Friday, July 29, 2011
Thursday, July 28, 2011
Wednesday, July 27, 2011
That's not just an outcome of the modest recovery we've been in the midst of for the past two years. This particular gauge had been dropping earlier in the year, and July was the first month of 2011 to show an increase. Since January 1st, the advisors' level of confidence in the economy had fallen by 20 percent. In June alone, the gauge had fallen by 9 percent.
The current reading of this particular survey takes us up to Monday. We'll have to wait and see how advisors' confidence fares once the bruising fight over the debt ceiling has ended.
Tuesday, July 26, 2011
The good news is, some American businesses have been making up the difference elsewhere. Coca-Cola, for instance, has seen European revenues fall from 17 percent of its overall total in 2008 to 14 percent now. But because its second-quarter revenues were up 15 percent in Eurasia and Africa and 13 percent in Latin America, Coke's revenues would be up 14 percent on the year even if it didn't sell a drop in Europe.
Monday, July 25, 2011
It wasn't so long ago that the entire IPO market appeared to be dead in the water. There were 11 IPOs in the entire third quarter of 2008. That dropped to three in the fourth quarter of 2008, and two in the first quarter of 2009. In that first quarter of '09, there were only 50 IPOs in the entire world.
Our economy still has its share of troubles. But the fact that people are once again willing to try to build a business and sell its ownership to the public is an encouraging sign.
Friday, July 22, 2011
The fees and penalties banks impose on their cardholders got a slightly more favorable response, but only slightly. The same percentage, 23 percent, felt that their fees were fair, but 42 percent found them somewhat or very unfair.
Still, people aren't so upset that they want to find new credit cards to use. The same survey found that only 8 percent describe themselves as extremely or very likely to change credit cards in order to get a better deal.
Thursday, July 21, 2011
According to a survey by CNNMoney, economists expect earnings for the S&P 500 to be up 13 percent over the course of 2011. That's a far cry from last year, when earnings rose a whopping 47 percent, but that was in comparison to the recession-hindered 2009 figures. Going up 13 percent from an already-strong figure is impressive indeed.
Since the recession officially ended in June 2009, corporate profits have risen an eye-popping 90 percent. That's a remarkable couple of years.
Wednesday, July 20, 2011
What happened then? The incident was little noticed, but academic research subsequently showed that the cost of issuing debt rose by about 60 basis points, or a little over half a percent, as a result of that little default. And the 60-point rise appeared to be permanent.
Nowadays, foreign bondholders own roughly 46 percent of all Treasury securities. It's a reasonable guess that, should the United States default on its debt again, those bondholders would end up demanding that 0.6 percent premium, if not more.
Tuesday, July 19, 2011
Moody's has come up with a solution to the debt-ceiling imbroglio that has been plaguing Washington, D.C.: Just do away with the idea altogether. The rating agency points out that the United States is one of the few countries where the legislature sets a ceiling on government debt to being with, and argues that the entire concept is outdated. Moody's asserts that the it would lessen the risk it assigns to government debt without the debt ceiling getting in the way.
This process used to be much more cumbersome than what we have now. Congress first established a firm debt limit in 1917 to help finance World War I. Prior to that, every time the Treasury Department wanted to sell bonds to raise money, it had to ask Congress for approval. The debt ceiling was intended to streamline the process and give Treasury the leeway it needed to issue debt without it getting out of control.
Congress has raised that limit a grand total of 102 times since 1917. Just since 2001, the debt ceiling has been raised ten different times. Is it time to stop moving those goalposts?
Monday, July 18, 2011
Maybe the greatest example of this trend is Apple. At the end of its last reporting quarter, Apple had around $66 billion in cash or securities on its hands. It's been adding to that pile furiously lately: the total was under $20 billion as recently as 2008. Apple's cash hoard is worth more than the combined market caps of its rivals Nokia, Research in Motion, and Motorola Mobility. According to one estimate, Apple could fund all its operations till 2018 even if it had no revenue whatsoever.
This is, in a sense, good news for our economy. If these corporations ever decide they have a good reason to spend all that money, we'll see a tremendous boost to the economy.
Friday, July 15, 2011
There was some concern, with the debt ceiling issue still up in the air, that investors would be shying away from the United States' long-term debt. Those concerns only increased when Moody's announced it would put the nation's AAA rating under review for a downgrade. But yesterday's auction stilled those fears for the moment, and Moody's has now said it doesn't see a downgrade happening.
Part of this has less to do with America's troubles and more to do with troubles that are still growing in Europe. Greece's credit rating actually was cut yesterday, all the way down to CCC. For all the problems this nation is facing, we're still a lot better off than the rest of the world.
Thursday, July 14, 2011
It’s important to understand what exceeding the debt ceiling would not mean. It wouldn’t mean a government shutdown, or that the government had to stop spending money. After all, revenues would still come in via taxes, so there would be new money for the feds to spend. It would not even mean an immediate default on our debt. One way to avoid that is if the government prioritized its spending. There wouldn’t be enough assets for it to pay all its obligations, but it could tell, say, defense contractors that they wouldn’t be receiving their payments until the crisis was resolved.
What would trigger the default is if the government stopped paying interest on the debt. That has to be given first priority, which is why the cuts to actual spending would be so draconian. To stay under the current debt ceiling, government spending would need to drop by around 40 percent. That's why the stakes have been so high, for both sides.
Wednesday, July 13, 2011
It's not clear how prosperous the hangar business is in Idaho in the best of times, but given that we were just entering a recession at the time, Davis' investment was wiped out. He sued the Capital Management partners back in March 2010, and they reached a settlement in February of this year.
If the story ended there, it wouldn't be so bad, except that the investment advisors didn't even pay out the agreed-upon settlement. The latest development is that this week, Buster Davis had a judge issue a warrant for the arrest of his financial advisor - in hopes of getting at least some of his bad investment back. Good luck, Buster.
Tuesday, July 12, 2011
The report found that young companies have been "starting smaller" for the last decade or so. That means that they've hired fewer workers upon entering into business, and have been slower to add jobs even as the business begins to mature.
And those newer, smaller firms are crucial to our economy. More than 60 percent of all jobs are created by companies that are five years old or less. More than half the jobs are created by companies with fewer than 50 employees. We need that job-creation engine to be strong if we're to fully emerge into recovery.
Sunday, July 10, 2011
As QE2 has come to a close, and as gas prices have drifted back downward, inflation expectations moderated. The TIPS spread dropped all the way to 2.14 percent in May. But it has started creeping back up lately, and by the end of June it was trading at around 2.4 percent.
Except for a plunge in early 2009, the TIPS spread has been fairly consistent at around 2.5 percent since 2004. It looks like it's going to stay in that range for a while.
Friday, July 8, 2011
Thursday, July 7, 2011
Only 41 percent of all couples have handled their investment decisions for retirement as a team. Just 17 percent say that either spouse would be able to take care of their financial decisions, if need be. And a whopping 73 percent of all married couples can't even agree on whether they have a detailed, completed retirement plan in the first place.
If you're unsure of what your retirement might entail, or what your spouse thinks it will entail, it's never too early to sit down and have that conversation. Better yet, sit down with your wealth manager and discuss what your retirement will be like - and what you want it to be like.
Wednesday, July 6, 2011
As a result, consumer credit scores are now the best they've been in four years. According to the credit-reporting agency Equifax, the average American credit score now sits at 696 out of a possible 850.
And maybe even better, people are starting to look for loans again. Consumer lending grew in the first quarter of 2011 - the first time that's happened since 2005. Extra money circulating through the economy will certainly help this recovery along.
Tuesday, July 5, 2011
* The Dow Jones Industrial Average is up 7.8 percent on the year. Its low point was on March 16, at 11,613, and peaked on the last day of April, at 12,810. It's now at 12,582.
* The S&P 500 isn't quite as strong, gaining 5.3 percent on the year. The Nasdaq is slightly under that, up 5.03 percent on the year. Both those markets' low and high points came on the same days as for the Dow.
* Treasury bond yields, by contrast, spent most of the first half of 2011 dropping. The yield for the 10-year bond peaked on February 8th, at 3.725 percent, and bottomed out on June 24th, at 2.87 percent, before rallying to its current level of just under 3.2 percent. All told, it's dropped 4.45 percent on the year.
Monday, July 4, 2011
Those who won our independence believed liberty to be the secret of happiness and courage to be the secret of liberty. ~Louis D. Brandeis
If our country is worth dying for in time of war let us resolve that it is truly worth living for in time of peace. ~Hamilton Fish
I believe in America because we have great dreams - and because we have the opportunity to make those dreams come true. ~Wendell L. Wilkie
Friday, July 1, 2011
What's been fueling this trend - pun intended - is gas prices. Nationally, gas prices are down 11 percent in 2011. Here in New Jersey, the average price of a gallon of gasoline has dropped from $3.88 at its peak on May 11 to $3.54 right now.
The consumer confidence numbers move because of a lot of different factors, but there's one thing that always takes precedence: When gas prices go up, consumer confidence goes down. When gas prices go down, consumer confidence goes up. With a long Fourth of July weekend coming up, and many of us getting ready to go on driving trips, it's nice to have both those trends moving in the right direction.