THE ECONOMY

Rupert Murdoch expects the capital markets to lurch through the next 12 months as Wall Street banks sift through mountains of bad debt related to the mortgage crisis, the News Corp. chairman said Wednesday.

“I’m a bit of a bear,” Murdoch told the Associated Press at the annual Allen & Co. media conference at the resort in Sun Valley, Idaho. “I think there’s more (bad news) to come and it’ll take a year to shake out.”

He said Wall Street banks will have to continue to sell assets to raise money after making wrong-way bets on securities backed by souring home loans. Investment firms and big banks have written off more than $250 billion since the credit crisis started last year, and more write-downs are expected.

That has forced them to sell shares at discount rates to boost their statutory capital reserves. It led to the government- orchestrated rescue of Bear Stearns & Co., and has sent shares in storied companies like Lehman Brothers and Citigroup Inc. to multiyear lows.

The Dow Jones industrial average has fallen about 20 percent from its all-time high above 14,000 in October. The blue-chip index continued its drop closer to 11,000 Wednesday as the sluggish economy and rising energy costs continue to spook investors.

Murdoch said he’d be “happy” with a Dow at 11,000 – “if it holds.”

Cash-strapped consumers desperate for deals are increasingly turning to pawn shops and payday lenders instead of the local mall and neighborhood bank.

Texas-based pawn shop operators Ezcorp Inc. and Cash America International Inc. both boosted their profit outlooks for the upcoming quarter this week.

The companies also offer “payday loans,” or short-term, high-interest cash advances to consumers on their paychecks. As more people struggle to cover the rising cost of gasoline and groceries, they are turning to payday lenders to help them bridge the days between paychecks.

From wire reports