News and Finance

How would you invest $10,000 in the coming year?

That’s a question posed annually to a panel of investment experts.

A year ago, our pundits were relatively optimistic as most suggested quality U.S. stock investments, along with some shorter-term bonds and global equities.

Having weathered a volatile year with more of the same likely ahead, they are retaining their basic strategies but spreading the hypothetical 10 grand among a wider number of investments. Some are increasing risk based on the possibility of economic improvement.

The panel now looks into its crystal ball for the coming investment year:

U.S. stock indexes rose in early trading Friday after 26 European nations agreed to consider tying their economies together more closely in hopes of preventing another debt crisis.

All 17 nations that use the euro will sign a treaty that allows a central European authority closer oversight of their budgets. Nine other EU nations are considering it. Britain is the sole holdout.

The Dow Jones industrial average rose 79 points, or 0.7 percent, to 12,076 in the first 15 minutes of trading. DuPont limited the Dow’s gains, falling more than 6.6 percent after the company said it expects earnings this year will fall well short of Wall Street’s expectations.

Bank stocks led the market higher. Morgan Stanley jumped 5.4 percent, Citigroup Inc. rose 2.8 percent.

The S&P 500 rose 9 points, or 0.8 percent, to 1,243. The Nasdaq rose 13, or 0.5 percent to 2,609.

The gains were broad. Of the S&P’s 10 industry groups, only materials companies fell.

Earlier, stocks rose in Europe, though they were off their daily peaks. Germany’s DAX rose 1.29 percent, France’s CAC 40 1.4 percent.

Germany and France, the two biggest economies in the euro zone, had hoped to persuade all 27 members of the European Union to change an EU treaty and impose tight fiscal rules on its members. Britain refused to join in because it wanted to be exempt from proposed financial rules.

Many think the only path out of the debt crisis is a more active role by the European Central Bank, which could buy up more government debt to keep nations’ borrowing costs down. It currently buys bonds in the markets, but only reluctantly, and in small quantities.

On Thursday the European Central Bank’s president Mario Draghi suggested he had no intention of increasing bond purchases after the bank delivered on market expectations to reduce its main interest rate by a quarter percentage point to 1 percent.

Draghi said he was surprised by some interpretations of his comments last week that “additional steps” would be taken if the 17 countries that use the euro agreed to closer budget controls. Germany and France have proposed a plan on closer fiscal unity that will dominate debate at the EU summit of leaders, which starts later Thursday.

Earlier in Asia, stocks declined as traders responded to the deal with caution. Japan’s Nikkei 225 closed down 1.5 percent, South Korea’s Kospi sank 2 percent and Hong Kong’s Hang Seng fell 2.7 percent.

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A simpler credit card agreement is getting a tryout.

The Consumer Financial Protection Bureau on Wednesday released a prototype of a credit card agreement that’s written in plain English. The idea is to sweep away the legalese and make it easier for consumers to understand a card’s costs and terms.

The agency is asking for the public’s feedback on the form, which can be found at:

http://www.consumerfinance.gov/credit-cards/knowbeforeyouowe.

For now, there are no plans to require credit card companies to adopt the form. But if the agency moved to make the form mandatory once its testing phase is over, it could establish an industrywide template that helped consumers comparison shop.

As it stands, the Consumer Financial Protection Bureau noted that the average credit card agreement runs 5,000 words and is packed with fine print that consumers don’t understand. The prototype agreement, by contrast, is just over 1,000 words and is broken down into three key sections _ costs, changes and additional information.

The form will be tested over the first half of 2012 with new credit card applicants at the Pentagon Federal Credit Union, one of the nation’s largest credit unions. Some applicants will get the existing version of the credit union’s card agreement so that the CFPB can compare consumer feedback.

The American Bankers Association, which represents the banking industry, said the prototype was a “good first step” but noted that it could leave card issuers susceptible to lawsuits.

That’s because the Consumer Financial Protection Bureau would keep a glossary of contract terms on its website; consumers could also request free printed copies.

“Making it available is not the same as getting it,” said Nessa Feddis, vice president and senior counsel for the ABA.

Feddis also noted that the separation of the contract terms online is a major reason the agency’s prototype is so much shorter than current agreements.

The Consumer Financial Protection Bureau was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act to police the financial products marketed to consumers. Consumer advocates have said that clearer mortgage disclosures could have helped prevent the subprime crisis that precipitated the financial meltdown.

Since it officially began operations this summer, the agency has focused on simplifying the disclosures consumers receive with a variety of financial products. The agency is also testing simplified forms for mortgages and has asked for feedback on the issues borrowers encounter when applying for private student loans.

The rollout of the sample credit card agreement comes as the White House urges the Senate to confirm Richard Cordray to head the consumer bureau. Republicans have said they will block confirmation of anyone to head the agency until other regulators and Congress have more control over the bureau.

The White House says a recent study shows about two-thirds of credit card users say they don’t completely understand their cards’ terms.

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Chancellor Angela Merkel is downplaying the news that Standard & Poor’s is examining the credit rating of 15 eurozone countries for a possible downgrade, saying the region is on the path out of its financial crisis.

She told reporters Tuesday that “what a rating agency does is the responsibility of the rating agency” but that leaders would plot a course to “regain confidence” when they meet later this week.

She says “I have always said this is a long process… and it will continue, but we charted the course yesterday with the French president and we will continue to stay the course.”

Markets have been jittery following the news that S&P had placed 15 nations on notice for possible downgrades, including France and Germany, which both have a AAA rating.

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Tobacco company Philip Morris USA Inc. must pay Oregon 60 percent of a $79.5 million award in a long-running lawsuit filed by the family of a Portland smoker, the state Supreme Court ruled Friday.

The cigarette maker’s parent company, Altria Group Inc., said it will lower its full-year earnings expectations based on the costs tied to the payments for this and a separate case by a former smoker.

Under Oregon law, 60 percent of punitive damage awards must go to a state fund to compensate crime victims. Philip Morris paid the family its share of the judgment but contested the requirement to pay the state.

The company argued that the state released its right to collect that money with the company’s master settlement agreement in 1998 with 46 states, five U.S. territories and the District of Columbia over claims about smoking.

The Supreme Court’s ruling Friday reversed a lower court decision and said the state’s share of punitive damages is due no matter what sort of lawsuit led to the award.

The money at stake is from a 1999 jury award in a lawsuit filed by the family of Jesse Williams, a janitor who had died two years earlier of lung cancer.

After years of appeals, Philip Morris paid the family in 2009, according to the Supreme Court’s decision. The payment, it said, was more than $61 million, which includes economic damages, the 40 percent share of punitive damages, interest and costs no faxing payday loan.

A state official said there was no ready estimate of how much the state’s 60 percent share is worth today, including interest and costs, and there was little anticipation it will be collected soon.

“We don’t actually expect this to be the end of the litigation,” said Tony Green, spokesman for Attorney General John Kroger.

A message seeking comment was left for Altria. In a statement, the Richmond, Va.-based company said it expects to record a pre-tax charge of $62 million related to judgments in the two cases and $57 million in related interest costs. As a result, Altria expects to earn $1.58 to $1.64 per share for the 2011 fiscal year. It earlier expected to earn $1.60 to $1.66 per share.

Excluding several other one-time items, the company expects to earn $2.01 to $2.07 per share for the year. Analysts polled by FactSet expect Altria to report adjusted earnings of $2.03 per share for the fiscal year.

The company’s shares fell 6 cents in after-hours trading. They closed Friday at $28.41, down 27 cents.

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Lee Enterprises, owner of the St. Louis Post-Dispatch, announced Friday that it will file a “prepackaged” bankruptcy in an effort to refinance about $1 billion in debt.

Lee said it has secured agreements with nearly all of its creditors, which it predicted would allow an exit from bankruptcy in 60 days or less.

The filing, expected on or about Dec. 12, is unusual in that the company plans to shed no debt and to pay a higher interest rate to all lenders.

In return, lenders agreed to extend the loans - now due in April - until at least December 2015. Lee also would cede a 13 percent ownership stake to three creditors, Goldman Sachs, Monarch Master Funding Ltd, and Franklin Templeton/Mutual Quest Fund, according to a September regulatory filing. In addition, the company expects no management changes.

Lee’s 48 newspapers turn an operating profit, and Lee has been making its debt payments. But the company, one of the nation’s largest newspaper chains, has been struggling for months to refinance the debt before it matures in April. An effort to issue junk bonds last spring failed.

“The market isn’t open to distressed entities like Lee, given that the company faces an uncertain operating environment, which obviously is how they ended up in this situation,” said Mike Simonton, credit analyst and managing director of Fitch Ratings in Chicago.

In a conference call with reporters, Lee’s Chief Executive Mary Junck said the company could carry the refinanced debt without trouble while also paying down the principal.

The company would be paying 9.2 percent interest on its debt, compared to 5.1 percent now. Lee officials noted that the interest rate is below that paid by some other troubled newspaper publishers and lower than proposed in the junk bond deal.

“Although the refinancing will require Lee to pay higher interest rates, it and our strong cash flow will keep Lee on solid financial footing as we continue reshaping our company for long-term growth by expanding our digital platforms, building audiences, driving sales and improving our balance sheet,” Junck said in a release.

The company said the bankruptcy will have no impact on its business, and that its papers will continue to publish. Vendors, advertisers, subscribers, employees and the company’s operations will not be affected, Lee said in a statement.

“Everyone had hoped that Lee would get by without doing it, but it didn’t come as a big surprise,” media analyst John Morton said of Lee’s bankruptcy plans. Morton is president of Morton Research Inc., based in the Washington area.

Like other newspaper chains, Lee has suffered from declining circulation and advertising revenue, brought on both by the sluggish economy and the migration of advertising revenue and readers to the Internet.

“Lee, like the Journal Register Co., Tribune Co., Freedom newspapers, borrowed heavily before the collapse (of print advertising revenue) to make acquisitions, and it left them with a heavy debt load,” Morton said. “Internet broadband use in homes started to soar at exactly the same time the newspapers’ ad revenues started to decline.”

Lee portrayed the development as good news for readers, shareholders and employees.

“We have achieved agreements with an overwhelming majority of our creditors to extend our existing loan agreements on reasonable terms that preserve stockholders’ ownership interests in the company with only 13 percent dilution,” Lee Chief Executive Mary Junck said in a press release.

However, Alan Mutter, a San Francisco-based media consultant and adjunct faculty member at the Graduate School of Journalism at the University of California at Berkeley, said the higher interest rate - and resulting higher debt payments - will put the squeeze on Lee if company revenue continues to fall after it exits bankruptcy.

“The lenders will have first call on any cash flow generated by the business,” Mutter said. “If revenues drop, then the company will have to find expense savings to remain current on its interest payments. In that event, the company may find it doesn’t have as much as it would like to invest in new digital products, reporting, or other needs in the business.”

The bankruptcy plan was announced after the close of the stock market. In after-hours trading, the stock jumped 12 cents to 65 cents, a 22.6 percent increase. Lee said the bankruptcy plan won’t affect its stock listing on the New York Stock Exchange.

prepackaged bankruptcy

In a prepackaged bankruptcy, a company works out terms with most creditors in advance, which allows the debtor to quickly reorganize and emerge from bankruptcy. The company then uses the bankruptcy proceedings to force its plan on the dissenting lenders.

In order to gain approval of the pre-packaged plan, at least 50 percent of each class of creditors must vote to approve it, and those voting for it must own two thirds of the dollar amount of the debt payday loan online.

Dissenters can object, but they must convince the court that the deal is not “fair and equitable,” said Norm Pressman, a bankruptcy lawyer with Goldstein & Pressman in St. Louis.

That basically means they must show that creditors would collect more if the company were liquidated and its assets sold off, said Pressman, who is not involved in the Lee case.

“Management worked hard and cut deals with everyone, but they don’t have 100 percent agreement,” he said. “They’ve done the counting, and they know they will have enough votes,” he said.

The dissenters may not even appear in court to oppose the plan, said Flip Huffard, managing director at the Blackstone Group, which advised Lee.

Creditors who haven’t agreed to the plan acted out of “apathy” rather than opposition, he said. “This will be a surgical bankruptcy filing,” he added.

Lee has two groups of creditors. One group holds about $865 million in debt secured by properties that Lee owned before 2005. Most of that debt was assumed that year when Lee bought Pulitzer Inc. The company said 94 percent of those debt holders have agreed to the deal. A second group of creditors holds $138 million in debt, which Lee inherited with the Pulitzer deal. That debt is secured by the old Pulitzer properties, including the Post-Dispatch. All of those creditors agreed to the deal, Lee officials said.

At one point, Lee hoped to borrow even more money to pay off the dissenting shareholders, but those plans fell through.

debt-fueled acquisitions

Lee newspapers have a combined daily circulation of 1.3 million and Sunday circulation of 1.6 million, as of the end of September. Lee also owns nearly 300 specialty publications, including the Suburban Journals of Greater St. Louis, Ladue News, and Feast and St. Louis’ Best Bridal magazines.

Lee’s history dates to 1890 when its namesake, A.W. Lee, became the publisher of a daily newspaper in Ottumwa, Iowa. More acquisitions of newspapers across the country followed, and in 2002, Lee acquired 16 newspapers through its purchase of Howard Publications Inc., which increased its revenue by 50 percent.

Three years later, Lee took an even bigger bite with its acquisition of Pulitzer, which owned the Post-Dispatch and 13 smaller daily papers nationwide, in a $1.46 billion cash deal. The Pulitzer acquisition made Lee the seventh largest U.S. newspaper publisher in terms of circulation, and increased Lee’s revenue by 60 percent.

Soon after its Pulitzer acquisition, however, the economic downturn put a sizable dent in Lee’s revenue stream as many advertisers cut back on spending. The company has also been forced to write down the value of its business.

Lee reported a loss of $8.8 million in its fourth fiscal quarter that ended Sept. 25. The company has sought to cut expenses across the company, including local layoffs at the Post-Dispatch and Suburban Journals this year, and the elimination of some Suburban Journal print editions.

Cutting costs has driven business decisions at newspapers across the country, following a steep decline in advertising spending.

Declines in newspaper revenue coincided with a credit crunch during the economic slump that made lenders less willing to refinance debt.

Multiple newspapers and newspaper publishers have turned to Chapter 11 bankruptcy organization, including the Tribune Co., which had $13 billion in debt when it filed for bankruptcy in December 2008. The Chicago-based publisher of the Chicago Tribune, Los Angeles Times and the Baltimore Sun, and owner of more than 20 television and radio stations, filed for bankruptcy a year after billionaire real estate developer Sam Zell purchased the company.

Tribune’s bankruptcy continues to drag through the courts as its creditors have not been able to agree on an exit plan. During the past three years, several of Tribune Co.’s newspapers have laid off employees, reflecting an industry-wide trend to downsize staff.

Some newspapers have had better success emerging from bankruptcy. The Minneapolis Star-Tribune, Minnesota’s largest newspaper, had $480 million in debt when it filed for bankruptcy in January 2009.

After a reorganization, the Star-Tribune trimmed its debt to $100 million when it emerged from bankruptcy eight months later. During the reorganization, the Star-Tribune slashed costs with a mix of voluntary employee buyouts, layoffs, and renegotiated contracts with unions.

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Fast-growing Asian and Middle Eastern airlines have signed orders recently for hundreds of new airplanes _ now they face the problem of finding enough pilots to fly them. For safety-conscious travelers, that means sticking with the big, well known airlines who can afford to lure the best staff as the scramble to fill the cockpit intensifies.

While there have been warnings for several years of a pilot shortage in Asia, the latest orders add to the urgency. The region is forecast to account for the lion’s share of global aircraft deliveries over the next two decades as demand for air travel surges amid strong economic growth. It’s also forecast to need the largest number of new pilots and the widening shortage of experienced staff is raising safety concerns and playing havoc with flight schedules.

“Quite a number of carriers are increasing their orders. So where are the pilots coming from? The shortage is going to manifest itself certainly as we go into next year because there’ll be a lot of planes coming in then, so these guys are going to have a hard time finding the pilots to fly them,” said Shukor Yusof, an aviation analyst with Standard & Poor’s.

Last month, Indonesia’s Lion Air ordered 230 Boeing Co. 737s with options for 150 more. Qatar Airways ordered at least 55 jets from Airbus SAS while Emirates ordered 50 Boeing 777s. From 2011 to 2030, Boeing and Airbus both predict Asia will account for about a third of global aircraft deliveries worth a total of more than $1 trillion.

To keep up with growth and replace retiring pilots, the International Civil Aviation Organization forecasts Asia will need 229,676 pilots over the next two decades, up from 50,344 in 2010. In the most likely scenario, Asia will be short about 9,000 pilots a year because it will need about 14,000 but have capacity to train only about 5,000.

“Never in human history have we seen a time when 2 billion people will enter the middle class and demand air travel. That time is now,” said William Voss, president of the Washington, D.C.-based Flight Safety Foundation.

Some airlines are already acting.

Emirates has announced plans to set up a dedicated $109 million flight training center in Dubai that will be able to train up to 400 students at a time. Earlier this year, Canadian flight-training company CAE Inc. said it was expanding its training center in Zhuhai, China that it runs jointly with China Southern Airlines.

But Roei Ganzarski, Boeing’s chief customer officer for flight services, warns that recruiting pilots will be a long-term problem for the aviation industry. “We’ve already heard of a few airlines that have either reduced their operations or even grounded their airplanes because they don’t have enough people to fly them.”

Training a commercial airline pilot takes time _ up to three or four years. Trainees must obtain a Private Pilot’s License and then a Commercial Pilot’s License. Then they need an Air Transport Pilot’s License _ the advanced credential required to fly a commercial airliner _ which involves logging about 1,500 flying hours. It’s an expensive and time-consuming entire process that rookies starting from scratch will need two to three years to complete.

Once they’re hired by an airline as a first officer, candidates will need more time for additional conversion training for the type of aircraft they’ll be flying, which could take another year.

Aviation industry executives say small airlines will be hit hardest because they can’t compete with big, rich carriers such as Dubai-based Emirates, the Middle East’s biggest airline.

Capt. Alan Stealey, senior vice president for flight operations, said Emirates isn’t facing problems recruiting its target of 600 pilots this year, up from about 400 or 450 in past years paydayloans.

Emirates lures staff with generous salaries and benefits. First officers earn tax-free annual salaries averaging $95,000 while captains get about $135,000 as well as free housing, medical benefits and tuition fees.

Emirates also operates some of the world’s newest, most advanced jets _ another draw for recruits.

“We’re an airline of choice from a pilot’s point of view,” said Stealey. “The shortage will not be in carriers like Emirates,” but rather will hit smaller, regional carriers hardest, he predicted.

The crash of an Air India Express jet in May 2010 highlighted the problems smaller airlines are facing. An investigation blamed the Serbian pilot for the disaster in which a Boeing 737 operated by the national carrier’s low-cost arm crashed while landing at Mangalore’s airport, killing 158 people.

The probe found that the pilot slept through more than half the flight and woke up disoriented when it was time to land the aircraft.

India’s pilot shortage has been driven by fierce demand as a slew of carriers have started up in the past decade and expanded rapidly. Pilots complain that they don’t have enough rest time between flights, a violation of international aviation safety practices.

Indian airlines have been forced to look abroad for staff, which comes with its own problems as some Eastern European pilots had difficulties with English _ the international language of aviation.

By hiring pilots from countries where English isn’t spoken widely, “you have to accept that there’s potential for confusion, or less comprehension,” said Gideon Ewers, a spokesman for the U.K.-based International Federation of Airline Pilots’ Associations.

Airlines across Asia have been recruiting foreigners. China has at least 1,300 foreign flight captains, according to the state-run China Daily newspaper. Garuda Indonesia and Korean Airlines have also been forced to hire foreign pilots. In China, state media quoted an American pilot for Spring Airways complaining he had to rely on his Chinese first officer to communicate with air traffic controllers who wouldn’t or couldn’t speak English.

Experts say while some smaller airlines are forced to hire pilots on short-term contracts, they don’t have as much control over the quality of the pilot’s training and experience as big airlines with cadet programs do. The result is that while airlines may have crews that meet the minimum training requirements, some airlines will have crews that are excellent but others are “dangerously marginal,” said Voss.

At airlines where safety and training standards are closely followed, the pilots in the cockpit “correct the missteps and correct problems on the spot. All of those little corrections eventually define the safety culture of that airline,” said Voss.

“If the crews are all on six-month contracts, that doesn’t happen. Risky behavior goes unchallenged, professionalism decays, and disaster inevitably follows.”

A potentially even graver shortage looms of maintenance personnel, aviation groups say. Boeing forecasts that Asia will need a quarter-million new technicians over the next two decades, up from about 46,500 now.

“It is a more difficult problem to solve,” said Voss,”since the job is very unattractive and harder to train.”

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AP Business Writer Adam Schreck in Dubai, Aviation Writer Slobodan Lekic in Brussels and AP Writer Nirmala George in New Delhi contributed to this report.

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Follow Kelvin Chan at twitter.com/chanman

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Costs related to its spin-off of its Post cereal business, merger and integration costs and non-cash impairment charges led Ralcorp Holdings to post a loss of $370.1 million in the fourth quarter. 

St. Louis-based Ralcorp’s loss of $6.72 per share in the fourth quarter that ended Sept. 30, compares to a gain of 76 cents per share a year ago. For the fourth quarter a year ago, Ralcorp posted a profit of $41.9 million.

Ralcorp’s net sales increased 8 percent in the fourth quarter to $1.22 billion, up from $1.13 billion a year ago.

Ralcorp recorded non-cash impairment charges of $471.1 million in its branded cereal segment in the fourth quarter, including trademark impairments.

For the entire 2011 fiscal year, Ralcorp posted a loss of $187.2 million compared to a profit of $208.8 million in fiscal 2010. Ralcorp’s net sales increased to $4.7 billion in fiscal 2011, up from $4 billion in fiscal 2010.

Ralcorp announced its plans to spin-off its Post branded cereal business as a separate publicly held company in July. Ralcorp’s other business units include pasta, frozen bakery products, and snacks, sauces and spreads.

Ralcorp executives plan to hold a conference call with analysts to discuss fourth quarter and fiscal 2011 results Wednesday morning at 7 a.m.

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China’s sovereign wealth fund wants to invest in improving neglected U.S. and European roads and other infrastructure to spur global growth, the fund’s chairman said in comments published Monday.

The China Investment Corp. wants to begin in Britain by teaming up with fund managers or investing directly in infrastructure projects, Lou Jiwei said in a commentary in London’s Financial Times newspaper.

The CIC has about $410 billion in assets. Until now, it has limited its investments outside China mostly to small shareholdings in publicly traded companies to avoid stirring possible political opposition.

“China is keen to get involved” in improving U.S. and European infrastructure, which “badly needs more investment,” Lou wrote.

Lou did not say in which other countries the CIC might invest but cited an estimate that the United States needs to spend at least $2.2 trillion in infrastructure repairs or rebuilding.

“Free of the inflationary pressure that afflicts many emerging economies, the U.S. and Europe should make substantial investment,” he said. “We cannot count on developing countries to deliver a stable economic recovery on their own.”

Some commentators in both Europe and China have suggested Beijing might use its foreign reserves, the world’s biggest at $3.2 trillion, as political leverage at a time when other governments urgently want investment.

Lou stressed that the CIC would act as a commercial investor and wanted to make a profit.

“CIC believes that such an investment, guided by commercial principles, offers the chance of a `win-win’ solution for all,” he wrote.

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