Monthly Archives: April 2009

Monday Wall Street Dives as Investors Dump Financials

Now at 7,907, down 233. Rachel

NEW YORK (AP) — Investors are having doubts about banks’ recent profit reports and wondering whether the better-than-expected performance masks larger problems with bad debt.

Stocks fell sharply Monday as investors sold financial stocks and locked in profits after a six-week rally. The major indexes tumbled 2-3 percent, including the Dow Jones industrial average, which fell 230 points.

Worries about the financial industry overshadowed Oracle Corp.’s announcement that it would acquire Sun Microsystems Inc. for $7.4 billion and a $6 billion bid by PepsiCo Inc. to buy its two biggest bottlers.

Drops in commodities like oil weighed on energy and materials stocks.

The selling came at the start of the busiest week yet for companies reporting results from the first three months of the year. Investors are looking for signals that a rally from 12-year lows in early March can continue.

Wall Street has been emboldened by tentative signals that the economy could be stabilizing, but after a 24 percent surge in the Dow Jones industrial average some investors are asking whether the market has risen too quickly.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are now viewing bank earnings with more skepticism amid concerns that even the better-than-expected results are disguising problems. Income from trading and low-corowing rates have boosted results but not erased more difficult problems with bad debt, he said.

“They’re looking at bank numbers and are saying they are not that great,” Saluzzi said.

In midday trading, the Dow fell 231.30, or 2.8 percent, to 7,900.03.

Broader stock indicators also lost ground. The Standard & Poor’s 500 index fell 29.53, or 3.4 percent, to 840.07, and the Nasdaq composite index fell 58.45, or 3.5 percent, to 1,614.62.

About 10 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 605 million shares.

Concerns about the sustainability of bank earnings weighed on financial stocks. Bank of America reported earnings that were higher than expected in the first quarter but also set aside $13.4 billion to cover losses on souring debt. The stock fell 16.2 percent.

Citigroup Inc. fell 15.6 percent, while JPMorgan lost 4.5 percent.

Jeffrey Frankel, president of Stuart Frankel & Co. in New York, said the retreat in financial stocks is welcome after their sharp rise from early March since rising too quickly could endanger their gains. Many bank stocks have doubled in only weeks.

“These banks have had a tremendous run,” Frankel said. “Now you’re hearing the bearish camp speak up a little bit.”

Investors are also cautious about financials after The New York Times reported that the White House and the Treasury Department could avoid having to ask for more money beyond the $700 billion already allocated for the government’s bank rescue fund by converting the government’s loans into common stock. Such a move would give the government a controlling stake in banks.

Wall Street was more upbeat about the Oracle deal, which carries a 42 percent premium to Sun’s Friday closing stock price of $6.69. Sun jumped 36 percent, while Oracle slipped 2.7 percent.

Beverage and snack maker PepsiCo Inc. offered to acquire Pepsi Bottling Group and PepsiAmericas in an effort to cut costs. Pepsi lost 3.9 percent, while Pepsi Bottling and PepsiAmericas both jumped about 21 percent.

In earnings news, drug maker Eli Lilly & Co.’s first-quarter earnings rose 24 percent on higher sales of the antidepressant Cymbalta and as costs for Humalog, a form of insulin Lilly makes, remained flat. Shares slipped 1.3 percent.

Hasbro Inc. fell 3.8 percent after the nation’s second-largest toy maker said first-quarter profit fell 47 percent because of a stronger dollar and as retailers reduced inventory levels.

Investors are parsing earnings for information on the direction of the economy. Since March, figures on home sales, manufacturing, retail sales and even unemployment have signaled that the economy might not be worsening as quickly as it had been earlier in the year.

Light, sweet crude fell $4.21 to $46.12 a barrel on the New York Mercantile Exchange.

Occidental Petroleum Corp. lost 5.9 percent, while Dow Chemical Co. fell 8.2 percent.

In other market moves, the Russell 2000 index of smaller companies fell 23.33, or 4.9 percent, to 456.04.

Bond prices mostly rose, sending the yield on the 10-year Treasury note down to 2.84 percent from 2.95 percent late Friday. The yield on the three-month T-bill was unchanged at 0.13 percent.

The dollar was mixed against other major currencies, while gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.19 percent. In afternoon trading, Britain’s FTSE 100 fell 2.8 percent, Germany’s DAX index fell 4 percent, and France’s CAC-40 fell 3.7 percent.

More with Ken Burns …


I had a chance to talk with documentary filmmaker Ken Burns during his visit to IslandWood on Sunday. I asked him what was next for him, now that “The National Parks: America’s Best Idea” is pretty much in the can.

Burns said he’ll do an update to his baseball series, and one of his focuses will be on Ichiro. Also, he’s excited about an upcoming project about gun- and liquor-running into the Northwest during Prohibition.

It was wonderful to see the kids under the direction of Marie Marrs from Eagle Harbor High School so engaged about filmmaking, and to have this opportunity, well, was pretty fantastic. 

Rachel Pritchett

Kitsap Business Briefs

Colliers Picked
to Sell Sites on
City’s Waterfront


Colliers International has been awarded the listing of new condos on the Bremerton waterfront. 

Current plans call for 637 residential units and 11,500 square feet of waterfront retail space. The portfolio offers developers the opportunity to break ground immediately on the site closest to the Seattle ferry, while owning virtually all the district’s major waterfront multifamily locations for development in the years to come.  

Pet Sitter Opens
in Port Orchard

Port Orchard

Hart to Heart Pet Sitting has opened its doors in Port Orchard. 

Hart to Heart provides pet owners with an alternative to kenneling pets while they’re away from home. 

Owner Jo Anne Hartman has years of experience with care of all types of household pets, as well as horses. She also has years of experience working with animal rescue organizations and the Humane Society.

The firm is licensed, bonded and insured and employees are Red Cross Certified in pet first aid and CPR. Areas of service are Port Orchard, Bremerton, Belfair and Gig Harbor. Reach them at (360) 876-6058.

Kitsap County UPS Stores Encourage
Peanut Recycling


In celebration of Earth Day April 22, The UPS Stores in Kitsap County to bring in clean foam packaging peanuts of all sizes, shapes and colors for reuse.

This is part of an ongoing effort by The UPS Stores to increase peanut recycling throughout the year. According to the Plastic Loose Fill Council, more than 30 percent of plastic loose-fill is used again. For business centers such as The UPS Stores, that reuse rate can be as high as 50 percent.

The UPS Stores locations in Kitsap County are 3377 Bethel Road SE, Suite 107, in Port Orchard; 19689 Seventh Ave. NE in Poulsbo; 321 High School Road NE on Bainbridge Island; 2916 NW Bucklin Hill Road in Silverdale; and 8000 Werner Road in Bremerton.

New Business
Helps Others
With Web Sites


North Kitsap-based Labyrinth Hill has established a new division, Cascadia Seminars, to update local businesses on how to improve the results they get through their Web sites. Its first seminar is scheduled for Wednesday. 

For registration information, visit or call (360) 638-2642.

Computer Training
Center Opens in CK


Information Systems Professionals of Silverdale has expanded its IT support business to include a new computer-training facility at 3500 Bucklin Hill Road in Silverdale.

ISP’s goal is to help students stay competitive in the workplace by improving and expanding their computing skills and productivity when working with Microsoft business applications and Intuit QuickBooks. Info: (360) 662-0111 or


On the Job

Lanny Ross has been elected to the supervisory committee of the Kitsap Credit Union board of directors, where he will represent KCU members. He is superintendent of the Puget Sound Naval Shipyard welding shop, overseeing more than 900 employees. He serves as the regional vice president of the National Association of Active and Retired Federal Employees.

Brian Cox of Pacific Asset Management in Port Orchard has earned certification as an investment adviser representative. The exam, administered by the Financial Industry Regulation Authority, measures proficiency on such topics as retirement planning, portfolio managing strategies and fiduciary obligations. Cox will work both in Port Orchard, as well as in Redondo Beach, Calif., where his wife plays professional soccer for the Los Angeles Sol and the U.S. Women’s National Team.

Teyanna Dohermann has been chosen associate of the month for March at Express Employment Professionals of Kitsap County, where she is currently working as a medical assistant. 

Sean Spencer has been promoted to vice president and commercial loan officer at Bremerton-based Westsound Bank. He is a 33-year resident of Kitsap County who lives in Port Orchard with his wife Angela, their young daughter Eva and soon to arrive son. He has been a commercial loan officer with Westsound Bank since June of 2005, and is a former professional baseball player who pitched for the Seattle Mariners, Montreal Expos and the Baltimore Orioles. He also pitched for the Greek Olympic team in the 2004 Athens Olympics. 

Billi Jean Gurnsey of Port Orchard, formerly of Wave Media Services, has joined Wave’s Business Solutions team, a division of the Kirkland-based cable, Internet and phone services company. She has previously worked for such companies as Wave Media Services, the Kitsap Sun, The Olympian, Lamont’s, and KGHO and KTOL radio stations. Reach her at (360) 620-7582.

Chris Rieland, CEO and president of Pacific Northwest Title Co., recently received the Economic Development Champion Award from Kitsap Development Alliance for instinctive creativity, enthusiasm and unwavering commitment to Kitsap County’s economic vitality. In 2004, she was named a board member; she served as its chair for the 2007-2008 term and was influential in re-engineering a new direction for the organization.


April 28

What: Port Orchard Chamber of Commerce will sponsor a Community Affairs Forum April 28. The chamber invites the community to join them and South Kitsap County Commissioner Charlotte Garrido for an update on county activities and projects. A question and answer period will be held.

When: 7:30 a.m.

Where: Bayview Deli and Java, 1213 Bay St. in Port Orchard

Cost: Free


April 29

What: The Silverdale Chamber of Commerce will feature an April 29 luncheon with a number of activities to encourage participation and interaction. It also will feature a business showcase, highlighting businesses that specialize in health and wellness products and services. The public is invited to attend. Bring lots of business cards and be prepared to get to know new people.

When: 11:30 a.m. to 1 p.m.

Where: Silverdale Beach Hotel, 3037 NW Bucklin Hill Road in Silverdale

Cost: $18 if paid by April 24, otherwise $22. A meal will be guaranteed if the reservation is made before the April 24

Reservations: Requested; call the chamber at (360) 692-6800 or online at


May 13

What: Patrick Snow will discuss “Creating Your Own Destiny” at the May 13 luncheon meeting of Greater Poulsbo Chamber of Commerce.

When: 11:30 a.m. networking; noon lunch

Where: Kiana Lodge, 14976 Sandy Hook Road NE in Suquamish


May 14

What: The Port Orchard Chamber of Commerce will have a membership meeting with Amber Carter from the Association of Washington Business speaking on “Key Tax Measures of 2009 Legislature and How to Comply.” Non-members are welcome.

When: 11:30 a.m.

Where: Clubhouse at McCormick Woods, 5155 McCormick Woods Drive SW in Port Orchard

Cost: $20 if prepaid, $22 at the door; non-members, $22 in advance

Reservations: Required; online at or by calling (360) 876-3505 by May 12


May 28

What: The Port Orchard Chamber of Commerce will hold its 2009 Business Showcase, Business After Hours and Best of South Kitsap Awards May 28. Businesses are invited to showcase their business and services and network. The public is welcome.

When: 5 to 8 p.m.

Where: Port Orchard Armory,1950 Mile Hill Drive in Port Orchard

Cost: $100 for members, $200 for non-members

Reservation: Required; space is limited so reserve early by calling (360) 876-3505

Update on Richard LeMieux …

This from the Buffalo (New York) News …

DUNKIRK—Inspired by the author of a book about being homeless, a Dunkirk church is taking action to give comfort and cleanliness to the homeless.

First United Methodist Church on Sixth Street will open men’s and women’s shower facilities and a washing machine and dryer in honor of author Richard LeMieux’s visit to the community Saturday and next Sunday.

LeMieux’s “Breakfast at Sally’s” is a firsthand account of two years of living homeless on the streets of Bremerton, Wash. The book details his struggles to stay warm and find food for himself and his dog, Willow. Thoughts of suicide were stopped only by loyalty to his canine companion.

“Who would take care of Willow?” he reasoned.

In honor of LeMieux, the church has named its homeless project “The Willow Mission.”

The Rev. Amy Fitzgerald said parishioners were motivated to develop the rest-room facilities.

“They read the book and decided to take action,” she said.

LeMieux was impressed. “Pastor Amy is so enthusiastic,” he

said. “I have never experienced anything like what is being done in Dunkirk.”

LeMieux’s account of homelessness has drawn widespread attention, including in Washington, where he lives, and in Ohio, where he was a newspaper sportswriter for 17 years.

Once a successful writer and publisher, LeMieux said that as one of the homeless, he often felt like he was just watching the world from the outside. But his loss of family, friends, wealth and possessions taught him about the power of friends and people who care.

He has been transformed. “Since the book was published I have

taken my life from the depths of despair, depression, fear, anger, bewilderment and not caring to now — and now I want to live forever,” he said.

“I want to enjoy the opportunity to help others,” he said.

LeMieux said he still goes to Sally’s — his pet name for the Salvation Army – where he enjoys meals, talks to homeless people he knew from his years on the streets and encourages them to help the new homeless — those impoverished by the economic slump — find their next meal or a safe place to sleep.

“Honestly, at one point I thought there was no purpose in my life, but the book has taken on its own life,” LeMieux said. “People like those at the church in Dunkirk are writing the next chapter.”

A simple shower was an important issue when he lived on the streets, and he was lucky enough to have someone at the YMCA allow him to use the shower free of charge once a week. LeMieux said he found safety in churches and eventually, a pastor and his family helped free him from a life on the streets.

LeMieux, who currently draws Social Security, lives in a small apartment. He hasn’t forgotten the hand extended his way and offers rides to the homeless and spends most of his time trying to help out when he can.

He will speak and sign his book at 6:30 p. m. Saturday in St. Elizabeth Ann Seton Catholic Church, 328 Washington Ave.

LeMieux also will speak at the 11 a. m. service next Sunday in First United Methodist Church.

One Blogger’s View On Further Credit-Card Limits

I don’t agree with the whining protectionism about protecting people from credit cards.  What I do have a problem with is the credit companies using the current market conditions as an excuse to take predatory actions against people like me — punishing me to cover their losses from people who have defaulted.  There has been a lot of this from more than one of my creditors (I am a small businessman; I usually do consulting work) but the stunt that Chase pulled on me stands out.
I have a large balance with Chase under a promotional rate that was frozen for the lifetime of the balance, provided that I don’t make a late payment.  A few months ago they sent me a letter.  Hey, remember that deal we made, when you transferred those balances to us?  Even though you have never been late with a payment in the fifteen years we’ve done business with you, we’re not happy with that now, because of “challenging business conditions”.  
Chase gave me two choices.  Either give up that lifetime promo rate we agreed on, or else we will accelerate your repayment by increasing the minimum monthly payment as high as we possibly can within our legal rights.
Being that things are very hard right now, having that minimum payment increase from $250 to $650 was simply not an option. I had no choice but to agree to give up the promo rate.  
Is this legal?  Yes, it is.  Is this ethical?  I don’t care, really, business is business. But is this predatory? ABSOLUTELY this is predatory.
Aaron Salo

Monday Stocks Will Start on Positive Note

Now at 8,131, up .6 percent. The Standard & Poor’s 500 index rose 13.04, or 1.5 percent, to 869.60. The Nasdaq composite index rose 20.53, or 1.2 percent, to 1,673.07. The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 8,889.64, up 145.08, or 1.7 percent, for the week. A year ago, the index was at 14,910.93.

NEW YORK (AP) — Wall Street found enough in the latest earnings reports to keep its six-week rally alive.

Stocks ended another winning week with a slender advance Friday as earnings from Citigroup Inc. and General Electric Co. came in ahead of the market’s meager expectations.

The numbers weren’t great by normal standards but were good enough to extend a rally that began in early March on signs that the economy might be finding some stability. Citigroup was the fourth bank in a week with news that pointed toward a budding recovery in the industry. But the company, echoing comments from JPMorgan Chase & Co. on Thursday, also said loan losses are expected to continue in the months ahead.

GE, meanwhile, said its first-quarter earnings dropped 36 percent as sales and profits shrank at its GE Capital financial division. The stock edged up 1 percent.

Kent Engelke, chief economic strategist at Capitol Securities Management, said the results placated investors. “If these companies didn’t meet or exceed these expectations, we would have gotten killed,” he said.

Wall Street showed resilience in the first big week of first-quarter earnings reports, weathering disappointments from chip maker Intel Corp. and Google Inc. While investors weren’t happy with Friday’s news, they weren’t caving to uncertainty as they did the first two months of the year, when heavy selling brought the major indexes to 12-year lows.

“I think most people realize there are still causes for concern, but maybe not causes for panic,” said Carl Beck, a partner at Harris Financial Group, a Colonial Heights, Va.-based investment advisory firm.

Stocks fluctuated for much of Friday to end with slight gains. The Dow Jones industrial average rose 5.90, or 0.1 percent, to 8,131.33.

The Standard & Poor’s 500 index added 4.30, or 0.5 percent, to 869.60, while the Nasdaq composite index rose 2.63, or 0.2 percent, to 1,673.07.

For the week, the Dow is up 48 points, or 0.6 percent, giving the average six straight up weeks. That’s the longest streak since it rose for seven straight weeks in the period ended May 18, 2007.

The S&P 500 index posted a gain for the week of 1.5 percent. The Nasdaq is up 1.2 percent for the week and 6 percent for the year.

Wall Street’s rally began in early March after Citigroup reported it had operated at a profit during the first two months of the year. A string of more upbeat economic and earnings data gave the rally momentum, but, as often happens during earnings season, the market has stumbled when companies have unsettling news.

With the bulk of first-quarter reports still to come in the next two weeks, the market is likely to see some turbulence as investors try to assess company by company how the overall economy is doing. While that tends to be Wall Street’s pattern during any earnings period, the anxiety is particularly heightened right now as investors hope for an end to the recession.

While Wells Fargo & Co., Goldman Sachs Group Inc. and JPMorgan Chase have all reported profits that surpassed expectations, some of those gains came on trading activity that’s not expected to continue. And companies that depend heavily on lending are still seeing borrowers default because of the recession.

“I think the response is guarded,” said Joseph Tatusko, chief investment officer at Westport Resources Management. “There are waves of defaults and credit issues that have yet to come on shore.”

Citigroup reported a quarterly loss of just under $1 billion, less than analysts expected. A year ago, the bank suffered a loss of more than $5 billion. Its shares lost 9 percent, falling 36 cents to $3.65.

Two other major banks, Bank of America Corp. and Morgan Stanley, will report results next week. Other big reports due next week include Boeing Co., Coca-Cola Co., IBM Corp. and McDonald’s Corp.

Mattel Inc., the largest U.S. toymaker, said Friday that weak overseas sales and cautious orders from retailers led to a wider loss than expected. But the stock jumped $1.98, or 15.2 percent, to $15.01 after the company said sales of Barbie rose 18 percent in the U.S.

Mobile phone maker Sony Ericsson posted a $387 million loss and said it would cut an additional 2,000 jobs, while Toshiba Corp., Japan’s top chipmaker, warned that its loss for the last fiscal year will be bigger than expected.

Investors were cautious during the week, mindful that poor earnings reports could easily send the market reeling. Stocks dipped earlier this week on poor retail sales and an unexpected drop in wholesale prices, but better-than-expected earnings reports from JPMorgan and Nokia Corp. helped the market snap back. The Dow and the S&P 500 index are at their highest levels in more than two months and the Nasdaq is at its highest level of the year.

Jim Herrick, director of equity trading at Baird & Co. attributed some of the buying to short-covering. This occurs when investors who earlier sold borrowed stock on expectations of a market drop are forced to buy back those shares. The pattern of stocks fluctuating in early trading only to move higher late in the day has been a recurring theme in the past few days.

In other trading, the Russell 2000 index of smaller companies rose 5.49, or 1.2 percent, to 479.37.

About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 7.1 billion shares, compared with 6.43 billion Thursday.

Bond prices dipped, sending the yield on the 10-year Treasury note up to 2.95 percent from 2.83 percent.

Light, sweet crude added 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.

Overseas, Britain’s FTSE 100 rose 1.0 percent, Germany’s DAX index gained 1.5 percent, and France’s CAC-40 rose 1.8 percent. Japan’s Nikkei stock average rose 1.7 percent.

And What If GM Goes Bankrupt?

DETROIT (AP) — A Chapter 11 filing might be the most effective way to overhaul General Motors Corp., but that doesn’t mean the sweeping changes that are possible in bankruptcy court are going to be quick or easy.

GM CEO Fritz Henderson said Friday that the company still would prefer to restructure out of court as it tries to prove it can survive to repay its $13.4 billion in government loans, but he conceded that bankruptcy protection is more probable than it was in the past.

Henderson said in a conference call with reporters that GM is simultaneously restructuring out of court and planning for Chapter 11. The company would either file a prearranged bankruptcy in which stakeholders agree to take cuts, or use a section of the federal code that allows companies to sell off bad assets and keep good ones.

Experts say there are many reasons why the quick, “surgical” bankruptcy that GM may seek won’t be as smooth or as fast as the company and U.S. government expect.

“It would be a mammoth undertaking,” said Jon Groetzinger, a visiting law professor at Case Western Reserve University in Cleveland. “It has been done, not on a scale quite as big as GM.”

In order for it to go quickly, GM would have to gain agreements from creditors to wipe out debts, unions to change contracts, and perhaps dealers to alter franchise agreements, experts said. There could be thousands of claims from employees, retirees, parts suppliers and others that would have to be heard by the court.

“The only way it would be speedy was if they had all the agreements in advance. But then why would you need it?” asked Doug Bernstein, a lawyer with Plunkett Cooney PC in Bloomfield Hills, Mich.

It’s overly optimistic to think GM can go in and out of bankruptcy for a “quick rinse” of its troubles in as little as two weeks to four months, according to Bernstein. The process, he said, could drag on because creditors could object to contract changes and be heard in court. Experts say six months would be considered quick.

Key to emerging quickly would be advance deals with the United Auto Workers union and holders of roughly $28 billion in GM bond debt. Bondholders are being asked to take stock for part of their debt, while the union is negotiating to accept stock for roughly $20 billion in payments GM must make to a trust that will take over retiree health care costs next year.

Henderson said there has been dialogue but no intense talks with a bondholders’ committee. Negotiations with the union have taken a back seat to talks at Chrysler LLC, which faces an April 30 deadline to finish restructuring and forge an alliance with Italy’s Fiat Group SpA. GM’s deadline to give the government completed restructuring plans is June 1.

The decision to file for bankruptcy would be made with the Treasury Department’s autos task force and GM’s board, and the government is not pressuring GM to file, Henderson said.

“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process,” he said. “That continues today. But I wouldn’t be able to hazard a guess as to what the probabilities would be.”

Henderson mentioned Section 363 of the bankruptcy code, in which companies under court supervision auction off bad assets while keeping good ones.

“The first thing a company will do when they go into bankruptcy is figure out what their bum assets are,” Groetzinger said. “It’s a way of shedding the nonproductive or less-productive assets.”

But such auctions need time for the company to line up bidders, and creditors may object to the terms, he said. GM’s good assets also could be auctioned, he said.

Even if GM gets deals outside of bankruptcy to exchange debt for equity, slash benefits, or close showrooms, not every bondholder, retiree or dealer will agree, said Steve Mertz, a partner with the Faegre & Benson law firm in Minneapolis.

“At the end of the end of the day you’re going to have to use the bankruptcy process to implement whatever agreements they negotiated outside of bankruptcy,” he said.

Regardless of how GM is restructured, the automaker will need more government aid in the second quarter, Henderson said, although further loans haven’t been approved. The company said in February that it would need $4.6 billion in the quarter, and that hasn’t changed, he said.

Meanwhile, GM is finding ways to make deeper cuts than its Feb. 17 viability plan outlined. Henderson emphasized that more factories will be shuttered beyond the five closures GM announced in February. The factories have not been identified.

More employees will lose their jobs this year than the 47,000 the company had planned to lay off two months ago.

GM is also working to slash its portfolio of eight brands.

Henderson expects final bids from three potential Hummer buyers by next week, with a decision expected by the end of April. He said several parties are interested in GM’s troubled Saab unit. GM revealed this week that a number of groups have proposed to take over Saturn.

More than six parties are interested in buying a stake in GM’s Opel unit in Germany, and Henderson said he expects work to be done in the next two to three weeks.

But despite reports that GM is under pressure to get even smaller, Henderson emphasized that the company’s plan calls for the automaker to keep four core brands — Chevrolet, Cadillac, GMC and Buick. He said GMC and Buick are highly profitable.

Henderson also said the company will not sell its ACDelco parts division, despite having potential buyers.

“It’s a highly profitable business for us. It’s creating good, strong cash flow,” Henderson said. “Our conclusion was that we weren’t going to get the value for the business.”

Henderson also said the company’s April sales were “OK,” but he did not elaborate.

GM shares fell 8 cents, or 4.1 percent, to $1.86 Friday.

Mixed Signals, Yes, But Economy Still Mired

The Associated Press

Companies are turning in surprisingly good quarterly earnings — including better-than-expected news Friday from two relative weaklings in the banking and manufacturing industries — but economists say a recovery is probably still months away.

Of the 52 companies in the Standard & Poor’s 500 stock index that have reported first-quarter earnings so far, 62 percent have posted results that beat Wall Street expectations. And recent data have provided faint hope of a comeback.

Not so fast, economists say.

Mark Vitner, senior economist at Wachovia Corp., said that despite “that just maybe we can see some light at the end of the tunnel now,” an end to the recession won’t likely come until closer to year’s end.

Even under that scenario, high unemployment would stretch well into 2010.

“I don’t think we should oversell these flickers of improvement,” said Brian Bethune, an economist with IHS Global Insight. “An actual recovery is still several months into the future — it’s not imminent.”

The latest grim reminder came Friday night when regulators seized two failed banks in Missouri and Nevada, pushing the number of U.S. bank failures so far this year to 25 — the same as for all of 2008.

On Friday, Citigroup Inc. and General Electric Co., two of the most beleaguered companies in their industries, turned in first-quarter results that beat Wall Street expectations.

Citi lost money for the quarter, but before paying dividends — which were tied to the government’s $45 billion investment in the company — it actually earned $1.6 billion.

That report followed surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. earlier in the week. But some analysts say the earnings announcements are concealing the depth of the financial industry’s woes.

Goldman Sachs changed its calendar so a $780 million loss in December didn’t drag down its reported earnings for the quarter. Wells Fargo minimized possible future losses on its purchase of failed bank Wachovia.

And thanks to a recent rule change, many banks were able to pump up the values of the toxic assets at the heart of the credit crunch. The change is “like a gain that goes right to their bottom line,” said Lawrence Brown, an accounting professor at Georgia State University.

Looming over the banks is uncertainty over “stress tests” that regulators are conducting. Investors don’t know how much information will be made public when results are announced May 4. But even faint reports of trouble could threaten the industry.

White House senior economist Austan Goolsbee said Friday the stress tests should show to what degree the accounting rule change affected the banks’ bottom lines.

“In these bank examinations you’ve got some pretty well-adept examiners and regulators,” Goolsbee said in a C-SPAN interview that will air this weekend. “If there was some element of gamesmanship, I don’t think they’re going to be fooled by that.”

The positive bank earnings reports hopefully are a sign that the government’s financial rescue policies are starting to breathe life into the frozen credit markets, Goolsbee said. “And I hope that’s what we will find when we come through” the stress tests, he added.

GE, meanwhile, said its first-quarter earnings fell 36 percent on sharply lower profits at its troubled finance arm. GE has a stake in nearly every sector of the economy, from light bulbs to locomotives.

“We’ve come from a period where people thought the world was going to end to a period that is a little better,” Keith Sherin, GE’s chief financial officer, told analysts in a conference call.

On Wall Street, stocks seesawed before closing moderately higher, giving the market its sixth straight week of gains. The Dow Jones industrial average closed up 5 points, at 8,131.

There has been some silver in recent economic data. The number of Americans receiving jobless benefits has topped 6 million for the first time, but jobless claims were down for the second weekend in a row.

And housing construction unexpectedly plunged in March, though construction of single-family homes has stabilized somewhat.

Most analysts think a bottom has been reached in sales of new and previously occupied homes. Homebuyers are rushing to take advantage of lower prices, incentives and interest rates. February sales of new and existing homes showed monthly gains.

A series of Federal Reserve snapshots from around the country released earlier this week found some faint signs that the steep drop in economic activity that began last fall is starting to level off.

Administration officials this week pressed their economic agenda by pointing to signs of life.

“By no means are we out of the woods just yet,” President Barack Obama said in a speech on the economy. “But from where we stand, for the very first time, we are beginning to see glimmers of hope.”

New problems could still emerge. A wave of defaults linked to commercial mortgages has caused concern for companies that loaded up on securities backed by the those loans. Securities tied to credit cards pose a similar fear.

Just this week, the second-largest owner of shopping malls in the nation, General Growth Properties Inc., buckled under $27 billion in debt and filed for Chapter 11 bankruptcy protection.

General Motors Corp. acknowledged Friday that a bankruptcy filing remains probable because of the government-set restructuring goals it must meet to get federal aid beyond the $13.4 billion it’s already received.

Other CEOs have been more positive. There are signs of mild optimism from the technology sector, especially the claim by Intel Corp. CEO Paul Otellini that the PC market had “bottomed out” after going through its worst stretch since 2002. Research group IDC said the PC industry could turn around by the end of the year.

But other signals weren’t as good. Cell phone maker Nokia Corp. reported a 90 percent drop in profits and said it still looks like the market for mobile devices will shrink this year. Rival Sony Ericsson lost money.

And even the Internet’s biggest profit engine, Google Inc., showed it was singed by the recession, posting its weakest revenue growth in nearly five years as a public company.

In the skies, American Airlines parent AMR Corp. and low-cost carrier Southwest Airlines both reported losses and predicted weak demand at least for the near future. Fewer people are flying, and airlines have to cut fares to lure those who still fly.

A Love Affair With Penny Slots

Yes, there are penny slots at Suquamish Clearwater Casino Resort, in case you’re interested. Rachel

KANSAS CITY, Mo. (AP) — Gamblers may be cutting back like other consumers, but one thing they’re not doing is pinching pennies.

Their spending on penny gambling machines produced about one-fourth of all slot machine revenue in Nevada last year, and more in other states. In Missouri, one of few states where gambling revenue rose in 2008, more than half of all casino revenue came from penny slots. For many casinos, penny slots are producing the only kind of revenue that’s rising.

Gamblers say they like the machines — which were impractical before quiet paper payouts started replacing the tumbling bucketfuls of coins in a jackpot — because they can play longer for the same amount of money.

No matter that casinos like penny slots because they’re more lucrative for the house.

“It’s all just for recreation,” said Kansas City resident Cora Logan, 72, who was playing a penny slot machine at Isle of Capri in Kansas City on her 42nd wedding anniversary. “When you come here, don’t expect to win. If you put a lot of money in these you’re crazy.”

The four casinos in Kansas City, like most across the country, serve mainly local markets, as opposed to “fly-in” markets like Las Vegas, China’s Macau and, to some degree, Atlantic City in New Jersey. That means most casinos depend heavily on low-rollers who visit often. Logan, who said she hadn’t expected to win when she and her husband walked in, was up $100 after three hours.

“Affordability is why people love them,” said Frank Legato, a slot machine expert and editor of Las Vegas-based Global Gaming Business magazine. “Casinos just love them because the average bets are the same as the quarter or dollar games, but their house edge is bigger on these games.

“People playing penny machines are not concerned about that. They just want to have fun and play a long time with little money.”

To play penny slots — which include video poker machines and slots with colorful video narratives, as well as machines that look and operate more like traditional one-arm bandits — gamblers place electronic bets in one- or two-cent increments. The machines allow wagers anywhere from one penny to $10 or more per spin.

Gamblers feed the machines cash — or credit cards, in some states — and any winnings are paid out with a paper ticket that can be redeemed at a cashier’s cage or money machine or used to place more bets.

With 3-D video graphics, bonus spins and familiar story lines like “Star Wars” or “Wizard of Oz,” the machines provide a form of “active participatory entertainment” that wasn’t available with the old three-reel slots. That makes them especially big among people who go to casinos for the social aspect.

“I’m just here to have fun,” said Stephanie Wright, 41, of Kansas City, as she played a one-cent “Blazing 7s” machine at Isle of Capri. “My boyfriend plays cards and I like to sit and play these while he does that.”

Wright used to play quarters in her roughly weekly visits to Kansas City casinos before she got hooked on penny slots.

“If you want to bet the max, you can, but I go low,” she said. “Sometimes I get excited and go big once in a while, but usually I don’t bet that much.”

Missouri’s 12 casinos hold nearly 11,000 penny slots, more than half their machines. Statewide, penny slots brought in $81.1 million in February alone, which is about 55 percent of the $146.6 million casinos won during the month.

In adjacent Illinois, which lost gamblers to Missouri in 2008 when a smoking ban went into effect, penny slots brought in $18.9 million in February, or roughly 15.4 percent of $123.3 million in total casino revenue for the month.

Missouri is among five states — Iowa, Indiana, South Dakota and Pennsylvania are the others — where commercial gambling revenue rose in 2008, while it fell 8.5 percent nationwide. Tribal casinos’ revenue is not counted in national tallies.

Darrell Pilant, vice president and assistant general manager at Harrah’s in North Kansas City, said the number of penny machines is growing because patrons prefer them. And he thinks that growth will continue as new technology makes no-coin play even more appealing.

“I can’t say that in three years or five years every machine on the floor will be video, but certainly at some point there will be fewer and fewer traditional slot machines,” he said.

Higher-denomination, three-reel slot machines will always be in demand among hard-core gamblers who play for large jackpots and not necessarily entertainment, he said. But their presence in casinos is gradually diminishing.

Before coinless payment technology came on the scene in 2001, gamblers’ winnings clanged into a metal hopper, creating the din that typically greeted casino visitors. Cashing out nickel jackpots could be especially annoying when a machine ran out of coins and an attendant had to refill it midway through a payout. And the gambler always came away with not just buckets full of nickels that had to be exchanged, but dirty hands from dealing with so many coins.

Without a paper receipt, Kansas City’s Logan would have been saddled with more than 55 pounds of pennies — at 181 pennies per pound — when she won that $100 on her anniversary.

Technological changes have made the concept of denomination almost irrelevant, experts say. Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno said the term penny slots is a misnomer because most wagers on the devices are much greater.

“There’s a touch of delusion to this whole discussion,” Eadington said. “The average play per spin is obviously way above a penny — usually the 30- to 50-cent range, depending on the market.”

Pilant compares someone losing $30 or $40 in a slot machine over a few hours with a person who spends the same amount going to a ball game or night on the town.

That’s a familiar tack among casinos as they market the entertainment aspects of gambling and lessen their focus on who is most likely to leave the casino with less than they brought in.

And penny slots, because they keep people in their seats longer, play right into that theme — especially in markets that depend on return customers.

“The difference we talk about is frequency,” Pilant said. “Vegas is a low-frequency market. A Kansas City customer might go there twice a year but maybe 40 times here. The decisions are different in Kansas City than in Vegas. At the end of the day you’ve got to make sure the customer who lives in your market is loyal to you.”

Obama to Address Credit Card Abuses; Tell Us Your Story


Give me a call or e-mail me with your experience with credit-card debt, or with how you think Congress and the president should go with this.

Rachel Pritchett, business report

(360) 475-3783

WASHINGTON (AP) — The White House says that it will back congressional efforts to clamp down on credit card abuses in an effort to address the recession’s effect on Main Street.

The House and Senate are considering a credit card bill of rights to limit the ability of credit card companies to raise interest rates on existing balances and to require greater disclosure. White House economic adviser Larry Summers said people need to save more, but that the government also needs to curb credit card pitches that addict people to plastic.

President Barack Obama is “going to be very focused, in a very near term, on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn’t have paid if they knew what they were getting themselves into,” Summers said.

Summers said the administration wants to see a better-regulated financial system, encourage savings and eventually get back to a situation where government spending is not a drain on the economy.

“Individuals are going to have to save more, that’s why savings incentives are so important,” he said. “That’s why we need to do things to stop the marketing of credit in ways that addicts people to it — so that our households are again saving, and families are again preparing to send kids to college, for their retirement, and so forth.”

Summers made the comments in an interview broadcast Sunday on NBC’s “Meet the Press.” He was attending a summit of Western Hemispheric leaders in Trinidad and Tobago.