Friday, October 29, 2010
Except for that blip in July, new jobless claims were at their lowest since August 2008, or just a few months into the recession. The number of people who are continuing to receive unemployment benefits is at 4.36 million; that's the lowest that figure has been since November 2008. Of course, some of the drop in that figure is the result of people using up all their unemployment benefits.
The Labor Department's official unemployment report for the month of October will be out next Friday. At that point, we'll have a better idea of whether this was just a blip, or a genuine cause for optimism.
Thursday, October 28, 2010
It's important to realize who the brokerage's customers are, the ones the SEC are concerned about. It's not some guy making trades out of his basement; more likely, it's what's known as quantitative trading firms. These are firms who buy and sell stocks based solely on what their computer algorithms are telling them to buy, which means they have a tremendous advantage if they're not limited by the broker's customary controls.
This is a huge business. By one estimate from earlier this year, naked access accounts make up nearly 40 percent of all stock trades. While eliminating this type of trading would reduce the possibility of enormous, instantaneous drops in the market, it's anyone's guess what other effects it might have.
Wednesday, October 27, 2010
Tuesday, October 26, 2010
Monday, October 25, 2010
Friday, October 22, 2010
It's getting so you can't even trust the police anymore. Remember the TV show CHiPs, about two Callifornia highway patrol cops, which was on the air from 1977 to 1983? If you do, then you remember Officer Jon Baker, played by Larry Wilcox (pictured at right), who was the partner of Ponch Poncherello, played by Erik Estrada.
Thursday, October 21, 2010
Wednesday, October 20, 2010
You'll recall that the housing crisis was driven by the practice of securitizing and selling off mortgages, often chopping them up into little bitty pieces. One of the results of this is that it's not clear, at this point, who owns many of the houses that have been foreclosed on. In many instances, the foreclosures have been initiated by a little-known company called MERS, which maintains an electronic registry of mortgage records. MERS doesn't actually hold any mortgages, just the records of them, but it has begun thousands of foreclosure proceedings anyway. Whether or not it's legal for it to do so remains very much an open question.
What we do know is that the attorneys general from all 50 states have signed on to an investigation of the foreclosure process, which shows how expansive, both geographically and politically, this problem has become. What all of this will do to a still-fragile housing market is anyone's guess.
Tuesday, October 19, 2010
So that's the good news. On the other side, overall production in the U.S. fell by 0.2 percent in September, which also came as a surprise to economists. That's a drop in the output of all American factories, utilities and mines. Now, 0.2 percent is a very small number, but still, it should be moving in the opposite direction.
The differences might be explained by the anticipation of the Fed's moves, in which they're expected to purchase a significant amount of Treasury bonds in early November. It could be that that's what causing the backwards-looking numbers to be more sluggish than the forward-looking ones.
Monday, October 18, 2010
As we head into the home stretch of this election season, one issue that hangs in the balance for a new Congress to tackle is the estate tax. As you probably know, there is no estate tax for 2010, but it is scheduled to return in 2011, at a rate of 55 percent on estates valued at more than $1 million. But neither party seems comfortable with letting this situation stand. There are several proposals that may come into play, depending on who wins control of Congress in November:
* The most visible Democratic proposal, from Senate Finance Committee chairman Max Baucus of Montana, would set the new estate tax to its 2009 levels: a rate of 45 percent, with an exemption of $3.5 million.
* On the Republican side, Senate Minority Leader Mitch McConnell of Kentucky has suggested raising the exemption level to estates worth more than $5 million, and lower the tax to 35 percent.
* More than 250 congressional candidates, primarily Republicans, have pledged to permanently repeal the estate tax.
So that's three possibilities that are out there. We've got a new article on the Echelon Wealth Strategies Web site discussing how the estate tax got to this point, where it's headed, and what it means to you. To read the article, just click here.
Friday, October 15, 2010
Of course, it's a scam, designed to get you to enter a credit-card number to make up for the missing payment. For one thing, if the IRS has any issues with your taxes, they will get in touch with you via the good old U.S. mail. If your electronic payment is ever rejected, you'll get a detailed letter in the mail explaining the situation. They're also very careful about giving you multiple points of access to them, including a phone number and information available at www.IRS.gov.
For its part, here's how the IRS responds to such "phishing": The IRS does not initiate taxpayer communications through e-mail. In addition, the IRS does not request detailed personal information through e-mail or ask taxpayers for the PIN numbers, passwords, or similar secret access information for their credit card, bank or other financial accounts.
Thursday, October 14, 2010
The First Premier Bank Mastercard advertises that it charges a one-time $75 "first-year annual fee." What it doesn't advertise as boldly is that it also charges a subsequent-year annual fee of $75 as well. There's also a processing fee, ranging from $25 to $95, and a fee just for raising your credit limit.
That card is aimed specifically at people with poor credit, so you're not very likely to end up with one. But you might stumble into something like the Platinum Zero Visa from Applied Bank, which claims it has zero interest, zero application fees, and zero annual fees. But after six months, the card starts charging $9.95 per month - which means you end up paying over a hundred bucks a year for something with "zero" fees.
For more, see the latest issue of Consumer Reports.
Wednesday, October 13, 2010
Tuesday, October 12, 2010
In a sense, that is also what the Fed would also be doing early next month if it buys up Treasurys, as Fed chair Ben Bernanke has signaled recently. If the Fed buys up a significant amount of these bonds - one estimate holds that it will purchase $600 billion worth - that will have the effect of injecting that amount of money into the economy. Basically, that's $600 billion in the pocket of whoever the Fed buys those bonds from.
And one of the effects of that is to put more dollars into the economy, thereby lowering the value of all of them. Just the speculation that the Fed would take this move drove the dollar last week to its lowest level versus the yen in 15 years. With a weaker dollar, our exports will cost comparatively less for foreign buyers, and they'll be able to snap up more of our goods and services. That's the plan, anyway; we'll see how well it works.
Monday, October 11, 2010
The worse news is that the broadest measure of unemployment, commonly called U-6, dropped again to 17.1 percent, the highest it's been since April. That includes people who have stopped looking for work and people who would like to find full-time jobs but have had to settle for less than that. Temp jobs are up 23 percent since September 2009.
If there's a silver lining in all of this, it's that the private sector did add new jobs for the month, with 64,000 workers hired. The reason overall job loss was so high was that the government shed 159,000 jobs. But even that is problematic. It's one thing when these are census workers losing their jobs, since we expected those jobs to be temporary in the first place. But in September, state and local governments lost more workers (83,000) than did the Census Office (76,000).
Friday, October 8, 2010
The fact that there were so many fraudsters involved here probably was instrumental in duping so many people. If you see 10 or 12 of your "friends" on Facebook all getting excited - and seeming to have insider knowledge - about a particular company's stock, it's easy to fall for the ruse. The wisdom of the crowds is a very real phenomenon.
But this is one more reason to stick with prudent, long-term investing. Once you hear about a hot stock tip, that should be the beginning of the research process, not the end. If all those people had looked into the longshoremen's tips and discovered for themselves whether the stocks were really worth buying, they'd be $7 million richer today.
Thursday, October 7, 2010
Wednesday, October 6, 2010
Tuesday, October 5, 2010
That trade was made by an actual trader, but several automated trading programs picked up on the big sale and the price drop, and automatically followed suit. Those S&P futures are considered bellwethers for the stocks in the S&P 500, so when traders saw the futures plunging, many of them began selling off the underlying stocks as well.
Eventually, cooler heads prevailed, and the market quickly made back all those losses when people realized the drop had been caused by, essentially, nothing. The SEC hasn't yet decided if it needs to implement additional regulations to keep such plunges from happening in the future, although it has put circuit breakers on the market to halt or slow trades of any stock that moves more than 10 percent in a five-minute period.
Monday, October 4, 2010
* Although the bailout fund was initially funded with $700 billion, and is often described that way, it was actually reduced to $475 billion by the financial reform act passed last summer.
* Banks received $250 billion, of which $158 billion has been paid back. The government projects that this aspect of the program will eventually result in a profit of $5 billion to $20 billion for the Feds.
* The Big Three automakers got $82 billion, including money for lenders like Chrysler Financial and GMAC. Of that, about $15 billion has been paid back. For this part of the program, the government expects to eventually lose from $15 billion to $34 billion.
* A fund of $46 billion was created to help troubled homeowners modify their mortgages, but this has been a failure. Only 15 percent of eligible loans have been modified, and all the money is expected to be lost.
Friday, October 1, 2010
Meanwhile, retail stocks posted their biggest quarterly gain since 2003 for the quarter that ended yesterday. The S&P Retail Index was up 19 percent, with the biggest gainers being Liz Claiborne (up 44 percent for the quarter) and the Warnaco Group (up 41 percent).
Those factors probably fueled the mild drop in workers filing new unemployment claims, which dropped by 16 percent last week. None of these figures on its own is the sign of a rip-roaring recovery, but the fact that they're so broad-based gives us reason for cautious optimism.