The slumping economy has taken a toll on a massive construction project that was supposed to help boost the Las Vegas economy. Work on the Echelon Hotel- Casino stopped Friday and won't start back up for at least a year. The delay for Echelon is the first huge blow to the future of Las Vegas because of the slow economy. 800 construction workers were told to stop working because Echelon has been placed on hold. "Clearly, as we look at it, we think in the next nine to 12 months -- we think in the next three to four quarters -- that we will be at a place where we can restart the project," said Boyd Gaming President and CEO Keith Smith. SLIDESHOW: Poor Economy Delays Echelon Project Smith made the public announcement at the release of their quarterly earnings report. He says this has nothing to do with Boyd Gaming as a company, but how the slow economy affected the minority partners on the project. Morgan's Hotel Group committed to building two boutique hotels, but no one would agree to loan them the money for their part. General Growth Properties was building the mall and could not sign high end stores to long term leases. Smith says that forced Boyd to delay Echelon, "It's interesting. When you turn the clock back a year, you could have never guessed that we would be in this position a year later." Smith adds waiting about a year will hopefully loosen investment money. Without that money, the third wave of new jobs in Las Vegas will have to wait. Echelon Delay Could Have Major Economic Impact Encore opens in December, planning to hire 5,300 people. In 2009, Project CityCenter opens employing 12,000 people. But the 10,000 new jobs at Echelon set for 2010 will have to wait. "We began to notify the workers and contractors this morning -- having conversations with them. We will be winding down with them as quickly as possible," said Smith. Some work will continue for the next year, but only to make sure that the equipment stays secure on the construction site. Smith believes that by 2011, when it's now scheduled to open, the economy should be in a full up-swing. Boyd Gaming is in the process of renegotiating with Morgan's and General Growth Properties. Because they could not make financing, their contracts with Boyd Gaming are up in September. General Growth Properties released earnings Thursday. In their call with investors they alluded to this problem. The company owns four other properties in Las Vegas. The President and CEO says the Grand Canal Shoppes at the Venetian is doing very well. Stores are making an average of $1,200 a square foot. The Fashion Show Mall on the Strip is making about $1,100 a square foot. But the newly opened Shoppes at the Palazzo are struggling. Many of the stores have still not opened. General Growth's newest property, the Shoppes at Summerlin Centre, has also been put on hold. By waiting a year to open, General Growth hopes to have 90-percent of the shoppes rented.
Saturday, August 2, 2008
Las Vegas Now | Poor Economy Delays Las Vegas Echelon Project
Profit at Sun Microsystems Falls 73 Percent - NYTimes.com
SAN FRANCISCO (AP) — Profit at Sun Microsystems, the computer server maker, declined 73 percent in the most recent quarter as slumping sales to big American companies and reorganization charges weighed on the server and software maker.
Willie Walsh, the chief executive of British Airways.
The company, based in Santa Clara, Calif., also revealed plans Friday to expand its stock buyback program by $1 billion, a sign that Sun believes its shares, which have fallen by 50 percent over the last nine months, are undervalued and poised to rebound.
Wall Street did not share that optimism.
Sun’s shares sank 12.3 percent, to $9.32, on the company’s worse-than-expected guidance, which indicated that the pressures that hurt Sun in the April-June period, its fourth quarter, are affecting the current quarter.
Sun said before the market opened that it expected a “slight” sales decline in its first quarter, which ends in September, and indicated it most likely would not turn a profit. Analysts surveyed by Thomson Financial were expecting flat sales and a profit of 11 cents a share in this quarter.
The Goldman Sachs analysts David Bailey and Min Park said in a note to clients that Sun’s results supply “another piece of evidence that the problems the company faces have no short-term fixes, and we would continue to avoid the shares.”
Sun blamed weakness in the American economy, which has caused some of its biggest customers to cut spending, and the sale of fewer higher-end servers, which carry better profit margins. Sun faces intense competition in that market from I.B.M. and Hewlett-Packard.
Sun earned $88 million, or 11 cents a share, in the quarter, compared with $329 million, or 36 cents a share, in the period a year ago.
Excluding one-time charges, Sun earned 35 cents a share.
Sales were $3.78 billion, down from $3.84 billion last year.
Reuters Business Summary - washingtonpost.com
Small Florida bank is 8th U.S. failure this year
WASHINGTON (Reuters) - Bank regulators closed a small Florida-based bank on Friday, the eighth U.S. bank to fail this year under pressure from a weak economy and a credit crisis precipitated by falling home prices. The Federal Deposit Insurance Corp said First Priority Bank had $259 million in assets and $227 million in deposits and its failure will cost the federal fund that insures deposits an estimated $72 million.
S&P emails slammed mortgage debt products: report
CHICAGO (Reuters) - Analysts at Standard & Poor's Rating Services warned against mortgage-related debt products in internal e-mails that, in one case, called the complex financial deals "ridiculous," the Wall Street Journal reported in its weekend edition. The Journal cited a draft revision of a U.S. Securities and Exchange Commission report on bond-rating firms that was first released on July 8.
Yahoo board wins solid shareholder backing in vote
SAN JOSE, California (Reuters) - Yahoo Inc's (YHOO.O) board of directors won strong backing from shareholders at its annual meeting on Friday, with Jerry Yang, the company's embattled CEO, receiving 85 percent of the vote in his favor. Investors holding nearly 76 percent of Yahoo's 1.38 billion shares gave solid votes in favor of all nine current directors, in what represents an endorsement of their tough stance with Microsoft Corp (MSFT.O) in talks on a merger or partial sale.
Carrefour denies report it looking for new chief
PARIS (Reuters) - French supermarket chain Carrefour (CARR.PA) denied on Saturday that it had hired headhunters to seek a replacement for Jose Luis Duran, its chief executive. The Financial Times quoted an unnamed prominent businessman as saying he had been approached by a headhunter before a July 28 shareholder meeting called to approve a simplification in the management structure.
U.S. Vehicle Sales Fall 13.2% Amid High Gas Prices and Tight Credit - NYTimes.com
Vehicle sales in the United States fell last month to their lowest level in 16 years, as consumers continued to shun large trucks because of high gas prices, and tight credit kept less creditworthy customers off lots.
A Ford plant in Oakville, Ontario. The automaker reported that sales in the United States fell 15 percent in July from a year ago.
Multimedia
Sales were down 13.2 percent, at a time when the companies had expected to begin seeing an improvement.
Instead, the five largest automakers each reported sales declines on Friday. Sales fell 26.1 percent at General Motors, the largest car company, while Chrysler, which used to be the third-largest, reported a 28.8 percent decline and came within a few thousand sales of falling to sixth place. The Ford Motor Company posted a 14.7 percent decline.
Together, the three Detroit automakers accounted for just 42.7 percent of the vehicle market last month, selling about 150,000 fewer vehicles than they had a year earlier.
The declines in the United States market affected foreign automakers too.
Toyota Motor reported an 11.9 percent decline, while Honda, which builds fewer trucks than its rivals and was the only large automaker to report a sales increase for the first half of the year, said its July sales decreased 1.6 percent. Nissan’s sales rose 8.5 percent on strong demand for its small cars.
As recently as this spring, executives in Detroit forecast that auto sales would rebound in the second half of 2008, as consumers spent their federal rebate checks and overcame difficulties in the housing market. But the July sales figures suggest that will not be the case.
In fact, the industry’s annualized sales rate of 12.55 million was its lowest since April 1992, showing that the market is continuing to deteriorate.
Soaring borrowing costs for the automakers’ financing arms and other lenders have led to higher automotive loan rates and tighter credit standards, which have cut sharply into sales. G.M. said it is losing 10,000 sales a month that it used to get from customers with below-average credit ratings.
“In the next several months, or even the next year I would say, the unfolding credit situation that customers are facing in dealerships will take center stage,” said James D. Farley, Ford’s marketing chief. “A lot more creativity has to take place in the finance and insurance office to sell a car now.”
Meanwhile, leases are becoming significantly harder to obtain, with Chrysler no longer offering leases through its financing arm.
G.M. and Ford said on Friday that they will cut back on leasing but remain committed to that business.
Falling sales of sport utility vehicles and pickup trucks have caused resale values of those vehicles to plummet, and that has turned many leases into huge money losers for the automakers. Unprofitable leases led to write-downs of $2.1 billion for Ford and $716 million for G.M.’s financing arm, the General Motors Acceptance Corporation, which it partly owns. GMAC this week halted subsidies for leases in Canada.
“All the risk, all the liability and all the expense is being put onto the consumer with this move away from leasing,” said Rebecca Lindland, an analyst with the research firm Global Insight. “There may be unintended consequences to this move, and they may be unpleasantly surprised that consumers walk away and go someplace else.”
About 20 percent of customers lease vehicles, according to J. D. Power & Associates’ Power Information Network. Mark LaNeve, G.M.’s vice president for North American sales and marketing, said G.M. hoped to cut leasing so that it accounted for between 10 and 15 percent of its business.
“It’s a move that we have to make to reduce our risk in the marketplace,” said Mr. LaNeve. “If the industry can see its way through this, it’s going to give us much higher quality of sale and a much higher profit per vehicle.”
Chrysler said Friday that it would offer 72-month financing deals so that customers could buy a car with monthly payments similar to leases to ease the transition away from leasing.
Ford estimated that total light vehicle sales this year would be 13.7 million to 14.2 million, a considerable drop from the first half’s annualized rate of 15 million. In 2007, automakers sold more than 16.1 million vehicles in the United States.
Ford said that its car sales were up 7.8 percent last month, but that sales of S.U.V.’s, a segment that used to generate huge profits for all three Detroit automakers, plunged 54.4 percent. G.M. sold 18.9 percent fewer cars and 34.7 percent fewer light trucks.
At Toyota, car sales were roughly flat because of shortages of some models, while sales of pickup trucks and S.U.V.’s dropped 27 percent.
Summer is typically a strong season for the automakers, as they unload their remaining inventory from the old model year and begin selling new vehicles. But $4-a-gallon gas and a sluggish economy have kept many consumers who might normally be in the market for a new car away from dealerships.
Thursday, July 31, 2008
Bloomberg.com: Worldwide
July 31 (Bloomberg) -- The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, signaling that the country is in worse shape than investors had anticipated.
``We're in a recession,'' Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. ``It's going to widen, it's going to deepen.''
The economy may weaken further as the temporary boost from tax rebates, which aided a pick-up in gross domestic product last quarter from the previous three months, fades. Stocks and the dollar dropped, Treasuries rallied, and traders reduced bets that the Federal Reserve will raise interest rates this year.
``This confirms the general picture of weakness, but it is surprising that GDP declined,'' said Martin Feldstein, who headed the National Bureau of Economic Research until June and serves on the group's recession-dating panel. He added that today's figures underscored his estimate that a downturn began in December or January. The last time the economy contracted was in 2001.
Gross domestic product increased at a 1.9 percent annualized rate, the Commerce Department said in Washington, compared with the median projection of 2.3 percent in a Bloomberg News survey. The Labor Department said separately that more Americans filed claims for unemployment insurance last week than at any time in more than five years.
Financial Markets
Yields on benchmark 10-year Treasuries dropped to 3.97 percent at 10:47 a.m. in New York, from 4.05 percent late yesterday. The Standard & Poor's 500 Stock Index declined 0.1 percent to 1,283.1. The dollar fell 0.4 percent to $1.5632 per euro.
``As we look forward, we realize we have to grow out of a deeper hole than we thought,'' said Jack Ablin, who helps manage $55 billion as chief investment officer at Harris Private Bank in Chicago. ``We're going to operate at a kind of lackluster growth rate for many quarters to come.''
The smallest trade deficit in seven years, helped by the weakening U.S. dollar, prevented the economy from shrinking again last quarter. The trade gap narrowed to a $395.2 billion annual pace, adding 2.4 percentage points to growth, the most since 1980. Excluding trade, the economy would have contracted at a 0.5 percent pace, the second such decline in the last three quarters.
Exports may have also spurred a gain in the National Association of Purchasing Management-Chicago's business activity index. The group said today its measure increased to 50.8 this month from 49.6 in June. Fifty is the dividing line between growth and contraction.
2009 Recovery
``Exports are making the difference between a near recession, or mild recession, and a deep recession,'' Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm, said in an interview with Bloomberg Television. ``We don't really see a recovery until some time in the spring or summer'' of 2009 for the economy, he said.
Initial claims for unemployment insurance jumped by 44,000 to 448,000, the Labor Department said today. The department tomorrow may say payrolls declined by 75,000 in July, bringing total job losses so far this year to over 500,000.
Annual benchmark revisions showed consumer spending slowed more than previously estimated and the housing slump worsened. The economy shrank 0.2 percent in the fourth quarter last year, compared with a previously reported 0.6 percent gain.
First-quarter figures were also revised down to show a 0.9 pace of growth compared with a prior estimate of 1 percent.
Economists' Forecasts
The median forecast of economists for the second quarter GDP figures was based on 79 estimates in a Bloomberg News survey. Today's report is the first for the period and will be revised in August and September as more information becomes available.
Declines in growth in the revisions are reinforcing the recession signals sent by the loss of jobs so far this year. Still, a downturn is unlikely to be officially declared for months to come.
The NBER, the Cambridge, Massachusetts-based arbiter of economic cycles, defines a recession as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in GDP, payrolls, production, sales and incomes. The NBER usually declares a recession six to 18 months after it begins.
Bush would become the first president since Richard Nixon to have two recessions while in office, after the downturn from March to November of 2001.
The housing slump continued to hurt the economy, even as the decline moderated. Residential construction dropped at a 15.6 percent annual pace after dropping 25.1 percent in the first three months of the year. The decline detracted 0.6 percentage point from growth, the smallest reduction in more than two years.
Consumer Spending
Consumer spending last quarter grew at a 1.5 percent pace, less than anticipated, compared with a 0.9 percent gain in the January-to-March period that was the smallest in 13 years.
Most economists are forecasting the lift from the rebates will fade in the second half of the year. Retail sales rose 0.1 percent in June, less than forecast, indicating consumers may already have started to retrench at the end of the quarter.
Shoppers are hunting for bargains to stretch the buying power of the stimulus checks. Wal-Mart Stores Inc., the largest retailer, said same-store sales in June rose 5.8 percent, the biggest increase in four years, as costumers spent the rebate money on discounted gasoline and food.
`Struggling' Americans
``At times like now, when the average American is struggling with the cost of everyday needs, price matters,'' Eduardo Castro- Wright, chief executive officer of Wal-Mart's U.S. stores division, told shareholders last month.
The price index in today's report rose at an annual rate of 1.1 percent, the smallest increase since 1998 and down from 2.6 percent in the first quarter.
Investors are betting the Fed will keep the benchmark rate unchanged at 2 percent at its Aug. 5 meeting, according to federal funds futures contracts. Odds of an increase by year-end fell to about 60 percent today from 69 percent yesterday, futures prices showed.
Bloomberg.com: U.S.
July 31 (Bloomberg) -- Exxon Mobil Corp., the world's biggest oil company, posted a smaller increase in second-quarter profit than analysts estimated after production slid the most in at least a decade, sending its shares lower.
Oil and gas output tumbled 7.8 percent after Venezuela seized assets, Nigerian workers went on strike and governments from Angola to Russia kept more crude under contracts that give them a bigger share when prices rise. Crude climbed above $140 a barrel for the first time, allowing Exxon Mobil to achieve the highest profit ever for a U.S. company without one-time gains.
Net income rose to $11.7 billion, or $2.22 a share, from $10.3 billion, or $1.83, a year earlier, the Irving, Texas-based company said today in a statement. Excluding costs related to the Valdez oil-spill lawsuit, per-share profit was 26 cents below the average of 12 analyst estimates compiled by Bloomberg.
``They are not growing,'' said Philip Weiss, an analyst at Argus Research in New York who rates Exxon Mobil shares ``buy'' and owns none. ``Production is becoming more and more of a concern. For these guys, access to reserves is a very big issue.''
Chief Executive Officer Rex Tillerson, 56, is spending $52 million a day to search for new fields after reserves fell in 2007 by the most in at least a decade. Exxon Mobil plans to start 12 projects this year that will pump the equivalent of 411,000 barrels of crude a day, more than the daily output of Prudhoe Bay, the largest U.S. oil field.
Refining Profit Falls
Record energy prices inflated costs for Exxon Mobil plants that process crude and natural gas into fuels and chemicals. Profits from refining and chemicals fell 54 percent and 32 percent, respectively. U.S. gasoline futures rose at less than half the pace of crude during the quarter.
Exxon Mobil fell $2.68, or 3.2 percent, to $81.70 at 12:02 p.m. in New York Stock Exchange composite trading. The shortfall in earnings per share relative to analyst estimates was the company's biggest in at least three years. The stock has dropped 13 percent this year.
Royal Dutch Shell Plc, Europe's largest oil producer, today reported a 33 percent gain in second-quarter profit to $11.6 billion. London-based BP Plc said earlier this week that its net income climbed 28 percent to $9.47 billion. Shell's output fell 1.6 percent, and BP's was little changed from a year earlier.
Chevron Corp., the second-biggest U.S. oil company, and France's Total SA are scheduled to report earnings tomorrow. ConocoPhillips, the third-largest U.S. petroleum producer, said last week that its profit jumped to a record $5.44 billion.
Production Falls
Exxon Mobil pumped the equivalent of 3.8 million barrels of oil a day, its lowest average since the third quarter of 2005. Crude production declined in every region where the company has wells, and gas output fell everywhere except Russia, Europe and Africa. Production-sharing contracts with price triggers took away 160,000 barrels of daily oil equivalent, company spokesman Henry Hubble told investors on a conference call.
Profit from oil and gas sales climbed 68 percent to $10 billion.
``If oil prices are going up $20 and $30 a barrel a quarter like they have been, it hides a lot of flaws,'' said Brian Gibbons, an analyst at New York-based CreditSights Inc. ``The question on everyone's mind is, how do these guys expect to grow production given the restrictions on access to reserves?''
Tillerson, who succeeded Lee Raymond as CEO in January 2006, is facing increasing barriers to oil and gas exploration in Russia, Alaska and the South China Sea as governments limit access or raise the costs of tapping natural resources.
Price Impact
New York oil futures, which had never traded as high as $112 before the second quarter, surged to a record $143.67 in June. Each $1 gain in the price of oil boosts Exxon Mobil's net income by 11 cents a share, according to William Featherston, an analyst at UBS Securities LLC.
Natural gas rose even faster than oil in this year's first half, and the average second-quarter price jumped 50 percent to $11.47 per million British thermal units. Exxon Mobil's output is about 60 percent crude and 40 percent gas. Oil and gas sales account for more than 80 percent of profit.
Exxon said its second-quarter revenue jumped 40 percent to $138.1 billion. The company said it had $290 million in after- tax costs related to the June ruling by the U.S. Supreme Court that reduced a punitive damage award for the 1989 Valdez spill from $2.5 billion.
Exxon Mobil generates about $27 of cash flow from each barrel of production, 21 percent higher than the industry average, Gibbons said. The company was the most efficient oil and gas producer among its peers, yielding almost $3 of cash flow for every $1 spent, he said.
To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.
Mortgage rates drop as commodities ease - Jul. 31, 2008
NEW YORK (CNNMoney.com) -- Mortgage rates fell slightly this week according to a weekly report released Wednesday, as lower oil prices briefly ease fears of price inflation.
The Primary Mortgage Market Survey from mortgage finance company Freddie Mac said that rates of 30-year fixed-rate mortgages (FRMs) averaged 6.52% for the week ended July 31 with an average 0.7 point discount, down from an average 6.63% last week, and down from an average of 6.68% recorded during the same week last year.
The 15-year FRM averaged 6.07% this week with an average of 0.6 point, down from 6.18% last week, and down from 6.32% last year.
A point, or "discount point," can be purchased at the time of closing to decrease the mortgage rate. Each point costs 1% of the loan amount and each point that a borrower purchases lowers the the loan interest rate.
Five-year adjustable-rate mortgages (ARMs) averaged 6.07% this week, with an average 0.6 point, down from last week when it averaged 6.16%. A year ago, the 5-year ARM averaged 6.29%.
One-year ARMs averaged 5.27% this week with an average 0.6 point, down from last week when it was 5.49%. At this time last year, the 1-year ARM averaged 5.59%.
"Mortgage rates moved lower this week as a drop in commodity prices eased market concerns over inflation pressures," said Freddie Mac chief economist Frank Nothaft in a statement.
The price of gasoline at the pump continued to fall below $4 a gallon as crude oil prices have fallen nearly $23 a barrel over the past several weeks from its peak of $147.27 on July 11.
"Yes, there is some influence in hope for less inflation pressure, but we'd need a more extended period of these softening prices" to see a significant decline, said Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information. 
