Business and Finance

Federal regulators on Wednesday imposed new curbs on the practice of short-selling, hoping to prevent spiraling sales sprees in a stock that can stoke market turmoil.

The Securities and Exchange Commission, divided along party lines, voted 3-2 at a public meeting to adopt a new rule. Investors and lawmakers have clamored for the agency to put such brakes on trading moves they say worsened the market’s downturn in the fall of 2008.

The rule puts in a so-called circuit breaker for stock prices, restricting short-selling of a stock that has dropped 10 percent or more for the rest of a trading session and the next one. The new curbs will take effect in about 60 days, but stock exchanges have six months after that to implement them guaranteed approval cash loans.

Short-sellers bet against a stock, in a practice that is legal and widely used on Wall Street. They borrow a company’s shares, sell them and then buy them when the stock falls and return them to the lender — pocketing the difference in price.

The SEC move followed months of wrestling with the controversial issue. The SEC asked for public comment last April on several alternative approaches to restraining short-selling, and a bipartisan group of senators have pushed the agency to act or face legislation. The agency got more than 4,300 comments on the issue.

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After days of speculation, Houston oil service companies Schlumberger Ltd. and Smith International Inc. jointly announced today plans to merger in a stock transaction valued at about $11 billion.

Smith shareholders will receive 0.6966 shares of Schlumberger in exchange for each Smith share. Based on the closing stock prices for both companies on Feb. 18, the agreement places a value of $45.84 per Smith share – 37.5 percent higher than Smith’s Feb. 18 closing price of $33.35.

Upon closing, Smith stockholders collectively will own approximately 12.8 percent of Schlumberger's outstanding shares of common stock.

Andrew Gould, Schlumberger’s chairman and chief executive officer, said that Smith’s drilling technologies, other products and expertise complement those of Schlumberger.

Smith CEO John Yearwood predicts accelerated technology development for the combined company’s customers.

Said Yearwood: “Schlumberger offers Smith's various segments enhanced engineering and design capability to place our products and expertise at the center of the total drilling system of the future.”

The deal, which is subject to regulatory and Smith stockholder approvals, is expected to close in the latter part of the year. It will create an industry giant with revenues double that of rival Halliburton Co. (NYSE: HAL).

For 2009, Schlumberger (NYSE: SLB) and Smith (NYSE: SII) reported revenue of $22.7 billion and $8.2 billion, respectively.

Meanwhile, Halliburton posted 2009 revenue of $14.7 billion.

Schlumberger expects to realize incremental pretax synergies — after integration costs –of approximately $160 million in 2011 and approximately $320 million in 2012. Schlumberger expects the combination to be accretive to earnings per share in 2012.

On Feb. 19, Smith’s stock shot up by more than 14 percent to a new 52-week-high of $38.16 in heavy trading after The Wall Street Journal reported that the company was in advanced talks to be acquired by Schlumberger.

There was no word yet as to how many jobs might be impacted by the transaction.

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Early reports from stores on the holiday shopping season looked good. But it turns out retail sales actually fell in December, leaving economists scratching their heads about the state of the recovery.

Sales dropped 0.3 percent from November, mostly because people spent less on cars and appliances, the government said Thursday. For the year, sales fell 6.2 percent. Economists said the monthly decline could just be a blip and suggested looking at the past two months together, which would show spending rising modestly. But with unemployment high and credit tight, the report shows the recovery remains tentative.

"I wasn’t expecting this. It’s a bit of a puzzle," said Scott Hoyt, senior director of consumer economics at Moody’s Economy.com. "Consumer spending is growing very weakly, but the key thing is that it’s growing."

Retail sales have now fallen two years in a row. The decline in 2008 was much smaller, 0.5 percent. They are the only two years sales have fallen since the government started keeping records in 1992 bad credit unsecured personal loans.

For December, there was a 0.8 percent decline in auto sales, even as automakers report higher sales. That could be because fewer luxury cars were sold and automakers offered more incentives, said Jeff Schuster, executive director of automotive forecasting for J.D. Power.

The next few months still look scary for retailers. Stores are finding shoppers have little reason to buy now that the holidays have passed. January sales are off to a weaker-than-expected start, according to the International Council of Shopping Centers.

People "don’t see the best in front of them," said Eric Bender, retail analyst at Brean Murray, Carret & Co. "There is a tremendous amount of uncertainty."

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Four decades ago Stewart Brand opened The Whole Earth Catalog with a rollicking mission statement: "We are as gods, and might as well get good at it."

It was an apt mantra for the eco-friendly, do-it-yourself lifestyle guide, which was so clever it won a National Book Award. Now a futurist, author, and business consultant, Brand opens his latest book, Whole Earth Discipline: An Ecopragmatist Manifesto, with an urgent update of his youthful declaration: "We are as gods and HAVE to get good at it."

The cause for urgency is climate change. Until 2003, Brand writes, "I had only the usual concerns" about the seemingly "dire but distant" issue. Then he saw studies of Greenland ice cores revealing that, in the past, the climate has tipped into a radically different state, such as an ice age, in less than a decade.

Runaway positive feedback is the likely cause. Here’s an example: As human greenhouse emissions mount, global warming causes mirror-like polar ice to give way to dark ocean. That makes the Arctic absorb more solar heat, which melts more ice, leading to yet more heat absorption. This and other positive feedbacks are likely driving the ominously fast melting of Arctic ice, which was half gone by the summer of 2007, three to four decades earlier than predicted — the great melt is unfolding with tipping-point-like speed.

Channeling climate scientists, Brand predicts that fresh water and other resources will be in desperately short supply in many areas of a climate-changed world. A global state of constant war over dwindling resources might well ensue, killing billions.

Too dire? Consider: Tibetan Plateau glaciers, which feed shared rivers of China, India, Pakistan, and other Asian countries, are now melting away to expose a drought-prone tinderbox filled with vying nuclear powers, as well as "feral zones" controlled by Al Qaeda and its allies. If increasingly plausible worst-case scenarios play out, Brand tersely observes, "we’re ants on a burning log."

His scary analysis is the setup for a hopeful, though controversial, message: All may still be well if we get really good at using tools many Greens love to hate cash advance payday loans. To wit: urbanization (which enables efficiencies of scale and lower per-capita use of resources), nuclear power (to displace coal’s heavy greenhouse emissions), biotech (to engender, among other things, biofuel-producing microbes and drought-resistant crops), and geoengineering (such as lofting megatons of smoky particulates into the stratosphere to block sunlight and cool the climate).

Brand’s case for parting ways with environmentalism’s old guard rests largely on surprising developments that, he freely acknowledges, have shown some of his former views were wrong. Who knew that the rise of developing-world megacities, with their sprawling slums, would defuse the population bomb? (In rural villages, Brand notes, "every additional child is an asset, but in the slum, every additional child is a liability, so the newly liberated women in town focus on education and opportunity — on fewer, higher-quality children.")

That the expected number of excess cancers from the Chernobyl nuclear disaster would now be less than 1% of initial projections, and that the Chernobyl area would be a uniquely biodiverse wildlife sanctuary teeming with rare species? That the widespread cultivation of bioengineered corn, once thought to kill monarch butterflies, appears to be greatly benefiting them?

Not surprisingly, Brand’s iconoclasm has heated up the blogosphere, and some deep-dyed Greens apparently feel the trailblazer whose whole-earth visions seeded the first Earth Day in 1970 is doing a Lieberman.

Wrong.

Brand has always been an Obama-like, big-picture pragmatist — his famous catalog’s supreme virtue was its usefulness. And while some of his positions cry out for debate — I’m not sure I’d trust a real god to attempt geoengineering, much less us fumbling, self-taught ones — no one has brought more breadth, clarity, and cogency to bear on the biggest issue of our time. At 70, environmentalism’s pithiest polemicist has outdone himself, giving us one of the most important green tracts since Silent Spring. Read it. 

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Morgan Stanley Asia Ltd. Chairman Stephen Roach said U.S. policy makers should start to exit emergency stimulus measures now if the economic recovery is as strong as they say it is.

“There is never an easy time to do it,” Roach said on Bloomberg Television today. “The longer they wait, the greater the chance they sow the seeds for the next bubble. So I’m in favor of an early exit strategy.”

The Federal Reserve on Dec. 16 pledged to keep interest rates “exceptionally low” for an “extended period” even as officials said financial markets were healthy enough to allow most emergency lending programs to expire at the end of this month. Chairman Ben S. Bernanke and his fellow policy makers cut the benchmark rate almost to zero in December 2008.

“We’ve seen the most extraordinary monetary stimulus on the record in the 15, 16 months post-Lehman Brothers,” Roach said. “We’ll have to see the most extraordinary withdrawal of stimulus on record” and “if this recovery is as strong as Bernanke and markets think it is, the time to exit is now.”

Data since the Nov. 3-4 Fed meeting showed that “economic activity has continued to pick up and that the deterioration in the labor market is abating,” the Open Market Committee said in a Dec. 16 statement. “Financial market conditions have become more supportive of economic growth,” while the economy is “likely to remain weak for a time,” policy makers said free business cards.

Roach, in a separate interview on WBBR radio, also disagreed with Bernanke’s argument put forward on Jan. 3 that low central bank interest rates didn’t cause the housing bubble of the past decade.

‘Ludicrous’ Claim

“I think it’s ludicrous to think that monetary policy didn’t play any role in causing the so-called subprime crisis,” Roach said. “Bernanke is really digging in his heels here, this is a point of view that he developed as an academic when he was at Princeton.”

Roach argued during the boom that central banks should prevent asset prices from rising too far, in contrast with Fed officials including former Chairman Alan Greenspan.

Bernanke “embraced Greenspan’s philosophy in the same fashion, arguing that monetary policy should not be used to address asset bubbles, this is more of a regulatory oversight issue,” Roach said. “The regulatory oversight function failed hugely in the last seven or eight years but I would argue so did monetary policy.”

“I think we need to take a very careful look at monetary policy and central bankers who do not believe that interest rates played a role in this crisis,” he said. “I think that view is dead wrong.”

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The number of Americans filing for initial unemployment insurance jumped last week, the government said Thursday, with a figure that was above analysts’ expectations.

There were 474,000 initial job claims filed in the week ended Dec. 5, up 17,000 from the previous week’s unrevised 457,000, the lowest level since September 2008, the Labor Department said in its weekly report.

A consensus estimate of economists surveyed by Briefing.com expected 455,000 new claims.

The 4-week moving average of initial claims was 473,750, down 7,750 from the previous week’s revised average of 481,500

"Today’s number is less surprising than last week’s and takes the wind out of the sails for hopes of a super fast recovery. But 474,000 would have been a welcoming number not too long ago." Said Tim Quinlan, economist at Wells Fargo. "We’re still seeing a gradual, relative improvement in the job market."

Continuing claims: The government said 5,157,000 people filed continuing claims in the week ended Nov. 28, the most recent data available. That’s 303,000 down from the preceding week’s revised 5,460,000 claims.

The 4-week moving average for ongoing claims fell by 123,500 to 5,416,500 from the previous week’s revised 5,540,000.

But the slide may signal that more filers are dropping off those rolls into extended benefits.

Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, or people whose benefits have expired.

Congress passed legislation last month to extend federally paid benefits up to 99 weeks, depending on the state, but the law only helps those who exhaust the unemployment lifelines by the year’s end no fax payday loans.

Lawmakers in the House and the Senate introduced bills last week to push the deadline to apply for unemployment benefits as far back as 2011.

State-by-state: Jobless claims in 21 states declined by more than 1,000 for the week ended Nov. 28, the most recent data available. Claims in California dropped the most, by 28,672, which the state attributed to a shorter work week due to the Thanksgiving holiday and fewer layoffs in the service industry.

Seven states said the claims increased by more than 1,000. Claims in Wisconsin jumped by 8,067, which a state-supplied comment said was due to layoffs in the construction, service and manufacturing industries.

Outlook. While claims popped from their downward trajectory, Quinlan said the figure is lower than the number filed in October and most of November, and a significant improvement from the filings in March that were above 600,000.

"One week is not a trend maker," said Quinlan, adding that when claims fell from 580,000 to 534,000 between mid-August and mid-September, they jumped back up above 550,000 in the last week of September before declining again.

"We’ve seen a recovery in every sector of the economy except the job market, and now that last segment is finally falling into place," he said. "The second half of 2009 has been characterized by a slowing in the pace of job losses. The first half of 2010, we should see actual job growth."  

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State Treasurer Ben Westlund on Tuesday announced a $5 million investment in Marquam Hill Capital.

The Beaverton firm is launching a venture capital fund that will help Portland-area businesses connect with researchers at Oregon Health & Science University. The money is expected to help launch medical-related startup businesses developing products for the prevention and treatment of cancer.

The $5 million investment was made through the Oregon Growth Account, which is managed by the state treasurer.

Created in 1995, the Growth Account invests a portion of Oregon Lottery money in Oregon businesses.

To date, the program has invested roughly $93 million of state money. As of March, it had generated $18 million in earnings.

The investment is contingent on the Marquam Hill Capital Fund raising an additional $20 million.

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Dubai World’s debt problems are a wake-up call that the economic recovery is still fragile and that there are still risks, OECD Secretary General Angel Gurria told Reuters.

Gurria said the incident had reminded markets of growing debt concerns, something that should prompt governments to be cautious in withdrawing from large stimulus measures to boost growth after the worst global recession in decades.

Dubai spooked financial markets last week when it said two flagship firms, Dubai World and its Nakheel unit, planned to delay repaying billions of dollars in debts.

Dubai World “is a reminder of the fragility of the recovery process and that fact that it is still in its infancy and that there are still downside risks,” Gurria told Reuters during a summit of Ibero-American leaders in Portugal. “It’s a property development gone bad, but a big one.”

He said governments should “keep their guard up,” and err on the side of caution when deciding to cut stimulus packages.

“It’s better to stay a little longer than to withdraw too early,” Gurria said. “There is now also this parallel concern that debt is accumulating at a very fast speed and that obviously is a problem because markets are also getting very tense about that.”

Dubai has alerted markets to those risks in recent days as have growing budget deficits in some countries, such as Greece which saw a widening of its bond spreads last week.

Gurria said the downturn was taking its toll on balance sheets.

“So you are having a lot of pressure on many balance sheets because of market related portfolios, that are not subprime, they weren’t wrong in the beginning, but they are getting sour because of the economic situation in general,” he said.

Gurria also warned of the growing risks of the so-called carry trade, whereby investors borrow funds in a currency with low interest rates or countries such as the United States to finance investments in countries with higher-yielding assets like China, driving prices higher.

“There is a danger of creating a bubble, because if you have a very large flow into a relatively stable number of assets you create inflation in the prices that is not consistent with the real change in value of the assets,” he said.

He said assets such as Chinese stocks had risen much more than many other markets because of this process.

“You can create artificially high prices which can then with one piece of bad news or one movement in the exchange rate or interest rates suddenly burst, and that is when you have a disorderly adjustment,” Gurria said.

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An "excessively loud" triceratops and a little girl’s chemical-laced purse were among the items listed in the U.S. Public Interest Research Group’s 2009 list of dangerous toys released Tuesday.

The 24th annual report, "Trouble in Toyland," targeted 16 examples of toys in 3 categories: toys that it considers dangerously loud, or containing small parts that may present choking hazards for small children, or containing toxic chemicals or lead.

The toys are made or marketed by various companies throughout the world.

Small parts

In the first category, the PIRG, a public advocacy organization, listed toys that "pose potential choking hazards." This included three toys that "may violate" the ban on small parts for children under three, such as the Creative Wood Stacking Rings from Zaidy Products, the Real Wood Shape Sorter Barn from P&C Enterprise and an "unnamed play food tray" from World Market.

The PIRG also identified several toys with small parts that come uncomfortably close to violating bans, thereby posing potential hazards. This includes one of the Baby Born toy kids from Zapf Creation, the Pizza Planet Gift Pak from Mattel, the FurReal Baby Bird from Hasbro (HAS) and the Worky tool set from Nemmer.

"Although the toys do not violate the letter of the law, these parts could block a child’s airway given their shape and size," the report said.

The report said that the baby bottle included with the FurReal Baby Bird "barely passes the small parts test." But Hasbro said the "allegations are false."

"The FurReal Friends product does not contain small parts, is properly age graded for kids four and up, and the packaging contains the appropriate labeling," said a Hasbro spokeswoman, in an e-mail.

Excessively loud

The PIRG also listed several toys deemed "excessively loud" at close range, meaning that they match or exceed 85 decibels within 25 centimeters of the toy, presenting a risk of hearing loss.

The organization pegged the loud toys as the Kota and Pals Stompers Triceratops from Playskool, the Secret Saturdays Cryptid Claw from Mattel (MAT, Fortune 500), the Laugh & Learn Learning Phone from Fisher Price and the Bright Lights Phone from VTech.

Hasbro said, in an e-mail to CNNMoney.com, that its triceratops "complies with all sound requirements."

Lead and chemicals

Five products made the list for containing lead or "potentially toxic chemicals."

This includes a Touch and Feel Cloth Book called "Big Rex and Friends" from Priddy Books. The PIRG said that a red dot on one of the pages contains lead. Likewise, the Alligator Cell Phone charm from the Claire’s retail chain also contains lead, the organization said easy payday loan.

The organization also identified a Collector’s Series toy duck that has lead paint on its face and body. The organization said that the manufacturer of this toy was unknown, but that it was purchased at a Dollar Tree store.

A Dollar Tree spokesman told CNNMoney.com that PIRG informed his company of the lead-tainted duck on Oct. 29, and it was removed from stores at that time.

The PIRG identified two toys containing "potentially toxic" chemicals known as phthalates, including Pretty Princess Puppy Purse from Claire’s and the Elmo Lunch Bag from Fast Forward New York. (See correction.)

A spokesman for Claire’s, Steven Anreder, said the retailer is no longer selling the alligator phone charm. He also said the charm and the puppy purse are not toys.

The organization initially reported that Sassy manufactured the Elmo Lunch Bag. But Rick Locker, a lawyer representing Sassy, told CNNMoney.com that Sassy had nothing to do with the product. He sent the PIRG a letter requesting them to "cease and desist from disseminating erroneous information." The PIRG retracted the misidentification and said it regretted the error.

Efforts to reach other companies named in the report were not immediately successful.

A toy industry group reacted to the PIRG list.

"Protecting children will always be the toy industry’s highest priority," said Joan Lawrence, vice president of safety standards for the Toy Industry Association, in an e-mail to CNNMoney.com. "Consumers have every reason to trust the safety of the three billion toys sold in America each year."

Jonathan Samet, publisher of thetoyinsider.com, an industry observer, said that he didn’t want to minimize PIRG’s warnings, but the noise warnings did not concern him as much as choking and lead.

"Choking is obviously the biggest issue," he said. "Right now, I think safety testing is at its highest level that it’s probably ever been. If you are concerned, then take the toy away from the child and either return the toy to the retailer or just throw it away."

The PIRG released its list just three days ahead of Black Friday, one of the busiest shopping days of the year. This year, Black Friday retail sales are expected to outpace 2008, with 16% more shoppers participating.

Correction: An earlier version of this article, because of erroneous information released by U.S. PIRG, listed an incorrect manufacturer of the Elmo Lunch Bag.  

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On an overcast English morning, two women from middle England are out shopping. They duck first into the Gucci boutique, fingering discounted handbags and rifling through racks of last season’s fashion lineup. Dolce & Gabbana is next, followed by Armani.

The outlet boutiques — among 136 clustered along a cobblestone outdoor shopping center called Bicester (BIS-ter) Village about an hour’s drive from London — are mobbed with bargain-seekers even at an early hour.

"You get value for money here," says Ann Prentice, who pauses to chat only briefly before her friend hustles her off to Valentino. "My husband is in business, so it’s hard for us just now, but I don’t mind paying more for quality."

Luxury outlet malls are the one bright spot of brisk trade going into the holiday shopping season. In recent weeks, retailers have reported small but still rather anemic signs of recovery. Yet sales numbers show that consumers have been flocking to discount outlets all year long, despite the recession.

Value Retail, the London-based company that owns the largest string of luxury outlets in Europe, including Bicester Village, has seen sales rise 20% to just over 1 billion euro ($1.5 billion) in the first three quarters of this year compared with 2008. (Sales totals are for the nine cities where its Chic Outlet Shopping outlets are located, including Milan, Paris, Dublin, Munich, and Madrid.) Foot traffic also rose 10% in the third quarter to 6.5 million shoppers.

When sales are tabulated for the fourth quarter, the growth is expected to be off the charts given the almost complete retail freeze of the fourth quarter of 2008. That compares with predictions of flat or at most a 2% increase in spending across the retail sector over the holiday shopping period.

Value Retail, whose major investor also owns part of the sprawling Woodbury Common outlet mall outside of New York City, has seen its growth this year double the average over the past 14 years, when sales increased at a rate of about 10% annually, according to Scott Malkin, Value Retail’s chairman.

"It’s human nature to indulge," Malkin says. "I think we’ve gone away from ‘I need more for the sake of more and more,’ to people being more discerning in what they purchase."

That sentiment has benefited luxury outlets in a year when full-priced luxury sales have been forecast to fall as much as 10%, according to Bain & Co. consultants.

Rather than view outlet shopping as cannibalizing from their High Street or Madison Avenue sales, luxury retailers in fact have welcomed the opportunity to sell excess merchandise in a slow time, while reaching a separate segment of customers to whom they wouldn’t normally be able to sell.

"We’re a service to the brand," says Desirée Bollier, the CEO of Value Retail Management low rates payday advance. "The brands have a lot more stock they want to dispose of, elegantly. We’re a platform for them that is quality, with a customer that is aspirational."

These so-called "aspirational" customers — those who may not be as wealthy as the typical elite luxury buyer, but will still purchase a few high-end pieces — now make up 60% of luxury buyers overall, according to Bernstein Research, an arm of AllianceBernstein.

"Before the recession, we were nice to have," says Bollier, referring to luxury outlets. "With the recession we’re a must. Our customers are not your fashionistas. She’s not going to buy the ‘It’ bag, but she recognizes the quality of a timeless piece."

Still, some fashion-forward heavy hitters are among the recent shoppers at these outlet malls: Stars Elizabeth Hurley and Victoria Beckham have been spotted in Bicester Village recently. Over the summer, a Saudi princess arrived with a retinue of 70 people. Tipped off in advance, says Malkin, the luxury brands sent out the Arabic speakers from their stores in London for the day to accommodate the entourage.

Most of Value Retail’s shoppers make the outlets a day-trip destination from the cities they’re visiting, or if they’re local residents, they may drive an average of two to three hours to reach an outlet mall. Some of these customers feel too intimidated to walk into a full-priced luxury boutique for the first time, so buying an item at a discount outlet can build confidence and allow shoppers to trade up. Rather than look for a dress to wear for an upcoming Saturday night, for example, they’re shopping for more enduring or signature items — at discounts of up to 60%.

"We use the expression, ‘guilt-free shopping,’" Malkin says, a particularly important sentiment in a recession. "What we’ve seen in the last 18 months is that women will buy something at full price in the center of Paris or London or Madrid and tell people that they bought the item at one of our villages. It’s a ways of avoiding conflict, of not wanting to seem better off than their friends and create discomfort and guilt."

The hope, of course, is that aspirational customers will be so satisfied with the items they purchase that they will eventually trade up into becoming luxury customers themselves, paying full price.

"People nine months ago said luxury is finished," says Malkin. "That’s nonsense. There will always be luxury, just that the nature of it will always be evolving." 

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