Instead of reflecting the current economic cloudiness, the US stock market is starting to feed economic fear. Stocks have fallen for a disheartening four weeks in a row. Some on Wall Street worry that the resulting blow to confidence, not to mention 401k statements, has set off a spiral of fear that could push prices even lower, cause people and businesses to pull back and tip the economy into a new recession.
"I'm nervous that fear will lead companies to stop hiring and people to stop spending," says Jim Paulsen, chief investment strategist of Wells Capital Management, famous for his usually bullish take on the markets.
A home sales report this past week showed that more sales than usual fell apart at the last minute, which suggests plunging stocks and dismal economic news gave buyers cold feet. At least 16% of deals were canceled ahead of closings last month.
Beth Ann Bovino, senior economist at Standard & Poor's, says that another big plunge in stocks could "push us closer to the brink." The Standard & Poor's 500 stock index ended Friday at 1,123.53, down 5% for the week. The average is down 16% during the four-week losing streak. One reason for the drop is fear that another recession, if not certain, is more likely now.
The run of bad economic news started last month when the government said the economy grew much more weakly in the first half of this year than thought. Growth, at a paltry annual rate of 0.8%, was the slowest since the Great Recession ended in June 2009.
The economic weakness has made investors more likely to sell stocks at the first hint that things are getting worse. And last week, they got signs aplenty. A regional survey by the Federal Reserve said manufacturing had slowed in the mid-Atlantic states by the most in more than two years. Existing home sales fell in July for third time in four months. Another report showed that exports from Japan, the world's third-biggest economy, had slumped for the fifth straight month. Japan is still reeling from the effects of an earthquake and tsunami in March.
The housing market, which usually helps lead an economic recovery, keeps getting worse. The plunging stock market and scary economic news won't make it any better.
"What you're seeing with the economy, on the job front, it's scaring a lot of people," says Brian Fine, a loan manager at Mortgage Master in Rockville, Md. He says the housing market will languish until buyers and sellers feel more secure about the economy.
"People are really motivated by larger economic trends. It's all about if you feel confident enough to buy a home right now," he says.
The news from Europe got worse, too. Its economy has slowed considerably — even in Germany, which has been its greatest source of strength. Fear spread that European banks, already ailing because they hold bonds of countries that are struggling with debt, were having trouble getting short-term loans to pay for day-to-day activities.
Some Wall Street analysts say reports of trouble were exaggerated, but that didn't seem to matter. For investors, the prospect of banks scrambling for cash dredged up bad memories of the global credit freeze that hit in the fall of 2008, and they sold stocks.
"A negative feedback loop ... appears to be in the making," two economists at Morgan Stanley wrote Thursday in a widely cited report that itself seemed to beget more fear and selling. It warned that the US was "dangerously close" to recession.
Stock investors aren't the only ones worried. Martin Fridson, global chief credit strategist at BNP Paribas Investment Partners, notes that investors in bonds issued by the riskiest American companies are dumping them, too. These investors fear that in a recession companies might not be able to pay interest on these so-called junk bonds.
The selling has forced up the average interest rate on the bonds to 8.3%. If investors had faith in the economy, the rate would be 4.6%, Fridson says. "I'm nervous. I think there's a very material risk of falling into recession."
Investors are responding to the risk by putting their money where they feel safe. Demand for the 10 yr Treasury note was so high last week that the yield dipped below 2% for the first time in half a century. And the price of gold has set one record after another. It topped $1,800 an ounce last week.
Although unemployment remains stubbornly high, at 9.1%, there are signs that the economy, while not strong, is still growing. Retail sales grew in July at the fastest pace since March. Employers added 117,000 jobs last month, but far better than the hundreds of thousands of jobs lost each month during the Great Recession. Factory production rose in July because automakers made more cars.
And Wall Street analysts who analyze companies and advise investors when to buy and sell don't seem to be worried. As stocks were falling Friday, research firm FactSet released figures that showed just how much more optimistic these analysts are than the average investor.
Stocks are priced at roughly 11 times their expected earnings per share over the next year. That's a steep discount compared with the market's long-term average of 15 times. Translation: If you believe the US will avoid recession and companies will generate profits as high as the analysts think they will, the S&P should be trading at 1,560 — just below the S&P's record high of 1,565 in October 2007.
Of course, if the economy is weak and earnings don't come in as expected, it could turn out that stocks were trading today at 15 times the next year's earnings. That's what many of today's sellers seem be expecting.
And skeptics note that analysts are notoriously bullish, and tend to overestimate profits as the economy slows. Wells Capital's Paulsen thinks stocks should be trading higher, though he suggests investors will pay a steep price if he's wrong.
"If we have a recession, we'll probably break 1,000" on the S&P index, he says.
Investors will be on edge this week as they scrutinize new data on the economy. On Tuesday, new home sales for July are released, followed on Thursday by a weekly report on how many people are joining the unemployment line. On Friday, the government will give its second estimate of how fast the economy grew from April through June.
The most anticipated event, though, is a speech the same day by Federal Reserve Chairman Ben Bernanke at a retreat in Jackson Hole, Wyoming sponsored by the Federal Reserve Bank of Kansas City. The Fed pledged earlier this month to keep interest rates low through mid-2013. Investors hope Bernanke will announce, or at least preview, further steps to help the economy. But economists say it is unlikely Bernanke will unveil anything ambitious.
With all the high emotion surrounding stocks, economist Joel Naroff cautions investors not to read too much into the recent swings. He says that stocks have a habit of running from one extreme to the other, including this spring, when he thought they were far too high. He thinks stocks may be fairly valued now.
They reflect an "economy that is growing but not growing at any great pace," he says. "It is not in recession."
Sunday, August 21, 2011
Wednesday, July 27, 2011
Just Who Owns America's Debt? Americans!
Truth is elusive. But it's a good thing we have math. Our friends at Business Insider know this, and put those two principles to work today in this excellent and highly informative little slideshow, made even more timely by the ongoing talks in Washington, DC aimed at staving off a US debt default.
Here's the big idea:
Many people — politicians and pundits alike — prattle on that China and, to a lesser extent Japan, own most of America's $14.3 trillion in government debt. But there's one little problem with that conventional wisdom: it's just not true. While the Chinese, Japanese and plenty of other foreigners own substantial amounts, it's really Americans who hold most of America's debt. Here's a quick and fascinating breakdown by total amount held and percentage of total US debt, according to Business Insider:
Hong Kong: $121.9 billion (0.9%)
Caribbean banking centers: $148.3 (1%)
Taiwan: $153.4 billion (1.1%)
Brazil: $211.4 billion (1.5%)
Oil exporting countries: $229.8 billion (1.6%)
Mutual funds: $300.5 billion (2%)
Commercial banks: $301.8 billion (2.1%)
State, local and federal retirement funds: $320.9 billion (2.2%)
Money market mutual funds: $337.7 billion (2.4%)
United Kingdom: $346.5 billion (2.4%)
Private pension funds: $504.7 billion (3.5%)
State and local governments: $506.1 billion (3.5%)
Japan: $912.4 billion (6.4%)
US households: $959.4 billion (6.6%)
China: $1.16 trillion (8%)
The US Treasury: $1.63 trillion (11.3%)
US Social Security trust fund: $2.67 trillion (19%)
So foreigners own about $4.5 trillion in debt. But America owes America $9.8 trillion and there's where a default would hurt the worst!
Here's the big idea:
Many people — politicians and pundits alike — prattle on that China and, to a lesser extent Japan, own most of America's $14.3 trillion in government debt. But there's one little problem with that conventional wisdom: it's just not true. While the Chinese, Japanese and plenty of other foreigners own substantial amounts, it's really Americans who hold most of America's debt. Here's a quick and fascinating breakdown by total amount held and percentage of total US debt, according to Business Insider:
Hong Kong: $121.9 billion (0.9%)
Caribbean banking centers: $148.3 (1%)
Taiwan: $153.4 billion (1.1%)
Brazil: $211.4 billion (1.5%)
Oil exporting countries: $229.8 billion (1.6%)
Mutual funds: $300.5 billion (2%)
Commercial banks: $301.8 billion (2.1%)
State, local and federal retirement funds: $320.9 billion (2.2%)
Money market mutual funds: $337.7 billion (2.4%)
United Kingdom: $346.5 billion (2.4%)
Private pension funds: $504.7 billion (3.5%)
State and local governments: $506.1 billion (3.5%)
Japan: $912.4 billion (6.4%)
US households: $959.4 billion (6.6%)
China: $1.16 trillion (8%)
The US Treasury: $1.63 trillion (11.3%)
US Social Security trust fund: $2.67 trillion (19%)
So foreigners own about $4.5 trillion in debt. But America owes America $9.8 trillion and there's where a default would hurt the worst!
Wednesday, July 13, 2011
Obama using scare tactics via television interviews rather than working on the problem
Well President Obama warned us yesterday that retirees might not receive their Social Security checks in August if lawmakers fail to reach an agreement on how to reduce the federal debt.
"I cannot guarantee that those checks go out on Aug. 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it," Obama told CBS's Scott Pelley in an interview set to air tonight on the CBS Evening News.
Here's my response....."Why don't you quit giving all these television interviews and actually go work on fixing the problem?"
Roughly $20 billion in Social Security checks are set to be mailed out on Aug. 3--a day after the Treasury Department says the US will begin defaulting on its financial obligations unless the debt ceiling is raised.
But the president cautioned that it's more than just Social Security checks that could be affected. "These are veterans' checks. These are folks on disability," Obama said, according to excerpts released by CBS News. "There are about 70 million checks that go out."
The president's comments come a day after he warned of dire financial consequences should Republicans and Democrats fail to come to an agreement on raising the debt ceiling and paying down the deficit. In a press conference yesterday, Obama said if Republicans fail to compromise on a debt deal that it could "throw millions of more people out of work."
Obama and congressional leaders are set to meet again later today as the two sides continue to bicker over the debt ceiling and how to shore up the nation's dire fiscal state. The White House is pressing for an agreement by July 22nd (a little over a week before Aug 2), the date when Treasury officials say the US will hit its debt limit.
Get to work please Mr President and stop running around using fear tactics on the American public. Get a room. Sit both leaderships down. Hammer out a compromise. Get on with business rather than promoting your own personal agenda that is not in the best interests of our country!
"I cannot guarantee that those checks go out on Aug. 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it," Obama told CBS's Scott Pelley in an interview set to air tonight on the CBS Evening News.
Here's my response....."Why don't you quit giving all these television interviews and actually go work on fixing the problem?"
Roughly $20 billion in Social Security checks are set to be mailed out on Aug. 3--a day after the Treasury Department says the US will begin defaulting on its financial obligations unless the debt ceiling is raised.
But the president cautioned that it's more than just Social Security checks that could be affected. "These are veterans' checks. These are folks on disability," Obama said, according to excerpts released by CBS News. "There are about 70 million checks that go out."
The president's comments come a day after he warned of dire financial consequences should Republicans and Democrats fail to come to an agreement on raising the debt ceiling and paying down the deficit. In a press conference yesterday, Obama said if Republicans fail to compromise on a debt deal that it could "throw millions of more people out of work."
Obama and congressional leaders are set to meet again later today as the two sides continue to bicker over the debt ceiling and how to shore up the nation's dire fiscal state. The White House is pressing for an agreement by July 22nd (a little over a week before Aug 2), the date when Treasury officials say the US will hit its debt limit.
Get to work please Mr President and stop running around using fear tactics on the American public. Get a room. Sit both leaderships down. Hammer out a compromise. Get on with business rather than promoting your own personal agenda that is not in the best interests of our country!
Friday, June 24, 2011
US House of Representatives sends Obama message on Libya
President Barack Obama asked Congress for the authority for US military operations against Libya. On Friday the House of Representatives sent a resounding vote of no. In a repudiation of the commander in chief, the House voted overwhelmingly against a resolution that would have favored letting the mission continue for one year while barring American ground forces.
Even after Secretary of State Hillary Rodham Clinton made a final hour plea the vote was 295-123, with 70 Democrats abandoning Obama's stance on Libya. The Republican leader of the House, Speaker John Boehner, said he supported the president's authority as commander in chief. "But when the president chooses to challenge the powers of the Congress, I as speaker of the House will defend the constitutional authority of the Legislature," he said.
House Republicans and some Democrats are furious with Obama for failing to seek congressional authorization as required under the War Powers Resolution. The 1973 law, often ignored by Republican and Democratic presidents, says the commander in chief must seek congressional consent for military actions within 60 days. That deadline has long passed.
Earlier this month, the House voted 268-145 to rebuke Obama for failing to provide a "compelling rationale" for the Libyan mission and for launching US military forces without congressional approval.
Even after Secretary of State Hillary Rodham Clinton made a final hour plea the vote was 295-123, with 70 Democrats abandoning Obama's stance on Libya. The Republican leader of the House, Speaker John Boehner, said he supported the president's authority as commander in chief. "But when the president chooses to challenge the powers of the Congress, I as speaker of the House will defend the constitutional authority of the Legislature," he said.
House Republicans and some Democrats are furious with Obama for failing to seek congressional authorization as required under the War Powers Resolution. The 1973 law, often ignored by Republican and Democratic presidents, says the commander in chief must seek congressional consent for military actions within 60 days. That deadline has long passed.
Earlier this month, the House voted 268-145 to rebuke Obama for failing to provide a "compelling rationale" for the Libyan mission and for launching US military forces without congressional approval.
Thursday, June 23, 2011
Pottermore - All Things for the Harry Potter fan
Today famous author J.K. Rowling introduced the newest saga for the Harry Potter fan. Pottermore. The announcement was made via youtube and had been eagerly awaited for months by Potter fans. Details about the site come after months of guessing and social media hype.
The site goes live on July 31 when 1 million registered users will be chosen through an online competition to help flesh out the Pottermore world. Visitors can register now to enter that competition.
Rowling said she created the website to give back to Harry Potter's "muggle" followers. At Pottermore, users will be able to share comments, ideas and drawings about all things Harry Potter and even buy Harry Potter e-books. There is also a puzzle map called "Secret Street View," where users can enter secret map coordinates that spell out p-o-t-t-e-r-m-o-r-e.
The site lets fans delve into Harry Potter's beloved Hogwarts School of Witchcraft and Wizardry. They can shop for wands in Diagon Alley, travel to Hogwarts from the imaginary Platform 9 3/4 at London's King's Cross train station and be sorted into Hogwarts school houses by the perceptive Sorting Hat.
The deal brings longtime e-book refusnik Rowling into the digital fold, but comes as a bitter potion to established booksellers, who will be shut out of the latest chapter of a vastly profitable saga.
"You can't hold back progress," Rowling told reporters in London. "E-books are here and they are here to stay."
Rowling reiterated that she will not write any more Harry Potter books and that she is done writing in the immensely popular series. There could be an encyclopedia compiled though. The seven Harry Potter novels have made Rowling one of the world's richest women, with a fortune estimated by Forbes magazine at $1 billion.
The site goes live on July 31 when 1 million registered users will be chosen through an online competition to help flesh out the Pottermore world. Visitors can register now to enter that competition.
Rowling said she created the website to give back to Harry Potter's "muggle" followers. At Pottermore, users will be able to share comments, ideas and drawings about all things Harry Potter and even buy Harry Potter e-books. There is also a puzzle map called "Secret Street View," where users can enter secret map coordinates that spell out p-o-t-t-e-r-m-o-r-e.
The site lets fans delve into Harry Potter's beloved Hogwarts School of Witchcraft and Wizardry. They can shop for wands in Diagon Alley, travel to Hogwarts from the imaginary Platform 9 3/4 at London's King's Cross train station and be sorted into Hogwarts school houses by the perceptive Sorting Hat.
The deal brings longtime e-book refusnik Rowling into the digital fold, but comes as a bitter potion to established booksellers, who will be shut out of the latest chapter of a vastly profitable saga.
"You can't hold back progress," Rowling told reporters in London. "E-books are here and they are here to stay."
Rowling reiterated that she will not write any more Harry Potter books and that she is done writing in the immensely popular series. There could be an encyclopedia compiled though. The seven Harry Potter novels have made Rowling one of the world's richest women, with a fortune estimated by Forbes magazine at $1 billion.
Monday, June 20, 2011
Michelle Obama wasting American taxpayer dollars on another vacation
Well it seems Michelle Obama is off on another one of her famous "vacations". Last fall it was Spain where US taxpayers picked up the tab for Air Force One and $100s of thousands of dollars for 70 secret service and security personnel. This time it is Africa and the taxpayer is footing the bill once again.
Just so Michelle Obama, her mom and kids can go on a vacation to Africa? There's our taxpayer dollars hard at work! Oh, my bad. It is an official visit according to the White House. Botswana? Seriously? A safari? Dinner at a game preserve? Sounds like an official visit to me.
Fresh off the "London Leisure Tour" that the American taxpayers funded and now off to Botswana with the entire family in tow. Isn't it wonderful that we give millions upon millions of our money to countries that hate us. Now we have to fund vacation after vacation for the President's family and friends.
A trip to Africa to inspire African youth....how about trying to inspire American youth. How about instead of wasting $10 million taxpayer dollars on a trip to Africa we put that money to work in towns in the USA that have a need?
Just so Michelle Obama, her mom and kids can go on a vacation to Africa? There's our taxpayer dollars hard at work! Oh, my bad. It is an official visit according to the White House. Botswana? Seriously? A safari? Dinner at a game preserve? Sounds like an official visit to me.
Fresh off the "London Leisure Tour" that the American taxpayers funded and now off to Botswana with the entire family in tow. Isn't it wonderful that we give millions upon millions of our money to countries that hate us. Now we have to fund vacation after vacation for the President's family and friends.
A trip to Africa to inspire African youth....how about trying to inspire American youth. How about instead of wasting $10 million taxpayer dollars on a trip to Africa we put that money to work in towns in the USA that have a need?
Friday, June 3, 2011
Some disheartening facts about the Barack Obama Presidency
Here are some facts about the Barack Obama Presidency thus far. Nothing short of disheartening to say the least.
1. Doubled the national debt in a single year
2. Proposed to double the debt again within 10 years
3. Joined the country of Mexico and sued a state in the United States to force that state to continue to allow illegal immigration
4. Put 87,000 workers out of work by arbitrarily placing a moratorium on offshore oil drilling on companies that have one of the best safety records of any industry because one foreign company had an accident
5. Used a forged document as the basis of the moratorium that would render 87,000 American workers unemployed
6. Spent hundreds of thousands of dollars to take his First Lady to a play in NYC
7. Reduced your retirement plan holdings of GM stock by 90% and given the unions a majority stake in GM
8. Given Gordon Brown a set of inexpensive and incorrectly formatted DVDs, when Gordon Brown had given him a thoughtful and historically significant gift
9. Given the Queen of England an iPod containing videos of his speeches
10. Visited Austria and made reference to the nonexistent "Austrian language"
11. Stated that there were 57 states in the United States
12. Flown all the way to Denmark to make a five minute speech about how the Olympics would benefit him walking out his front door in his home town
13. Been so Spanish illiterate as to refer to "Cinco de Cuatro" in front of the Mexican ambassador when it was the 5th of May (Cinco de Mayo), and continued to flub it when he tried again
14. Burned 9,000 gallons of jet fuel to go plant a single tree on Earth Day
15. Ok'd Air Force One flying low over millions of people followed by a jet fighter in downtown Manhattan causing widespread panic
16. Failed to send relief aid to flood victims throughout the Midwest with more people killed or made homeless than in New Orleans
17. Created the position of 32 Czars who report directly to him, bypassing the House and Senate confirmation process
WAKE UP FOLKS. These are not "political assertions" designed to make BO "look bad" (he does a very fine job of that without any help) - they are simply just some of the facts of his actions.
Now, the question before the good people of America is: Can we really stand anymore of him in office?
1. Doubled the national debt in a single year
2. Proposed to double the debt again within 10 years
3. Joined the country of Mexico and sued a state in the United States to force that state to continue to allow illegal immigration
4. Put 87,000 workers out of work by arbitrarily placing a moratorium on offshore oil drilling on companies that have one of the best safety records of any industry because one foreign company had an accident
5. Used a forged document as the basis of the moratorium that would render 87,000 American workers unemployed
6. Spent hundreds of thousands of dollars to take his First Lady to a play in NYC
7. Reduced your retirement plan holdings of GM stock by 90% and given the unions a majority stake in GM
8. Given Gordon Brown a set of inexpensive and incorrectly formatted DVDs, when Gordon Brown had given him a thoughtful and historically significant gift
9. Given the Queen of England an iPod containing videos of his speeches
10. Visited Austria and made reference to the nonexistent "Austrian language"
11. Stated that there were 57 states in the United States
12. Flown all the way to Denmark to make a five minute speech about how the Olympics would benefit him walking out his front door in his home town
13. Been so Spanish illiterate as to refer to "Cinco de Cuatro" in front of the Mexican ambassador when it was the 5th of May (Cinco de Mayo), and continued to flub it when he tried again
14. Burned 9,000 gallons of jet fuel to go plant a single tree on Earth Day
15. Ok'd Air Force One flying low over millions of people followed by a jet fighter in downtown Manhattan causing widespread panic
16. Failed to send relief aid to flood victims throughout the Midwest with more people killed or made homeless than in New Orleans
17. Created the position of 32 Czars who report directly to him, bypassing the House and Senate confirmation process
WAKE UP FOLKS. These are not "political assertions" designed to make BO "look bad" (he does a very fine job of that without any help) - they are simply just some of the facts of his actions.
Now, the question before the good people of America is: Can we really stand anymore of him in office?
Subscribe to:
Posts (Atom)