Results included a loss of $61.3 million, or 19 cents per share, for loans the company had to buy back from Wall Street investors because more customers of its Option One Mortgage Corp. subprime unit are falling behind on payments.

Subprime borrowers have weaker credit histories than prime borrowers, and often miss payments faster as interest rates rise or the economy slows.

The mortgage loss, disclosed on August 24, was the latest setback for a company already facing regulatory and litigation problems, errors in computing its own taxes, and a loss of market share to rival Jackson Hewitt Tax Service Inc. (NYSE:JTX - news)

H&R Block also cut its full-year profit per share forecast to between $1.60 and $1.85 from between $1.80 and $2.05. The company generates much of its profit and revenue in the quarter ending April 30, which includes the main tax filing season.

Analysts polled by Reuters Estimates on average forecast a first-quarter loss of 36 cents per share on revenue of $587 million, and full-year profit of $1.53 per share. Many cut their forecasts after last week's announcement.

Chief Executive Mark Ernst told reporters on a conference call that H&R Block is reserving twice as much for loan buybacks as it did three months earlier.

"Loan buyers are being much more stringent in the enforcement of provisions to buy back loans," Ernst said. "We've reserved for 100 percent of that exposure."

Ernst also said the company has tightened underwriting standards, especially in the Midwest and other regions where delinquencies are highest.

H&R Block shares closed Thursday up 13 cents at $21.03 on the New York Stock Exchange. They have fallen 14 percent this year, while Jackson Hewitt is up 14 percent.

LAWSUITS

Mortgage services generated a $4.9 million pretax quarterly loss, compared with $130.7 million of income a year earlier, as revenue fell 44 percent to $169.7 million.

Revenue increased 62 percent in business services and 15 percent in tax services, but fell 13 percent in consumer financial services.

This week, H&R Block agreed to a $39 million settlement to end a class-action lawsuit accusing it of deceiving customers into taking out high-interest loans while they waited for tax refunds.

The company is also still defending a lawsuit by New York Attorney General Eliot Spitzer accusing it of steering clients into retirement accounts that carry excessive fees.

Some investors have speculated H&R Block might sell some lagging businesses to bolster its share price, but it did not hint of plans to do so.

"You're going to a get a conglomerate discount against that share price unless all of the performing units in that entity are going very well," Chief Financial Officer William Trubeck told reporters.

Paul Kasriel says it's the worst supply/demand equation of residential real estate in 34 years. Sales in July were down more than a fifth. Inventories were up more than a fifth. And a lot of real estate investors are now going to the liquor store to get another fifth. They wish they could turn the clock back a few months and unload properties at last year's prices.

But maybe the situation is not as bad as it looks. The New York Times reported the news last week that real estate downturns in England and Australia have been surprisingly mild. And now, Business Week has a big story entitled "Housing: The Roof Won't Collapse On The U.S. Economy."

According to Business Week, housing can go a little soft without damaging the economy too severely. That view has become the mainstream dream. What do we know; maybe it will turn out to be true. As our friend John Mauldin points out, we usually muddle through. Usually, tomorrow is like today. Usually, nothing too bad or too good...happens. Usually, things are average, ordinary, common, and regular.

But wait, there is nothing ordinary about this housing bubble. In the space of less than 10 years, according to Robert Shiller's index, the real value of residential property doubled. And householders doubled up their debt, too. Neither are things that happen every day; in fact, they've never happened before!

We are not looking into a crystal ball here. We are just putting two and two together. If things are usually usual, then when they are unusually unusual, they are probably more likely to become usual again, rather than become more unusually unusual. That seems so obvious to us, we won't bother to explain it.

And when housing prices become usual, then the poor sap who has bet his house on something extraordinary is likely to be in a tight spot. And since the entire U.S. economy, and by extension the entire world economy, depends on him being able to continue to spend, then they're all in a tight spot.

Yes, the whole world economy now depends on a man who spends money he doesn't have - money of no sure value - on what he surely can't afford, and which he probably doesn't need anyway. He can only do so as long as his house rises in price. And now, that the rise in housing prices has come to an end. What next?

Everyone has come to expect slowing real estate gains. The boom is over; everyone seems to think so. So, where is the surprise? Where's the money to be made...or lost?

Again, we don't know. But in August 1982, Business Week famously predicted that the equity market was finished. Now, in August 2006, BW tells us not to worry: the roof will not collapse. BW might not be right, but it might be consistent; the roof might blow up.

The housing story can be swiftly told. Price inflation in housing had been running at close to 10 per cent a year but in the past few months this has ground to a halt. The supply of new homes on the market has shot up and is now equivalent to ten months' sales (first graph).

The number of housing permits, which had been rising steadily since the early 1990s - and which did not turn down significantly during the 2001 recession - has suddenly fallen (second graph). And inflation for existing homes is now zero, maybe negative (final graph).

It is actually quite difficult to get up-to-date figures for house prices in the US, but I gather from a paper by Commerzbank that one of the more reliable series comes from the Office of Federal Housing Enterprise Oversight. In the past 30 years this has never turned negative, though in real terms it fell in economic downturns of the early 1980s and early 1990s.

Some calculations by the bank suggest outcomes somewhere between prices being flat in real terms to a fall of 5 per cent in real terms. That would be less serious than the house price deflation in the UK in the early 1990s, and the bank concludes that a decline in housing activity likely to provoke a recession next year is unlikely at present interest rates. So, a soft landing.

That is still the majority view on Wall Street and at the Federal Reserve. Minutes out this week from the last meeting, when the Fed held rates instead of increasing them as it had done steadily over the previous two years, confirm that it expects a slowdown next year. Specifically it thinks there will be 18 months of below-trend growth but nothing worse.

But then they would say that, wouldn't they? It is very hard in the context of the public debate for mainstream forecasters to predict recession. For the Fed to do so, given its authority, would almost certainly be to provoke one. If you are seeking the opposing view you have to go to the mavericks.

One small independent forecasting unit that had not previously come up on my radar is the Economic Cycle Research Institute (ECRI). It was one of the very few organizations in the US to predict the 2001 recession and its views now have just been reported in the New York Times.

The ECRI does not yet call a recession but it is concerned. It thinks that the last six months show similarities to two situations. One is the run-up to previous recessions; the other to the gentle slowdowns that took place in the middle of the cycle in the 1980s and 1990s. At the moment it feels it is too early to decide which way things will flip.

This notion that it is evens whether there will be a recession next year, while much more gloomy than the mainstream position, feels to me to about the right judgement at the moment. In another couple of months we will know much more.

Meanwhile consumers are worried. The economic forecasting unit, the Conference Board, found that consumer confidence in August was at its lowest since November last year. You would expect that. The issue is the extent to which a lack of confidence translates into lower purchases. The evidence is consistent but not conclusive, but the danger is there.

The questions that follow are whether this danger is fully understood by the rest of the world and whether US policy could respond effectively if and when the danger of recession becomes more apparent. I think the answer to both is "probably not".

You have to remember that the world economy now is very different to the world economy during the run-up to the last US recession in 2001. Most obviously, China is much more important in terms of incremental demand, while Europe is much less important.

But China is very dependent on the US market to maintain demand, much more so than Europe ever was. China would ride through a US recession by switching output to the domestic market, but the shock would linger. What concerns me is that there is really very little folk-memory in China of a US recession - even the one in 2001 was a very mild one.

As for the US response, the Fed would stop increasing rates but its ability to start cutting them is very limited. Inflation remains high relative to money interest rates, at least by historical standards. Real interest rates are still only about 2 per cent. If real rates at 2 per cent are enough to stop the economy, that tells you that an awful lot of people are over-borrowed.

Yes, in extremis, the Fed can cut rates. Were there some kind of financial crash that is what central banks do. But trimming rates when inflation is above 3 per cent is not really credible. Indeed were it to cut short rates there would be a danger that long rates would move upwards and long rates are extremely important for housing finance.

Monthly payments matter. They matter to many people in Britain, of course, but I think they matter more in the US. They crop up in casual conversation - in a chat with the immigration official at Detroit airport, for example - in a way that they don't quite dominate things in Britain.

My overriding impression is that that the US consumer is quite close to a tipping point, a point where collectively he or she will at last decide to slow down the growth of spending and maybe start to cut back. In Detroit I guess that has already happened.

That would indeed point towards recession. But set against that another thought. It is that economies are like supertankers and America's is more "supertankerish" than any other. Things change quite slowly; momentum takes a long time to lose pace. If the "recession next spring" view is wrong, it will be because of that momentum.

But then, you say, how will the US cope with a long period of slower growth, little or no rise in house prices and still-high energy costs? Americans are in for tougher times, and I think they know it.

High-dollar Washington galas headlined by the fundraiser-in-chief brought in a big share of the total. The president also has scooped up campaign cash in 36 cities, travels that have taken him as near as McLean, Va., in the Washington suburbs and as far as Medina, Wash., 2,800 miles to the west. On Thursday, Bush adds yet another locale to the list: Salt Lake City.

All this to-and-fro presidential politicking is only expected to increase as November draws closer. And it is the taxpayers, not the campaigns or political parties, who foot most of the travel bill.

When Bush, Vice President Dick Cheney, first lady
Laura Bush or any federal official helps a candidate,
Federal Election Commission guidelines say the campaign must reimburse the government only the equivalent of a first-class fare for each political traveler on each leg of the trip. Typically, that means paying a few hundred or at most a few thousand dollars to cover the president and a couple of aides from the White House Office of Political Affairs.

The White House deems staffers from any other office "official," eliminating any need for campaigns to cover their travel.

And the White House requires reimbursement only if the president specifically advocates a candidate's election, for instance by headlining a fundraiser or a rally on their behalf. That means that staging appearances alongside the president - from Air Force One's jetway or at a policy event - costs a candidate nothing even though they can bask in the media spotlight.

Bush is not the first president to operate this way. The federal regulations governing reimbursement for political travel have been on the books at least since the Reagan administration, and the White House said Bush adheres to all rules.

Pete Sepp, spokesman for the National Taxpayers Union, a taxpayers advocacy organization, suggested at least requiring campaigns to cover the actual cost of fueling and providing a crew to Air Force One, which runs to tens of thousands of dollars each hour for the specially retrofitted Boeing 747-200B Bush usually uses.

But Massie Ritsch, spokesman for the Center for Responsive Politics, which tracks money's impact on politics, said that seems unrealistic. "You would bankrupt the campaign," he said.

Ritsch said the system is likely to remain for the foreseeable future - mostly because both Democrats and Republicans have benefited, leaving little will on either side to change it.

"Having a member of your party in the White House is a perk for any candidate in that party," he said. "He comes with all the trappings of the president and you as a candidate really don't have to pay for any of it."

Beside the substantial Air Force One costs, other expenses not covered by the airfare reimbursement are extensive.

The
Secret Service provides massive presidential protection. Advance teams fan out before trips to map every move. Overnight stays bring hotel costs for the large presidential entourage. Duplicate motorcades of well over a dozen vehicles each, including armored limousines and sometimes several helicopters, must be shipped ahead on cargo planes to every city.

Like others before it, the White House often transfers more of the bill-paying burden onto taxpayers by pairing an "official" event with the political one. Then, the percentage of time spent on official and political duties is calculated to determine what portion of the first-class fare is owed by the campaign.

Nearly two-thirds of Bush's travel days outside of Washington for political appearances this election cycle have included an "official" event. Most of the time, the two events are near enough not to require a separate flight, making it even more economical for the campaign.

At the beginning of August, for instance, Bush stopped briefly at a county emergency operations center outside Cleveland to commemorate routine disaster declarations for the area's heavy rains. It was a stop added only at the last minute, and just five minutes from a home where he was scheduled to raise $1.5 million for Ohio's Republican candidate for governor, Kenneth Blackwell.

An increasingly common approach is to pick a local business for Bush to tour and use as a backdrop for casual remarks on the economy. A visit earlier this month to a York, Pa., Harley-Davidson plant preceded a fundraiser for Republican gubernatorial candidate Lynn Swann.

In July, Bush chatted with workers at a Wisconsin Allen-Edmonds shoe factory before helping GOP Rep. Mark Green (news, bio, voting record)'s gubernatorial campaign. And in mid-August, the president raised money for Republican congressional candidate John Gard in Oneida, Wis., following a brief stop at a nearby metal plant.

A president's unique ability to attract large donations from party faithful, and to do it on the cheap for the benefiting campaign, help explain why Bush is in demand as a fundraiser despite low approval ratings. Many candidates, however, are choosing this year to set up their Bush-headlined donor receptions in private homes, where the media is barred.

The review is being led by Kenneth Leet, a former Goldman Sachs and Bank of America executive, and has already mooted a possible sale of Jaguar.

However, that option looks less likely now, with Mr Ford stating: "We continue to be encouraged by Jaguar's progress and by the strength and appeal of the Jaguar, Land Rover and Volvo product line-ups." By contrast, Aston Martin is "the most logical and smart divestiture choice", he said. A source at Ford of Europe confirmed that "some parties had expressed an interest" in Aston Martin.

Despite the continuing fame of Aston Martin sports cars, their role in numerous Bond films, the rave reviews they routinely generate among motoring journalists, and their high price tags (the range tops out at £177,000) Aston Martin loses money: $162m (£85m) in the second quarter.

Its disposal would bring relief to Ford's hard-pressed shareholders and would be the first tangible fruit of the strategic review.

Although no names are yet firmly in the frame, the JCB chairman, Sir Anthony Bamford, would seem a possible buyer given his very public recent interest in Jaguar. He would not be alone. Various private equity interests, the former Ford boss Jacques Nasser, Oleg Deripaska, the billionaire head of the Russian GAZ concern, and car groups from Renault-Nissan to Hyundai have been mentioned in the context of Jaguar, and will no doubt be quietly running their slide rules over Aston Martin, a fine ornament for any of them.

It may be that Ford has discovered that selling off Jaguar but keeping Land Rover is too logistically demanding, given the way the two have been so closely integrated - sharing engines for example. Aston Martin's headquarters is at the old British Leyland technical centre in Gaydon, Warwickshire where it shares facilities with Land Rover. However, because it is a much smaller, niche player, making about 5,000 cars a year, Aston Martin should be easier to extricate.

Even by the dramatic standards of the British motor industry, Aston Martin has had a chequered history, going bust and moving premises many times. It was founded in 1921 by Lionel Martin and Robert Bamford (no relation to Sir Anthony) to race cars up Aston Clinton hill in Buckinghamshire, hence the name. It enjoyed its greatest success in the 1950s and 1960s when owned by a tractor maker, David Brown, who pioneered the DB series. Perhaps JCB ownership might similarly see James Bond in his first Aston Martin JCB.

While not the largest foreign defence market, the daily said industry officials and analysts consider it one of the fastest growing as it replaces fleets of Soviet-era planes and goes shopping for new radar and missile systems.

The largest near-term opportunity is India's plan to buy 126 fighter aircraft, which would replace their older Russian MiGs. Lockheed and Boeing are marketing their F-16 and F-18 aircraft respectively, squaring off against Britain's Eurofighter and Israel's Rafael.

"That will be the bellwether. How serious is India in looking at us as a supplier, how serious is the US in releasing technology?" Joel L. Johnson, an analyst at Teal Group Corp., a Fairfax research firm, told the Post .

"It's an untapped market that nobody has the inside track on yet," Johnson said citing Teal Group's estimate that India's defence budget is expected to reach more than $23 billion this year, compared with about $13 billion in 2000.

"The Indians have money, their economy is growing and, so, US companies are guessing that when our own defence budget finally gets crunched" the Indian market will be profitable, he was quoted as saying.

For both Lockheed and Boeing the orders could help extend their production lines. Lockheed has supported the F-16 line for years with international orders, but recently began laying off hundreds of workers as it prepared for demand to dwindle.

"If they pick us to re-capitalise their Air Force, you're talking about 25 years of relationship," the daily quoted Ron Covais, Lockheed's vice president for corporate international business development as saying.

Several of the Pentagon's largest contractors, including Lockheed Martin Corp. and Boeing Co., have either opened new offices or beefed up existing ones in India and are part of an industry-wide wooing of military officials and business leaders there.

Sikorsky Aircraft Corp., maker of the Black Hawk helicopter, opened an office in India in April and is competing for a contract for 200 helicopters potentially worth more than $3 billion. General Dynamics Corp., based in Falls Church, bought an Indian company in 2004 and is using it to sell communications equipment.

The Aerospace Industries Association, a lobbying group, is planning a trip there in December with executives from up to 20 companies.

"The biggest hurdle is going to be patience," Torkel Patterson, president of Raytheon International Inc., said of joining the market. "We're getting to know each other."

The company is hoping to sell Patriot missiles to India and to help it upgrade its missile defence system.

Overseas sales have become an increasingly important part of revenue for US defence contractors. Lockheed, headquartered in Bethesda, aims to increase its foreign business to 20 percent of revenue by the end of the decade, up from about 14 percent now.

Lockheed got a "toe" into the Indian market this year when it was hired to supply parts for submarines. "It's modest, but part of confidence building," said Lockheed's Covais.

Developing a significant presence in India will not be easy. The country has traditionally bought its weapons from Europe or Russia and has a complicated and lengthy procurement process, according to industry insiders cited by the Post.

"The cost of marketing could equal 5 to 10 percent of contract. You're looking at a lot of upfront costs," said Richard Aboulafia, an aviation analyst for Teal Group.

Los Angeles-based Northrop Grumman, the maker of the Global Hawk, has tapped the Maryland Department of Business and Economic Development for help, as it prepares to open an office in New Delhi next year.

The agency has arranged meetings for the firm and introduced them to Indian military officials, company officials said. "They have been educating us on how the Indian aerospace business has been developing," said Scott Porter, a Northrop vice president.

Critical to any contract, industry officials acknowledge, will be partnerships with Indian businesses, the Post said. The Indian government is expected to require contractors to do about 30 percent of the work in the country, aiding local businesses and ensuring that they will have access to critical technologies.

"I am convinced that such an approach will enable us to move further down the road in our relations," he added.

Chavez said that he wanted to open an embassy in the Angolan capital shortly, adding that it was "a priority of ours."

Venezuela is now the fifth largest oil exporter in the world, producing 3.27 million barrels a day while Angola, already Sub-Saharan Africa's biggest exporter after Nigeria, is on course to produce two million bpd by 2007.

The two leaders were expected to hold another round of talks later in the evening before Chavez flies out in the early hours of Friday morning.

Angolan officials said prior to the visit that the two leaders also planned to discuss the situation in the Middle East.

Chavez arrived in Angola the day after a trip to Damascus where he met fellow US arch-foe President Bashar al-Assad and pledged to "reject the American empire's imperialism and attempts at hegemony."

The minimum wealth needed to qualify was $A130 million, 13 times higher than the $10 million needed when the list was first published in 1983.

The latest results confirm that the enrichment of the privileged that began in 1983 under the Hawke-Keating Labor government has accelerated under Howard's Liberal-National Coalition since 1996. This process will only intensify further through the Howard government's massive tax handouts for the rich in the past two budgets.

Many of the super-rich have benefited from the current "commodities boom"-soaring corporate profits generated by high prices for mining exports, especially to China, and the resulting speculative investments in stocks and shares on global markets.

Highly inflated property prices, whilst preventing many low-income earners from buying and imposing rising debts onto others, have also produced spectacular returns for major property developers and investors. No less than 58 of the 200 members of the Rich List gained their wealth via property.

Parasitism prevails at almost every level. Some of the biggest tycoons simply inherited their riches, including James Packer, son of Kerry Parker, the media and gambling magnate, and Gina Rinehart, daughter of iron ore baron Lang Hancock.

One of the most loathsome enterprises, the gaming industry, which has produced chronic social problems from gambling addiction, continued its heavy presence in the Business Review Weekly list. James Packer assumed his late father's spot at the top of the list with assets of more than $7.1 billion. Buoyed by casino and other gambling profits, the family's wealth rose $200 million in 12 months.

Frank Lowy, the founder of the Westfield Group, the world's biggest owner of shopping malls, remained at number two after increasing his wealth by $600 million to $5.4 billion. In other words, Lowy's worth grew by almost $2 million a day, about 12,000 times the income of an average worker on $60,000 per year.

Packaging billionaire Richard Pratt, who controls the Visy group, came in third after adding another $500 million to his name and taking his total wealth to $5.2 billion. Next came Chinese-born solar panel manufacturer Zhengrong Shi with $3 billion.

Other billionaires included Harry Triguboff, whose $2.5 billion was acquired through property investment; racing personality David Hains ($2.3 billion); poker machine supplier Len Ainsworth and his sons ($1.9 billion); property and service magnate John Gandel ($1.8 billion) and Channel Seven television network owner Kerry Stokes ($1.8 billion).

Rinehart became Australia's first female billionaire with a fortune valued at $1.8 billion, doubling her $900 million listing last year. She is now ranked the 8th richest person in Australia.

While millions of ordinary people struggle to relieve the mounting financial stress produced by soaring fuel prices, rising interest rates, credit card debt and cuts in benefits for the unemployed, single parents and the disabled, the rich have difficulty spending their spectacular fortunes.

Consumer surveys reveal that spending on maintaining extravagant and self-indulgent lifestyles has hit record highs. At the Sydney Easter yearling sale, the world's third largest auction of year-old horses, the average price of a racehorse climbed 39 percent to $288,497 and 13 thoroughbreds sold for more than $1 million, compared with eight last year.

Sotheby's, the auctioneers, sold at least eight paintings in Australia for more than $1 million during 2005, compared to none the year before. Mark Fraser, managing director of Sotheby's Australia, said: "A lot of people accumulate vast wealth and then have no idea why they have bothered because once they have got the houses and the yachts; they're not quite sure what to do what next. Art is something they become passionate about."

Fifteen Lamborghinis were sold in the first four months of 2006, compared with six during the same period in 2005, according to figures kept by the Federal Chamber of Automotive Industries.

Such spending provides a glimpse of a world that millions in Australia can barely imagine. While guaranteeing further tax cuts for the rich, the Howard government has abolished social security rights for tens of thousands of people through its "welfare to work" packages. The new industrial relations legislation, which has already produced drastic cuts in wages and conditions for many workers, will only fuel the social polarisation and exacerbate class tensions.