Archive for July, 2009

U.S. to suspend auto clunkers program (Reuters)

Thursday, July 30th, 2009 | Finance News

WASHINGTON (Reuters) –
The Obama administration will suspend a $1 billion program intended to spur U.S. auto sales after it surprisingly approached its funding limit after only a few days, government and industry sources said.

The so-called "Cash for Clunkers" program authorized up to $4,500 to car buyers who traded in their gas guzzlers for more fuel efficient vehicles.

The program was expected to run through September 30 but the sources said the administration would suspend it within the next day.

Transportation Department officials had no immediate comment on the program that the agency administers.

(Writing by John Crawley; Editing by John O'Callaghan)

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Stock Fund Inflow Continued In June (Investor’s Business Daily)

Thursday, July 30th, 2009 | Finance News

Investors pumped $12 billion into stock funds in June. Bond funds pulled in $29.09 billion.

For stock funds it was the third straight month of inflow, according to the Investment Company Institute. It was the first three-peat since April 2007.

The bond funds flow was just shy of May's record $31.64 billion. And it was the second strongest monthly bond inflow ever, taking that honor from April's $28.5 billion.

Signs point 15 similar inflow this month.

June's $12 billion was 53% less than the $18.38 billion stock inflow in May. But it was well up from June 2008's $4.3 billion outflow.

Funds that invest primarily in U.S. stocks took in $5.70 billion in new money in June as the S&P 500 inched up 0.02%. They pulled in $14.05 billion in May.

Stock funds that invest primarily overseas drew in $6.30 billion from investors in June vs. $4.33 billion inflow the month before.

During the month, the MSCI EAFE index rose 1.06%, while the dollar rose 1.25% against the world's major currencies.

Year to date, stock funds gave back just $396 million. They lost $22.61 billion in the year-earlier period.

Hybrid funds, which invest in both stocks and bonds, had inflow of $1.92 billion vs. $2.80 billion the previous month. Year to date, hybrid funds lost $1.91 billion vs. gaining $10.34 billion a year earlier.

The taxable bond fund flow of $23.71 billion was just short of May's $25.10 billion. Since the end of May, the yield curve has steepened slightly.

Rates on 10-year Treasuries edged up 0.06 percentage point 15 3.53%. Rates on three-month T-bills rose 0.05 point 15 0.19%.

For the year to date, bond funds had inflow of $142.60 billion vs. $82.62 billion a year earlier.

Municipal bond funds took in $5.38 billion in June vs. $6.54 billion in May. Year to date, inflow totaled $28.70 billion vs. $17.38 billion a year earlier.

Money Fund Flow

Money-market funds, which often have wide swings in flows, saw outflow of $116.53 billion in June vs. $25.55 billion in outflows the month before. Year to date, money-market outflow was $189.17 billion vs. $232.33 billion the year before.

Institutional money funds disgorged $76.39 billion vs. $7.19 billion inflow the month before. Money funds that cater to individuals had outflow of $40.14 billion vs. outflow of $25.8 billion the month prior.

The combined assets of all mutual funds -- stocks, bonds and money market -- shed $64.5 billion, or 0.6%, to $10.011 trillion in June, from $10.075 trillion the month before.

They stood at $9.601 trillion just six months prior. Stock fund assets rose 0.1% since May to $4.01 trillion. They totaled $3.704 trillion at the end of 2008.

Hybrid fund assets rose $5.4 billion, or 1%, to $526 billion from $520.7 billion the month before. They came to $498.7 billion at the end of 2008.

Bond fund assets rose $39.6 billion, or 2.8%, to $1.431 trillion from $1.391 trillion the month before. That figure stood at $1.228 trillion six months prior.

Taxable money-market fund assets shed $103.3 billion, or 3.1%, to $3.2 trillion from $3.3 trillion the month before and $3.34 trillion at year's end.

Conrad Gann, president of TrimTabs, says industrywide fund flows are flat in July vs. June.

His firm sees bond funds pulling in a net $33 billion in July, with stock funds drawing a net $9.2 billion.

Vanguard Flows

Flows into Vanguard, one of the largest mutual fund providers, were strong in June and so far this month. The firm says its funds netted $4.6 billion in June. The firm estimates it received $5 billion in inflows into its mutual funds in July.

T. Rowe Price said it enjoyed $5.9 billion in net mutual fund inflows in the first half of the year. That's slightly less than the $6.1 billion in flows in the same period last year.

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MetLife posts $1.4 bln quarterly net loss (Reuters)

Thursday, July 30th, 2009 | Finance News

NEW YORK (Reuters) –
MetLife (MET.N), the largest U.S. life insurer, posted a quarterly net loss of $1.4 billion on Thursday, as investment losses took their toll.

But the New York-based insurer's operating earnings, which excluded the investment losses, were better than expected, helped by stronger premium and fee income. Its shares rose about 1.3 percent in after-hours trading.

MetLife's net loss was equal to $1.74 a share, compared with a profit of $915 million, or $1.26 a share, a year ago.

The loss included after-tax realized losses of $2.6 billion -- $1.8 billion of which stemmed from losses on derivatives. Derivatives are a type of structured investment tied to the value of underlying assets.

MetLife's derivatives losses largely stemmed from improvement in the company's own credit spreads, hitting the valuation of its insurance liabilities by about $1 billion. It also recorded some losses on derivatives used to hedge interest rates and foreign-currency fluctuations.

MetLife said the writedowns were consistent with its expectations.

"I did not expect such a huge net loss," said Alan Rambaldini, an analyst with Morningstar in Chicago.

Still, MetLife's operating results were "pretty consistent," said Rambaldini. "There were slow, steady incremental steps, but full recovery really depends on how the (broader) markets react," he added.

Life insurers such as MetLife and its next-biggest rival, Prudential Financial (PRU.N), which reports earnings next week, have been particularly susceptible to recent turmoil in the credit markets. The industry as a whole holds trillions of dollars of investments, and is one of America's biggest commercial real estate investors.

Excluding the losses, MetLife's operating earnings were $723 million, or 88 cents a share, compared with $887 million, or $1.22 a share, in the year-ago period.

Analysts on average expected MetLife to post operating earnings of 68 cents a share, according to Reuters Estimates.

Premiums, fees and other revenue rose 6 percent to $8.4 billion.

But net investment income fell 10 percent to $3.9 billion. MetLife, like some of its rivals, said it had reduced its holding of short-term investments by $21.3 billion, opting to put more cash into longer-term, higher-yielding assets.

RETIREMENT PLANNING

MetLife said its annuities business saw a 43 percent increase in deposits in the quarter, stemming from a record $4.5 billion in variable annuity deposits.

Life insurers are seeing increased demand for annuities as Americans begin to deploy cash more actively into retirement investments.

Variable annuities are much like mutual fund investments, except they include features such as a guaranteed stream of retirement income.

But MetLife's strong balance sheet is helping it stand out against rivals.

"MetLife, unlike some of the other companies, is benefiting from a 'flight to quality,'" said Morningstar's Rambaldini.

Unlike half a dozen of its peers, MetLife never asked to be included in TARP, a federal funding program originally intended for banks, instead tapping capital markets when it needed to bolster capital.

The company's net worth, or the book value of its equity, rose about 18 percent in the quarter to roughly $25 billion.

Shares closed up 4 percent at $33.57 on Thursday and were up 1.3 percent at $34 in after-hours trading.

(Reporting by Lilla Zuill; Editing Bernard Orr and Matthew Lewis)

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