Argentina celebrates bond payoff as end of an era

by MICHAEL WARREN (Associated Press Writer Almudena Calatrava contributed to this story.)
Associated Press 8/2/2012

BUENOS AIRES, Argentina — Bond payoffs are supposed to be boring, but Argentina’s president is celebrating Friday’s final $2.3 billion payment on a bond given to people whose savings were confiscated a decade ago, calling it a lesson for European countries now mired in foreign debt.

The nation’s economic disaster left thousands with a grim choice after the government seized their dollar-denominated deposits to stop bank runs in 2002. They could switch to devalued pesos and regain access to what was left of their savings, or accept a piece of paper promising to repay the money in dollars over the next 10 years.

Few had any faith in the government’s promises back then. Argentina had just defaulted on more than $100 billion in foreign debt, banks were shuttered, the economy was in ruins and streets were filled with pot-banging protesters whose chants of “throw them all out” would send five presidents packing.

But Argentina has mostly paid up after all, making good on 92.4 percent of that defaulted debt so far, including $19.6 billion in U.S. currency over the years to cancel the Boden 2012 bond. Most of the hard-luck account-holders later sold the bonds at a loss, but as the government makes its last $2.3 billion payment on Friday, the few stalwarts who kept the faith have been made whole, while earning a modest 28 percent profit over the years.

“It was good business” for anyone who got the bonds early and held them, said Jorge Oteiza, a bond trader with Banco Comafi in Argentina. “To have the same buying power you had back then isn’t bad.”

President Cristina Fernandez praised her government for meeting its commitments and blamed multinational financial institutions for the debt crises that afflicted Argentina back then and threaten Europe today.

“This is the money that the banks should have returned to the Argentine citizens,” she said during a national address from the Buenos Aires stock exchange Thursday night. Showing charts and rattling off numbers, she argued that her government has shown the world how to emerge from default without imposing austerity measures, while growing its economy and strengthening the social safety net.

This debt relief “has given us an immense independence from the activity of the market,” she said to applause from the hundreds of guests she had invited onto the exchange floor.

Argentina’s foreign-currency debt has dropped from a daunting 166 percent of GDP at the end of 2002 to a more manageable 42 percent of GDP at the end of 2011, said Ramiro Castineira of the Econometrica consulting firm. “If before it was a burden to shoulder, now it’s just a handbag. It doesn’t restrict the economy as it did in the past,” he said.

However, the debt has grown in nominal terms during the same period, from $137 billion to $179 billion.

Many economists suggest the official story is misleading at best, since the government has refused to pay billions of dollars in other bad debts while borrowing freely within Argentina, taking money from pension funds, provinces, state-owned banks and the central reserve to stimulate the economy and reduce its foreign debt exposure.

In her determination to make Argentina financially independent, critics say Fernandez has only shifted the debt burden onto her citizens, imposing terms that could stunt the country’s future growth. For example, the government promised to pay negative 0.25 percent interest over 10 years for the $27.9 billion it took from the central bank for debt relief.

“It’s wonderful to see Argentina pay down debt, but for every dollar they’re paying down, they’re borrowing two or three through the other window, and increasingly from their own people,” said Arturo Porzecanski, an expert on emerging markets at American University in Washington.

Economy Minister Hernan Lorenzino proudly described the Argentine recipe in a column Wednesday published by Telam, the government news agency: Spurn the requirements of the International Monetary Fund and World Bank. Strong-arm the so-called “vulture funds” into accepting lower returns on their risky bets. Nationalize private pension plans, the airline and now the YPF oil company, putting their assets to use creating jobs. And tap central bank reserves to pay down international debts.

Frozen out of international markets as a consequence of the 2002 default, this government made breaking their rules a point of pride, Lorenzino suggested.

“At first, they called us heretics and the international community turned its back on us,” he recalled. But “this government makes policies today without conceding to international pressure, thinking first of those on the inside, and later on those outside.”

Lorenzino has said this government will not take on more international debts. Not that it could: Friday’s payoff still doesn’t resolve nearly $7.5 billion it owes the U.S. and other Paris Club nations, or the $11.2 billion claimed in U.S. courts by bond holdouts.

Argentina also owes millions in court judgments to U.S. companies, and Spain’s Repsol Group wants $10.5 billion for its shares in YPF that Fernandez expropriated this year. Many of these investors would try to seize any newly borrowed money before it reaches Buenos Aires.

Lorenzino suggested that Argentina’s renegade approach makes it better prepared to confront global crises because the portion of its debt held by the private sector has dropped from 124 percent of GDP a decade ago to 14 percent last year. “This was possible only under the concept of economic independence, political sovereignty and social justice,” Lorenzino wrote.

But this shift from private to public debt means that the government is essentially borrowing from Argentine taxpayers and bank account holders to stimulate its economy, at rates far below inflation, which is estimated at 25 percent a year or more. Unless this changes soon, the money could run out and there will be few other places to turn for help.

“This is no longer an ‘us-versus-them’ problem,” Porzecanski said. “At first they went after the big multinationals, then the ‘filthy-rich bondholders,’ then powerful institutions like the IMF. Now it has become a fight for financial resources within Argentina. That’s why I think the end is coming.”

Family Net Worth Drops to Level of Early ’90s, Fed Says

NY Times – June 11, 2012

WASHINGTON — The recent economic crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.

Andrew Harrer/Bloomberg News

A house for sale in Washington. Falling home prices accounted for three-quarters of the losses in net worth.

A hypothetical family richer than half the nation’s families and poorer than the other half had a net worth of $77,300 in 2010, compared with $126,400 in 2007, the Fed said. The crash of housing prices directly accounted for three-quarters of the loss.

Families’ income also continued to decline, a trend that predated the crisis but accelerated over the same period. Median family income fell to $45,800 in 2010 from $49,600 in 2007. All figures were adjusted for inflation.

The new data comes from the Fed’s much-anticipated release on Monday of its Survey of Consumer Finances, a report issued every three years that is one of the broadest and deepest sources of information about the financial health of American families.

While the numbers are already 18 months old, the survey illuminates problems that continue to slow the pace of the economic recovery. The Fed found that middle-class families had sustained the largest percentage losses in both wealth and income during the crisis, limiting their ability and willingness to spend.

“It fills in details to a picture that we already knew was quite ugly, and these details very much underscore that,” said Jared Bernstein, an economist at the Center on Budget and Policy Priorities who served as an adviser to Vice President Joseph R. Biden Jr. “It makes clear how devastating this has been for the middle class.”

Given the scale of those losses, consumer spending has remained surprisingly resilient. The survey also illuminates where the money is coming from: American families saved less and only slowly repaid debts.

The share of families saving anything over the previous year fell to 52 percent in 2010 from 56.4 percent in 2007. Other government statistics show that total savings have increased since 2007, suggesting that a smaller group of families is saving more money, while a growing number manage to save nothing.

The survey also found a shift in the reasons that families set aside money, underscoring the lack of confidence that is weighing on the economy. More families said they were saving money as a precautionary measure, to make sure they had enough liquidity to meet short-term needs. Fewer said they were saving for retirement, or for education, or for a down payment on a home.

The report underscored the limited progress that households had made in reducing the amounts that they owed to lenders. The share of households reporting any debt declined by 2.1 percentage points over the last three years, but 74.9 percent of households still owed something, and the median amount did not change.

The decline in reported incomes could have increased the weight of those debts, tying up a larger share of families’ take-home pay. But one of the rare benefits of the crisis, historically lower interest rates, has helped to offset that effect. Families also have been able to reduce debt payments by refinancing into mortgages with longer terms and deferring repayment of student loans and other obligations.

The survey also confirmed that Americans are shifting the kinds of debts they carry. The share of families with credit card debt declined by 6.7 percentage points to 39.4 percent, and the median balance fell 16.1 percent to $2,600.

Families also reduced the number of credit cards that they carried, and 32 percent of families said they had no cards, up from 27 percent in 2007.

Conversely, the share of families with education-related debt rose to 19.2 percent in 2010 from 15.2 percent in 2007. The Fed noted that education loans made up a larger share of the average family’s obligations than loans to buy automobiles for the first time in the history of the survey.

The cumulative statistics concealed large disparities in the impact of the crisis.

Families with incomes in the middle 60 percent of the population lost a larger share of their wealth over the three-year period than the wealthiest and poorest families.

One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.

Those middle-income families also lost a larger share of their income. The earnings of the median family in the bottom 20 percent of the income distribution actually increased from 2007 to 2010, in part because of the expansion of government aid programs during the recession. Wealthier families, which derive more income from investments, were also cushioned against the recession.

The data does provide the latest indication, however, that the recession reduced income inequality in the United States, at least temporarily. The average income of the wealthiest families fell much more sharply than the median, indicating that some of those at the very top of the ladder slipped down at least a few rungs.

Ranking American families by income, the top 10 percent of households still earned an average of $349,000 in 2010.

The average net worth of the same families was $2.9 million.

Santa Cruz County unemployment at 13.6 percent despite the addition of 1,300 jobs

JONDI GUMZSanta Cruz Sentinel:   03/23/2012

SANTA CRUZ — Another 1,300 jobs were added in Santa Cruz County in February, but the labor force grew as well, putting unemployment at 13.6 percent compared to 13.5 percent in January, according to figures posted Friday by the state Employment Development Department.

Unemployment is higher, 15.3 percent, in Monterey County, and lower, 8.8 percent in Santa Clara County, home to Silicon Valley tech companies.

Santa Clara County is ahead of California, which has a jobless rate of 11.4 percent and nearly matches the nation at 8.7 percent.

Locally the jobs picture is improved from a year ago, when unemployment was 14.8 percent, and two years ago, when it was 15.5 percent.

Santa Cruz County reported 92,300 jobs in February, up 1,300 from January.

All of the increase came in nonfarm jobs, with 500 in private education and health services, 200 in business and professional services and 200 in retail and wholesale trade.

Construction, devastated by the collapse of the real estate market, increased from 2,600 to 2,700. Since the numbers are rounded up to the next 100, the increase could be smaller but even so it’s the first gain since March 2011.

The industry was consistently at 2,800 jobs from April to November of 2011, dropping back to 2,700 in December and 2,600 in January.

The last time this sector saw more than 3,000 jobs was in October 2010.

“Looking at month over, all but the farm jobs are either zero or positive,” said state labor analyst Jorge Villalobos.

All of the numbers were similar to 10-year averages, except in private education and health services, which added 200 more jobs than usual.

Compared to a year ago, Santa Cruz County has added 3,100 jobs, up 3.5 percent.

The leisure and hospitality sector is much healthier compared to a year ago, adding 1,300 jobs including 800 in food service and drinking places. The rebound is smaller in Monterey County, which has a strong tourism component but over the year added only 600 leisure and hospitality jobs including 300 in food and drinking places.

Other gains were in professional and business services, private education and health services, retail and manufacturing.

The reason unemployment inched upward despite an increase in people working in Santa Cruz County and commuting elsewhere is the size of the labor force.

The February labor force was reported as 151,200, up from 149,100 in January. Villalobos said one possibility is that previously discouraged workers when surveyed said they are looking for work and thus are counted in the labor force.

Has commercial real estate hit bottom in Santa Cruz County?


SC Sentinel 05/03/2010

SANTA CRUZ — The county’s once hot commercial real estate market has cooled considerably, with nearly a million square feet of office space empty at the start of the year and asking rates dropping compared to a year ago.

The market hasn’t hit the 1 million mark since 2004, according to Cassidy Turley BT Commercial, which reviews the data for Santa Cruz County quarterly.

Last week, Wells Fargo closed three bank branches as it completed its acquisition of Wachovia, putting new office space on the market in Capitola, Aptos and Scotts Valley. Sue Lewis, community president at Wells Fargo, said it didn’t make sense to keep them open because all three had bank branches nearby.

Leasing agent Matt Shelton of J.R. Parrish said activity picked up in the first quarter in Scotts Valley, which has the most commercial space in the county.

“We’ve leased more this year than in the last 18 months,” Shelton said.

The deals included: Embarcadero Technology, which leased 20,000 square feet in the Granite Creek Business Center, moving from the former Borland campus; helmet-maker Easton-Bell, which took another 11,000 square feet on Scotts Valley Drive and brought people here from Los Angeles; and Roku Networks, which expanded from 3,000 to 10,000 square feet on El Pueblo Drive.

University of the Pacific economist Jeffrey Michael predicts a slow five-year recovery for the state, with Silicon Valley showing early signs of growth. His forecast says sustained business investment is needed to sustain the recovery against forces such as state and local government cuts, foreclosures and tight credit conditions.

In Scotts Valley, office vacancy had risen to 18.9 percent at the end of 2009 compared to 17.7 percent a year before. Asking rates averaged $1.80 per square foot, down from $1.97.

Industrial vacancies rose to 7.3 percent from 3.3 percent in the same time frame, with the asking rate dropping 11 cents to 85 cents per square foot triple net.

In Mid-County, which includes Capitola, Aptos and Soquel, office vacancies rose from 4.4 percent to 7.9 percent while asking rates dropped 8 cents to $2.12 per square foot. Industrial vacancies grew from 3.5 percent to 4.8 percent, with asking rates falling 15 cents to 86 cents per square foot triple net.

Kohl’s took 11,000 square feet at the Capitola Mall and LED Green Power leased 7,350 square feet on Chanticleer Avenue in Santa Cruz but the Gottschalks space in the mall remains vacant.

Watsonville’s office vacancies rose from 5.4 percent to 8.2 percent; asking rates plummeted from $1.95 per square foot to $1.63. Driscoll Strawberry leased 8,600 square feet at the Westridge Business Park but Cassidy Turley called leasing “anemic.”

The normally stable industrial market eased with vacancies rising from 1 percent to 3.2 percent due in part to a large warehouse listed for sublease; asking rates dropped from 78 cents per square foot to 55 cents.

In the city of Santa Cruz, office vacancies edged up from 14.7 percent to 15.2 percent. Asking rates were $1.88 per square foot, off by just 4 cents.

The industrial market vacancy remained 8.7 percent. Staff of Life purchased the empty 18,000 square foot Pacific Coast car dealership on Soquel for its expansion project, but Cassidy Turley said leasing was sluggish.

Other major developments are on hold, including the Skypark Town Center in Scotts Valley, the Delaware Avenue mixed use project in Santa Cruz, and Sutter’s medical office planned on Chanticleer Avenue in Santa Cruz.

Shelton said a bigger Scotts Valley transaction, for 44,000 square feet, is “an inch away” from getting city approval.

It’s not already in the county and it’s not high-tech, he said, declining to name the firm until the deal is finalized.

“It gets better every day,” Shelton said. “The more people believe they’ve hit bottom, they’re more willing to make a move.”

Michael Schoeder of Cassidy Turley is representing Wells Fargo for the property available in Capitola and Scotts Valley.

The bank is asking $1.4 million for the former Wachovia building comprising 3,886 square feet at 1830 41st Ave. in Capitola near Whole Foods and the Capitola Mall. Already four offers have come in, according to Cassidy Turley managing broker Carol Canaris.

Wells Fargo has 3,420 square feet at 203 Mount Hermon Road in Scotts Valley is available for sublease; the lease expires March 31, 2012.

“If there’s a tenant we’ll take it,” said Jared Bogaard, whose family owns the building.

The vacant bank branch in Aptos was developed by Joe Appenrodt, who was unavailable to comment.

“Since the Aptos Village Plan passed it should become a very desirable space,” said Karen Hibble of the Aptos Chamber of Commerce. “It is a large space and parking is good as are the views from some of the windows. We certainly hope it does not remain vacant too long.”