Brazil is trying to restart its economic growth spurt

SAO PAULO, Brazil — The Brazilian government is hoping to get South America's largest economy kicking again.

It has yanked down interest rates to record lows and kept the value of the real, the Brazilian currency, in check. The government has even doled out tax cuts in attempts to boost growth.

But so far, there's not much evidence those strategies are working — and key economic data released Friday probably won't change things.

The government reported the economy grew less than 1% for 2012, which was slightly below what economists expected. That expansion in gross domestic product was well below the 4.5% the country had been recently averaging, presenting a challenge for a government that needs growth to continue its social progress.

"We're suffering from a hangover from growing too fast, and the slowdown in 2011 and 2012 has been worse than we expected," said Caio Megale, an economist at the Brazilian bank Itau Unibanco. "We're waiting to get back on track in 2013 and 2014, but still, because of structural limitations we think that for the time being we'll grow slower than we did from 2005 to 2010."

Brazilians are living better than ever, enjoying record-low unemployment and still-rising wages. But more social gains depend on how — and whether — the country rebounds, economists say.

In Latin America, countries such as Mexico and Colombia are sucking in some of the investment that used to come to Brazil when it was still an investors' darling. After overtaking the UK as the world's sixth-largest economy last year, Brazil slid back into seventh place, ahead of France.

Investors have been startled by stubborn inflation, low productivity and onerous taxes that have reappeared as the country attempts to get back on track. Stocks have slid, and the Brazilian government hasn't done much to make it easy for foreign investors.

"Investing in Brazil is less of a no-brainer now," Megale said. "You have to know what stock or asset you're investing in. It's not just that you bring your money in and automatically make more money, like it was before."

For much of the 21st century so far, two factors propelled the previously long-suffering Brazilian economy forward.

First, Asian demand for commodities such as iron ore and soy pushed up prices, and money poured into Brazil. From 2000 to 2011, Brazilian exports to China increased more than fortyfold.

Second, governments put the country's previously crisis-ridden financial system on track, enabling Brazilians to go on a credit-fueled spending spree, often for basic (and Asian-made) consumer items such as refrigerators, cars and washing machines.

The resulting boom, combined with moderate social programs put in place by the government of Luiz Inacio "Lula" da Silva, has lifted almost 40 million Brazilians out of poverty and reduced the often shocking inequality among the country's residents. Investors got some nice returns, and Brazil emerged on the world stage — winning the rights to host the 2014 World Cup and 2016 Olympics in Rio de Janeiro.

But a recent slowdown in China, not to mention the European economic crisis, has taken its toll. Banks say Brazilian consumers are reaching the limit of debt they can take on.

After the economy averaged 4% to 5% GDP growth per year in 2005-10, growth dropped to 2.7% in 2011, and in 2012 it is expected to have been less than 1%.

"We think the growth from 2005 to 2010 was an exceptional period, owing to factors that won't be repeated," said Tony Volpon, an economist with Nomura in New York. He expects Brazil to grow 3.5% this year. "The government is waiting for the measures taken in 2012 to sooner or later cause growth, but those measures may have simply failed."

From 2011 to 2012, Brazil's central bank brought interest rates down to 7.25% from as high as 12.5% — around where they had long hovered as some of the highest in the world. The government also granted ad hoc tax breaks to stimulate industry and continued intervening in the foreign exchange markets.

The much-feared threat of inflation has also reared its head again. Inflation may be approaching the official upper limit of 6.5%.

That's still much lower than problematic levels in neighboring Argentina, but Brazil is especially averse to price rises after going through years of hyperinflation. Some parts of the market want the central bank to change course and raise rates again.

"Growth will stay slow unless there are structural changes, and that really means reform. There is some low-hanging fruit for easy changes, such as with the tax code, which is very silly in places," Volpon said. "But unlike in Mexico, there is no political consensus here for reform at the moment."

This may be because in the streets of Brazil, normal people are feeling great, and the government is confident. While investors have taken a hit, high wages and low unemployment have gone hand in hand with approval ratings for President Dilma Rousseff as high as 78%. With most people happy, there is little incentive to make changes.

But all will not stay rosy if growth doesn't return, Volpon and Megale said.

Many Brazilian industries are in dire need of skilled laborers, having already snapped up everyone available. Economists believe a scarcity of productive workers is one of a few obstacles to getting the country back on track, along with huge infrastructure bottlenecks long in need of investment.

"If we can't get investment up to 25% of our GDP, we'll never be able to grow at the rates we had going recently," said Paulo Sandroni, professor of economics at the Fundacao Getulio Vargas, an elite business school. Poor infrastructure could also be a headache during the World Cup and Olympics.

The worst-hit part of the economy, however, has been industrial production, undercut by competition from China, high costs, and an overvalued real.

"So far a consumer boom has counteracted drops in manufacturing output," Sandroni said. "But the weakening of the dollar really hurt us."

After the real climbed against the dollar, making Brazilian exports less competitive, Brazil Finance Minister Guido Mantega in 2010 blamed loose monetary policy in the United States, then put in place a shifting regime of capital controls that made it harder to invest in the country.

The real eventually came down, but as with low interest rates and the fiscal stimulus, the expected benefits have not yet materialized.

business@latimes.com

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GM, Ford, Toyota post healthy sales as auto industry growth slows

After posting a big gain in January, U.S. auto sales moderated last month with most carmakers reporting steady single-digit gains. 

Industry executives said they still believed the auto segment of the U.S. economy would continue to grow this year, but the rate of growth would be slower than recent years.

“We will see moderate growth as we go throughout the year,” said Jonathan Browning, chief executive of Volkswagen Group of America.

“We do believe the debate on sequestration and the global economic environment does have a drag on consumer confidence,” Browning said.

Sales of Volkswagens rose 2.9% to 31,456 vehicles compared with the same month a year earlier.  It was its best February since 1973.

Even though the leap year made February 2012 one day longer than February 2013, General Motors Co., the nation’s largest automaker, said its sales rose 7% last month to 224,314 vehicles compared with a year earlier.

“The housing sector has now joined auto sales in propelling the U.S. economy forward,” said Kurt McNeil, vice president of GM's U.S. sales operations. “More importantly, the recovery in new home construction is reinforcing the underlying improvement in auto-buying conditions, especially for pickups."

Chrysler Group said its U.S. sales rose 4% last month to 139,015 vehicles compared with the same month a year earlier. It was the company’s best February sales result since 2008.

Ford Motor Co. said its sales grew 9% to 195,822 vehicles. It was the automaker’s best February sales since 2007.

Toyota Motor Corp. said its U.S. sales rose 4.3% to 166,377 vehicles last month.

Hyundai said its sales rose 2% to 52,311. It was the best February for the South Korean automaker since it started selling cars in the U.S. in the 1980s.

“In spite of concerns over reduced consumer confidence related to the end of the payroll tax holiday, we believe these head winds are unlikely to affect the new vehicle market, as we see purchasers of new vehicles as less sensitive to the income reduction,” said Brian Johnson, an analyst with Barclays Capital.

He said the tax increase and economic uncertainly were likely to play a bigger role in the used vehicle market.

Ford analyst Erich Merkle Johnson estimated overall U.S. sales for the month will reach about 1.2 million, a gain of about 2% from the same month a year earlier, and represent an annualized selling pace of well over 15 million.

But while sales were up, the number of incentives and discounts car companies were offering for most anything but pickup trucks declined.

“Automakers enjoyed a month of ideal conditions for profitability in February, with incentives down nearly 4% and sales up,” said Kristen Andersson, analyst for auto price information company TrueCar.com. “We expect incentives spending to track within a narrow range the rest of the year as the supply of vehicles and consumer demand are forecasted to increase at similar levels.”

Other analysts were also upbeat, saying the month represented a continued slow-to-moderate growth trend for automakers.

"Similar to previous months, consumers will be lured to dealer showrooms by low finance rates, affordable lease payments and, most importantly, new and compelling product," said Alec Gutierrez, analyst of for Kelley Blue Book. "

He expected the sales results to be skewed toward smaller, fuel-efficient vehicles because gas prices are averaging about $3.75 a gallon nationally, and that typically changes the mix of cars sold during a given month.

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Follow me on Twitter (@LATimesJerry), Facebook and Google+.

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U.S. economy grew late last year, but barely

WASHINGTON -- The U.S. economy barely grew late last year, thanks largely to a plunge in federal defense spending that in part was likely preparation for the budget cuts under the so-called sequestration.

The nation's gross domestic product, or the total value of all goods and services produced, rose by a measly 0.1% in the fourth quarter, according to the Commerce Department's latest calculations released Thursday. The government's first estimate said inflation-adjusted GDP shrank 0.1% in the final three months of last year.

Analysts were expecting the quarterly GDP growth rate to be brought up to about 0.5% on average. GDP grew by 3.1% annualized in the third quarter of last year.

Still, economists did seem troubled by the modest revision, noting the unusually steep 22% annualized fall in defense spending in the fourth quarter. The stagnant GDP rate also reflected a big slowdown in business inventories, suggesting that companies may produce more in coming months to stock up on goods that have been run down.

Also belying the overall poor GDP growth were strong numbers for business investments, particularly residential investment, which jumped 17.5% at an annual rate. Private spending also increased by a decent 2.1%, slightly better than the third quarter.

Federal Reserve Chairman Ben S. Bernanke said this week that the flattening of the GDP growth rate late last year wasn't a sign of an economy that had stalled. Rather, he attributed it to weather-related disruptions and other transitory factors.

That's the good news. The bad news is that the economy continues to grow at a mediocre pace of about 2%, well below what Bernanke and other experts see as the potential for the economy and what is needed to bring down the unemployment rate more quickly.  

What's more, the fiscal budget cuts set to take effect Friday under the sequester will put further weight on an economy that just can't seem to gain much speed. GDP has grown on average by a little over 2% a year since the Great Recession officially ended in mid-2009.

Many economists expect GDP to advance by no more than that in the the first half of this year, and, if there are no big surprises, to pick up momentum in the second half as the effects of the tax increases this year and budget cuts fade and the economy benefits from a recovering housing market and the improvement in consumer finances and credit flows.

Still, that is a big "if." There's little indication that the political budget battles will ease anytime soon, and higher oil prices and renewed concerns about the Eurozone debt crisis have made the near-term outlook even more uncertain.   

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Pending home sales rise in January, industry group reports

Pending home sales rose in January in every U.S. region except the West, according to new data.

The National Assn. of Realtors said that its index of pending sales — based on the number of home purchase contracts signed — rose 4.5% in January from the previous month and 9.5% from January 2012.

The index, at 105.9, is at it hits highest reading since April 2010, the month a popular tax credit for buyers was driving the market up.

 “Favorable affordability conditions and job growth have unleashed a pent-up demand,” Lawrence Yun, chief economist for the group, said in a news release.

The group expects higher home sales in the short term but sales growth will be muted because there are not enough homes available for sale, Yun said.

An index level of 100 is equal to the average level of contract activity during 2001, which was the first year to be studied and also considered historically a healthy year of sales volume.

Month over month, pending sales were up 8.2% in the Northeast, 4.5% in the Midwest and 5.9% in the South. They were essentially flat, up just 0.1%, in the West, according to the index data.

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Bernanke warns Congress that budget cuts pose danger to economy

WASHINGTON -- Federal Reserve Chairman Ben S. Bernanke warned Tuesday that the upcoming budget cuts under the so-called sequestration would create a "significant" burden on an economy that is growing only moderately.

In his semi-annual economic report to Congress, the Fed chief urged lawmakers and the Obama administration to "consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run."

He told the Senate Banking Committee that the sequestration set to take effect March 1, which would cut federal spending by $85 billion this year, and other recent near-term budget changes could create a "significant headwind for the economic recovery."

"Besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions," he said in prepared remarks.

Bernanke said that the economy was continuing to grow at a moderate pace and that the flattening of growth late last year did not indicate a "stalling-out" of the recovery, but instead reflected weather-related disruptions and other transitory factors.

Still, Bernanke again highlighted the weakness and hardships in the labor market, noting the high unemployment rate and the millions of people struggling with long-term joblessness and the inability to obtain full-time work.

In addition to the slow recovery and the risks of sequestration, Bernanke's remarks came as the U.S. and the world faced renewed threats from the Eurozone debt crisis, which had quieted since late last year but reawakened this week in the wake of an impasse in Italian elections.   

Bernanke, in a question-and-answer session after his testimony, was expected to address those economic conditions as well as increased concerns about the effectiveness of the central bank's aggressive monetary stimulus to support the weak economy.

Inside and outside the Fed, experts and policymakers are concerned that the Fed's easy-money policies could be sowing the seeds of runaway inflation, asset bubbles and unstable financial markets down the road.

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U.S. debt woes are not so dire, experts say

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Most economists see 'sequestration' budget cuts as unavoidable

WASHINGTON -- With just a few days to go before new government spending cuts are set to take effect, what are the chances that another eleventh-hour action will avert the latest impending hit to the economy?

Very little, according to a survey of economists released Monday by the National Assn. for Business Economics. The group said that nearly 60% of economists now expect the so-called sequestration, which will slice about $85 billion from the federal budget, to begin March 1 in full or partial form.

The survey of 49 professional economists, representing industry, government and universities, indicates that experts don't see a recession scenario as a result of the new spending cuts, as they did the "fiscal cliff" of tax increases and fiscal reductions, which were mostly avoided at the last minute at the start of this year.

More than half of these economists predicted that the effects of sequestration and other budget uncertainties would shave economic growth by less than half a percentage point this year. Another one-third said the pain would be greater, with real gross domestic product, or total economic output, sliced by up to a full percentage point.

Either way, that's no small number given the mediocre pace of GDP growth since the Great Recession of a little more than 2% on average. And many economists, policymakers and business people across the country have expressed fears that the indiscriminate nature of the cuts under sequestration will impose unnecessary hardships on certain programs such as Head Start for preschool children.

Total government spending and investments are now seen as falling by 1% this year from 2012, according to the median, or mid-point, of the responses from the economists surveyed. That is worse than the 0.6% drag forecast in the association's survey in December.
 
Real GDP is expected to expand by 2% this year, down a bit from the 2.2% GDP growth in 2012. The nation is projected to add 170,000 jobs a month on average, down from 181,000 last year, according to the median value of responses. That should bring down the unemployment rate gradually, to 7.5% in the fourth quarter of 2013 from 7.9% at the start of this year.

Economists, however, see economic growth accelerating next year as the nation absorbs the fiscal spending cuts and benefits from the housing market recovery and a pickup in business investments. Real GDP is seen as growing by almost 3% in 2014, the survey said, and the unemployment rate is forecast to fall to 7% by the end of next year.

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Jason Bateman gives Ernest Borgnine's estate a new identity

Markus Canter and Cristie St. James, who share the title luxury properties director at Prudential in Beverly Hills, like Jason Bateman's real estate sense. The actor got privacy, potential and a knoll location for $3 million.

Actor Jason Bateman and his wife, actress Amanda Anka, are dropping anchor in the Beverly Crest area with the purchase of the estate of Ernest Borgnine for $3 million.

The gated country English compound sits on a half-acre knoll. The 6,148-square-foot home features a formal entry hall, a grand staircase, a paneled library, an office, a den, six bedrooms and seven bathrooms. There is a guesthouse and a swimming pool.

Bateman, 44, stars in the comic film "Identity Thief," released this month. He is known to generations of TV viewers for his roles in "Arrested Development" (2003-present) and "Valerie," later retitled "The Hogan Family" (1986-91). Anka, 44, has appeared in "Bones" (2008), "Notes From the Underbelly" (2007) and "Beverly Hills, 90210" (1996).

Borgnine, who died last year at 95, is remembered for his Oscar-winning performance in "Marty" (1955) and his work in the title role as commander of a madcap crew in the sitcom "McHale's Navy" (1962-65). Until 2011 he was the voice of Mermaidman on "SpongeBob SquarePants."

The estate came on the market in October for the first time in 60 years priced at $3.395 million.

Billy Rose, Paul Lester and Aileen Comora of the Agency in Beverly Hills were the listing agents. Richard Ehrlich of Westside Estate Agency represented the buyers.

Where pair spent days of their lives

Soap star Peter Reckell and his wife, singer Kelly Moneymaker, have sold their custom-built, eco-friendly home in Brentwood for $3.35 million.

Before building the 3,345-square-foot house, the couple had the existing home on the site torn down, crated and shipped to Mexico for reuse by Habitat for Humanity. Then they designed and built a three-bedroom, four-bathroom contemporary that uses solar power.

Green elements include a photovoltaic system with battery backup, skylights, recycled glass terrazzo floors with radiant heating, recycled denim and organic cotton insulation, bamboo cabinets and doors, a roof garden and a water reclamation system.

A temperature-controlled wine cave and a recording studio are among other features.

Along with an indoor/outdoor koi pond, a meditation fountain and a solar infinity pool, outdoor amenities include a 16th century East Indian temple that was turned into a pavilion.

"This is my sanctuary," Reckell said. It frames views of the Santa Monica Mountains Conservancy.

Reckell, 57, played Bo Brady on "Days of Our Lives" from 1983 through last year. The show began in 1965. He also appeared in "Knots Landing" (1988-89). He is an avid environmentalist and bikes to work.

Moneymaker, 42, is a former member of the music group Exposé. She was inspired to build an environmentally friendly home because the carpet and other elements in the old house bothered her allergies and affected her voice.

Public records show they bought the property in 2003 for $1.14 million.

Daniel Banchik of Prudential's West Hollywood office was the listing agent. Scott Segall of John Aaroe Group represented the buyer.

Another rock owner for home

Hard Rock Cafe co-founder Peter Morton has made his mark on L.A.'s real estate scene of late, buying the old Elvis Presley estate in Beverly Hills at year-end for $9.8 million.

But flying under the radar was his bigger off-market purchase midyear for a property in Bel-Air at $25 million, public records show. Area real estate agents not involved in the transaction say Morton plans to take down the existing home and build another on the site. The estate had belonged to Joseph Farrell, who founded National Research Group Inc. in 1978 and brought market testing to Hollywood. Farrell died in December 2011.

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Southern California malls target Asian shoppers

The arrival of the Lunar New Year this month seems to have sparked an epiphany for area shopping centers: Asian and Asian American consumers have a growing pile of money and want to spend it where they're welcome.

So in the Year of the Snake, malls around the Southland are hustling harder to make themselves more appealing to the demographic.

Desert Hills Premium Outlets, Ontario Mills and the Outlets at Orange are partnering on a "Snaking through Southern California" initiative to lure Chinese shoppers to their malls. Simon Property Group, which owns the centers, says it's attempting to market to Asian consumers with multilingual messaging and Lunar New Year decorations.

Many stores in South Coast Plaza now have Asian employees to cater to the influx of moneyed tourists from China, Japan and South Korea who flock to the upscale mall. The center also has a language-assistance program and maps in Asian languages.

Westfield Santa Anita in Arcadia, a city where more than half the population is Asian/Asian American, is hosting its first-ever Lunar New Year festival Saturday afternoon. Free activities include a lion dance, Chinese calligraphy demonstrations and a Year of the Snake photo booth for families.

The San Gabriel Valley center hung a 120-foot, 600-pound red-and-gold dragon installation above its indoor carousel. Decorators brought in a Chinese pagoda as well as kumquat trees for good luck.

Even after the holiday, Westfield plans to continue tweaking the Santa Anita mall -- currently home to Nordstrom, AMC Theatres, Macy’s and more -- to better suit its Asian American clientele.

This summer, Hai Di Lao, a hot-pot restaurant chain based in China's Sichuan province, is to open its first U.S. location at the center. Beijing-based eatery Meizhou Dongpo is also scheduled to move in, in early 2014.

The mall already offers some store directories in Chinese.

The revamps could have a major economic payoff. Government projections peg 2013 as a record year for Chinese tourism to the United States. A report from Nielsen this past fall showed Asian American buying power surging over $1 trillion within five years, from $718.4 billion in 2012.

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Stocks open higher following a two-day decline

Strong earnings results from big U.S. companies offered investors a whiff of hope Friday. Stocks rose after a two-day slump, but remained on track for their worst week this year.

Hewlett-Packard drove the Dow Jones industrial average higher a day posting fiscal first-quarter earnings that beat the forecasts of analysts and the company itself. The results came as relief after months of bad news for the computer maker. Its stock rose $1.36, or 8 percent, to $18.46.

American International Group Inc. helped boost the Standard & Poor's 500 index after saying its fourth-quarter operating results exceeded forecasts. The company's net loss was $4 billion, mainly because of claims related to Superstorm Sandy, in the first full quarter after it finished repaying its $182 billion government bailout. Its stock rose $1.39, or 4 percent, to $38.67.

The Dow Jones industrial average was up 42 points at 13,922 in the first 45 minutes of trading. The Standard & Poor's 500 index rose six to 1,508. The Nasdaq composite index rose 14 to 3,145.

All three indexes remain down for the week. The S&P 500 is on track for its first weekly loss of the year.

Stocks plunged Wednesday afternoon after minutes from the Federal Reserve's latest policy meeting spooked investors. The minutes revealed disagreement at the Fed about how long to keep buying bonds in an effort to boost the economy. The slide continued Thursday.

Many analysts believe that the Fed's bond-buying and resulting low interest rates have driven this year's stock rally, which has lifted indexes to their highest levels since the 2008 financial crisis.

Among the other corporate news moving markets:

— Abercrombie & Fitch sank after a key sales metric declined in the all-important holiday quarter. Its stock fell $2.27, or 5 percent, to $46.78.

— WebMD Health Corp. soared after the health website operator reported better-than-expected revenue and an optimistic outlook for 2013. The stock rose $3.85, or 24 percent, to $20.15.

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Inflation remains tame, but so do gains in earnings

WASHINGTON -- Despite worry in some corners about the Federal Reserve's stimulus efforts stoking inflation, there continues to be little indication that consumer prices are heading higher.

The consumer price index was flat in January for the second month in a row, the Bureau of Labor Statistics reported Thursday. A drop in gas prices and a halt to recent gains in food prices held down the overall index. Compared with a year ago, the consumer price measure for January was up a mild 1.6%.

But that moderate inflation rate will provide little comfort to most consumers. Not only have gas prices jumped in recent weeks, the end of the payroll tax holiday at the start of this year has clipped about $40 from the biweekly paycheck for the average worker.

With that, inflation-adjusted average hourly earnings in January were up just 0.6% from a year ago, the Bureau of Labor Statistics said.

Excluding energy and food, the so-called core measure of consumer prices, which is more closely tracked by the Fed, rose 0.3% in January from December, the highest in 20 months. Higher prices for clothes and shelter accounted for much of that increase, although consumers also paid more for airline fares, medical services and school tuitions in January.

Still, the annual core inflation rate in January held at 1.9% for the third straight month. That is just a notch below the 2% inflation target set by the Fed, which has been pumping money into the financial system to stimulate economic growth and help bring down the high jobless rate.

The Fed's stimulus efforts include the purchase of $85 billion worth of government and mortgage bonds a month, aimed at holding down long-term interest rates to spur investment, spending and hiring. Many economists and policymakers, including some Fed members, are concerned that the central bank's easy-money policies will lead to spiraling inflation down the road.

So far, there’s little sign of that.

"Consumer inflation remains relatively tame, mostly because of persistently subdued economic growth," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "Ongoing constraints on consumer budgets, however, will force a reallocation away from discretionary purchases toward necessities. This will hold overall inflation in check, but remain extremely uncomfortable."

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Consumer sentiment bounces back in February

Retail sales growth slows as higher payroll tax resumes

More Fed officials worry about negative effects of stimulus

Read More..

2 fugitives accused of Medicare fraud may be in Glendale, U.S. says

Federal investigators say Anush Sahakyan, above, and Karo Gotti Blkhoyan fraudulently billed Medicare for $1.3 million. (U.S. Department of Health and Human Services)

By Chad Terhune

February 20, 2013, 7:52 a.m.

Federal authorities say two of Medicare's most-wanted fugitives may be hiding out in Glendale.

Healthcare investigators say Karo Gotti Blkhoyan, 32, and Anush Sahakyan, 29, set up a phony medical clinic in South Carolina from 2009 to 2010 and billed for $1.3 million in false claims. Medicare paid out more than $300,000.

The pair, indicted last year on charges including healthcare fraud and money laundering, used the stolen identities of Medicare patients in California and New York, officials said.

"We have information through witnesses that they are in the Glendale area," said Su Kim, a special agent in South Carolina with the U.S. Department of Health and Human Services' inspector general.

The inspector general's office launched its most-wanted list in 2011, and 41 fugitives have been captured thus far. There are more than 170 fugitives on the list, officials said.

The giant healthcare program has been a tempting target for criminals for years. Medicare processes about 2.9 million claims daily and 10,000 seniors join the rolls every day.

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Follow Chad Terhune on Twitter

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Talk of more corporate deals sends stocks higher

Talk of more mergers and acquisitions is sending stock prices higher in early trading, setting the market up to continue a seven-week rally.

Reports that retailers Office Depot and OfficeMax are discussing a combination come after several big corporate deals were announced in recent weeks. Investors are becoming optimistic that more deals could be on the way as buyers pay premium prices for publicly traded companies.

The Dow Jones industrial average was up 44 points at 14,025 after the first hour of trading Tuesday. U.S. markets were closed Monday for the Presidents' Day holiday.

The gains were broad. All 10 of the industry groups tracked by the Standard & Poor's 500 index rose, led by consumer staples. Two stocks rose for every one that fell on the New York Stock Exchange.

The S&P 500 was up five points at 1,525. The technology-heavy Nasdaq composite index was up nine points at 3,201. Google traded above $800 a share for the first time.

Markets were also higher in Europe following news that the German economy is picking up steam. Indexes rose about 1 percent in Germany, France and Britain.

Stocks of office supplies stores jumped in early trading following a report in The Wall Street Journal that OfficeMax and Office Depot were considering a deal to combine, which would result in big cost savings. The paper said an announcement could come as early as this week.

OfficeMax soared $2.73 to $13.48, a gain of 25 percent, and Office Depot shot up 821 cents to $5.41, a gain of 18 percent. Staples also rose as investors anticipated that more mergers could be on the way for companies that sell office supplies.

Analysts cautioned that corporate deals in the highly competitive office supply business may not win the approval of antitrust regulators. Staples tried to buy Office Depot in 1997, but was blocked by the Federal Trade Commission.

The news follows shortly after a wave of big corporate deals that involved household names like Heinz and Dell.

Health insurers fell following the release of preliminary government data that suggests rate cuts to Medicare Advantage plans for next year that were steeper than many had anticipated.

Humana had the biggest loss in the S&P 500, dropping $6.27 to $71.72, a drop of 8 percent. UnitedHealth fell $1.35 to $56. Humana and UnitedHealth are the two largest Medicare Advantage providers.

The government says it expects costs per person for Medicare Advantage plans to fall more than 2 percent in 2014. The government uses this figure as a benchmark to determine payments for these privately run versions of the government's Medicare program, which covers the elderly and disabled. Medicare Advantage plans are offered by health insurers and subsidized by the government.

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Elizabeth Warren's first grilling of regulators is a YouTube hit

WASHINGTON — Sen. Elizabeth Warren (D-Mass.), a darling of liberals who has been mentioned as a potential 2016 presidential contender, had kept a deliberately low profile since her election in November.

In less than five minutes last week, however, the new Massachusetts senator announced her presence in the nation's capital and showed she plans to be a thorn in the side of the big financial institutions.

At her first hearing as a member of the Senate Banking Committee on Thursday, Warren chastised banking regulators for not trying to put more executives from big banks in jail for their roles in the financial crisis.

The exchange, in which Warren criticized the push to settle cases against big banks instead of pushing for convictions, has become a hit on YouTube. Four videos of the exchange have drawn a total of more than 1 million viewers as of Monday.

"I'm really concerned that too big to fail has become too big for trial," she told the heads of the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Commission and top officials from other agencies.

Warren very easily could have been on the other side of the dais last week as director of the Consumer Financial Protection Bureau. But she ran for Congress after Senate Republicans made clear they would block her appointment to head the agency she conceived and then helped launch as an Obama administration aide.

Tradition-bound Senate veterans do not take well to newcomers seeking a big  spotlight. So Warren laid low after her election victory over Republican incumbent Scott Brown in the nation's most expensive Senate race.

She secured a spot on the banking committee and largely stayed out of the spotlight. On Thursday, she patiently waited to question regulators at the end of a hearing on Wall Street reform.

When she got her turn, she didn't waste any of her limited time on the clock.

Warren pressed regulators with the same pointed but measured questions that helped launch her career in Washington as head of the watchdog panel for the $700-billion bailout fund.

"Now, I know there have been some landmark settlements," Warren said. "But we face some very special issues with big financial institutions. If they can break the law and drag in billions in profits and then turn around and settle, paying out of those profits, they don't have much incentive to follow the law.

"So the question I really want to ask is about how tough you are," she continued. "About how much leverage you really have in these settlements. And what I'd like to know is, tell me a little bit about the last few times you've taken the biggest financial institutions on Wall Street all the way to a trial."

The question drew some applause from the audience in the hearing room. And the seven regulators did not seem eager to answer.

When none of them initially volunteered, Warren asked, "Anybody?"

She called on Thomas Curry, head of the OCC, who said the agency did not have to bring banks to trial because it could use consent orders to achieve its goal. Warren then pressed SEC Chairwoman Elisse Walter, who said she'd have to get back to the senator with specific information.

"Anyone else want to tell me about the last time you took a Wall Street bank to trial?" Warren said. 

With her time running low, Warren finished up with a shot at the nation's largest banks. She asked if the reason the stocks of many Wall Street banks was trading below book value was because investors question if the firms were "adequately transparent and adequately managed."

She told reporters on Thursday she would continue pushing regulators to keep a close eye on the big banks.

"What this hearing was about was to make clear to the regulators that we expect them to use all of their tools in regulating Wall Street," she told reporters.

Warren's staff posted the exchange on YouTube, as did some other people. One video was titled, "Elizabeth Warren Smacks Down Wall Street Bankers," while another touted the clip as "Warren embarrasses banking regulators."

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A secret agent reveals her secrets of success

The prospect of a business book written by a former CIA officer fills one with dread at the inevitable 007 anecdotes and labored corporate parallels.

But "Work Like a Spy: Business Tips From a Former CIA Officer," published by Portfolio, turns out to be rather different. There are no gadgets, few cloaks and fewer daggers: Instead it is a bracingly realistic book about people at work. It is short. It is sharp. Better still, it is sensible.

It is also about spying, though only enough to lend a sprinkle of glamour and danger. The book jacket photo shows author J.C. Carleson, an undercover agent for eight years, looking like a real-life Carrie from "Homeland" — without the blond hair and the bipolar disorder.

Yet her stories from the field are as much blunder as conspiracy. The book opens with the heroine as a young case officer in an armed convoy in Iraq. It is 2003 and she is going to inspect a plant that the U.S. is convinced makes biological weapons. They disarm the guards and terrify everyone — only to discover it is a salt factory.

"Salt. (Insert your own expletive of choice here.) Salt!" she writes.

Carleson assures us that not all CIA work is suitable for general adoption: The threatening, lying, trapping, cheating, misleading and detaining that go with the territory should not be tried in the office.

But the spy can teach the general manager about human nature. Spies are simply better at observing people because they have spent more time practicing and because the stakes are too high to screw it up.

By comparison, the rest of us are pretty hopeless, only we don't know it. Reluctantly, I have started to reappraise my own view of myself as a brilliant judge of character and admit that such a belief is a liability.

I've just tried the following exercise: Pick a stranger and try to guess their education, profession, religion, income bracket, marital status and hobbies. Disaster: I was wrong on every score.

Because we cling to this idea that our gut instincts are reliable, we make a lot of avoidable mistakes. We make bad hiring decisions. We talk vaguely about wanting passion and creativity rather than setting to work corroborating resumes and seeking out references. Employers should make a short, precise list of the traits a job requires and hire to fill it. It is all obvious. Yet it takes a spy to point it out.

Less obvious but no less valuable is her tip for job candidates: Get the interviewer to do most of the talking and then hang on their every word. Since hardly anyone can resist talking about themselves to a rapt audience, a job offer is almost bound to follow.

To the public speaker and the salesman, Carleson has further good advice: Never rely on a script and never learn what you are going to say by heart. When you do this you use a different tone of voice, go on to autopilot and all trust is lost in an instant. Carleson is right. I have done this, but never again.

I also liked the observation about newly minted CIA officers (for which read new Harvard MBAs and so on) who emerge from the yearlong training process all swagger and irritating charm. This doesn't wash in the agency, any more than it does elsewhere. More seasoned colleagues slap them down. "Don't try to case officer me," they say.

Not everything from the book can be copied. The CIA keeps its best staff by doing sensible things such as moving people around, giving them interesting work and letting lone wolves be lone wolves.

Yet the perks of being an undercover agent also involve wearing disguises, learning how to crash cars and jump out of aircraft — all of which are big pluses, but not terribly transferable.

The main lesson from "Work Like a Spy" is that we are much more likely to get what we want if we watch other people carefully. It helps to identify the other person's weaknesses, and for this there are some common denominators: "… ego, money, ego, ego … ego, ego, ego."

Lucy Kellaway is a columnist for the Financial Times of London, in which this review first appeared.

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L.A.'s 'Urban Outlaw' selling his custom Porsche 911 accessories

Magnus Walker steps between the scarred carcasses of Porsche 911s lining his garage wall. He pauses and points to a gaping hole where the car's front hood should be.

"Cars in here have to die," he says, "so others can live."

With a chest-length beard and finger-thick dreadlocks, the 45-year-old English immigrant doesn't look like a prototypical buttoned-down Porsche collector. But for more than a decade, Walker has worked in downtown L.A.'s arts district, transforming scrap heaps into one-off custom 911s, earning him the nickname "Urban Outlaw."

"I don't build white glove, Pebble Beach show cars," he says. "I'm building cars for myself."

What once was an expensive obsession may now become a lucrative profession. Already a successful businessman, Walker has started a new company to sell merchandise and the accessories that have become his signature 911 modifications to a cult of followers.

Each of his 911s still has Porsche's trademark large oval headlights, low front hood and sloping teardrop roofline that give the car its legendary silhouette. But Walker's custom touches — drilled-out door handles, trunk lids with horizontal slats cut into the metal — give them a hot rod edge.

His handiwork is on display across the street from the "chop shop" in a showroom-like garage filled with classic Porsche advertisements, rows of vintage license plates and oil-smeared car parts. About a dozen candy-colored 911s from 1964 through 1973 sit parked and ready for the road.

Look closely. No two cars are the same.

There's a 1966 Irish green 911 with wooden interior accents and black vinyl interior. A few steps away is a 1965 silver 911 with a houndstooth interior and Porsche black side stripe. Front and center is a 1972 911 STR decked out in white with red and blue accents and gold wheels.

"I've got to make the next car better than the last one," he said. "I don't chase originality, but if I stumble upon it, I don't turn away."

Walker has never wanted to build 911s to sell them. He's received requests, but he prefers to build them the way he sees fit, in his own time. He sells them when he feels like it, and they fetch $40,000 to $130,000, depending on the rarity of the car.

Some, he can't imagine ever selling.

His innovation has won the admiration of Porsche executives, several of whom visited his shop in November during the Los Angeles Auto Show. Walker now has an open invitation to tour the company's factory in Stuttgart, Germany.

It's high praise from the company, which is known for its strict adherence to the 911's timeless styling. The two-door, rear-engine car is renowned for its simplicity. Its shape has remained virtually unchanged since the first model rolled off assembly lines more than half a century ago.

"We can't go as far as to say we endorse his work. That's pretty hard for a company like ours to say," said Nick Twork, a Porsche spokesman. "But his cars have a unique style, and we have taken notice."

Walker's real skill with modifying 911s doesn't have anything to do with shoehorning in a new engine or gaudy paint jobs. Rather, it's something known as "backdating" to Porsche connoisseurs.

As Porsche's popularity increased after the first 911 in 1964, so did the company's car production. Many of the hand-made or accessory detailing began to disappear.

So Walker applies subtle changes to the cars, such as swapping out a glue-on plastic rearview mirror with a chrome one, or taking out dashboard gauges and recalibrating them.

"You can only look at a stock car so many times," said Manny Alban, president of Porsche Club of America. "What he does is very tasteful. As long as he doesn't stick a Chevy V-8 in the back, we'll be OK with it."

Walker lightens the cars, lowers them closer to the ground and installs a stiffer suspension for aggressive handling — basically building a street version of a 911 race car.

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Stocks inch higher as finance ministers meet for G20

Stocks edged higher in early trading on Wall Street, putting the S&P 500 in line for a seventh straight week of gains.

The Standard & Poor's 500 rose one point to 1,522 as of 10:23 a.m. EST. For the week, the index is four points higher. It has risen every week so far this year.

The Dow Jones industrial average rose 26 to 13,978. The Nasdaq composite advanced 6 to 3,204.

Burger King gained 46 cents to $16.98. The company's fourth-quarter earnings nearly doubled after it revamped its menu.

A stock market rally that started in January has slowed in February. Investors piled into stocks at the beginning of the year after lawmakers reached a last-minute deal to avoid the “fiscal cliff” of sweeping tax hikes and spending cuts. The gains continued as investors were encouraged by signs that the housing and jobs markets are recovering.

Herbalife surged $3.51, or 9 percent, to $41.78 after the billionaire investor Carl Icahn disclosed that he had accumulated a 13 percent stake in the company. The stock of the supplement company slumped last year after Pershing Square Capital Management's William Ackman described it as a massive pyramid scheme and placed bets that it would fall.

The yield on the 10-year Treasury note, which moves inversely to its price, has risen since the beginning of the year as investors put more cash into stocks. The yield rose 1 basis point Friday to 2.01 percent. It started the year at 1.70 percent.

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Europe's recession deepened in 4th quarter as economy shrank 0.6%

WASHINGTON -- Europe's recession deepened at the end of last year as its economy shrank at an annual rate of 0.6% in the final three months, its sharpest contraction since the financial crisis.

The data for the Eurozone released Thursday was worse than analysts had expected, reflecting steeper-than-expected contractions for three of the region's largest economies: Germany, France and Italy.

Germany's economy shrank at an annual rate of 0.6% in the period after expanding at a 0.2% rate in the previous quarter.

Quiz: How much do you know about looming federal budget cuts?

"The decline of the gross domestic product at the end of 2012 was mainly due to the comparably weak German foreign trade: in the final quarter of 2012, exports of goods went down much more than imports of goods," said Germany's Federal Statistical Office.

Italy's economy contracted at an annual rate of 0.9%, while the French economy shrank at a rate of 0.3%, according to Eurostat, the European Union's statistical office.

The news from Europe comes after the U.S. recently reported its economy unexpectedly shrank 0.1% in the fourth quarter. Economists believe the U.S. contraction, the first since 2009, was an anomaly, driven in part by fears of the fiscal cliff and a drop in exports because of economic problems in Europe and China.

Other data, including the January unemployment report, indicate the U.S. economy still is expanding and growth is expected to pick up this year.

The 17-nation Eurozone, however, now has shrunk for three straight quarters. The fourth quarter contraction was sharper than the 0.1% drop in the previous quarter.

The October-through-December period was the worst for the European economy since a nearly 3% contraction in the first quarter of 2009.

Howard Archer, chief European economist for IHS Global Insight, said the report depicted a dismal end to a bad year. He had expected the economy to shrink 0.4%. 

"While Eurozone economic activity saw its low point around last October, we suspect that growth will remain a struggle for some time to come," Archer said. "However, it is looking increasingly possible that the Eurozone could at least stop contracting in the first half of 2013, significantly helped by a return to growth in Germany."

"The hope for the Eurozone is that a sustained overall easing of sovereign debt tensions and generally improved financial markets further reduces uncertainties and steadily lifts consumer as well as business confidence," he added.

ALSO:

Obama, European leaders working on trade deal

American Airlines-US Airways merger formally announced

Economy's slight shrinkage late last year surprises experts

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Treasury nominee Jacob J. Lew says he would work to boost recovery

WASHINGTON -- Treasury secretary nominee Jacob J. Lew told senators Wednesday that his top priority was to boost the economic recovery while also grappling with the nation's growing debt.

In his confirmation hearing before the Senate Finance Committee, Lew warned that automatic government spending cuts coming March 1 would damage the recovery. And he called for Democrats and Republicans to work together to improve the economy, citing his history of working across party lines.

"In recent years, some have argued that Washington is irrevocably broken, that our government cannot tackle the nation’s most serious problems, that bipartisanship is a thing of the past. I disagree," Lew said in his prepared remarks.

"The truth is, we all share the same goals. We want an economy that is expanding," he said.  

Quiz: How much do you know about looming federal budget cuts?

President Obama nominated Lew, 57, to replace Timothy F. Geithner, who stepped down as Treasury secretary last month. Lew had been Obama's chief of staff, and also served as head of the Office of Management and Budget in the Obama and Clinton administrations.

As the budget director for two Democratic presidents, Lew negotiated spending deals with Republican majorities in Congress. Between his government stints, Lew worked in the private sector. He was president of New York University and worked from 2006 to 2009 at Citigroup.

Lew was managing director and chief operating officer at Citi Global Wealth Management from 2006 to 2008. He held the same position at Citi Alternative Investments in 2008-09.

Lew descibed his role at Citigroup as being "part of the senior management team trying to drive organizational change at one of our nation’s largest banks."

Sen. Orrin Hatch (R-Utah) said he would press Lew at the hearing on his time at Citigroup and was among several Republicans who planned tough questions.

"Some of the units’ activities included proprietary trading along with sales and marketing of risky investments," Hatch said.

"If you knew about the marketing and sales of those investments, it would be instructive for us to find out what you knew," he continued. "If you did not know much about them, then it would be instructive for us to find out why, and to determine exactly what your responsibilities were during your years at Citi when you were very well compensated, including times when Citigroup was being propped up by American taxpayers."

Senate Finance Committee Chairman Max Baucus (D-Mont.) said that Lew, if confirmed, would need to focus on three areas -- job creation, stabilizing the federal goverment's finances and simplifying the tax code.

"The state of the economy is still fragile," Baucus said. "Unemployment near 8% for the next two years is unacceptable."

 ALSO:

Jacob J. Lew, White House chief of staff, to get Treasury nod

Obama says Treasury nominee Jacob Lew 'has my complete trust'

Widget lets you see how Treasury nominee Lew would sign your name

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Stocks edge higher in early trading

Stocks edged higher in early trading Tuesday following mixed earnings reports from companies including Avon, Goodyear and Coca-Cola.

The Dow Jones industrial average rose 30 points to 13,981 in the first hour of trading. The Standard & Poor's 500 was up two points at 1,519. The Nasdaq was up three at 3,194.

Avon, a direct seller of beauty products, jumped $2.68, or 16 percent, to $19.97 after the company posted a fourth-quarter loss that wasn't as bad as analysts had expected. Avon hopes to save $400 million by slashing costs. Michael Kors, a luxury clothing and accessories seller, rose $6.30, or 11 percent, to $63.23 after reporting earnings that beat analysts' predictions.

Coca-Cola, the world's largest beverage company, fell 61 cents to $38.03 after reporting fourth-quarter revenue that fell short of analysts' forecasts. Goodyear Tire & Rubber sank 6 percent to $13.11 after the company cut its forecast for full-year earnings, blaming weakness in the European economy.

About 70 percent of companies in the S&P 500 have reported earnings for the fourth quarter. Analysts are projecting that earnings will rise 6.4 percent for the period, an improvement from the 2.4 percent growth reported in the third quarter, according to S&P Capital IQ.

A start-of-the-year rally that pushed indexes close to record highs has slowed down. The S&P 500 is up 1.3 percent this month, following a 5 percent gain in January. The Dow has advanced 0.8 percent in February, after surging 5.8 percent a month earlier, logging its best January in almost two decades.

Stock advanced at the start of the year after lawmakers reached a last-minute deal to avoid the “fiscal cliff” of sweeping tax increases and spending cuts. Investors are also becoming more optimistic that the housing market is recovering and that hiring is picking up.

Investors will be watching closely Tuesday night when President Barack Obama delivers his annual State of the Union speech. Obama is expected to focus on the economy, including job creation.

A decline in bond prices since the beginning of the year has also slowed. The yield on the 10-year Treasury note, which moves inversely to its price, rose 3 basis points to 1.99 percent. The yield was 1.71 percent at the beginning of the year.

Among other stocks making big moves:

— Masco jumped $2.23, or 13 percent, to $20.02 after the home improvement and building products company reported earnings that beat analysts' expectations thanks to strong demand in North America.

— Dun & Bradstreet, a provider of credit and business data, fell $7.44, or 9 percent, to $77.92 after the company reported that a fourth-quarter profit that came in below market expectations.

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Dozens of airline fees rose or changed in 2012, study finds

Airline travel fees — including charges to check a bag and to board early — have become so prevalent that travelers almost need an advanced degree in mathematics to calculate overall trip costs.

Last year at least 36 airline fees increased, and 16 others were redefined, bundled or unbundled with other services, according to a recent study by the consumer travel website Travelnerd.

One bright spot in the Travelnerd study of 14 U.S. airlines is that most fee increases were only $5 to $10 each.

In one case an airline had a big fee reduction. The study found that United Airlines reduced its fee for checking an overweight bag to $100 from $200 for bags 50 to 70 pounds and to $200 from $400 for bags 71 to 100 pounds.

"Travelers really have to be extra cautious when booking a flight," said Alicia Jao, vice president of travel media at Travelnerd, who predicts travelers will see even more fees in 2013. "U.S. carriers are becoming creative at charging consumers extra fees."

But some airlines seem to charge fees arbitrarily, said Perach Mazol, a Los Angeles resident who recently flew to Florida with friends from Romania to take a cruise.

On her flight from L.A. to Fort Lauderdale, Fla., on Spirit Airlines, she said the Florida airline did not charge for the carry-on bags she and her friends were carrying, but the carrier asked for $50 each to carry the same bags on the flight back. (Spirit is one of only two airlines in the U.S. that charge passengers for carry-on luggage.)

"I don't understand why they charged us on one flight and they don't on the other," Mazol said. "It's confusing."

A spokeswoman for Spirit said the airline tries to enforce its policies consistently.

"Maybe she got lucky one way and didn't have to pay," Spirit spokeswoman Misty Pinson said.

United offering satellite-based Wi-Fi

United Airlines was one of the last major airlines to offer onboard wireless Internet. But the Chicago carrier is trying to make up for its tardiness.

United offers Wi-Fi in about 3% of its fleet of about 700 planes, one of the lowest rates of any major carrier in the nation, according to a recent study.

But United recently became the first U.S.-based international carrier to offer satellite-based Wi-Fi Internet for passengers traveling on long-haul overseas flights.

The carrier has installed satellite-based Wi-Fi on nearly a dozen planes, with plans to expand the service to more than 300 planes, or about 43% of the fleet, by the end of the year.

"With this new service, we continue to build the airline that customers want to fly," said Jim Compton, vice chairman and chief revenue officer at United.

Satellite-based Wi-Fi is typically as fast as ground-based Wi-Fi, experts say, but the advantage is that it can give passengers Internet access when flying over areas where cellular towers don't exist — such as the Pacific or Atlantic oceans.

But, of course, there is a price to pay for the service.

United is charging $3.99 to $14.99 for standard speed, depending on the duration of the flight, and $5.99 to $19.99 for faster speeds.

United is not the only airline to offer satellite-based Wi-Fi. Southwest Airlines, the nation's largest domestic carrier, offers it through Westlake Village-based Row 44.

Delta to raise fee to access lounges

Airline fees are rising not only for onboard services but for amenities at the airport too.

Delta Air Lines, which has invested more than $20 million in its airport lounges over the last two years, announced that it would raise the cost for annual membership to access its lounges across the country by $50, starting March 1.

The increase means that an annual membership will range from $350 to $450, depending on membership level. (The more miles passengers fly on Delta the less they pay for membership.)

Among the investments Delta has made is the addition of a new luxury bar that opened recently at Delta's lounge at Los Angeles International Airport. Instead of helping themselves at a self-serve bar, members can now belly up to a fully stocked bar and order a drink from a bartender.

hugo.martin@latimes.com

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