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– May 29, 2015

Fitch warns it may downgrade US over debt standoff

Fitch and another major ratings agency, Moody's, have a negative view on the U.S. as the country's debt burden has risen.Fitch and another major ratings agency, Moody's, have a negative view on the U.S. as the country's debt burden has risen.(AP) — The United States could lose its top credit rating for the second time from a leading agency if there's a delay in raising the country's debt ceiling, Fitch Ratings warned Tuesday.

Congress has to increase the country's debt limit, which effectively rules how much debt the U.S. can have, by the end of February or face a potential default, Fitch says.

There are fears that the debate will descend into the sort of squabbling and political brinkmanship that marked the last effort to raise the ceiling in the summer of 2011. Outgoing U.S. Treasury Secretary Timothy Geithner warned then that it had nearly reached a point where government would be unable "to meet our commitments securely."

"The pressure on the U.S. rating, if anything, is increasing," David Riley, managing director of Fitch Ratings' global sovereigns division said at a London conference. "We thought the 2011 crisis was a one-off event .... if we have a repeat we will place the U.S. rating under review."

If that happens, Riley said there was "a material risk" of the rating coming down, which could mean the U.S. would face steeper costs when it comes to servicing its debt.

If Fitch does move to downgrade the US, it will join Standard & Poor's, which was so concerned by the dysfunctional nature of the 2011 debate that it stripped the U.S. of its triple A rating for the first time in the country's history.

Fitch already has a negative outlook on the U.S. as the country's debt burden has risen to around 100 percent of its annual gross domestic product, and has said it will make a decision on the rating this year, regardless of how the debt ceiling discussions pan out.

The U.S. government reached its statutory debt limit of nearly $16.4 trillion at the end of 2012 but is pursuing some extraordinary measures and can use some in-house deposits that should see it through to the end of February, according to Fitch.

Another major ratings agency, Moody's, also has a negative view on the U.S. outlook.

Riley's comments come just two weeks after U.S. lawmakers agreed to a budget deal with the White House that avoided the so-called fiscal cliff of automatic tax increases and spending cuts that many economists thought could plunge the U.S. economy, the world's largest, back into recession. Relief that a deal was cobbled together, albeit at the final hour, is one of the reasons why sentiment in the financial markets has been buoyant in the first trading days of the new year. Many stock indexes around the world are trading at multi-year highs.

"The 'fiscal cliff' bullet was dodged .... (but it's) a short-term patch," said Riley.

Riley warned that the different arms of the U.S. government still have a number of issues to address. As well as increasing the debt ceiling, they have to agree to spending cuts that were delayed as part of the "fiscal cliff" agreement and back measures to avoid a government shutdown, potentially in March.

Though short-term fixes are more likely than not, Riley said the U.S. political environment is not as good as it should be for a country holding the gold-chip AAA rating. The past few years, Riley said, have been marked by "self-inflicted crises" between deadlines.

Overall, Fitch reckons the debt ceiling is "an ineffective and potentially dangerous mechanism for enforcing fiscal discipline."

The major reason behind the lack of swift action in the U.S. is that the Democrats control the White House and the Senate, while the Republicans have a solid majority in the House of Representatives. Both sides have differing visions of the role of the state in society and often varying political objectives.

Despite his cautious tone on the rating, Riley said the U.S. has a number of huge advantages and that getting the country's public finances into shape will not require the same level of austerity that many countries in Europe have had to enact over the past few years, partly because the U.S. economy is growing at a steady rate.

Other factors Fitch says support the U.S.'s AAA rating are the country's economic dynamism, lower financial sector risks, the rule of law as well as the global benchmark status of the country's bonds and the dollar.

However it says these "fundamental credit strengths are being eroded by the large, albeit steadily declining, structural budget deficit and high and rising public debt."

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Written on 05/29/2015, 9:07 am by Business Journal staff
First Solar, Inc. has donated $10,000 for the creation of a new scholarship at West Hills Community College District (WHCCD). 
Written on 05/29/2015, 9:03 am by Business Journal Staff
California’s tomato processors reported this week they have or will have contracts for 14.3 million tons of processing tomatoes for 2015, according to the U.S. Department of Agriculture (USDA). The updated expected production total represents a 2 percent increase from the final contracted production total from 2014. This year’s crop could be the largest California processed tomato crop on record. The previous record was set in 2014 when 14 million tons of processing tomatoes were harvested. In a news release issued today, the USDA’s National Agricultural Statistics Service said the May contracted acreage of 295,000 is 5 percent below the January intentions forecast and 2 percent above last year’s final contracted acreage. Fresno County remains the top California county in contracted planted acreage for 2015 with 91,000 acres of processing tomatoes.  Yolo, Kings, San Joaquin, and Merced make up the remaining top five counties for contracted planted acreage.  The top five counties make up 73 percent of the 2015 total contracted planted acreage for processing tomatoes in California. This early processing tomato estimate is funded by the California League of Food Processors in cooperation with the California Department of Food and Agriculture.
Written on 05/29/2015, 8:45 am by MARTIN CRUTSINGER, AP Economics Writer
(AP) — The U.S. economy shrank at a 0.7 percent annual rate in the first three months of the year, depressed by a severe winter and a widening trade deficit. The government's revision for last quarter was weaker than its initial estimate of a 0.2 percent growth rate. The U.S. trade gap — the difference between the value of exports and the larger value of imports — was found to be wider than first estimated. And consumer spending was slower than previously thought. But steady job gains are expected to fuel modestly healthy growth for the rest of 2015. The harsh winter, which kept many consumers home and businesses closed, and a labor dispute that slowed trade at West Coast ports are both over. Home sales and construction are rebounding, along with business investment. Analysts generally foresee the economy, as measured by the gross domestic product, growing at an annual rate of 2 percent to 2.5 percent in the April-June quarter, with further strengthening later in the year. But risks remain: A stronger dollar, which makes U.S. exports more expensive, will likely continue to keep the trade deficit wide. And cutbacks in oil drilling, a result of low energy prices, could depress spending in the energy industry. "While the evidence of a second-quarter rebound hasn't been overwhelming, we still think that the outlook for the economy is very encouraging," Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a research note. Last quarter's contraction marked the first since a 2.1 percent annual drop in the first three months of 2014, a slump that was also due in part to severe winter weather. Last quarter, the trade gap subtracted 1.9 percentage points from growth, the biggest drag in 30 years. Consumer spending, which drives about 70 percent of economic activity, slowed to annual growth of just 1.8 percent for the quarter, slightly below the government's first estimate. Consumers spent less on mobile phone services, among other expenses, than initially thought. One of the biggest hits to the economy last quarter came from cuts in drilling activity by energy companies — fallout from the sharp drop in oil prices over the past year. The government said investment in the category that covers energy exploration plunged at an annual rate of 48.6 percent, the steepest drop since 2009, during the Great Recession. The government also downgraded its estimate of the boost the economy got from business restocking. That change should be a positive for second quarter growth, because it means businesses won't have as large a backlog of unsold goods. Not all the revisions to the initial estimate for the first quarter were lower. Housing construction and business investment in equipment were both revised higher. Though falling GDP can be a sign of a recession, economists see little cause for such concern this year. Many economists also suspect that the government's calculations have tended to underestimate growth in the first quarter of each year. GDP has contracted in three quarters since the recession ended six years ago, and all three declines came in the first quarter of the year. The outlook has brightened considerably since winter. Most economists expect lower gas prices will eventually accelerate consumer spending, the main fuel for the economy. So far, most consumers haven't used their gasoline savings to spend much more on other goods and services. The average U.S. pump price reached $2.03 a gallon in January, the lowest level in eight years. Though the average has risen back to $2.74, according to AAA, that's still nearly a dollar below its point a year ago. Analysts also say that steadily solid hiring, which has helped cut the unemployment rate to a seven-year low of 5.4 percent, will continue to put money in more people's hands and fuel spending gains. "We are more than halfway through quarter two and we are seeing signs that the economy is recovering from the weak first quarter," said Jennifer Lee, senior economist at BMO Capital Markets. She said several economic reports next week including consumer spending, the trade deficit and auto sales for May should provide important clues on the economy's momentum. Also, some of the first quarter weakness may be revised away by government statisticians, who are studying whether their methods for making seasonal adjustments tend to overstate slowdowns during winter. The Bureau of Economic Analysis has said some adjustments will be reflected in the annual updates to economic growth it will issue in July. The government will release its third and final estimate for first-quarter GDP on June 24.
Written on 05/29/2015, 8:42 am by NICHOLAS K. GERANIOS, Associated Press
(AP) — A record crop of apples, coupled with the West Coast port slowdown earlier this year, is taking a toll on Washington apple growers. Nearly $100 million worth of apples that cannot be sold have been dumped into fields across central Washington, the nation's most productive apple region. The apples are being left to rot and compost in the hot sun, an unusual occurrence for an industry that has found ways to market ever-growing crops. "If we wouldn't have had the port slowdown, we wouldn't have needed this," Todd Fryhover, president of the Washington Apple Commission in Wenatchee, said of the dumping. He estimated that apple exporters lost at least three weeks of their season because of labor problems at West Coast ports. Along with a record supply of apples, that created surpluses that could not be shipped profitably to markets or processors, Fryhover said. "It is unusual," Fryhover said. The Washington State Tree Fruit Association estimated $95 million in lost sales because of apples that could not ship, a figure Fryhover considers low. Washington is by far the nation's largest producer of apples, a crop worth about $2 billion a year to the state's farmers. The 2014 crop totaled a record 150 million boxes, which weigh about 40 pounds each. About a third of the apples each year are exported to more than 60 countries. The labor dispute that hobbled international trade through West Coast seaports earlier this year didn't officially end until last week, when the union representing dockworkers announced its members had ratified a five-year contract. Union leaders had reached a tentative deal in February with the companies that own massive oceangoing ships that bring cargo to and from ports and operate the terminals where that cargo is loaded and unloaded. Ports from San Diego to Seattle were all but shut down several months ago as the two sides haggled. Companies that accused workers of coordinated slowdowns decided to cut their shifts, shuttering ports on nights and weekends. The tit-for-tat led to long lines of ships queueing outside of harbors, waiting for space at the docks. Meanwhile, U.S. exporters complained that their goods — including apples — were stuck on the docks as foreign competitors filled orders that should be theirs. The ports dispute created numerous problems for farmers. A big issue is that apples loaded into unrefrigerated containers sat on docks for weeks waiting to be loaded on a ship, Fryhover said. "It is a perishable crop," he said. The record crop also created a shortage of refrigerated storage space for the apples, which normally can be stored for months and sold year round. The result is lots of apples became too ripe even to be diverted to juice and applesauce makers and other processors, Fryhover said. And prices for processor apples are so low — $10 to $30 a ton — that they do not cover shipping costs, he said. The easiest way to get rid of culled apples is to dump them in fields, he said. That hasn't happened often in the past, but it doesn't create any special problems for the industry, he said. "These are apples," Fryhover said. "We're not throwing our TVs out. They don't harm the environment."
Written on 05/29/2015, 8:40 am by STEVE ROTHWELL, AP Business Writer
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Written on 05/29/2015, 8:37 am by PAUL WISEMAN, AP Economics Writer
 (AP) — A weak U.S. economy pulled down consumer sentiment in May. The University of Michigan says its index of consumer sentiment dropped to 90.7 from 95.9 in April. The May reading was the lowest since November. Consumers of all ages and income levels were gloomier this month. And they were less confident both about current economic conditions and the future. But Richard Curtin, chief economist of the surveys, noted that the index has averaged 94.6 the first five months of 2015, highest since 2004. On Tuesday, the Conference Board, a business group, reported that its measure of consumer spirits showed modest improvement in May. Its consumer confidence index rose to 95.4 from 94.3 in April. The Conference Board credited an improved job market: Employers added a healthy 223,000 jobs in March, up from an unimpressive 85,000 in March. And unemployment tumbled to 5.4 percent last month, lowest since May 2008. Still, consumers have reasons to be cautious about the economy and their own financial wellbeing. The Commerce Department reported Friday that the U.S. economy fell at a 0.7 percent annual pace the first three months of the year, hurt by severe winter weather and a widening trade deficit. And gasoline prices have been rising after hitting a low of $2.03 a gallon in late January. Prices at the pump are up to $2.74 a gallon from $2.56 a gallon a month ago, according to AAA.
Written on 05/29/2015, 8:37 am by BRIAN MELLEY and 
MICHAEL R. BLOOD, Associated Press
(AP) — Emergency workers and officials from a pipeline operator had gathered last week to train for the worst — an oil spill — when a 911 call came in reporting a noxious smell at a nearby beach. Santa Barbara County firefighters rushed to the shoreline, where they discovered oil flowing across a beach and into the Pacific. What was supposed to be a drill turned real. "It was very black. You couldn't see the sand anymore," fire Capt. Craig Vanderzwaag recalled after arriving at the leak May 19. "You could see rolling waves with black oil lapping up on the beach." By the time the firefighters traced the source of the spill to a ruptured underground pipeline, thousands of gallons of crude had escaped. As oil fouled the sand and water, firefighters wielding shovels and axes moved dirt and rocks to prevent more of it from spilling into a drainage ditch, but the leak quickly stretched 9 miles along the coast. What was done that day to detect and stop the spill and protect some of the most fabled coastline in California has come under scrutiny, as officials continue cleaning up a leak estimated at up to 101,000 gallons and try to figure out what went wrong. U.S. Sens. Barbara Boxer and Dianne Feinstein of California labeled the response to the spill "insufficient" in a letter Thursday to the Pipeline and Hazardous Materials Safety Administration. The senators questioned why the line lacked an automatic shut-off valve and whether some workers were left on the sidelines while the leak spread. "We need answers about why this happened, why the response was insufficient and what can be done to prevent another tragic spill like this from happening in the future," said the letter, which also was signed by Massachusetts Sen. Edward J. Markey, a fellow Democrat. "We are concerned that insufficient preparation may have slowed down the response effort," they wrote. In reply, Plains All American Pipeline said it was a "competent and experienced operator." "We train regularly for situations such as this, hoping that they will never happen. However, in a real event, no one is fully satisfied with the speed of response," the company said in a statement late Thursday. "Upon confirming the release, we immediately activated our emergency response plan and marshaled critical resources to the scene, scaling up those resources quickly as we better understood the cleanup requirements." Among the senators' concerns: It took Plains about 90 minutes after the spill to notify the National Response Center, a clearinghouse for reports of hazardous-material releases that coordinates responses, according to disclosures so far. Additionally, Plains had reported problems with the line earlier that day. "We are concerned that Plains Pipeline may not have detected this spill or reported it to federal officials as quickly as possible, and that these delays could have exacerbated the extent of the damage to the environment," the senators wrote. Linda Krop, chief counsel of the Environmental Defense Center, said she was at the shore until 10 p.m. the day of the spill and nothing was being done to prevent crude from washing into the sea. "The response was extremely tardy that allowed oil to get in the water where it will never be fully recovered," Krop said. "Waves were washing oil off the beach and off the rocks and nothing was being done." Coast Guard Capt. Jennifer Williams said the effectiveness of the response will be evaluated in the investigation. She said it took awhile to get the cleanup ramped up because people had to come from out of town. "During the early stages, people didn't even know how much was on the beach. People were getting to the scene and trying to ascertain how big a problem it was," she said. Officials said earlier Thursday that the ruptured section of pipeline had been removed for analysis. The spill marred the same stretch of shoreline as a 1969 oil platform blowout that helped spawn the modern environmental movement. That spill spewed more than 3 million gallons of crude into the ocean, spoiled miles of beaches and killed thousands of birds and other wildlife.
Written on 05/29/2015, 8:34 am by Business Journal staff
Fresno State-based nonprofit radio station, KFSR will host its first ever live music festival on June 27.  KFSR Fest kicks off at University President Joseph I. Castro’s house, 4411 N. Van Ness Blvd., in Old Fig Garden at 11 a.m. The event will feature three live bands on three stages throughout the day including a jazz, blues and alternative group.  Guest DJ opportunities are available through sponsorship donations and the winners will schedule a date to co-host an hour of radio programming and choose music for the show.  Seating is festival style and attendees are encouraged to bring lawn chairs and picnic blankets. No umbrellas or coolers will be allowed into the festival. Tickets are $25 and include a picnic lunch. KFSR is a listener-supported, non-commercial public radio station listened to and operated by Fresno State. The station broadcasts at 2,600 watts and can be heard throughout Fresno and Clovis at 90.7 on the FM dial. As a licensed 501(c)3 organization, contributions made to the station are tax-deductible. 
Written on 05/29/2015, 8:32 am by LARRY NEUMEISTER, Associated Press
(AP) — Prosecutors are asking a Manhattan judge to sentence a San Francisco man who created the online drug-peddling site Silk Road to decades in prison, while the defendant is asking to be freed soon enough to show he's a changed man. Ross William Ulbricht, 31, is set to be sentenced Friday following his February conviction in federal court. In a letter to U.S. District Judge Katherine Forrest, Ulbricht said he regrets what he calls a "very naive and costly idea." He said he ruined his life and destroyed his future by what he now calls his "terrible mistake," and he promised to no longer be the "rebellious risk taker" he was if he is given less than the life sentence recommended by the Probation Department. "Please leave a small light at the end of the tunnel, an excuse to stay healthy, an excuse to dream of better days ahead, and a chance to redeem myself in the free world before I meet my maker," he wrote. Prosecutors, though, asked for a sentence substantially longer than the 20-year mandatory minimum, saying Ulbricht "developed a blueprint for a new way to use the Internet to undermine the law and facilitate criminal transactions" before he was nabbed in a San Francisco library in 2013, two years after launching Silk Road. He was convicted of seven drug and conspiracy counts by a jury that deliberated only three hours. Prosecutors said Ulbricht collected over $18 million in bitcoin commissions operating a website with thousands of listings under categories like "Cannabis," ''Psychedelics" and "Stimulants." They said he brokered more than 1 million drug deals worth $213 million. To support a lengthy sentence, prosecutors said in a legal brief that Ulbricht's massive narcotics-trafficking enterprise had resulted in at least six drug-related deaths, including a 27-year-old Microsoft employee and a 16-year-old boy in Perth, Australia. They also said he solicited multiple murders for hire in attempts to eliminate perceived threats, though authorities found no evidence anyone was killed. "The site enabled thousands of drug dealers to expand their markets from the sidewalk to cyberspace, and thereby reach countless customers whom they never could have found on the street. The consequence was to vastly expand access to illegal drugs," prosecutors said.
Written on 05/29/2015, 8:26 am by BRANDON BAILEY, AP Technology Writer
(AP) — Apple has bought a company that makes augmented-reality software, which adds information or images to real-world scenes when viewed through a special headset or even a smartphone camera. It's the latest sign that major tech companies see big potential for products that let users view the world with extra features added by technology. Apple, Google, Facebook and Microsoft are all working on augmented- or virtual-reality products. Augmented reality can add hand-drawn sketches, navigational directions, historic video or computer-generated, three-dimensional images to a real-world scene. Virtual reality can make viewers feel as if they are immersed in an artificial world. Apple on Thursday confirmed the purchase of Munich-based Metaio for an undisclosed sum but did not say what it plans to do with the technology.

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Written on 05/29/2015, 8:37 am by BRIAN MELLEY and 
MICHAEL R. BLOOD, Associated Press
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Written on 05/29/2015, 8:32 am by LARRY NEUMEISTER, Associated Press
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Written on 05/29/2015, 8:26 am by BRANDON BAILEY, AP Technology Writer
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Written on 05/29/2015, 8:45 am by MARTIN CRUTSINGER, AP Economics Writer
(AP) — The U.S. economy shrank at a 0.7...
Written on 05/29/2015, 8:42 am by NICHOLAS K. GERANIOS, Associated Press
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Written on 05/29/2015, 8:40 am by STEVE ROTHWELL, AP Business Writer
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Written on 05/29/2015, 8:37 am by PAUL WISEMAN, AP Economics Writer
 (AP) — A weak U.S. economy pulled down...