EBay Falls as Average Selling Price Drops on Its Retail Sites

By Beth Jinks

July 16 (Bloomberg) -- EBay Inc., the world's largest Internet auctioneer, fell 6.6 percent in late U.S. trading after reporting that people are paying less for items on its retail sites.

The average selling price fell 6 percent in the second quarter, slowing growth in spending by online buyers. Gross merchandise volume, the value of all goods that users sold on EBay's sites, rose 8 percent, the smallest increase in at least five quarters, EBay said today in a statement.

The decelerating sales growth underscored growing demand for discounts as higher food and gasoline prices eat into household budgets. Chief Executive Officer John Donahoe's strategy of removing most upfront fees boosted listings and encouraged bargain-hunting.

Consumers are ``trading down to lower-priced items,'' particularly in the U.S. and U.K. where economies are slumping, Chief Financial Officer Robert Swan said on a conference call. ``We'll feel the effects of that until the economy rebounds.''

The San Jose, California-based company said net income rose 22 percent to $460.3 million, or 35 cents a share. EBay also said that Rajiv Dutta, who oversaw auction and retail sales, will retire in October and be replaced by Lorrie Norrington, his operating chief.

Profit excluding some items was 43 cents, beating analysts' estimates by 2 cents. Revenue in the three months ended June 30 rose 20 percent to $2.2 billion from $1.83 billion, EBay said.

Full-year profit excluding items may rise to $1.72 to $1.77 a share, higher than it previously forecast, EBay said today in a statement. Analysts surveyed by Bloomberg estimated $1.74.

`Making Changes'

``EBay is making changes now it really should have made three or four years ago,'' Timothy Boyd, an analyst with American Technology Research in Greenwich, Connecticut, said in a Bloomberg Television interview today. Some analysts had estimated the value of merchandise transactions to climb 13 to 14 percent, he said.

EBay fell $1.86 to $26.24 at 7:29 p.m. after the results were released. Earlier, the shares rose 4.5 percent in Nasdaq Stock Market composite trading, giving it a 15 percent decline for the year.

Nineteen analysts surveyed by Bloomberg estimated second- quarter profit, excluding some items, of 41 cents a share. Seventeen predicted sales of $2.16 bill1ion. Profit a year earlier was $375.8 million, or 27 cents.

Third Quarter

Third-quarter profit, excluding some costs, may be 39 cents to 41 cents a share, on sales of as much as $2.15 billion, EBay said. Analysts estimated earnings of 41 cents on revenue of $2.17 billion.

``Average sales price inflation is not something we can manage but it's something that will play its way out,'' Donahoe said on the call. ``We're confident, with buyers coming back and increasing their frequency, over time,'' merchandise volume and revenue will rebound, he said.

PayPal revenue climbed 33 percent to $602 million as the payment unit signed agreements with Delta Air Lines Inc. and Blockbuster Inc.

Revenue from Skype, its Internet-telephone unit, climbed 51 percent to $136 million in the quarter, and added almost 29 million users. Skype named Josh Silverman as its chief executive officer in February.

EBay's marketplaces revenue jumped 13 percent to $1.46 billion in the second quarter. Overseas sales make up 56 percent of EBay's revenue. New marketplace listings rose 19 percent to $666.9 million from a year earlier, the third consecutive quarterly increase, EBay said.

Fraud Detection

EBay boosted its fraud detections and removed suspect items from its sites earlier, which contributed to lower average sales prices, Swan said in an interview today.

``We've made a conscious effort to try to stimulate activity in low-priced items on the site through promotions, in all our big markets, particularly Germany,'' Swan said. ``Those low-priced items convert at a higher rate.''

Automobile sales' contribution to gross merchandise volume growth decelerated to 0 percent in the second quarter, from about 7 percent in the first quarter, as the market for used cars fell in the U.S., Swan said.

Revenue from fees collected from vehicle sales rose 11 percent from a year earlier as EBay shifted car advertising onto local classified sites.

Donahoe, 48, joined EBay in 2005 from Bain & Co.. He's said his three priorities for the company are improving its fixed- price online retail business, growing PayPal and bolstering customer safety and trust.

EBay announced June 19 it's expanding insurance for buyers and sellers using PayPal across the 190 countries it operates, and offering discounts to some big sellers. In January, EBay bought Israeli software company Fraud Sciences Ltd. for $169 million to improve PayPal security.

A New York court this week said EBay isn't responsible for the sale of fake Tiffany & Co. jewelry on its Web site. The U.S. win contrasts with a French court ruling last month that ordered EBay pay $63.6 million to LVMH Moet Hennessy Louis Vuitton SA, over claims the site didn't do enough to block the sale of counterfeits.

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Budgeting for Lazy People

In matters of budgeting, there are two clear camps of consumers: them, and the rest of us.

They are the people you ask to calculate what everyone owes when there are more than two of you dining out. They know exactly how much they spent on ATM fees last week, last month, and last quarter. They balance their checking accounts down to the penny. Daily.

The rest of us? Well, we swear that tomorrow, we really are going to sit down and make a budget. It's not that we don't mean it -- it's just that we have issues with following through.

The secret to setting up a budget you'll actually follow
If nothing else, remember this one simple budgeting rule: Spend less money than you make.

Now that you've memorized that line, let's fine-tune that advice. Procrastinators, you can rejoice: There is such a thing as a budget that you can stick to. What's the secret? Take every shortcut possible.

Since money advice is our full-time jobs, we've been through the budgeting process enough to spot the corners that can be cut and the steps that can be skipped. The Fool's Lazy Budget still requires some prep work (hey, we aren't miracle workers), but we've streamlined the process so that you can start seeing results right away. After all, we don't want you to set up a budget, only to abandon it a few weeks later.

The purpose of this budget is to come up with a system to govern everyday spending. We're leaving out housing, insurance, and the all-important savings categories for now.

So let's start corralling your cash flow, Fools:

Step 1: Take a snapshot of your spending
Every budget starts with sniffing out your spending habits and determining exactly where your money goes on a day-to-day basis. Don't skip this step: After all, if you don't know how much you're spending and on what right now, you can't decide where you want to spend and on what from now on.

You can do this the hard way -- tracking your spending for three months, inputting every expenditure in a 218-category spreadsheet, then spending nights poring over the data -- or you can do it the one-step way.

The one-step way it is! For those who do most of your spending on one credit card (paid off in full each month, right?) or with a debit card, review the raw data your bank provides on your monthly statement, and come up with general categories for spending areas in which the amounts you shell out make you shudder. It's even better if your financial institution provides a year-end spending summary, with your weak spots fully graphed in four-color bar charts.

If most of your spending is done with old-fashioned cash, go about your business as usual for one week -- just write down all of your expenditures. Then project the results over four weeks. Now you have a rough idea of where your dough goes. As stated above, pinpoint the big categories where your overspending occurs.

Step 2: Plan your next shopping spree
After you get over the horror of your daily spending, the next step is to go on a virtual shopping spree. Sorry, this trip doesn't involve a pit stop at the food court; it's more like a cerebral trip to the mall of your future.

• Grab a piece of paper, a pencil, and a snack.
• Make a list of what you need to buy or do over the next three to six months. These could be physical purchases (like new tires for the car, airfare for the family vacation) or financial plans (such as paying off a credit card, maxing out this year's IRA or adding to your emergency fund).
• Do the same for planned long-term (one to five years) purchases.

Voila! You have a "spending plan" (so much nicer than the word "budget," don't you think?). Meaning every time you whip out your wallet, you have a tangible list of money goals to help drive your spending decisions and propel you financially forward. Bonus points to those who make a laminated wallet-sized version of the list for everyone in the family.

Extra credit: If you've got time, repeat the same exercise, only focus on the emotional uses of your money: List five uses of your money that will positively affect your life in the near-term and the long-term. Then, list five uses of your money that will add little to your quality of life in a decade or more. This touchy-feely step may seem odd, but thinking about what you really want to do with your money can greatly affect your plans for spending and saving it.

Step 3: Do some simple division
With your money goals in hand, pencil in how much each item on your "wish list" is going to run you on a monthly basis. Simply divide the total amount for those new tires by the number of months until you need them. Magic, no?

Step 4: Set up a no-brainer savings system
With your targeted spending plan in place, it's time to direct your money towards your goals. If, in the past, you've been derailed by daily expenditures or surprise "can't-live-without" purchases (ahem), here's an instant fix: Hide your money from yourself.

That's right: The best way to save your money is to keep your cash out of spending reach by diverting it to a separate savings account -- one different from the checking account you use for everyday expenditures. (We can help you figure out the best place to park your short-term cash, too.)

You've already figured out the monthly amounts you need to sock away, but, don't worry -- there's no need to bother remembering to move your money from your checking to your savings account month after month. Tell your bank to do the work for you.

Set up automatic recurring cash transfers from your main checking account into your separate savings account. (Though you can set it and forget it, we do recommend checking in to make things are kosher every once in a while.)

With your savings on autopilot, all that's left to do is stay out of your own way. Ah, but that can be much easier said than done, which means going into spending triage mode...

Step 5: Stop mindless overspending
Life is full of temptations. (According to the rundown of my annual credit card spending, "merchandise/retail" is my temptress.) You can stay strong, grasshopper, with nothing more than a few envelopes and a ball-point pen.

The "envelope" method of budgeting will instantly structure your everyday spending. It's simple:

• Come up with a reasonable weekly amount you'll allow yourself to spend in your biggest categories. (Those are typically "food" (or, depending on your lifestyle, get more specific such as "lunch," "family dinners out"), "entertainment" (e.g. happy hours, movies, tabloids to pass the time), "transportation" (gas, parking, taxis, public transportation), "apparel/services" (dry cleaning, bangs trim, cute shoes.)
  
  For guidance, consider that the four biggest budget categories for typical American household are housing (34%), transportation (18%), food (13%) and entertainment (4%). Of course we encourage all Fools to be better than average, so if you can spend less of your budget on these big categories, huzzah.
• Create envelopes for each of those categories.
• Put the allotted amount of cash to cover a week's worth of expenses into each envelope. (You don't have to carry the entire wad with you every day, but do make sure you don't cheat with extra visits to the ATM.)
• Once the cash is gone, so is your weekly stipend.

As with all of our lazy budget shortcuts, feel free to add or subtract layers of complexity, depending on how much detail you can stand. But don't tax yourself too much: Remember that in dollars-and-cents (and sanity) terms, sweating the big stuff before all else will save you the most coin. Plus, it will leave you plenty of time to procrastinate about stuff besides your finances.

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Oil's 2-day decline: more than $10 a barrel

NEW YORK (CNNMoney.com) -- Oil prices plummeted Wednesday, bringing the two-day selloff to $10.58 a barrel, on reports indicating that demand for oil and gas may slacken in the future.

The government's weekly inventory report suggested that record high gasoline prices may be reducing the nation's energy consumption, and OPEC released a report on Tuesday indicating that global demand for 2009 would be less than it was in 2008.

Light sweet crude oil for August delivery settled down $4.14 to close at $134.60 a barrel on Wednesday on the New York Mercantile Exchange.

Wednesday's drop followed a $6.44 plunge Tuesday that was the second largest decline ever on a dollar basis.

Government supply report: The government's weekly stockpile report showed that crude supplies rose by 3 million barrels in the week ended July 11. Analysts were looking for a drop of 3 million barrels according to a poll by energy research firm Platts.

Gasoline supplies rose by 2.4 million barrels, rather than the 1.1 million decline analysts expected.

Distillates, used to make diesel fuel, jet fuel and heating oil, rose by 3.2 million barrels. Analysts were looking for an increase of only 1.7 million barrels.

"That, coupled with the general malaise that's out there with the economic outlook, sets us up with a potential cracking of these oil prices," said John Kilduff, energy analyst with MF Global.

Bernanke: The two-day oil selloff follows the gloomy economic picture being painted by Federal Reserve Chairman Ben Bernanke in his Congressional testimony.

On Tuesday, Bernanke told the Senate Banking Committee that high energy prices and slower economic growth have limited ability of U.S. households to purchase fuel and other necessities.

Bernanke also appeared Wednesday before the House Financial Services Committee, saying that inflation was "likely to move temporarily higher in the near term."

The price of gasoline and diesel fuel in the United States touched new records Wednesday, according to a daily survey from motorist group AAA. Gasoline is more than 35% more expensive than last year.

"The weaker economic outlook, the inventory build, all contribute," said Amanda Kurzendoerfer, commodities analyst with Summit Energy. However she warned that long-term investors may see the price decline as a buying opportunity.

"The one thing we can be sure of is that we're looking at a lot of volatility going forward," she said.

OPEC, Brazil: The Organization of Petroleum Exporting Countries, which supplies about 40% of the world's oil, cut its demand forecast for 2009 Tuesday to an increase of 900,000 barrels a day, 100,000 barrels less than 2008.

There were also reports that production in Brazil had not been hurt as much as originally feared by a labor strike in the Campos Basin, which supplies about 80% of the country's oil, and tensions eased with Iran, the second largest producing member of OPEC.

State-owned oil company Petroleo Brasileiro SA said production had not been affected by the ongoing strike at 33 offshore platforms that began on Monday.

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Investors hope falling oil prices will bolster stocks

By Matt Krantz, USA TODAY

Stock investors looking for an end to the pain they've been experiencing all year hoped a break in oil prices Tuesday might provide the one glimmer of hope.

Oil had its biggest pullback in 17 years in dollar terms, according to the Associated Press, as concerns about the U.S. economy knocked the price of a barrel of crude down $6.44 to $138.74. Oil had been down as much as $10 earlier in the day.

But while the sell-off of oil helped the stock market crawl back from its scary lows of the day, it wasn't exactly a signal the bear is over. The Dow Jones industrial average ended down 92.65 points at 10,962.54, an improvement from its 227-point deficit earlier, but not enough to curb the market's downtrend. The Dow closed below 11,0000 for the first time in nearly two years. It's 22.6% below its 2008 closing high and down 17.4% this year.

Investors are hoping a break in oil prices could be that one glimmer of hope that drowns out the bad news from everything from the credit crunch to the housing bust. "It's oil that got us" in a bear market, says James Paulsen of Wells Capital Management. "Oil is the thing that changed everything. If you can take that back out, this gets better in a hurry."

But investors remain torn on whether any relief in oil prices is enough to tame the bear market. Two camps are forming that believe:

FIND MORE STORIES IN: Dow Jones | Rydex | Steve Sachs

•Lower oil prices are the impetus to get investors to buy stocks again. Investors are using the price of a barrel of oil as a proxy for inflation, says Steve Sachs, director of trading for Rydex. So lower oil prices would be a comforting sign. "A substantial drop in the price of oil will be more than enough to get equity markets off their lows and headed up," he says.

Paulsen says higher oil prices have fueled concerns about consumer spending, then in turn housing and then in turn financials and the dollar. If oil prices fall, that breaks the cycle, he says.

•Oil declines aren't enough to counteract bigger problems facing stocks. Despite the big decline in oil Tuesday, it's just a blip in what's been a big move, says Oliver Wiener, trader at BTIG. The price of a barrel of oil, even after Tuesday's sell-off, is up 44.6% this year. And the futures market indicates traders expect higher prices six to nine months from now.

More important than oil are regulators' efforts to help the economy's bigger woes such as the moves to bail out beleaguered mortgage companies, he says. That's why investors shouldn't assume stocks will rise even if oil continues to fall, he says. "There's no single correlation here," he says. "It's not crude down, stocks up."

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World Court orders U.S. to stop executions of 5 Mexicans

THE HAGUE, Netherlands (AP) — The U.N.'s highest court ordered U.S. authorities on Wednesday to do everything possible to halt the executions of five Mexicans in Texas until their cases are reviewed.

The Bush administration has unsuccessfully tried to get Texas courts to review the cases and said it expected the World Court's order to have little impact.

The World Court told U.S. authorities in 2004 to review the cases of 51 Mexicans sentenced to death by state courts after finding they had been denied the right to seek help from consular officials.

The World Court has no enforcement powers but President Bush issued a directive to the Texas courts to abide by the 2004 ruling. The state courts refused to review the cases and the U.S. Supreme Court ruled 6-3 in March that the president cannot compel the state courts to comply.

Mexico turned again to the U.N. court in The Hague last month, arguing that the United States was defying the 2004 World Court order and asking the judges to issue an emergency injunction to stop the killings of five men whose executions were imminent.

FIND MORE STORIES IN: United States | Washington | George W Bush | Texas | Mexico | Netherlands | Hague | World Court | Jose Medellin | John B. Bellinger III | Juan Manuel Gomez-Robledo

Chief State Department advocate John B. Bellinger III argued that the World Court, the U.N.'s judicial arm for resolving disputes among nations, lacked jurisdiction because the Bush administration agreed with Mexico and there was no dispute.

"It almost never happens that the federal government enters an appearance in state court proceedings," he said, calling the Bush administration's intervention "highly unusual."

Mexico's chief advocate, Juan Manuel Gomez-Robledo, told the court the U.S. was nonetheless "in breach of its international obligations." He said international law applies not only to nations, but to their component states and asked the court to clarify its earlier ruling and in the meantime intercede with the U.S. authorities to halt the schedule of executions.

The U.N. judges ruled 7-5 Wednesday that it would consider Mexico's case and also try to stop the executions.

The World Court acknowledged that the U.S. federal government "has been taking many diverse and insistent measures" to persuade Texas not to carry out the execution of any of the 51 Mexicans covered by the original 2004 ruling.

Bellinger said that the World Court has limited powers over U.S. states or federal authorities in Washington.

"It does not have technical legal effect in the United States that would ... have a direct impact either on the United States or on Texas itself," he said.

Federal authorities were still discussing the case "constructively" with Texas, Bellinger said, and "Texas does take this all very seriously."

Mexico's ambassador to the Netherlands, Jorge Lomonaco Tonda, said he was satisfied with the result.

"We have full confidence that the ruling will be applied," he added.

The first of the Mexicans, Jose Medellin, is scheduled to be killed by lethal injection on Aug. 5 for taking part in the gang rape and murder of two teenage girls 15 years ago.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Hezbollah prisoners freed in exchange for dead Israeli soldiers

BEIRUT (AFP) — Five Lebanese prisoners freed by Israel arrived to a hero's welcome in Lebanon Wednesday, hours after Hezbollah handed over the bodies of two Israeli soldiers seized by its guerrillas two years ago.

Among those freed in a prisoner swap greeted with triumph in Lebanon but anguish in Israel was Samir Kantar , who was sentenced to five life terms for a 1979 triple murder, including of a child.

The prisoners were transported to Lebanon late afternoon in a convoy of four International Committee of the Red Cross vehicles via the Naqura border crossing, where they were cheered and applauded by crowds of Hezbollah supporters who had been waiting all day for their arrival.

They were then flown by helicopters to Beirut, where they were accorded a red carpet welcome by Lebanese President Michel Sleiman, Prime Minister Fuad Siniora, Parliament Speaker Nabih Berri, the entire cabinet and a host of lawmakers and religious leaders.

The five -- Kantar and Hezbollah fighters Khaled Zidan, Maher Kurani, Mohammed Sarur and Hussein Suleiman -- stood on a platform as Sleiman spoke and then shook hands with the politicians lined up to greet them.

"Your return is a new victory and the future in your presence will be a path in which we will realise the sovereignty of our territory and the liberty of our people," Sleiman said.

"I tell Samir and his companions that they have a right to be proud of their country, their army and their resistance."

Kantar kissed his mother, Siham Kantar, 71, after the meet and greet with the politicians as crowds and the media swarmed around him.

His mother had burst into tears while waiting earlier at the airport when she was told that her son had arrived in Naqura and was indeed free after more than 28 years in jail.

"I never gave up hope for a day," she said, choked by emotion.

"This moment makes up for 30 years of waiting. I want to hug and kiss him. My only wish is to see him."

The four freed Hezbollah fighters were captured in the July-August 2006 war which killed more than 1,200 people in Lebanon and 160 in Israel were also freed. They and Kantar were the last remaining Lebanese prisoners in Israeli jails.

Hezbollah chief Hassan Nasrallah made a rare public appearance at celebrations attended by tens of thousands of people in the southern suburbs of Beirut Wednesday night.

"The period of defeat is over and the time of victory has arrived," Nasrallah said at the celebrations marking the success of emptying Israeli jails of Lebanese prisoners.

"This people and this nation and this country that gave a clear picture to the world... cannot be defeated," he added.

Kantar told the cheering crowds he thanked God for giving him the strength to endure his almost three-decade imprisonment, which made him the longest-serving Arab prisoner in Israel.

The five prisoners were released in exchange for the bodies of two Israeli soldiers, Ehud Goldwasser and Eldad Regev , captured on July 12, 2006.

The fate of the two soldiers was not known until their bodies were returned to Israel Wednesday morning.

"Today we hand over Ehud Goldwasser and Eldad Regev," Hezbollah official Wafiq Safa said at Naqura, as men placed two black coffins on the ground amid a crowd of onlookers.

The mood in Israel had been sombre as it waited to learn the fate of Goldwasser and Regev, whose capture in a deadly cross-border raid in July 2006 triggered a devastating 34-day war in Lebanon.

"Both soldiers have been identified," an army spokeswoman told AFP after forensic tests on the remains.

Goldwasser's family broke down in cries of despair when they saw the footage of Hezbollah handing over the caskets, while neighbours gathered around the Regev home, lighting candles and quietly shedding tears.

"Eldad! Eldad! What have they done to you?" wailed Regev's aunt Hana.

Many in Israel question whether the nation is paying too high a price for the return of the soldiers who are to be buried on Thursday, saying the swap risks bolstering its arch foes in the region.

Israel also was to transfer to Lebanon the remains of 199 Palestinian and Hezbollah fighters exhumed over the past week.

Among the first bodies handed over was that of Dalal al-Moghrabi , who led a bloody commando attack in 1978 that Israelis describe as the "Coastal Road Massacre."

She was killed in a battle with Israeli forces after her group blew up a bus they had hijacked on the road between Tel Aviv and Haifa, killing 36 people.

Lebanese television showed footage of a convoy of trucks crossing into Lebanon Wednesday evening carrying the bodies of the remaining fighters.

They were due to be transported to Beirut Thursday morning, Hezbollah said in a statement.

Israel's Jerusalem Post newspaper has billed the festivities in Lebanon as "a celebration of evil."

Israeli commentators warned the swap had given a propaganda victory to Hezbollah, setting a dangerous precedent for any future exchanges and possibly encouraging new attempts by militant groups to seize Israeli soldiers.

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Cops to IndyMac customers: Remain calm or face arrest

Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest Tuesday as they tried to pull their money on the second day of the failed institution's federal takeover.

At least three police squad cars showed up early Tuesday as tensions rose outside the San Fernando Valley branch of Pasadena-based IndyMac.

Federal regulators seized Pasadena-based IndyMac on Friday and reopened the bank Monday under the control of the Federal Deposit Insurance Corporation. Deposits to $100,000 are fully insured by the FDIC.

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches on Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.

When it was clear some wouldn't get in before closing, FDIC employees apparently took down names and told them to return Tuesday.

Other customers began lining up at 1:30 a.m. Tuesday, and by dawn, tensions escalated because people on the list were getting priority.

By 8 a.m., about 50 people on the list waited in one line and many more waited in another.

Five people were allowed in at a time.

Customers became infuriated, and police told them they could be arrested if they didn't remain calm.

Police stood by at some other branches around Southern California but there were no other reports of problems.

For more news and observations about crime in Los Angeles

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Fox News host: 15 year-old detainee ‘maybe deserved’ harsh treatment.»

Today, lawyers for Canadian national Omar Khadr, a Guantanamo detainee, released an interrogation video from 2003, showing Khadr weeping and begging for better medical treatment. Discussing the video today on Fox News, host Trace Gallagher declared Khadr had killed an American solider — Khadr is accused of throwing a grenade — and so “maybe he deserves” to be tortured. Watch it:

According to reports, Khadr — who was just 15 years old when captured — was tortured while held by the U.S. in Bagram, Afghanistan, where “he was repeatedly brought into interrogation rooms on stretchers, in great pain” and “pain medication was withheld, apparently to induce cooperation.”

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