Thursday May 29, 9:24 am ET
By Emma Vandore, AP Business Writer
World food prices set to fall from current record but will remain high, report says
PARIS (AP) -- World food prices are set to fall from current peaks in the coming years but will remain "substantially above" average levels from the past decade, a report said Thursday.
The world's poorest nations are most vulnerable -- particularly the urban poor in food-importing countries -- and will require increased humanitarian aid to stave off hunger and undernourishment, according to a joint agricultural report by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization said.
"Rising prices now translate, unfortunately, as an increase in hunger and civil strife. Uncertainty rules and our people are worried," FAO chief Jacques Diouf told a Paris news conference.
OECD head Angel Gurria, at his side, added: "The end of cheap food in a world where half the population lives with less than two dollars a day is a source of grave concern."
High oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuel production and speculation have sent food prices soaring worldwide, trigging protests from Africa to Asia and raising fears that millions more will suffer malnutrition.
"There is a real need to foster growth and development in poor countries and to assist in developing their agricultural supply base," said the report, based on a forecast of the cereals, oilseeds, sugar, meats, milk and dairy products markets for the period 2008 to 2017. It reflects agriculture and trade policies in place in early 2008 and includes an assessment of the biofuels markets for bioethanol and biodiesel.
Despite the prices hikes, general price levels have remained "remarkably stable," suggesting that inflation in the coming decade will "remain low," the report says.
"We do not expect the current price levels to last. But the average of most agricultural commodity prices over the next 10 years will still exceed the average of the previous decade by 10 to 50 percent, depending on the commodity," Gurria said.
Compared with the previous decade, the report said average prices from 2008-2017 for beef and pork will rise 20 percent; sugar around 30 percent; wheat, maize and skim milk powder 40 to 60 percent; butter and oilseeds more than 60 percent; and vegetable oils over 80 percent.
Besides investing in agriculture, the report recommends helping poorer countries diversify their economies and improve governance and administrative systems.
The two international bodies also urged governments to rethink trade-restricting policies such as protecting domestic producers through high price support, export taxes and trade embargoes.
Gurria also called for the "swift and ambitious" conclusion of the Doha trade talks.
"As yields return to normal and farmers respond to higher prices, supply will expand and bring prices down," he said. "That, in turn, will tone down the panic reactions both by market participants and by some governments, which have contributed to exacerbate prices."
"But after the 'spike in the hike' disappears, the more permanent factors will come into play," he said, noting high oil prices and growing biofuel production.
The report says demand for biofuels has boosted demand for grains, oilseed products and sugar at a time when stocks are lower.
Analysis "suggests that the energy, security, environmental and economic benefits of biofuels production ... are at best modest, and sometimes even negative," the report said, urging "alternative approaches."
Internationally, overall food prices have risen 83 percent in three years, according to the World Bank. Part of the increase is the result of adverse weather in major grain-producing regions, with spillover effects on crops and livestock competing for the same land.
Developing countries such as India and China will dominate production and consumption of most commodities by 2017, the report said.
The report assumes a strengthening of the U.S. dollar against most other currencies, which it said will increase incentives to boost domestic production in some countries.
The report also recommends examining the link between climate change and water availability and the effect on production and yield shortfalls, and developing genetically modified organisms "offers potential that could be further exploited," the report says.
Rising food prices, in the absence of adequate regional markets, are increasing food insecurity in Africa, said Ndiogou Fall, president of ROPPA, a network representing farmers from 10 West African nations.
"Agriculture in our countries has been turned into a mine of raw materials for the European food industry," Fall said in a statement from Rome, where he was attending talks led by Italian farmers' group Coldiretti. "Until this logic changes, we won't be able to step out of the crisis."
Associated Press writer Marta Falconi in Rome contributed to this report.
http://www.oecd.org/
http://www.fao.org/
Thursday, May 29, 2008
Yang 'Listening' But Yahoo Caught Between a Rock and Carl Icahn
Posted May 29, 2008 09:54am EDT
by Aaron Task in Investing, Internet, Newsmakers, Venture Capital, M and A, IPOs
At the All Things D conference Wednesday night, Jerry Yang reiterated what Steve Ballmer said the night before: Yahoo and Microsoft are talking, but not about an all-out acquisition of Tech Ticker's parent.
Meanwhile, The Wall Street Journal reports "people close to Yahoo" would "likely entertain an offer" in the mid-$30s range, suggesting the two sides are tantalizingly close to Microsoft's since-pulled $33 bid.
A full buyout is ultimately the most likely outcome, says Dan Colarusso, managing editor of Portfolio.com, but Ballmer is likely to wait a little longer to ratchet up the pressure on Yahoo's board.
Speaking of which, the Journal also says Carl Icahn would prefer Yahoo do an outsourcing deal with Google vs. an alternative transaction with Microsoft.
Colarusso believes this is merely a ploy by Icahn to let Ballmer know the famed corporate raider also has options, even if he's pretty much placed all his chips on a Microsoft-Yahoo deal getting done.
For Yahoo, dealing with Ballmer is better than dealing with Ichan, says Colarusso, but Ballmer needs Yahoo, too, and Portfolio.com provides a roadmap for (finally) getting the deal done.
by Aaron Task in Investing, Internet, Newsmakers, Venture Capital, M and A, IPOs
At the All Things D conference Wednesday night, Jerry Yang reiterated what Steve Ballmer said the night before: Yahoo and Microsoft are talking, but not about an all-out acquisition of Tech Ticker's parent.
Meanwhile, The Wall Street Journal reports "people close to Yahoo" would "likely entertain an offer" in the mid-$30s range, suggesting the two sides are tantalizingly close to Microsoft's since-pulled $33 bid.
A full buyout is ultimately the most likely outcome, says Dan Colarusso, managing editor of Portfolio.com, but Ballmer is likely to wait a little longer to ratchet up the pressure on Yahoo's board.
Speaking of which, the Journal also says Carl Icahn would prefer Yahoo do an outsourcing deal with Google vs. an alternative transaction with Microsoft.
Colarusso believes this is merely a ploy by Icahn to let Ballmer know the famed corporate raider also has options, even if he's pretty much placed all his chips on a Microsoft-Yahoo deal getting done.
For Yahoo, dealing with Ballmer is better than dealing with Ichan, says Colarusso, but Ballmer needs Yahoo, too, and Portfolio.com provides a roadmap for (finally) getting the deal done.
Saturday, May 17, 2008
Citi Settles Enron Suit for $1.66B
Wednesday March 26, 2:03 pm ET
By Madlen Read, AP Business Writer
Citigroup to Pay $1.66 Billion to Settle Enron Creditors Bankruptcy Lawsuit
NEW YORK (AP) -- Citigroup Inc. agreed Wednesday to pay $1.66 billion to creditors of Enron Corp. who lost money when the energy trader collapsed in 2001.
Citigroup was the last remaining defendant in what was known as the "Mega Claims" lawsuit, a bankruptcy suit filed in 2003 against 11 banks and brokerages. The filer, called Enron Creditors Recovery Corp., alleges that with the help of banks like Citigroup, Enron kept creditors in the dark about the company's financial troubles by using shady accounting.
Wednesday's settlement -- plus previous bank settlements and Enron's subsequent release of $1.7 billion held in reserves -- gives those creditors more than $5 billion, Enron said. That amounts to 37.4 cents on each dollar the creditors had tied up in Enron, according to Enron.
Citi, which denies any wrongdoing, had been trying to get the creditors suit tossed out. Enron's creditors -- which include individual employees and small companies who lent Enron money -- had filed claims against Citi that could have potentially totaled about $21 billion.
The creditors' suit is separate from a $40 billion class-action lawsuit by shareholders, which Citigroup already settled in June 2005 for $2 billion.
That shareholder suit has pulled in more than $7 billion from companies including Citi, Bank of America Corp. and JPMorgan Chase & Co., and as of January planned to pay out stockholders $6.79 per share of common stock and $168.50 per share of Enron's stock-like preferred shares, according to a mailing to Enron investors.
But late last month, a federal judge delayed a decision on whether to approve the plan to distribute the settlements. Meanwhile, there are several companies that remain as defendants in the shareholder case, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC.
For Citigroup, Wednesday's settlement of the creditors' suit has resolved the bank's two largest remaining claims. The settlement arrives a month ahead of a scheduled April trial.
Still, the $1.66 billion settlement wipes out more than half of the $2.8 billion in litigation reserves Citi held as of Dec. 31, 2007, according to a regulatory filing. Citi said earlier this year those reserves are sufficient to cover all pending suits.
Several years after the Enron collapse, Citi is wrangling with its own financial problems. A plunge in demand for assets backed by mortgages caused the bank to suffer a nearly $10 billion loss in the fourth quarter of 2007, its biggest loss ever.
Citigroup shares fell $1.25, or 5.3 percent, to $22.17 by midday trading Wednesday.
In addition to paying Enron creditors $1.66 billion, Citi is waiving about $4 billion in claims it made against Enron. Citi said it agreed to a separate settlement resolving all disputes with the holders of Enron credit-linked notes. It would not disclose the amount of that settlement.
Before it filed for bankruptcy, Enron in its hey-day had been the seventh-largest company in the United States.
Enron's collapse into bankruptcy obliterated thousands of jobs, more than $2 billion in pension plans, and more than $60 billion in market value. It also resulted in the convictions of Enron's founder Kenneth Lay and former chief executive Jeffrey Skilling for fraud, conspiracy and other charges. Lay died in July 2006 of heart disease, and Skilling is serving a sentence of more than 24 years. Lay's death vacated his conviction.
AP Business Writer Lauren LaCapra in New York contributed to this report
By Madlen Read, AP Business Writer
Citigroup to Pay $1.66 Billion to Settle Enron Creditors Bankruptcy Lawsuit
NEW YORK (AP) -- Citigroup Inc. agreed Wednesday to pay $1.66 billion to creditors of Enron Corp. who lost money when the energy trader collapsed in 2001.
Citigroup was the last remaining defendant in what was known as the "Mega Claims" lawsuit, a bankruptcy suit filed in 2003 against 11 banks and brokerages. The filer, called Enron Creditors Recovery Corp., alleges that with the help of banks like Citigroup, Enron kept creditors in the dark about the company's financial troubles by using shady accounting.
Wednesday's settlement -- plus previous bank settlements and Enron's subsequent release of $1.7 billion held in reserves -- gives those creditors more than $5 billion, Enron said. That amounts to 37.4 cents on each dollar the creditors had tied up in Enron, according to Enron.
Citi, which denies any wrongdoing, had been trying to get the creditors suit tossed out. Enron's creditors -- which include individual employees and small companies who lent Enron money -- had filed claims against Citi that could have potentially totaled about $21 billion.
The creditors' suit is separate from a $40 billion class-action lawsuit by shareholders, which Citigroup already settled in June 2005 for $2 billion.
That shareholder suit has pulled in more than $7 billion from companies including Citi, Bank of America Corp. and JPMorgan Chase & Co., and as of January planned to pay out stockholders $6.79 per share of common stock and $168.50 per share of Enron's stock-like preferred shares, according to a mailing to Enron investors.
But late last month, a federal judge delayed a decision on whether to approve the plan to distribute the settlements. Meanwhile, there are several companies that remain as defendants in the shareholder case, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC.
For Citigroup, Wednesday's settlement of the creditors' suit has resolved the bank's two largest remaining claims. The settlement arrives a month ahead of a scheduled April trial.
Still, the $1.66 billion settlement wipes out more than half of the $2.8 billion in litigation reserves Citi held as of Dec. 31, 2007, according to a regulatory filing. Citi said earlier this year those reserves are sufficient to cover all pending suits.
Several years after the Enron collapse, Citi is wrangling with its own financial problems. A plunge in demand for assets backed by mortgages caused the bank to suffer a nearly $10 billion loss in the fourth quarter of 2007, its biggest loss ever.
Citigroup shares fell $1.25, or 5.3 percent, to $22.17 by midday trading Wednesday.
In addition to paying Enron creditors $1.66 billion, Citi is waiving about $4 billion in claims it made against Enron. Citi said it agreed to a separate settlement resolving all disputes with the holders of Enron credit-linked notes. It would not disclose the amount of that settlement.
Before it filed for bankruptcy, Enron in its hey-day had been the seventh-largest company in the United States.
Enron's collapse into bankruptcy obliterated thousands of jobs, more than $2 billion in pension plans, and more than $60 billion in market value. It also resulted in the convictions of Enron's founder Kenneth Lay and former chief executive Jeffrey Skilling for fraud, conspiracy and other charges. Lay died in July 2006 of heart disease, and Skilling is serving a sentence of more than 24 years. Lay's death vacated his conviction.
AP Business Writer Lauren LaCapra in New York contributed to this report
Thursday, May 15, 2008
Icahn to Yahoo board: Sell to Microsoft or leave
Thursday May 15, 7:32 pm ET
By Michael Liedtke, AP Business Writer
Icahn sets out to replace 'irresponsible' Yahoo board in move to renew Microsoft talks
SAN FRANCISCO (AP) -- Yahoo Inc. Chief Executive Jerry Yang spent months fending off Microsoft Corp.'s unsolicited takeover bid. Now he may only have a few weeks to persuade the software maker to revive its last offer of $47.5 billion, or risk being fired in a shareholder mutiny led by activist investor Carl Icahn.
Spurred on by outraged shareholders, Icahn notified Yahoo Thursday that he will lead a revolt to oust Yang and the rest of the Internet company's board unless they renew negotiations with Microsoft that fell apart May 3 when the two sides couldn't agree on a price.
In a response late Thursday, Yahoo Chairman Roy Bostock signaled that the Sunnyvale-based company is prepared to battle the New York financier.
Bostock criticized Icahn for having a "significant misunderstanding of the facts" about Microsoft's offer and the Yahoo board's response. He also emphasized that Yahoo remains open to a sale "if it offers our stockholders full and certain value."
To pressure Yahoo, Icahn has nominated an alternate slate of directors to replace the current board in an election scheduled July 3 at Yahoo's annual meeting. If the uprising is successful, an Icahn-led board presumably would fire Yang as CEO and try to negotiate a sale to Microsoft.
In his letter to Bostock, Icahn lambasted the board's actions as "irresponsible" and "unconscionable," given that Yahoo's stock stood at $19.18 before Microsoft first made its bid. He urged the board to reopen the talks.
"I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies," Icahn wrote.
Bostock defended Yang and the Yahoo board in his letter to Icahn. "We continue to believe that Yahoo's current board has the independence, the knowledge, and the commitment to navigate the company through the rapidly changing Internet environment and to deliver value for Yahoo and its stockholders," Bostock wrote.
To gain leverage in the looming battle, Icahn revealed that he has spent more than $1 billion snapping up 59 million Yahoo shares and options to give him a 4.3 percent stake in the company. He plans to seek approval from the Federal Trade Commission to acquire up to $2.5 billion in Yahoo stock, including his current holdings.
Icahn's challenge opens a dramatic new chapter in a saga that began Jan. 31 when Microsoft stunned Yahoo with a takeover bid that started out at $44.6 billion, or $31 per share, and then rose to $47.5 billion, or $33 per share, earlier this month.
The showdown now features at least five billionaires with diverse agendas:
Yang and fellow Yahoo co-founder David Filo, who believe Yahoo is worth at least $53 billion; Icahn and basketball team owner Mark Cuban, who has agreed to help shake up the company that made him rich; and Microsoft CEO Steve Ballmer, who, until recently at least, viewed Yahoo as a key weapon in his crusade to topple Internet search and advertising leader Google Inc.
Hoping to seal the deal, Ballmer orally offered to buy Yahoo $33 per share. But Yang and Filo -- speaking on behalf of Yahoo's board -- sought $37 per share, a price the stock hasn't reached in more than two years. The impasse prompted Ballmer to withdraw the bid.
Yahoo shares rose 61 cents, or 2.3 percent, to finish Thursday at $27.75. That's the stock's highest closing price since Microsoft broke off talks.
While Icahn made it clear he wants Yahoo sold to Microsoft, there are no guarantees the software maker is still interested in buying its rival.
A Microsoft spokesman declined to comment on Icahn's letter, saying the Redmond, Wash.-based company has "moved on."
Besides Icahn, the alternate slate of nominees includes Cuban, who sold Broadcast.com to Yahoo for $8.1 billion in stock in 1999. Cuban used part of his Yahoo windfall to buy the Dallas Mavericks, a National Basketball Association franchise that he still owns. He called upon Yahoo to sell to Microsoft in a February blog posting.
If Yahoo can't find a way to placate Icahn, the battle threatens to distract Yahoo and the rest of the company's management from their turnaround efforts, said James Post, a Boston University professor specializing in corporate governance and ethics.
"Senior management cannot concentrate on managing the business when they are concentrating on managing critical relationships with angry shareholders," Post said.
And there's no doubt Yahoo shareholders are furious, said Darren Chervitz, co-portfolio manager of the Jacob Internet Fund, which owns about 100,000 Yahoo shares.
"There's a strong feeling that Yang and the board did not do their fiduciary duty," Chervitz said. "They had a very strong offer on the table and did everything to brush it aside, if not sabotage it."
Paulson & Co., a New York hedge fund that owns 50 million Yahoo shares, said Thursday that it will back Icahn's alternate slate of directors if Yahoo's board doesn't negotiate a sale to Microsoft.
Icahn has a long history of challenging corporate boards overseeing troubled companies. Most recently, he has forced major changes at Blockbuster Inc. and Motorola Inc. He also played a pivotal role in the recent $8.5 billion sale of business software maker BEA Systems Inc. to rival Oracle Corp., which dropped an earlier bid of $6.7 billion.
The billionaire investor's other notable nominees to the Yahoo board include: venture capitalist Adam Dell, whose brother, Michael, founded Dell Inc.; and Frank Biondi Jr., the former chief executive of Viacom Inc.
Icahn also recruited two nominees that Microsoft reportedly lined up for a possible hostile takeover attempt that never materialized. Those two are advertising executive Edward Grey and former Nextel Partners CEO John Chapple.
The revolt threatens to jettison Yang, 39, from the company that he started with Filo, 41, while they were graduate students at Stanford University 14 years ago. Together, Yang and Filo still own 134 million Yahoo shares, or nearly 10 percent of the company.
Yang has argued Yahoo eventually will be worth more than Microsoft's last offer if it can expand its share of a rapidly growing Internet advertising market. He has pledged to boost Yahoo's net revenue growth by 25 percent in 2009 and 2010 -- well above the company's recent pace of 12 percent.
"It is irresponsible to hide behind management's more than overly optimistic financial forecasts," Icahn wrote Bostock.
Although Ballmer and other Microsoft executives have been saying publicly they don't need to buy Yahoo to bolster the company's unprofitable Internet operations, many analysts have dismissed the statements as posturing.
Collins Stewart analyst Sandeep Aggarwal believes Microsoft will eventually buy Yahoo for $33 or $34 per share. The "body language from Yahoo and Microsoft do not suggest that both companies have really moved on," Aggarwal wrote in a Thursday research note.
If the two companies really abandoned hope for a deal, Aggarwal reasons they would have already announced other moves indicating they were heading in a new direction.
For instance, Yahoo has been discussing a possible advertising partnership with Google for weeks without agreeing to a deal. And if Microsoft weren't still interested in Yahoo, Aggarwal believes the company would have already announced another acquisition or "radical changes" in its strategy for building a more compelling Internet search engine.
Associated Press Business Writer Jennifer Malloy in New York contributed to this story.
By Michael Liedtke, AP Business Writer
Icahn sets out to replace 'irresponsible' Yahoo board in move to renew Microsoft talks
SAN FRANCISCO (AP) -- Yahoo Inc. Chief Executive Jerry Yang spent months fending off Microsoft Corp.'s unsolicited takeover bid. Now he may only have a few weeks to persuade the software maker to revive its last offer of $47.5 billion, or risk being fired in a shareholder mutiny led by activist investor Carl Icahn.
Spurred on by outraged shareholders, Icahn notified Yahoo Thursday that he will lead a revolt to oust Yang and the rest of the Internet company's board unless they renew negotiations with Microsoft that fell apart May 3 when the two sides couldn't agree on a price.
In a response late Thursday, Yahoo Chairman Roy Bostock signaled that the Sunnyvale-based company is prepared to battle the New York financier.
Bostock criticized Icahn for having a "significant misunderstanding of the facts" about Microsoft's offer and the Yahoo board's response. He also emphasized that Yahoo remains open to a sale "if it offers our stockholders full and certain value."
To pressure Yahoo, Icahn has nominated an alternate slate of directors to replace the current board in an election scheduled July 3 at Yahoo's annual meeting. If the uprising is successful, an Icahn-led board presumably would fire Yang as CEO and try to negotiate a sale to Microsoft.
In his letter to Bostock, Icahn lambasted the board's actions as "irresponsible" and "unconscionable," given that Yahoo's stock stood at $19.18 before Microsoft first made its bid. He urged the board to reopen the talks.
"I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies," Icahn wrote.
Bostock defended Yang and the Yahoo board in his letter to Icahn. "We continue to believe that Yahoo's current board has the independence, the knowledge, and the commitment to navigate the company through the rapidly changing Internet environment and to deliver value for Yahoo and its stockholders," Bostock wrote.
To gain leverage in the looming battle, Icahn revealed that he has spent more than $1 billion snapping up 59 million Yahoo shares and options to give him a 4.3 percent stake in the company. He plans to seek approval from the Federal Trade Commission to acquire up to $2.5 billion in Yahoo stock, including his current holdings.
Icahn's challenge opens a dramatic new chapter in a saga that began Jan. 31 when Microsoft stunned Yahoo with a takeover bid that started out at $44.6 billion, or $31 per share, and then rose to $47.5 billion, or $33 per share, earlier this month.
The showdown now features at least five billionaires with diverse agendas:
Yang and fellow Yahoo co-founder David Filo, who believe Yahoo is worth at least $53 billion; Icahn and basketball team owner Mark Cuban, who has agreed to help shake up the company that made him rich; and Microsoft CEO Steve Ballmer, who, until recently at least, viewed Yahoo as a key weapon in his crusade to topple Internet search and advertising leader Google Inc.
Hoping to seal the deal, Ballmer orally offered to buy Yahoo $33 per share. But Yang and Filo -- speaking on behalf of Yahoo's board -- sought $37 per share, a price the stock hasn't reached in more than two years. The impasse prompted Ballmer to withdraw the bid.
Yahoo shares rose 61 cents, or 2.3 percent, to finish Thursday at $27.75. That's the stock's highest closing price since Microsoft broke off talks.
While Icahn made it clear he wants Yahoo sold to Microsoft, there are no guarantees the software maker is still interested in buying its rival.
A Microsoft spokesman declined to comment on Icahn's letter, saying the Redmond, Wash.-based company has "moved on."
Besides Icahn, the alternate slate of nominees includes Cuban, who sold Broadcast.com to Yahoo for $8.1 billion in stock in 1999. Cuban used part of his Yahoo windfall to buy the Dallas Mavericks, a National Basketball Association franchise that he still owns. He called upon Yahoo to sell to Microsoft in a February blog posting.
If Yahoo can't find a way to placate Icahn, the battle threatens to distract Yahoo and the rest of the company's management from their turnaround efforts, said James Post, a Boston University professor specializing in corporate governance and ethics.
"Senior management cannot concentrate on managing the business when they are concentrating on managing critical relationships with angry shareholders," Post said.
And there's no doubt Yahoo shareholders are furious, said Darren Chervitz, co-portfolio manager of the Jacob Internet Fund, which owns about 100,000 Yahoo shares.
"There's a strong feeling that Yang and the board did not do their fiduciary duty," Chervitz said. "They had a very strong offer on the table and did everything to brush it aside, if not sabotage it."
Paulson & Co., a New York hedge fund that owns 50 million Yahoo shares, said Thursday that it will back Icahn's alternate slate of directors if Yahoo's board doesn't negotiate a sale to Microsoft.
Icahn has a long history of challenging corporate boards overseeing troubled companies. Most recently, he has forced major changes at Blockbuster Inc. and Motorola Inc. He also played a pivotal role in the recent $8.5 billion sale of business software maker BEA Systems Inc. to rival Oracle Corp., which dropped an earlier bid of $6.7 billion.
The billionaire investor's other notable nominees to the Yahoo board include: venture capitalist Adam Dell, whose brother, Michael, founded Dell Inc.; and Frank Biondi Jr., the former chief executive of Viacom Inc.
Icahn also recruited two nominees that Microsoft reportedly lined up for a possible hostile takeover attempt that never materialized. Those two are advertising executive Edward Grey and former Nextel Partners CEO John Chapple.
The revolt threatens to jettison Yang, 39, from the company that he started with Filo, 41, while they were graduate students at Stanford University 14 years ago. Together, Yang and Filo still own 134 million Yahoo shares, or nearly 10 percent of the company.
Yang has argued Yahoo eventually will be worth more than Microsoft's last offer if it can expand its share of a rapidly growing Internet advertising market. He has pledged to boost Yahoo's net revenue growth by 25 percent in 2009 and 2010 -- well above the company's recent pace of 12 percent.
"It is irresponsible to hide behind management's more than overly optimistic financial forecasts," Icahn wrote Bostock.
Although Ballmer and other Microsoft executives have been saying publicly they don't need to buy Yahoo to bolster the company's unprofitable Internet operations, many analysts have dismissed the statements as posturing.
Collins Stewart analyst Sandeep Aggarwal believes Microsoft will eventually buy Yahoo for $33 or $34 per share. The "body language from Yahoo and Microsoft do not suggest that both companies have really moved on," Aggarwal wrote in a Thursday research note.
If the two companies really abandoned hope for a deal, Aggarwal reasons they would have already announced other moves indicating they were heading in a new direction.
For instance, Yahoo has been discussing a possible advertising partnership with Google for weeks without agreeing to a deal. And if Microsoft weren't still interested in Yahoo, Aggarwal believes the company would have already announced another acquisition or "radical changes" in its strategy for building a more compelling Internet search engine.
Associated Press Business Writer Jennifer Malloy in New York contributed to this story.
Global market expected to drive cancer drug growth
Thursday May 15, 2:04 am ET
By Matthew Perrone, AP Business Writer
Cancer therapy demand in developing world to drive drug sales, analysts predict
WASHINGTON (AP) -- The global market for cancer drugs will grow twice as fast as that for all other pharmaceuticals as the developing world spends more on health care, a new report says.
China, Brazil, Russia and other emerging countries are becoming bigger customers for pharmaceuticals as they invest more in treating and diagnosing cancer, according to a report issued Thursday by IMS Health.
The health care research firm expects pharmaceutical spending in countries such as India, Mexico and Turkey to grow by 12 to 13 percent over the next 15 years, compared with single-digit growth for more developed nations.
Cancer drug spending is expected to grow between 12 and 15 percent annually through 2012 to $75 to 80 billion, according the report. The overall drug market is expected to grow at 6.4 percent.
Feeding that demand are the multibillion-dollar research and development budgets of firms like Genentech Inc., Amgen Inc. and Novartis AG.
"Oncology is the top of the bill when it comes to new products in development," said Titus Pattel, a vice president with IMS. "Oncology R&D dwarfs all other research efforts within these organizations."
Cancer drug sales are expected to reach $48 billion this year, led by Genentech's breast cancer drug Herceptin, Novartis' leukemia drug Gleevec and other blockbusters.
But the market is not immune to a slowdown. Expiring patents on older cancer drugs and efforts to tighten health care spending could limit future growth, according to IMS.
Some European countries have begun paying drug companies based on how successfully their drugs treat patients. The Italian government, for example, only began reimbursing Johnson & Johnson for the cancer treatment Velcade after the drug demonstrated positive results in patients. IMS said that the adoption of similar policies in the U.S. it could slow spending on cancer medications.
Pharmaceutical firms also face a tougher regulatory environment in the U.S., where the Food and Drug Administration has delayed several highly anticipated cancer therapies.
Last year, the agency denied approval of Dendreon's prostate cancer vaccine Provenge, despite an overwhelmingly positive review by the agency's outside advisers.
"There's a tendency from the FDA to be more conservative than they have over the last 10 years," Pattel said.
An aggressive review environment could dampen the market for between 25 and 30 new anticancer drugs currently in development, the IMS report says. At the same time, some of the biggest blockbuster cancer drugs of the last decade will lose their patent protection, including Sanofi-Aventis' Taxotere and AstraZeneca PLC's Arimidex.
Expiring drug patents and an increasingly crowded market for cancer therapies will lower spending in the U.S. and Europe. These markets are expected to account for 65 percent of the global cancer drugs market by 2012, down from 71 percent last year, according to IMS.
The company's forecast comes ahead of the American Society of Clinical Oncology's annual meeting, which begins May 30. Abstracts for company studies will be released online Thursday night, giving researchers and investors a preview of clinical results for experimental drugs.
By Matthew Perrone, AP Business Writer
Cancer therapy demand in developing world to drive drug sales, analysts predict
WASHINGTON (AP) -- The global market for cancer drugs will grow twice as fast as that for all other pharmaceuticals as the developing world spends more on health care, a new report says.
China, Brazil, Russia and other emerging countries are becoming bigger customers for pharmaceuticals as they invest more in treating and diagnosing cancer, according to a report issued Thursday by IMS Health.
The health care research firm expects pharmaceutical spending in countries such as India, Mexico and Turkey to grow by 12 to 13 percent over the next 15 years, compared with single-digit growth for more developed nations.
Cancer drug spending is expected to grow between 12 and 15 percent annually through 2012 to $75 to 80 billion, according the report. The overall drug market is expected to grow at 6.4 percent.
Feeding that demand are the multibillion-dollar research and development budgets of firms like Genentech Inc., Amgen Inc. and Novartis AG.
"Oncology is the top of the bill when it comes to new products in development," said Titus Pattel, a vice president with IMS. "Oncology R&D dwarfs all other research efforts within these organizations."
Cancer drug sales are expected to reach $48 billion this year, led by Genentech's breast cancer drug Herceptin, Novartis' leukemia drug Gleevec and other blockbusters.
But the market is not immune to a slowdown. Expiring patents on older cancer drugs and efforts to tighten health care spending could limit future growth, according to IMS.
Some European countries have begun paying drug companies based on how successfully their drugs treat patients. The Italian government, for example, only began reimbursing Johnson & Johnson for the cancer treatment Velcade after the drug demonstrated positive results in patients. IMS said that the adoption of similar policies in the U.S. it could slow spending on cancer medications.
Pharmaceutical firms also face a tougher regulatory environment in the U.S., where the Food and Drug Administration has delayed several highly anticipated cancer therapies.
Last year, the agency denied approval of Dendreon's prostate cancer vaccine Provenge, despite an overwhelmingly positive review by the agency's outside advisers.
"There's a tendency from the FDA to be more conservative than they have over the last 10 years," Pattel said.
An aggressive review environment could dampen the market for between 25 and 30 new anticancer drugs currently in development, the IMS report says. At the same time, some of the biggest blockbuster cancer drugs of the last decade will lose their patent protection, including Sanofi-Aventis' Taxotere and AstraZeneca PLC's Arimidex.
Expiring drug patents and an increasingly crowded market for cancer therapies will lower spending in the U.S. and Europe. These markets are expected to account for 65 percent of the global cancer drugs market by 2012, down from 71 percent last year, according to IMS.
The company's forecast comes ahead of the American Society of Clinical Oncology's annual meeting, which begins May 30. Abstracts for company studies will be released online Thursday night, giving researchers and investors a preview of clinical results for experimental drugs.
Tuesday, May 13, 2008
Economic 'misery' more widespread
Some experts argue that true inflation and unemployment -- the components of the economy's 'Misery Index' -- are higher than the government's official figures.
NEW YORK (CNNMoney.com) -- Americans are feeling a lot more economic pain than the government's official statistics would lead you to believe, according to a growing number of experts.
They argue that figures on unemployment and inflation are being understated by the government.
Unemployment and inflation are typically added together to come up with a so-called "Misery Index."
The "Misery Index" was often cited during periods of high unemployment and inflation, such as the mid 1970s and late 1970s to early 1980s.
And some fear the economy may be approaching those levels again.
The official numbers produce a current Misery Index of only 9, not far from the low of 6.1 seen in 1998.
But using the estimates on CPI and unemployment from economists skeptical of the government numbers, the Misery Index is actually in the teens. Some worry it could even approach the post-World War II record of 20.6 in 1980.
"We're looking at government numbers that are really out of whack," said Kevin Phillips, author of the book "Bad Money."
According to the government's most recent Consumer Price Index, a key inflation reading, consumer prices rose 4% in the 12 months ending in March. The April CPI report will be released Wednesday morning and economists expect no change from March, despite record gas prices.
But Phillips argues that consumer prices are probably up at least 5% and perhaps more than 10%.
Part of the disconnect may be due to the fact that nondurable goods, such as food and gasoline, makes up only 12% of CPI.
In addition, food and energy prices are eliminated from the so-called core CPI, which many economists tend to focus more closely on because they claim food and gas prices are volatile.
But food and energy costs are a part of household budgets that are very important to consumers. And those prices have been skyrocketing: gas prices were up about 25% over the 12 months ending in March while food prices rose 4.5% over the same period.
To that end, nearly half of the respondents of a recent CNN/Opinion Research Corp. poll said inflation was the biggest problem they face.
CPI missed the housing bubble...and bust
Another problem with the CPI figures, according to skeptics, is that it doesn't accurately reflect what's going on in the housing market. That's significant because the cost of buying a home has twice the impact on CPI as does the prices of all nondurable goods combined.
The CPI showed only an 11% rise in home ownership costs from 2002 through 2006, a time that the National Association of Realtors reported that existing home prices soared 34%.
The reason for the low CPI reading is because the CPI looks at equivalent rents, rather than home prices. So inflation was understated during this period, according to Phillips. He argues this may have helped feed the housing boom since it kept mortgage rates lower than they should have been.
Now that the housing boom has gone bust, the CPI appears to be missing the declines in home prices as well; it estimates that the cost of owning a home posted a 12-month increase of 2.6% in March.
But because the CPI figure was so far behind tracking the increase in home values, the housing component of CPI still is leading to a lower inflation reading than what it should be, Phillips said.
The unusual way that housing prices are estimated isn't the only peculiarity of the CPI report. Over the past ten years, there have been other changes in the calculations, particularly for big ticket items.
Cuts to estimated prices for items like electronics and cars that are thought to have improvements in quality year-after-year have lowered the overall CPI. In addition, changes in the way certain products, such as food, are tracked by the government, have also contributed to lower readings than otherwise expected.
Bill Gross, the manager of Pimco Total Return, the nation's largest bond fund, refers to the CPI as a "con job" that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low.
In a report about the CPI, he noted that some of the adjustments don't accurately reflect how much consumers pay for goods. Pimco estimates that the changes have shaved more than a percentage point off the CPI.
"Did your new model computer come with a 25% discount from last year's price?" Gross wrote. "Probably not. What is likely is that you paid about the same price for memory improvements you'll never use."
Another flaw with the CPI numbers is that the government now assumes that higher prices for one item will lead consumers to buy more of a substitution item. That may be true. But if people buy fewer steaks and more hamburgers, for example, it's unrealistic to say that inflation isn't a problem, skeptics maintain.
"The government can claim there's no inflation but all they're measuring is a reduced standard of living," argues Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments.
With all this in mind, California economist John Williams argues that CPI is understating inflation by at least 3 percentage points and perhaps as much as 7 percentage points. So instead of an annual inflation rate of 4%, the true number could be between 7% and 11%.
Finally, there's the unemployment rate. It was at a relatively low 5% in April. But according to Williams' Web site, ShadowStats.com, the actual rate may be between 8% and 12% if you use a more accurate reading of those out of work.
Even the government's own numbers show there are many unemployed people not showing up in the unemployment rate. The official reading does not include 4.8 million people who want to work but haven't found a job, for example.
Many of these people are dropped from the official calculation because they have become so discouraged from looking without success that they haven't looked in the previous four weeks. Simply adding those people to the number of unemployed takes the current unemployment rate to 7.8%.
The Bureau of Labor Statistics, which produces both the CPI and unemployment readings, says changes in both measures were made to more accurately reflect the real world. The BLS also says the changes have resulted in changes of less than 1% for each measure.
Still, the Labor Department's own broadest measure of unemployment, which includes as jobless those working part-time jobs because they can't find full-time positions as well as some discouraged job seekers, puts the unemployment rate at 9.2% in April, the highest level for that reading in more than three years.
So if you take that number and add that to the 7% that Williams thinks is a more likely annual inflation rate, you're looking at a "Misery Index" of 16.2, much worse than the 9 you get from the official numbers.
And while that may seem a bit high, it's probably a more accurate gauge of how bad the economy is for many Americans.
NEW YORK (CNNMoney.com) -- Americans are feeling a lot more economic pain than the government's official statistics would lead you to believe, according to a growing number of experts.
They argue that figures on unemployment and inflation are being understated by the government.
Unemployment and inflation are typically added together to come up with a so-called "Misery Index."
The "Misery Index" was often cited during periods of high unemployment and inflation, such as the mid 1970s and late 1970s to early 1980s.
And some fear the economy may be approaching those levels again.
The official numbers produce a current Misery Index of only 9, not far from the low of 6.1 seen in 1998.
But using the estimates on CPI and unemployment from economists skeptical of the government numbers, the Misery Index is actually in the teens. Some worry it could even approach the post-World War II record of 20.6 in 1980.
"We're looking at government numbers that are really out of whack," said Kevin Phillips, author of the book "Bad Money."
According to the government's most recent Consumer Price Index, a key inflation reading, consumer prices rose 4% in the 12 months ending in March. The April CPI report will be released Wednesday morning and economists expect no change from March, despite record gas prices.
But Phillips argues that consumer prices are probably up at least 5% and perhaps more than 10%.
Part of the disconnect may be due to the fact that nondurable goods, such as food and gasoline, makes up only 12% of CPI.
In addition, food and energy prices are eliminated from the so-called core CPI, which many economists tend to focus more closely on because they claim food and gas prices are volatile.
But food and energy costs are a part of household budgets that are very important to consumers. And those prices have been skyrocketing: gas prices were up about 25% over the 12 months ending in March while food prices rose 4.5% over the same period.
To that end, nearly half of the respondents of a recent CNN/Opinion Research Corp. poll said inflation was the biggest problem they face.
CPI missed the housing bubble...and bust
Another problem with the CPI figures, according to skeptics, is that it doesn't accurately reflect what's going on in the housing market. That's significant because the cost of buying a home has twice the impact on CPI as does the prices of all nondurable goods combined.
The CPI showed only an 11% rise in home ownership costs from 2002 through 2006, a time that the National Association of Realtors reported that existing home prices soared 34%.
The reason for the low CPI reading is because the CPI looks at equivalent rents, rather than home prices. So inflation was understated during this period, according to Phillips. He argues this may have helped feed the housing boom since it kept mortgage rates lower than they should have been.
Now that the housing boom has gone bust, the CPI appears to be missing the declines in home prices as well; it estimates that the cost of owning a home posted a 12-month increase of 2.6% in March.
But because the CPI figure was so far behind tracking the increase in home values, the housing component of CPI still is leading to a lower inflation reading than what it should be, Phillips said.
The unusual way that housing prices are estimated isn't the only peculiarity of the CPI report. Over the past ten years, there have been other changes in the calculations, particularly for big ticket items.
Cuts to estimated prices for items like electronics and cars that are thought to have improvements in quality year-after-year have lowered the overall CPI. In addition, changes in the way certain products, such as food, are tracked by the government, have also contributed to lower readings than otherwise expected.
Bill Gross, the manager of Pimco Total Return, the nation's largest bond fund, refers to the CPI as a "con job" that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low.
In a report about the CPI, he noted that some of the adjustments don't accurately reflect how much consumers pay for goods. Pimco estimates that the changes have shaved more than a percentage point off the CPI.
"Did your new model computer come with a 25% discount from last year's price?" Gross wrote. "Probably not. What is likely is that you paid about the same price for memory improvements you'll never use."
Another flaw with the CPI numbers is that the government now assumes that higher prices for one item will lead consumers to buy more of a substitution item. That may be true. But if people buy fewer steaks and more hamburgers, for example, it's unrealistic to say that inflation isn't a problem, skeptics maintain.
"The government can claim there's no inflation but all they're measuring is a reduced standard of living," argues Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments.
With all this in mind, California economist John Williams argues that CPI is understating inflation by at least 3 percentage points and perhaps as much as 7 percentage points. So instead of an annual inflation rate of 4%, the true number could be between 7% and 11%.
Finally, there's the unemployment rate. It was at a relatively low 5% in April. But according to Williams' Web site, ShadowStats.com, the actual rate may be between 8% and 12% if you use a more accurate reading of those out of work.
Even the government's own numbers show there are many unemployed people not showing up in the unemployment rate. The official reading does not include 4.8 million people who want to work but haven't found a job, for example.
Many of these people are dropped from the official calculation because they have become so discouraged from looking without success that they haven't looked in the previous four weeks. Simply adding those people to the number of unemployed takes the current unemployment rate to 7.8%.
The Bureau of Labor Statistics, which produces both the CPI and unemployment readings, says changes in both measures were made to more accurately reflect the real world. The BLS also says the changes have resulted in changes of less than 1% for each measure.
Still, the Labor Department's own broadest measure of unemployment, which includes as jobless those working part-time jobs because they can't find full-time positions as well as some discouraged job seekers, puts the unemployment rate at 9.2% in April, the highest level for that reading in more than three years.
So if you take that number and add that to the 7% that Williams thinks is a more likely annual inflation rate, you're looking at a "Misery Index" of 16.2, much worse than the 9 you get from the official numbers.
And while that may seem a bit high, it's probably a more accurate gauge of how bad the economy is for many Americans.
Friday, May 9, 2008
Barely surviving on credit cards
No longer able to turn their homes for cash, Americans are increasingly using plastic to meet their basic living expenses. But many can't afford to pay the bills.
NEW YORK (CNNMoney.com) -- These days, more and more people are saying "Charge it."
Finding themselves strapped for cash and unable to use their home as an ATM, Americans are increasingly turning to credit cards to cover gas, groceries and other living expenses.
But many find themselves struggling to pay the burgeoning bills at a time when even the basic needs are growing costlier.
"Other sources of money for a lot of Americans are drying up," said Dick Reed, regional counseling manager of Consumer Credit Counseling Service of Greater Atlanta, who sees more clients with mounting credit card debts these days. "Consumers just don't have a place to go to get money. They are digging themselves into a deeper hole not only to pay for normal living expenses, but to make minimum payments on outstanding debt."
Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans' credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion, This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.
In Atlanta, debtors calling the agency in the first quarter of this year had an average of $29,300 in unsecured debt, primarily on credit cards, up from $25,700 in 2007. They spent $335 on groceries and $242 on gas, on average, in April. A year earlier, those outlays averaged only $291 and $181, respectively.
For many people, racking up credit card debt is not a choice they want to make, experts say. Not too long ago, they could have tapped into the equity in their homes through loans or lines of credit or refinancing. But this debt, which usually carries lower interest rates, is no longer as widely available with the collapse of the housing market.
So, faced with soaring costs for food and fuel, people find they must charge more to make ends meet.
"They are not able to increase their income, but their expenses are going up, so the credit card becomes a way to cope," said Sara Gilbert, executive director of the Consumer Credit Counseling Service in Fort Collins, Colo.
Reluctance
Take Lois Eldridge. The Arizona retiree has watched in dismay as her credit card balance doubled to $2,000 over the last few months. Higher gas and grocery prices forced her to charge these essentials for the first time late last year.
She has since drastically reduced her spending on clothing, entertainment and dining out. It's helped, but she says she's still adding about a $100 a month to her balance.
The retired criminology professor also has tried to get a job at a local college in order to supplement her Social Security and savings. But she found would-be employers either paid too little or told her she was overqualified. Her only other options were minimum-wage jobs at local retailers.
"My income has stayed the same, but my expenses are much more than they were last year, even with my attempts to cut back," said Eldridge, 71, who plans to put her federal tax rebate toward her debt. "I'm somewhat overwhelmed that I've had to use credit cards, which I've never had to do before. All I've done in the last four to six months is worry, worry, worry."
Eldridge isn't the only one worrying. Industry analysts say that both credit card balances and delinquencies are on the rise, a sign that a growing number of Americans can't afford their spending habits.
Not surprisingly, those facing the greatest stress tend to be in weak housing markets who are already struggling with their mortgage payments, experts said. Also, as unemployment ticks up and companies cut back on overtime, some people find they don't have enough income to pay the bills.
Falling behind
To be sure, many use their credit cards for convenience and pay their bills on time, sometimes to take advantage of reward programs. But cracks are appearing.
Credit card delinquency rates hit a 4-year high of 4.53% in February, according to Moody's, a debt rating agency.
"Once they've fallen behind, it's increasingly difficult for them to become current on their credit card payments again," said William Black, senior vice president at Moody's. "It's a more challenging economic environment. There's less money to go around."
Meanwhile, card balances have been creeping up steadily since the start of 2006, and jumped nearly 9% during 2007, according to Equifax, a credit data and analysis firm. That's due to a combination of people spending more and paying off less each month, said Myra Hart, senior vice president of analytical services at the firm.
The number of credit cards issued has also risen. At the end of 2007, there were 420 million cards on the market, up 7.6% from a year earlier.
Americans are carrying high levels of debt, compared to historical levels, while their savings rate is quite low, Hart said.
"In the long term, that's not a good thing," she said. "We're really at a tipping point for consumer credit. It depends on what happens to the economy and employment."
Growing balances and delinquencies aren't good for the economy, which is dependent on consumer spending, said Bill Hampel, chief economist at the Credit Union National Association.
"A lot of people will quit going out to dinner if they see their balances rise," Hampel said. "This will hurt the economy."
By Tami Luhby, CNNMoney.com senior writer
Last Updated: May 9, 2008: 2:50 PM EDT
NEW YORK (CNNMoney.com) -- These days, more and more people are saying "Charge it."
Finding themselves strapped for cash and unable to use their home as an ATM, Americans are increasingly turning to credit cards to cover gas, groceries and other living expenses.
But many find themselves struggling to pay the burgeoning bills at a time when even the basic needs are growing costlier.
"Other sources of money for a lot of Americans are drying up," said Dick Reed, regional counseling manager of Consumer Credit Counseling Service of Greater Atlanta, who sees more clients with mounting credit card debts these days. "Consumers just don't have a place to go to get money. They are digging themselves into a deeper hole not only to pay for normal living expenses, but to make minimum payments on outstanding debt."
Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans' credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion, This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.
In Atlanta, debtors calling the agency in the first quarter of this year had an average of $29,300 in unsecured debt, primarily on credit cards, up from $25,700 in 2007. They spent $335 on groceries and $242 on gas, on average, in April. A year earlier, those outlays averaged only $291 and $181, respectively.
For many people, racking up credit card debt is not a choice they want to make, experts say. Not too long ago, they could have tapped into the equity in their homes through loans or lines of credit or refinancing. But this debt, which usually carries lower interest rates, is no longer as widely available with the collapse of the housing market.
So, faced with soaring costs for food and fuel, people find they must charge more to make ends meet.
"They are not able to increase their income, but their expenses are going up, so the credit card becomes a way to cope," said Sara Gilbert, executive director of the Consumer Credit Counseling Service in Fort Collins, Colo.
Reluctance
Take Lois Eldridge. The Arizona retiree has watched in dismay as her credit card balance doubled to $2,000 over the last few months. Higher gas and grocery prices forced her to charge these essentials for the first time late last year.
She has since drastically reduced her spending on clothing, entertainment and dining out. It's helped, but she says she's still adding about a $100 a month to her balance.
The retired criminology professor also has tried to get a job at a local college in order to supplement her Social Security and savings. But she found would-be employers either paid too little or told her she was overqualified. Her only other options were minimum-wage jobs at local retailers.
"My income has stayed the same, but my expenses are much more than they were last year, even with my attempts to cut back," said Eldridge, 71, who plans to put her federal tax rebate toward her debt. "I'm somewhat overwhelmed that I've had to use credit cards, which I've never had to do before. All I've done in the last four to six months is worry, worry, worry."
Eldridge isn't the only one worrying. Industry analysts say that both credit card balances and delinquencies are on the rise, a sign that a growing number of Americans can't afford their spending habits.
Not surprisingly, those facing the greatest stress tend to be in weak housing markets who are already struggling with their mortgage payments, experts said. Also, as unemployment ticks up and companies cut back on overtime, some people find they don't have enough income to pay the bills.
Falling behind
To be sure, many use their credit cards for convenience and pay their bills on time, sometimes to take advantage of reward programs. But cracks are appearing.
Credit card delinquency rates hit a 4-year high of 4.53% in February, according to Moody's, a debt rating agency.
"Once they've fallen behind, it's increasingly difficult for them to become current on their credit card payments again," said William Black, senior vice president at Moody's. "It's a more challenging economic environment. There's less money to go around."
Meanwhile, card balances have been creeping up steadily since the start of 2006, and jumped nearly 9% during 2007, according to Equifax, a credit data and analysis firm. That's due to a combination of people spending more and paying off less each month, said Myra Hart, senior vice president of analytical services at the firm.
The number of credit cards issued has also risen. At the end of 2007, there were 420 million cards on the market, up 7.6% from a year earlier.
Americans are carrying high levels of debt, compared to historical levels, while their savings rate is quite low, Hart said.
"In the long term, that's not a good thing," she said. "We're really at a tipping point for consumer credit. It depends on what happens to the economy and employment."
Growing balances and delinquencies aren't good for the economy, which is dependent on consumer spending, said Bill Hampel, chief economist at the Credit Union National Association.
"A lot of people will quit going out to dinner if they see their balances rise," Hampel said. "This will hurt the economy."
By Tami Luhby, CNNMoney.com senior writer
Last Updated: May 9, 2008: 2:50 PM EDT
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