,100.57.
At last month's meeting of the Federal Reserve's policy-making committee, the central bank pledged to buy $85 billion of Treasurys and mortgage-backed bonds and also keep a benchmark interest rate near zero until the unemployment rates drops below 6.5 percent.
On Thursday, the minutes from that meeting showed Fed officials were divided over the bond purchases. Some of its 12 voting members thought they should continue through this year, while another group thought they should be slowed or stopped much earlier. Just "a few" members saw no need for a time frame, according to the minutes.
"It's pretty surprising," said Thomas Simons, market economist at the investment bank Jefferies. "I think everybody thought there was broad agreement on policy, but now it seems like few of them really wanted to vote for it."
The stock market opened on a weak note after retailers reported mixed holiday sales and as the prospect of a new budget battle in Congress loomed. UnitedHealth Group led the Dow lower. The insurance giant's stock fell $2.55 to $51.99 after analysts at Deutsche Bank and other firms cut their ratings on the stock.
"It's natural to relax a bit after such a huge day as yesterday," said Lawrence Creatura, who manages a small-company fund at Federated Investors.
The Dow soared 308 points Wednesday, its largest point gain since December 2011. The rally was ignited after lawmakers passed a bill to avoid a combination of government spending cuts and tax increases called the "fiscal cliff."
That deal gave the market a jump start into the new year. The Dow and the S&P 500 are already up more than 2 percent.
"We're off to a very strong start," Creatura said. "The dominant reason is the resolution of the fiscal cliff. But January is usually a strong month, as investors all shift money into the market at the same time. When the calendar flips, it's as if you're allowed to begin the race anew."
Economists had warned that the full force of the fiscal cliff could drag the country into a recession. The law passed late Tuesday night averted that outcome for now, but other fiscal squabbles are likely in the months ahead. Congress must raise the government's borrowing limit soon or be forced to choose between slashing spending and paying its debts.
In other Thursday trading, prices of U.S. government bonds fell, sending their yields higher. The yield on the benchmark 10-year Treasury note rose to 1.90 percent from 1.84 percent late Wednesday, a sign that some bond traders believe the Fed minutes hinted at an early end to its bond buying.
Family Dollar Stores sank 13 percent after reporting earnings that fell short of analysts' projections. The company also forecast a weaker outlook for the current period and full year. Family Dollar's stock lost $8.30 to $55.74.
Nordstom Inc. surged 3 percent after the department-store chain reported strong holiday sales, especially in the South and Midwest. Nordstrom's stock was up $1.64 to $55.27.
Among other stocks making big moves:
— Transocean jumped $2.96 to $49.20. The owner of the oil rig that sank in the Gulf of Mexico in 2010 after an explosion killed 11 workers reached a $1.4 billion settlement with the Justice Department.
— Hormel Foods, known for making Spam and other meat products, said that it's buying Skippy, the country's No. 2 peanut butter brand, from Unilever for about $700 million. Hormel's stock jumped $1.19 to $33.20.

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Fiscal-cliff deal no recipe for a robust economy

Housing is rebounding. Families are shrinking debts. Europe has avoided a financial crackup. And the fiscal cliff deal has removed the most urgent threat to the U.S. economy.
So why don't economists foresee stronger growth and hiring in 2013?
Part of the answer is what Congress' agreement did (raise Social Security taxes for most of us). And part is what it didn't do (prevent the likelihood of more growth-killing political standoffs).
By delaying painful decisions on spending cuts, the deal assures more confrontation and uncertainty, especially because Congress must reach agreement later this winter to raise the government's debt limit. Many businesses are likely to remain wary of expanding or hiring in the meantime.
One hopeful consensus: If all the budgetary uncertainty can be resolved within the next few months, economists expect growth to pick up in the second half of 2013.
"We are in a better place than we were a couple of days ago," Chad Moutray, chief economist for the National Association of Manufacturers, said a day after Congress sent President Barack Obama legislation to avoid sharp income tax increases and government spending cuts. But "we really haven't dealt with the debt ceiling or tax reform or entitlement spending."
Five full years after the Great Recession began, the U.S. economy is still struggling to accelerate. Many economists think it will grow a meager 2 percent or less this year, down from 2.2 percent in 2012. The unemployment rate remains a high 7.7 percent. Few expect it to drop much this year.
Yet in some ways, the economy has been building strength. Corporations have cut costs and have amassed a near-record $1.7 trillion in cash. Home sales and prices have been rising consistently, along with construction. Hiring gains have been modest but steady. Auto sales in 2012 were the best in five years. The just-ended holiday shopping season was decent.
Bernard Baumohl, chief global economist for the Economic Outlook Group, thinks the lack of finality in the budget fight is slowing an otherwise fundamentally sound economy.
"What a shame," Baumohl said in a research note Wednesday. "Companies are eager to ramp up capital investments and boost hiring. Households are prepared to unleash five years of pent-up demand."
The economy might be growing at a 3 percent annual rate if not for the threat of sudden and severe spending cuts and tax increases, along with the haziness surrounding the budget standoff, says Ethan Harris, co-director of global economics at Bank of America Merrill Lynch.
Still, Congress' deal delivered a walloping tax hike for most workers: the end of a two-year Social Security tax cut. The tax is rising back up to 6.2 percent from 4.2 percent. The increase will cost someone making $50,000 about $1,000 a year and a household with two high-paid workers up to $4,500.
Mark Zandi, chief economist at Moody's Analytics, calculates that the higher Social Security tax will slow growth by 0.6 percentage point in 2013. The other tax increases — including higher taxes on household incomes above $450,000 a year — will slice just 0.15 percentage point from growth, Zandi says.
Congress' deal also postpones decisions on spending cuts for military and domestic programs, including Medicare and Social Security. In doing so, it sets up a much bigger showdown over raising the government's borrowing limit. Republicans will likely demand deep spending cuts as the price of raising the debt limit. A similar standoff in 2011 brought the government to the brink of default and led Standard & Poor's to yank its top AAA rating on long-term U.S. debt.
Here's how key parts of the economy are shaping up for 2013:
— JOBS
With further fights looming over taxes and spending, many companies aren't likely to step up hiring. Congress and the White House will likely start battling over raising the $16.4 trillion debt limit in February.
Many economists expect employers to add an average of 150,000 to 175,000 jobs a month in 2013, about the same pace as in 2011 and 2012. That level is too weak to quickly reduce unemployment.
The roughly 2 million jobs Zandi estimates employers will add this year would be slightly more than the 1.8 million likely added in 2012. Zandi thinks employers would add an additional 600,000 jobs this year if not for the measures agreed to in the fiscal cliff deal.
Federal Reserve policymakers have forecast that the unemployment rate will fall to 7.4 percent, at best, by year's end. Economists regard a "normal" rate as 6 percent or less.
— CONSUMER SPENDING
Consumer confidence fell in December as Americans began to fear the higher taxes threatened by the fiscal cliff. Confidence had reached a five-year high in November, fueled by slowly declining unemployment and a steady housing rebound. Consumer spending is the driving force of the economy.
But the deal to avoid the cliff won't necessarily ignite a burst of spending. Taxes will still rise for nearly 80 percent of working Americans because of the higher Social Security tax rate.
Since the recession officially ended in June 2009, pay has barely kept up with inflation. The Social Security tax increase will cut paychecks further. And with the job market likely to remain tight, few companies have much incentive to hand out raises.
Thanks to record-low interest rates, consumers have whittled their debts to about 113 percent of their after-tax income. That's the lowest share since mid-2003, according to Haver Analytics. And the delinquency rate for users of bank credit cards is at an 18-year low, the American Bankers Association reported Thursday.
Yet that hardly means people are ready to reverse course and ramp up credit-card purchases. Most new spending would have to come from higher incomes, says Ellen Zentner, senior economist at Nomura Securities.
"We don't see the mindset of, 'Let's run up the credit card again,'" she says.
— HOUSING
Economists are nearly unanimous about one thing: The housing market will keep improving.
That's partly because of a fact that's caught many by surprise: Five years after the housing bust left a glut of homes in many areas, the nation doesn't have enough houses. Only 149,000 new homes were for sale at the end of November, the government has reported. That's just above the 143,000 in August, the lowest total on records dating to 1963. And the supply of previously occupied homes for sale is at an 11-year low.
"We need to start building again," says Patrick Newport, an economist at IHS Global Insight.
Sales of new homes in November reached their highest annual pace in 2½ years. They were 15 percent higher than a year earlier. And October marked a fifth straight month of year-over-year price increases in the 20 major cities covered by the Standard & Poor's/Case-Shiller national home price index.
Potential homebuyers "are more likely to buy, and banks are more likely to lend" when prices are rising, says James O'Sullivan, chief U.S. economist at High Frequency Economics. "It feeds on itself."
Higher prices are also encouraging builders to begin work on more homes. They were on track last year to start construction of the most homes in four years.
Ultra-low mortgage rates have helped spur demand. The average rate on the U.S. 30-year fixed mortgage is 3.35 percent, barely above the 3.31 percent reached in November, the lowest on records dating to 1971.
Housing tends to have an outside impact on the economy. A housing recovery boosts construction jobs and encourages more spending on furniture and appliances. And higher home prices make people feel wealthier, which can also lead to more spending.
"When you have a housing recovery, it's nearly impossible for the U.S. economy to slip into recession," Zentner says.
— MANUFACTURING
Factories appear to be recovering slowly from a slump last fall. The Institute for Supply Management's index of manufacturing activity rose last month from November. And a measure of employment suggested that manufacturers stepped up hiring in December. Factories had cut jobs in three of the four months through November, according to government data.
Another encouraging sign: Americans are expected to buy more cars this year. That would help boost manufacturing output. Auto sales will likely rise nearly 7 percent in 2013 over last year to 15.3 million, according to the Polk research firm. Sales likely reached 14.5 million last year, the best since 2007. In 2009, sales were just 10.4 million, the fewest in more than 30 years.
And if Congress can raise the federal borrowing limit without a fight that damages confidence, companies might boost spending on computers, industrial machinery and other equipment in the second half of 2013, economists say. That would help keep factories busy.

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Auto industry posts best U.S. sales year since 2007

U.S. auto sales rose 9 percent in December, led by foreign manufacturers, capping off the best year for the industry since before the recession.
The year's sales were driven by a slowly recovering economy, more available credit and the need for consumers and businesses to replace aging cars and trucks.
General Motors Co posted December U.S. sales growth of 5 percent compared with the year-earlier month, Ford Motor Co increased sales 2 percent and Chrysler Group LLC's sales rose 10 percent.
Wall Street cheered the results, sending GM and Ford stock to their highest levels since July 2011. GM shares ended 2.4 percent higher at $29.82 and Ford shares were up 2 percent to end at $13.46 on Thursday.
Research and consulting firm Polk said it expects U.S. auto sales to hit 15.3 million vehicles in 2013. GM and Ford both predicted industry sales of more than 15 million vehicles, but Toyota Motor Corp offered a more modest forecast of 14.7 million vehicles.
For the year just ended, U.S. auto sales rose 13.5 percent to nearly 14.5 million new vehicles, the best performance since 2007, according to Reuters calculations.
In the decade prior to 2008 when the recession slowed the industry, U.S. auto sales averaged nearly 17 million vehicles a year.
While last month's auto sales showed little impact of jitters caused by the so-called fiscal cliff - which proved largely averted - automakers expressed worry over the fog of uncertainty still emanating from Washington.
The impact of a payroll tax increase that took effect at the start of the year and the upcoming congressional debate over raising the U.S. debt ceiling may keep some consumers out of the market in 2013, several automakers said.
"It would have been nice if all the open questions had been resolved in the 'fiscal cliff' discussion over the holiday, but clearly they weren't, and that does extend this period of uncertainty from a consumer point of view," Jonathan Browning, head of Volkswagen AG's American unit, told reporters on a conference call.
A 2 percentage-point payroll tax increase will take about $1,000 from the average household budget, said Ford economist Ellen Hughes-Cromwick.
"It is something that we're looking at very carefully, as it will crimp the consumer spending scene somewhat in the months ahead," said Hughes-Cromwick.
Jesse Toprak, analyst with TrueCar.com, said the hit to households would be about the same amount as a down payment on a new vehicle.
"The cheap financing and improved income will make up for that, but that's something we're going to have a keep an eye on," he said.
Hughes-Cromwick said the tax increases for the wealthiest Americans will not greatly affect auto sales, because they tend to purchase new vehicles even if taxes change.
Tom Libby, an analyst at Polk, said continued low interest rates along with an improved housing sector and new product offerings from major automakers will make 2013 a bullish year for the industry.
Detroit's automakers showed December U.S. sales gains of 5 percent, slightly better than analysts' expectations, but not enough to stave off market-share gains by Toyota and Honda Motor Co Ltd .
The two largest Japanese automakers in the U.S. market rebounded from poor showings in 2011 when their inventory was constrained after the Japan earthquake and tsunami.
Toyota reported a 9 percent U.S. sales increase for December, which met analysts' expectations. Honda's December sales rose 26 percent but fell short of analysts' expectations. Honda sales are up 24 percent on the year.
Toyota's 2012 U.S. sales rose about 27 percent, compared with gains of 3.7 percent for GM, 4.7 percent for Ford, and 21 percent for Chrysler.
U.S. MARKET SHARE
GM's U.S. market share is now at its lowest level since at least 1960, and probably at a low not seen since 1930, according to industry journal Ward's Auto.
GM and Ford lost market share in 2012, dented by competition from Toyota and Honda which recovered from 2011 earthquake-related setbacks.
GM's 2012 market share fell to 17.9 percent from 19.6 percent in 2011. Its market share was 23.5 percent in 2007, before the recession. Ford's 2012 market share fell to 15.5 percent from 16.8 percent in 2011.
"We're always concerned about market share - always," said Mark Reuss, GM chief in North America. "But we're not going to give it away like we did in the past and burn the residuals and the brand values in anticipation of the biggest product portfolio launch that we've had in history."
Reuss referred to the years before GM's 2009 bankruptcy and taxpayer bailout, when vehicle production outpaced demand and it layered on incentives to lower prices for consumers.
The F-Series pickup truck from Ford, the top-selling vehicle in North America for more than three decades, had its best sales month in December since August 2007.
The F-Series remained the best-selling vehicle in the United States, with annual sales of 645,316, followed again by the full-size Chevrolet Silverado pickup, at 418,312.
BMW WINS LUXURY CROWN
Most luxury brands had a good year. BMW for the second straight year edged German rival Mercedes-Benz for the U.S. sales crown, followed by Toyota's Lexus and Honda's Acura.
The two U.S. luxury brands both saw sales fall in 2012, with Cadillac down 1.7 percent and Lincoln off 4.1 percent.
Japanese models swept the next four places, with Toyota Camry leading the Honda Accord, Honda Civic and Nissan Altima. Chrysler's Ram pickup placed seventh, followed by Toyota Corolla, Ford Escape and Ford Focus.
Both GM and Ford went into the recession that began in late 2007 - and into 2008 when gasoline prices spiked - overladen with low-mileage big pickup trucks and SUVs.
GM said on Thursday that in 2012 it sold in the U.S. market more than 1 million vehicles that get at least 30 miles per gallon in highway driving. And Ford said that in the year it sold the most small cars since 2001.
Sales of high-profile hybrid and electric vehicles were a mixed bag in 2012. GM's Chevrolet Volt tripled sales to 23,461, but still fell well short of the company's original goal of 40,000 vehicles. Nissan's Leaf was virtually flat, at 9,819.
Toyota maintained its lead in the green-car category, with total Prius sales of 236,659, up 73 percent with the addition of three new Prius derivatives in the past year.
Chrysler easily beat analysts' expectations and had its 33rd consecutive month of year-on-year sales gains. Its annual sales rose 21 percent. Its market share in 2012 rose to 11.4 percent from 10.7 percent in 2011. Chrysler is majority-owned by Italian automaker Fiat SpA .
Sales for South Korea's Hyundai Motor Corp and Kia Motors Co rose 5 percent. Hyundai, the larger of the sister companies, reported full-year U.S. sales of 703,007 vehicles, a company record.
Volkswagen reported a monthly increase of 31.5 percent for its namesake brand and luxury brands Audi and Porsche and a 30 percent gain for the full year.
December sales fell 12 percent for Lincoln, Ford's luxury brand.
Aided heavily by consumer incentives that reduce the price of the vehicles, GM in December dramatically trimmed its inventory of full-size pickup trucks to 80 days of supply from 139 days at the end of November. Most automakers like to have about 80 days of supply of these pickup trucks.
For the overall industry, the pace of annual sales increases has been in the double digits since the market bottomed in 2009, when it hit the worst annual sales rate since World War Two, adjusting for population.

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Huge gadget show gears up in Vegas

Think your high-definition TV is hot stuff — as sharp as it gets? At the biggest trade show in the Americas, which kicks off next week in Las Vegas, TV makers will be doing their best to convince you that HDTVs are old hat, and should make room for "Ultra HDTV."
It's the latest gambit from an industry struggling with a shift in consumer spending from TVs, PCs and single-purpose devices such as camcorders to small, portable do-it-all gadgets: smartphones and tablets. The Consumer Electronics Association estimates that device shipments to U.S. buyers fell 5 percent in dollar terms last year excluding smartphones and tablets, but rose 6 percent to $207 billion if you include those categories.
The trends suggest that the International CES (formerly the Consumer Electronics Show) is losing its stature as a start-of-the-year showcase for the gadgets that consumers will buy over the next 12 months. It started out as a venue for the TV and stereo industries. Later, PCs joined the party.
But over the last few years, TVs and PCs have declined in importance as portable gadgets have risen and CES hasn't kept pace. It's not a major venue for phone and tablet launches, though some new models will likely see the light of day there when the show floor opens on Tuesday. The biggest trendsetter in mobile gadgets industry, Apple Inc., stays away, as it shuns all events it doesn't organize itself.
Apple rival Microsoft Corp. has also scaled back its patronage of the show. For the first time since 1999, Microsoft's CEO won't be delivering the kick-off keynote. Qualcomm Inc. has taken over the podium. It's an important maker of chips that go into cellphones, but not a household name.
None of this seems to matter much to the industry people who go to the show, which is set to be bigger than ever, at least in terms of floor space.
Gary Shapiro the CEO of the organizing Consumer Electronics Association, expects attendance close to the 156,000 people who turned out last year. That's pretty much at capacity for Las Vegas, which has about 150,000 hotel rooms. The show doesn't welcome gawkers: the attendees are executives, purchasing managers, engineers, marketers, journalists and others with connections to the industry.
"We don't want to be over 160,000," Shapiro said in an interview. "We do everything we can not to be too crowded."
Nor do the shifting winds of the technology industry seem to matter much to exhibitors. Though some big names are scaling back or missing, there are many smaller companies clamoring for booth space and a spot in the limelight for a few days. For example, while Apple doesn't have an official presence at the show, there will be 500 companies displaying Apple accessories in the "iLounge Pavilion."
Overall, the CEA sold a record 1.9 million square feet of floor space (the equivalent of 33 football fields) for this year's show.
These are some of the themes that will be in evidence next week:
___ SHARPER TVs
Ultra HDTVs have four times the resolution of HDTVs. While this sounds extreme and unnecessary, you've probably already been exposed to projections at this resolution, because it's used in digital movie theaters. Sony, LG, Westinghouse and others will be at the show with huge flat-panel TVs that bring that experience home, if you have a spare $20,000 or so.
While the sets are eye-catching, they will likely be niche products for years to come, if they ever catch on. They have to be really big — more than 60 inches, measured diagonally — to make the extra resolution really count. Also, there's no easy way to get movies in UHDTV resolution.
"While there's going to be a lot of buzz around Ultra HDTV, we really think what's going to be relevant to consumers at the show is the continued evolution of 3D TVs and Internet-connected TVs," said Kumu Puri, senior executive with consulting firm Accenture's Electronics & High-Tech group.
___ BIGGER PHONES
Unlike TVs, new phones are launched throughout the year, so CES isn't much of a bellwether for phone trends. But this year, reports point to several super-sized smartphones, with screen bigger than five inches diagonally, making their debut at the show. These phones are so big they can be awkward to hold to the ear, but Samsung's Galaxy Note series has shown that there's a market for them. Wags call them "phablets" because they're almost tablet-sized.
___ ACROBATIC PCs
Microsoft launched Windows 8 in October, in an attempt to make the PC work more like a tablet. PC makers obliged, with a slew of machines that blend the boundaries. They have touch screens that twist, fold back or detach from the keyboard. None of these seems to be a standout hit so far, but we can expect more experiments to be revealed at the show.
"All the PC manufacturers recognize that they have to do things differently," Accenture's Puri said.
___ ATTENTIVE COMPUTING
CES has been a showcase in recent years for technologies that free users from keyboards, mice and buttons. Instead, they rely on cameras and other sophisticated sensors to track the user and interpret gestures and eye movements. Microsoft's motion-tracking add-on for the Xbox 360 console, the Kinect, has introduced this type of technology to the living room. Startups and big TV makers are now looking to take it further.
For example, Tobii Technology, a Swedish company, will be at the show to demonstrate "the world's first gaze interaction computer peripheral" — basically a camera that tracks where the user is looking on the screen, potentially replacing the mouse.
PointGrab, an Israeli startup, will be showing off software that lets a regular laptop webcam interpret hand movements in the air in front of it.
Assaf Gad, head of marketing at PointGrab, said that CES is usually full of hopeful companies with speculative interaction technologies, "but this year, you can actually see real devices.

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Live Nation Chairman Azoff resigns; Liberty buys shares

 Irving Azoff, a legendary music manager who helped make stars out of The Eagles and Christina Aguilera, resigned as chairman of Live Nation Entertainment and sold some of his stake in the concert promotion giant to John Malone's Liberty Media Corp.
Azoff is expected to start a new talent management agency, and is expected to take some of his former clients with him, according to a person familiar with his exit. Those acts haven't been identified.
Liberty Media said in a statement that its acquisition of some of Azoff's shares increased the company's stake to 26.4 percent.
Azoff sold 1.7 million shares Live Nation to Liberty. He owned 7.6 million shares, or 3.9 percent of the company in June, according to the company's proxy statement.
Live Nation's shares closed up 0.4 percent at $9.31 a share on Monday.
Azoff's contract ends in 2014, according to the company's proxy statement. Last week, Live Nation said it renewed Chief Executive Michael Rapino's contract for five years.
Azoff was chief executive of Ticketmaster in 2010 when the ticketing company merged with Live Nation. He was named executive chairman at the time of the merger, and chairman of the board the following year.
He retained his position as chief executive of Front Line, his management company, which was part of the merger.
"After successfully overseeing the integration of Live Nation and Ticketmaster over the past two years, my job is done," the 65-year-old music executive said in a statement.

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Tribune exits bankruptcy with new TV-focused board

 More than four years after crushing debt and plunging advertising sales forced it to file for Chapter 11 bankruptcy protection, Tribune Co. has emerged with a new television-focused board and over $1 billion in new financing.
Led by such creative and technology heavyweights as Ross Levinsohn, the former interim CEO of Yahoo Inc., and Peter Murphy, former strategic officer of The Walt Disney Co., the board's roster suggests a focus on the company's TV assets rather than newspapers, which haven't managed to turn around declines in readership and advertising. Peter Liguori, a former TV executive at Discovery Communications Inc. and News Corp.'s Fox, is expected to be named CEO in the next several weeks.
The exit closes a dark period for Tribune, which was founded in 1847 with a hand-cranked print run of 400 copies of the Chicago Tribune. It founded the WGN broadcasting brand with a radio station in 1924 and a TV station in 1948. The call letters stood for "World's Greatest Newspaper." Tribune first went public in 1983 valued at $206 million — one of the biggest IPOs of its day — and expanded over the years into a media giant through acquisitions of TV stations such as KTLA in Los Angeles and newspapers such as the Los Angeles Times, The Baltimore Sun and Newsday. It also owns a stake in the Food Network and online job site CareerBuilder.com.
In 2006, pressured by its long-sagging stock price and dissident shareholders, Tribune put itself on the block. Sam Zell, a Chicago real estate mogul who made his fortune in commercial real estate but had little experience with the media industry, took the company private in a leveraged buyout that valued Tribune at about $8.2 billion.
But the deal ballooned Tribune's debt load from $5 billion to more than $13 billion just as the Great Recession hit. Advertising revenue plummeted across the industry, which was also struggling with steep declines in circulation as readers found free access to news, sports and entertainment online. Less than a year after Zell closed the deal, Tribune filed for Chapter 11 protection.
The company's restructuring dragged on for years due to fraud allegations and dueling lawsuits between creditors. In the end, the parties agreed to a plan that included payouts of nearly $3 billion in cash to creditors and turned ownership over to senior lenders including Oaktree Capital Management, Angelo Gordon and Co., and JPMorgan Chase and Co.
The emerging Tribune is estimated to be worth about $4.5 billion, with television assets generating most of its value. Newspapers — seen as accounting for less than 15 percent of its value today — are expected to be sold off in a process that will likely see several bidders.
"Tribune is the poster child for the demise of the metropolitan newspaper," said Ken Doctor, a newspaper industry analyst with Outsell Inc. "Tribune remains a media company but likely drops the part of media that gave it its name and its birth, which is its newspapers."
Doctor says he expects that the Los Angeles Times and Chicago Tribune could be sold for around $600 million to $700 million. Interested bidders include News Corp.'s Rupert Murdoch, Freedom Communications owner Aaron Kusher, who bought the Orange County Register this summer, and Carlos Slim, the Mexican billionaire who invested in The New York Times Co., Doctor said.
As part of the restructuring, Tribune closed on a new $1.1 billion senior secured term loan and a $300 million revolving credit line. The loan will fund payments required under the reorganization plan, and the credit line will pay for its ongoing operations.
CEO Eddy Hartenstein said Monday that Tribune "emerges from the bankruptcy process as a multimedia company with a great mix of profitable assets, strong brands in major markets and a much-improved capital structure." He noted that the company's restructuring ensures that Tribune's subsidiary creditors and vendors receive payment "in full-100 percent recovery of what they are owed."
Hartenstein will remain at the helm for the next several weeks until the new board meets to designate executive officers.

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Shaw CEO sells most of stake after shareholders ok CB&I deal

 James Bernhard, chief executive of engineering company Shaw Group Inc , has sold off most of his stake in the company he founded after shareholders approved a sale to Chicago Bridge and Iron Co NV this month.
Late last week, Bernhard reduced his shareholding in Shaw to 143,356 shares from 1,131,603, according to filings with U.S. securities regulators on Monday, in a sale that would have raised more than $45 million.
In criticizing the deal price of $46 per share that Bernhard negotiated for Shaw, H. Kevin Byun at Denali Investors LLC speculated in a letter that Bernhard may have had political ambitions in Louisiana that influenced the timing of the sale to CB&I.
Denali, which had said it owns 1.1 percent of Shaw, was asking for a special committee to investigate Bernhard for potential conflicts of interest in selling off the Louisiana-based company.
But the $3 billion deal, comprising $41 per share in cash and $5 per share in CB&I stock when it was launched at the end of July, won approval from 83 percent of Shaw's outstanding shares on December 21.
Shares of Shaw closed at $46.61 per share on Monday, up 42 cents on the day.

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Best Buy loses two board directors

 Best Buy Co Inc said on Monday that two of its board directors had resigned, including one of its former chief executives, almost seven months after its founder, who is now mounting a bid for the struggling retailer, left the board.
The departures will leave Best Buy with four vacancies on its 11-member board.
The company's fortunes have faltered as consumers increasingly use its big box stores as showrooms for products they end up buying online at Amazon.com Inc and other websites.
Best Buy said that G. Mike Mikan, who served as interim CEO between April and September 2012 after former chief Brian Dunn was found to have had an improper relationship with a female employee, had stepped down from the board effective immediately.
Mikan left to become president of Edward Lampert's hedge fund ESL Investments Inc. Billionaire Lampert is the chairman of another retailer, Sears Holdings Corp, which he controls and is embarked on a turnaround campaign.
"Mike's background fits with our strategy and he will be a great asset to me and to ESL's portfolio companies," Lampert said in a statement on Monday.
Mikan's main corporate stint was at UnitedHealth Group Inc, where he spent 14 years and served as executive vice president and chief financial officer, as well as CEO of its Optum subsidiary. He became a Best Buy director in 2008.
Mikan was at the helm of Best Buy when Richard Schulze, its former chairman and founder, lost his chairmanship after he was held responsible for failing to notify the board about allegations against his protégé Dunn. Schulze resigned as board member in June.
In August, Schulze informed the board that he was interested in teaming up with private equity partners to buy the company but he has yet to table a solid offer and now faces a February 28 bid deadline.
Schulze remains Best Buy's largest shareholder with about one-fifth of the company's outstanding shares but the company is now led by turnaround expert Hubert Joly, who was tapped as CEO to come up with a new restructuring plan.
The second departure announced on Monday was expected. Matthew Paull, who had served on the board since 2008, will retire from the board in April 2013.
Paull stepped down as CFO of McDonald's Corp in 2008. Best Buy's rules dictate that a director must retire five years after he stops pursuing the primary career he or she was engaged in when appointed to the board.
Neither Paull nor Mikan indicated that they were resigning due to any disagreements with Best Buy's management, the company said.
The fourth vacancy on Best Buy's board dates back to June, when Rogelio Rebolledo left to also comply with the company's retirement policy.

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Sharp considering raising $1.2 billion to beef up capital: media

 Struggling Japanese TV maker Sharp Corp is considering raising more than 100 billion yen ($1.2 billion) this spring to bolster its capital base, the Yomiuri newspaper reported on Tuesday.
The debt-laden company, whose displays are used in Apple Inc's iPads and iPhones, was forced to seek a bailout from banks in September and has forecast a loss of 155 billion yen for the fiscal year to March 2013, hit by rising costs from a strong yen and tough competition from its South Korean rivals.
Sharp's capital-to-asset ratio is likely to fall to around 8 percent in March. Its main creditor banks want it to raise that ratio to above 10 percent with a mixture of steps including public and preferred share offerings as well as subordinated loans, the Japanese daily said, without citing sources.
Sharp will announce plans for a capital increase in February and hopes to use the proceeds to strengthen its capital base and its main liquid crystal display (LCD) panel business, according to the paper.
The company was not immediately available for comment.
Shares of Sharp have slumped and its credit rating was downgraded to junk status as the company struggles to turn its business around. It recently agreed on a capital and business tie-up with Qualcomm Inc in which the U.S. chipmaker will invest as much as $120 million.
Sharp's shares closed at 303 yen in Tokyo on Friday, well off its year-low of 142 yen hit in October but less than half its value at the outset of 2012.

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Future of state estate taxes hangs on U.S. "fiscal cliff"

Falling off the "fiscal cliff" is a bad thing, right?
Not necessarily for some state governments that could begin collecting more in estate taxes on wealth left to heirs if the United States goes over the "cliff," allowing sharp tax increases and federal spending cuts to take effect in January.
In an example of federal and state tax law interaction that gets little notice on Capitol Hill, 30 states next year could collect $3 billion more in estate taxes if Congress and President Barack Obama do not act soon, estimated the Urban-Brookings Tax Policy Center, a Washington think tank.
The reason? The federal estate tax would return with a vengeance and so would a federal credit system that shares a portion of it with the 30 states. They had been getting their cut of this tax revenue stream until the early 2000s. That was when the credit system for payment of state estate tax went away due to tax cuts enacted under former President George W. Bush.
With the return of the credit system next year as part of the "cliff," states such as Florida, Colorado and Texas - which have not collected estate tax since 2004 - could resume doing so. California Governor Jerry Brown has already begun to add the anticipated estate tax revenue into his plans, including $45 million of it in his 2012-2013 revised budget.
Brown may or may not be jumping the gun.
CLOUDY CLIFF AHEAD
The outlook on the "fiscal cliff" coming up at year-end is uncertain. Democratic President Barack Obama has said he hopes for a last-minute deal to avert it. That would need to get done soon, with Congress just now coming back from its holiday break.
Chances of an agreement became more remote last week after Republicans in the U.S. House of Representatives fumbled their own legislative attempt to prevent the fiscal jolt that economists say could trigger a recession.
House Speaker John Boehner abruptly adjourned the chamber for the holidays after failing to gather the votes from within his own party to pass legislation he and other Republicans had drafted, after walking out of negotiations with Obama.
Weeks of inconclusive political drama over the "cliff" have focused largely on individual income tax rates and spending on federal programs such Medicare and Social Security, but many tax issues are also involved, including the estate tax.
At the moment, under laws signed a decade ago by Bush, the estate tax is applied to inherited assets at a rate of 35 percent after a $5 million exemption. That means a deceased person can pass on an inheritance of up to $5 million before any tax applies. Inherited wealth passed to a spouse or a federally recognized charity is generally not taxed.
Obama wants to raise the rate to 45 percent after a $3.5 million exemption. Republicans have called for complete repeal of the estate tax, which they call the "death tax," though Boehner earlier this month called for freezing the estate tax at its present level. It was difficult to determine what the Republicans want after last week's events in the House.
STATES STAND TO GAIN
If Congress and Obama do not act by December 31, numerous Bush-era tax laws will expire, including the one on estate taxes. That would mean the estate tax rate will shoot up next year to the pre-Bush levels of 55 percent after a $1 million exemption.
It would also mean that for the first time in years, a portion of that estate tax would go to the states, through the return of the credit system.
Under that old law, estates paying the tax could get a credit against their federal tax bill for state estate tax payments of up to 16 percent of the estate's value.
If the fiscal cliff were allowed to take hold unaltered by Washington, 30 states would again automatically begin getting their share of federal estate taxes. The state laws are generally written so the state estate tax amounts are calculated under a formula based on the amount of the federal credit.
This would help states that have struggled with lower tax revenues since the 2007-2009 financial crisis and resulting recession, according to research by the Pew Center on the States, though painful federal spending cut backs would also hurt the states.

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