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Bankruptcies spike 33%
Number of bankruptcy filings in third quarter of 2009 soars to highest level since 2005. Business bankruptcies filed this year top 2008 total.
NEW YORK (CNNMoney.com) -- The total number of bankruptcies filed in the third quarter surged 33% in 2009 and is at the highest level since 2005, according to data released Wednesday.
The American Bankruptcy Institute, an industry research firm, said 388,485 bankruptcies were filed during the last quarter, compared to 292,291 filed during the same period in 2008, according to data released by the Administrative Office of the U.S. Courts.
Filings for the first nine months of the year climbed 35% to 1,100,035, compared to 841,496 filings during the same period in 2008. A total of 1,117,771 bankruptcies were filed last year.
"The spike in bankruptcy filings for both consumers and businesses reflect the continuing effects of today's weak economy," said ABI executive director Samuel Gerdano in a statement. "With unemployment surpassing 10% and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy."
Bankruptcies are at the highest level since 2005, when 2,078,415 were filed before Congress passed amendments to the Bankruptcy Code, said ABI.
In October 2005, Congress implemented legislation making it more difficult for filers to prove they should be allowed to clear their debts in a Chapter 7 bankruptcy, forcing more to file under Chapter 13. The law triggered more Americans to rush to file for bankruptcy in the months before the law went into affect.
The ABI report said business bankruptcy filings rose 32% in the third quarter of 2009 to 15,177, and filings for the first nine months of the year totaled 45,510, topping the total 43,546 business bankruptcies filed in 2008.
Personal bankruptcies increased 33% to 373,308 during the last quarter, led by a 42% hike in Chapter 7 filings, which totaled 265,721. The number of consumers filing Chapter 13 bankruptcies rose 15% to 107,142 filings in the third quarter, according to ABI.
During a twelve-month period ending Sept. 30 2009, the report said total filings increased more than 34% to 1,402,816, compared to 1,042,993 in the same period of 2008.
Nevada had the highest rate per capita filings in the country, with 10.49 residents per thousand filing for bankruptcy in the year ended Sept. 30. The state also had the highest rate of filings for chapter 7 bankruptcies at 7.53.
Tennessee had the highest rate of filings for Chapter 13 bankruptcies in the 12-month period with 4.36 people per thousand.
Jobless claims plummet to 14-month low
Number of initial filers for unemployment insurance sinks to 466,000, the lowest since Sept. 13, 2008.
NEW YORK (CNNMoney.com) -- The number of first-time filers for unemployment insurance fell to 466,000, the lowest level in 14 months, according to a government report released Wednesday.
That's the lowest number in the Labor Department figures since the week ended Sept. 13, 2008, and a decrease of 35,000 from the previous week's 501,000.
A consensus estimate of economists surveyed by Briefing.com expected 500,000 new claims in the week ended Nov. 21.
The 4-week moving average of initial claims was 496,500, down 16,500 from the previous week's average of 513,500.
The report is usually released on Thursdays, but it was posted a day early this week because of the Thanksgiving holiday.
"It seems to be a statistical pop," said Tim Quinlan, economist at Wells Fargo. "As much as I'd like it to continue, I don't see claims continuing to fall at this pace."
Still, Quinlan said he expects a gradual decline in initial claims throughout the coming months.
"If you told the average person that we're five or six months into a recovery, they'd probably want to shoot you because it doesn't feel that way to them," Quinlan said. "But we are seeing more encouraging signs overall, and unemployment claims will be part of that."
Continuing claims: The government said 5,423,000 people filed continuing claims in the week ended Nov. 14, the most recent data available. That's down 190,000 from the preceding week.
The 4-week moving average for ongoing claims fell by 98,500 to 5,712,250.
But the slide in continuing claims may signal that more filers are falling off those rolls and into extended benefits.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, nor people who have exhausted their benefits.
Administration efforts. Earlier this month, the Labor Department reported that the nation's unemployment rate rose above 10% for the first time since 1983.
A separate government report said 1 million people could lose their unemployment benefits in January if they don't receive further extended federal aid. President Obama signed a bill to extend government-provided unemployment insurance by up to 20 weeks, but the law applies only to those whose benefits will expire by the end of 2009.
The Obama administration said earlier this month that it will hold a jobs forum on Dec. 3. Obama will meet with labor representatives, financial experts and other business leaders to discuss the continued problems with unemployment.
State-by-state data: Only one state reported an initial claims increase of more than 1,000 for the week ended Nov. 14, the most recent data available.
Claims in Florida rose by 1,313, which a state-supplied comment attributed to layoffs in the construction, trade, service and manufacturing sectors.
Twenty-two states said that claims fell by more than 1,000. California reported that claims declined by 7,987; Texas had 4,710 fewer claims; Pennsylvania saw a dip of 4,321; Wisconsin had 2,716 fewer claims; and Ohio claims shrank by 2,486.
Gold hits record on talk of Indian buying
Weaker dollar also helps push the precious metal to fresh highs.
LONDON (Reuters) -- Gold prices hit record highs above $1,180 an ounce in Europe on Wednesday, boosted by the euro's move through $1.50 against the dollar and by a report that India may consider buying more bullion from the IMF.
U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $21.20 and settled at a record $1,187.00 an ounce.
The dollar fell to a 15-month low against the euro due to views that U.S. rates would stay low and as Russia said it would diversify currency reserves, though it pared losses after a mixed batch of U.S. data.
Meanwhile India's Financial Chronicle newspaper said on Wednesday that India is open to buying more gold from the International Monetary Fund, which has around another 200 tonnes to sell. The IMF said it had no comment to make on the report.
Standard Chartered analyst Daniel Smith said further Indian buying could be "potentially very bullish" for gold.
"Most commodities are rallying on the back of the weaker dollar, and that move is potentially quite significant," he said. "Gold has been outperforming on the back of this general rally in commodities, and that tells us that there is more to this than just the dollar story."
"My feeling is that we are going to keep going higher for the time being," he added.
The market is sensitive to speculation of further official sector buying after news in early November, that India's central bank had bought 200 tonnes of gold from the IMF, sparked a rally.
Russia, Sri Lanka and Mauritius have since also announced gold acquisitions, and traders speculate that more central banks, particularly in Asia, could be open to gold acquisitions to diversify their foreign exchange reserves.
Diversification
"We have had relatively supportive news from the central banks, particularly in Asia, confirming that there is demand for gold as a means of diversifying their large foreign exchange reserves," RBS Global Banking & Markets analyst Daniel Major said.
"There is plenty more potential for central banks to buy either IMF gold or other gold in the market to try and boost their reserves," he added.
Expectations for further reserve diversification, as well as prospects for further dollar weakness and fears over inflation in 2010 have all fueled investment demand for the precious metal, and could lead to further sharp prices gains.
"Central bank and other investor demand could see gold move to $1,500/oz in the next 3-6 months," Fairfax said in a note.
Dollar weakness helped lift other commodities, with oil prices ticking up half a percent in early trade and industrial metals prices climbing.
Elsewhere, holdings of the world's largest gold exchange-traded fund, the SPDR Gold Trust, rose nearly 1 tonne on Tuesday to their highest since late June.
Indian gold traders meanwhile continued to stock up for weddings in anticipation of a further price rise, but the flow of scrap sales eased.
Silver was bid at $18.63 an ounce versus $18.49. Holdings of the world's main silver ETF rose 136 tonnes to a record 9,252 tonnes on Tuesday, while ETF Securities' silver exchange-traded product also hit record levels.
Platinum was at $1,466 an ounce against $1,444.50, while palladium was at $369.70 against $366.35. Holdings of ETF Securities' palladium-backed ETP rose to a record 620,359 ounces on Tuesday, and are up 11% month-on-month.
Dollar slides to a 15-month low
Upbeat data bolsters economic outlook and pressures the greenback.
NEW YORK (Reuters) -- The dollar slid to a fresh 15-month low against a basket of currencies Wednesday as upbeat data on weekly jobless claims, personal consumption, and new home sales bolstered the outlook for the U.S. economy.
Traders also pushed the dollar to a 10-month low against the yen, encouraged by Federal Reserve minutes released on Tuesday which showed policymakers saw the U.S. currency's recent decline as "orderly." The minutes also affirmed expectations U.S. interest rates will stay essentially at zero until around mid-2010.
The U.S. reports along with the Fed stance emboldened investors to seek riskier investments elsewhere for higher returns, boosting higher-yielding currencies such as the Australian dollar.
"The big thing today is dollar weakness against virtually every currency and that's a reflection in part of the FOMC's seeming comfort with the dollar's decline being relatively orderly," said Nick Bennenbroek, chief currency strategist at Wells Fargo in New York.
The generally positive U.S. data also stoked the market's risk appetite, prompting a dollar sell-off, said Kathy Lien, director of FX research at GFT in New York.
For most of the year, the dollar, which is typically viewed as a safe haven, has tended to fall on upbeat economic news.
Lien specifically cited the decline in jobless claims. "Jobs are the most important thing, so they're latching on to the fact that jobless claims were below 500,000, which means we could see a better non-farm payrolls report going forward," she said.
Also enhancing U.S. economic prospects were an increase in new home sales and consumer confidence.
The euro hit a 15-month high at $1.5096 according to Reuters data, and was last up 0.6% at $1.5052.
The ICE Futures dollar index, which measures its performance against a basket of six currencies, fell to 74.399, a 15-month low. It last traded at 74.653, down 0.6%.
The dollar fell 1.0% to 87.69 yen according to Reuters data, after falling as low as 87.40, its lowest since January.
However, news the International Monetary Fund will likely tell euro zone finance ministers next week that the euro is undervalued versus the dollar has halted the dollar's slide, traders said.
In addition, a report saying the government of Dubai will ask creditors of its two flagship firms, Dubai World and property group Nakheel, to a debt standstill, partly dented risk sentiment.
"The Dubai news was a surprise and helped halt the rally in the euro against the dollar, as traders took some of their risky assets off the table," said Steven Butler, director of FX trading at Scotia Capital in Toronto.
Black Friday crowds eager to spend
Many bargain-hungry shoppers skip Thanksgiving meal to queue up for Black Friday deals on toys, cashmere sweaters and laptops.
NEW YORK (CNNMoney.com) -- Although Black Friday seems to be missing the usual mayhem associated with it, the good news for merchants is that shoppers are eagerly spending money on juicy discounts on toys, cashmere sweaters, Snuggie blankets and gadgets.
"What I've noticed so far is that [consumer] traffic is on par with last year, but people are buying more," said Marshal Cohen, chief retail analyst with market research firm NPD Group.
"They are going into stores with the pure intention of spending money. They have their stores, products and prices all picked out," he said.
Compared to previous years, Cohen said the Black Friday atmosphere appears to "be more tame."
"Look, retailers have been educating consumers for days before Black Friday on what their deals are going to be and on what items," said Cohen. "That's partly why we're not seeing the frenziness."
To his point, although the Toys R Us flagship store in Times Square had lines that were hundreds deeps for its midnight opening on Black Friday, it wasn't unruly at any point
At the Best Buy (BBY, Fortune 500) store in Holmdel, N.J., more than 500 people calmly gathered for the 5 a.m. Black Friday opening, some as early as 3 p.m. on Thanksgiving Day, to score early bird deals such as a Garmin GPS device for $99.99 and an 4 GB Intel laptop for under $400. (Best Buy combats doorbuster scalpers)
More importantly, Cohen said "pent-up" demand among consumers, who really haven't loosened their purse strings all year, will play a pivotal role for sellers this Black Friday.
"Who would have thought that cashmere sweaters at half-off are suddenly the hottest item today?," he said.
Elsewhere, Zhu Zhu, the electronic pet hamster was flying off shelves at Toys R Us and emerged as the frontrunner for this year's must-have toy. (Black Friday shoppers hear the call of Zhu Zhu)
"Retailers came out swinging for Black Friday, offering some of the holiday season's lowest prices on electronics, appliances, apparel and toys," said Tracy Mullin, president of the National Retail Federation (NRF), an industry trade group, in a statement. "Budget-focused shoppers seemed to be pleasantly surprised with post-Thanksgiving deals, which many retailers will extend into Saturday and even Sunday."
Power tools and Snuggies selling out
Sears (SHLD, Fortune 500) spokesman Tom Aiello said pre-dawn crowds outside its stores were " a little bit more than last year."
The department store chain reported an average of 300 to 400 shoppers lined up for its 4 a.m. opening on Black Friday.
Aiello agreed that the situation was mostly tame. "After the incident at a Wal-Mart last Black Friday, everyone has stepped up plans to make this a safe day," Aiello said.
He was referring to an incident in which a Wal-Mart (WMT, Fortune 500) employee was killed in a stampede at a New York store.
To help defuse waiting crowds this year, Wal-Mart extended the hours of many of its stores that were not already open 24 hours.
That strategy seemed to work at one St. Louis-area Wal-Mart location. Rather than queuing up outside the store's entrance, customers found that the biggest wait was at the cash register.
Checkout lines snaked throughout the store, with some shoppers waiting an hour or more before carting away plasma and HDTVs and other deeply discounted items for holiday shopping season.
"Customers realize, too, that they have to take a step back," Aiello said.
The top sellers at Sears so far include a Craftsman drill set for $39.99, down from its original price of $79.99, home-related goods, luggage, comforters and the Snuggie blanket.
"Snuggies are selling fast for $9.99 at out Kmart stores," Aiello said. "And our layaway section is jammed. People are buying the special deals and putting them on layaway."
Wally Brewster, spokesman for General Growth Properties (GGP), the second-largest mall operator, said shopper traffic at its malls "has been fairly steady throughout the morning."
He estimated that the company's Jordan Creek Town Center mall in West Des Moines, Iowa had about 35,000 shoppers by 2:35 a.m. CT, up from about 10,000 shoppers who arrived at the mall for its midnight opening.
"We have noticed that these people aren't rushing to get into stores," he said. "They are walking in and enjoying the experience."
One reason for the more controlled scenes, Brewster said, is that many retailers are giving substantial incentives such as free gift cards on purchases in addition to doorbuster discounts. "So people are still finding deals even if they miss the early bird items," he said.
Will midnight openings become the norm?
About 130 of Disney's 205 retail stores in the United States opened their doors at midnight Friday.
"It's been a good day for us," said Jim Fielding, president of Disney Store Worldwide. "We were very busy until 3:00 a.m. Now the traffic is more steady."
Fielding said hot sellers at its stores were toddler dolls, classic dolls, Buzz and Woody action figures from "Toy Story" and $10 plush toys.
"I would say that shoppers are focused on value," said Fielding. "But you could find value at $10 or at $50."
This year, more retailers opened their stores at midnight instead of the typical 5 a.m. Black Friday openings.
Fielding said the extra pre-dawn hours of business worked for Disney stores. "We're able to better manage the demand and spread [customer] traffic throughout the day," he said. "This may not become the norm for Black Friday for all retailers, but I think we will continue to be committed to it for the foreseeable future."
Tough challenge for merchants
The day after Thanksgiving is dubbed "Black Friday" because it traditionally marks the day of the year when retailers finally move out of the red, indicating losses, and into the black, representing profits.
But despite the hype surrounding Black Friday as the "unofficial" start to holiday gift shopping, it's not the busiest shopping day of the year. That day invariably is the Saturday before Christmas.
Still, for retailers, November and December are crucial sales months because the combined period can account for half, or more, of their sales and profits for the full year.
Although retailers know that they're facing an uphill battle to grow sales amid a tepid spending environment, the hope is that this year's holiday season will at least be an improvement from the previous year.
The NRF expects holiday sales to decline 1% versus a 3.4% drop in holiday sales the previous year.
The group maintains that even though many Americans have had a year to adjust to the recession, continued job losses and stagnant income growth are forcing many consumers to restrain their shopping impulses and shop only for necessities.
Overall, more bargain hunters are expected to hit stores on Black Friday and the weekend. The total is expected to be about 134 million, up from 128 million a year ago, according to the NRF.
"More shoppers will come out today than a year ago," said Britt Beemer, a retail industry expert and chairman of America's Research Group. "But consumers are so concerned about money that if and when the deals are gone, so are they."
Global markets rattled by Dubai credit woes
The sovereign wealth fund of Dubai asks creditors to extend due date on billions in debt payments, renewing fears about the health of the banking sector.
NEW YORK (CNNMoney.com) -- Asian markets plunged Friday after the sovereign wealth fund of Dubai requested an extension on billions of dollars worth of debt payments, sparking widespread credit concerns that spilled over to world markets.
European shares managed to regain ground, suggesting that concerns about Dubai World may have been overdone.
The selloff "was a slight over-reaction but a much needed correction," said Dave Babbs, head of trading at MF Global Spreads in London. "We expect to see a lot of exaggerated moves today with thin volumes."
The retreat comes two days after Dubai World, a state-owned investment fund, asked creditors for an extension on billions of dollars worth of debt payments due next month so that it could restructure. The move revived fears about the health of the global financial system and caused investors to shy away from risky assets such as stocks.
The Dubai World news "brought the credit crunch back after we thought we left it behind last year," said David Jones, chief market strategist at IG Markets in London.
"Things like this remind us that the economic recovery isn't going to be smooth," he added.
Dubai, which is one of seven emirates that make up the United Arab Emirates, borrowed billions over the last several years to fuel a construction boom.
But the emirate was hit hard by the credit crunch and investors are concerned about the possible fallout if Dubai World is forced to liquidate assets at fire-sale prices. That could put many big British banks, and possibly some U.S. banks, at risk.
Richard Bove, a prominent banking analyst, said other Arab states, including Abu Dhabi, will likely come to Dubai's aid if the fund fails. "However, if this takes months there will be financial upset everywhere," he wrote in a research report.
The dollar and the yen rose against rival currencies as investors flocked to perceived safe-haven assets.
The stronger dollar and credit concerns weighed on the commodities markets. Oil prices plunged 5%, while gold prices tumbled more than $18 per ounce.
In Asia, Japan's Nikkei closed down 3.2% and the Heng Seng in Hong Kong tumbled nearly 5%.
European markets recovered after opening sharply lower. The major gauges in London, Paris and Frankfurt all gained more than 1%.
U.S. stocks opened sharply lower, with the Dow Jones industrial average falling more than 160 points, or 1.6%.
All financial markets in the United States were closed Thursday for Thanksgiving and the stock market closes at 1 p.m. Friday. Trading is expected to be volatile and volume very light with many Wall Street pros taking a five-day weekend.
Dubai's threat to U.S. banks
Although there's little direct exposure to Dubai World's default risk, U.S. financial institutions could take major indirect hits.
NEW YORK (CNNMoney.com) -- The news that the sovereign wealth fund of Dubai requested a postponement of billions of dollars of debt this week could pose a big problem for U.S. banks.
The state-run investment company, Dubai World, owes about $60 billion. It rang up much of that in a building boom that included the world's tallest skyscraper and the Palm Islands in the Persian Gulf, settlements shaped like palm trees.
What is Dubai World? - CNN
New York-based Citigroup has the most exposure to default risk at Dubai World, which a J.P. Morgan equity research note estimated at $1.9 billion.
While the other major banks in the United States are believed to have little direct exposure, the ripple effect could be more crippling, according to Richard Bove, a bank analyst with Rochdale Securities.
"There could be huge indirect exposure," he said. "One has to assume that U.S. banks will be hurt."
Bove said the underlying problem is that there is a lot of uncertainty floating around. For example, there's little information available about counterparty derivatives, guarantees that transfer default risk from lenders to other financial institutions. And it's unknown how much of Dubai World's debt guarantee is held by U.S. banks.
And while UK banks, such as Standard Chartered, HSBC, Royal Bank of Scotland and Barclays are much more exposed to Dubai World, with a total of more than $30 billion in default risk according to J.P. Morgan's note, U.S. banks have extensive dealings with UK institutions. Those include trading and guaranteeing debt, which could translate into losses for U.S. banks.
There's also U.S. banks' interactions with their German counterparts. Dubai has loaned a lot of money to Eastern European nations, as has Germany. Any losses from defaults there could expose U.S. banks to some risk.
Finally, there's the impact of already reeling commercial real estate markets worldwide.
"Dubai may have to unload some very prestigious properties at distressed prices, and this will drive the price of all commercial real estate lower," said Bove. "That would clearly be a problem for American banks."
Bove also posited that the problems at Dubai World could add weight to the growing sentiment that is already strong in the U.S. Congress about beefing up regulation.
"Congress is demanding that anyone connected to the U.S. financial system has to be regulated," he said.
Rattling bank stocks
Bank stocks are particularly vulnerable to a market turndown triggered by the Dubai crisis, said Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors. He said the run-up this year has led to an overvalued stock market.
"We had been looking for something to trigger a correction," he said. "This could be that catalyst."
It would add to a market already made volatile, especially with the approach of the end of the tax season for mutual funds, which has put a lot of money in motion. The impact could fall heaviest on the financial sector.
Sorrentino added that the risk of default will put a damper on all commercial credit markets. Institutions may have to set aside more reserve funds to cover default risk, leaving less cash to lend out, and, in general, take a more cautious underwriting approach.
If lending does decrease, that could cut into bank profits.