Not a good sign for the overall market….
Comments »Brazil’s Central Bank Signals Upcoming Interest Rate Cuts
South Korea’s Growth Slows on Exports to Europe
Gold & Silver Miners Love Low-Rate Outlook
Comments »Silver and gold miners just got some great news today after having lost so much luster in recent months. The FOMC has now telegraphed that it expects that interest rates will remain exceptionally low through at least the end of 2014. Full Story.
Fed Sees Slower Growth But Offers No Hint Of More Easing
The Federal Reserve, ending a two-day policy meeting on Wednesday, repeated its view that the economy faces “significant downside risks” but it offered little to suggest it was close to launching another round of bond-buying to prop up growth.
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Its forecasts pointed to somewhat weaker economic growth this year and next, compared with Fed estimates published in November.
It did say, however, that it would maintain a “highly accommodative” monetary policy stance.
Earlier Wednesday, the Fed pushed back the likely timing of an eventual interest rate hike until late 2014, much later than it had previously said, because of the still-sluggish economic recovery.
In a historic step that it has touted as an effort toward greater transparency, the Fed also announced an official inflation target of 2 percent, and for the first time published individual policymakers’ forecasts for the federal funds rate.
These showed quite a wide range of views, including three of 17 policymakers who expect rates will need to rise this year and two others who do not see any increase until 2016.
Still, the biggest concentration of estimates was around 2014.
The assurance that rates would remain near zero for at least some 18 months longer than previously believed was enough to drive a steep rally in U.S. government bonds and push stocks into positive territory.
Economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the central bank said in a statement.
Many investors had expected the Fed to push its expectations for the first rate hike into 2014, but few had thought it would be late in the year. After every previous policy meeting dating back to August, the Fed had said rates were not likely to rise until mid-2013.
The central bank also appeared more sanguine on the inflation outlook, suggesting prices were now rising at a pace consistent with policymakers’ goals. The statement also dropped a reference saying the Fed was monitoring inflation and inflation expectations.
Aside from the 2014 rate pledge, the Fed’s statement hewed closely to its last policy pronouncement in mid-December. It described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices.
In a slight shift, it acknowledged signs that business investment has slowed.
“I think what they are seeing is that the rate of growth is not sufficient to bring down the unemployment rate,” said Brian Dolan, chief strategist at FOREX.com in Bedminster, New Jersey.
Richmond Federal Reserve Bank President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision.
He preferred to omit the description of the time period for ultra-low rates.
In response to the deepest recession in generations, the Fed slashed the overnight federal funds rate to near zero in December 2008.
It has also more than tripled the size of its balance sheet to around $2.9 trillion through two separate bond purchase programs.
The policy is credited with having prevented an even more devastating downturn, but it has been insufficient to bring unemployment down to levels considered normal during good economic times.
In December, the U.S. jobless rate stood at 8.5 percent, and some 13 million Americans were still actively looking for work but could not find it.
While forecasters expect the U.S. economy grew at a 3 percent annual rate in the last three months of 2011, they look for growth of just around 2 percent this year.
Fed officials appear likely to bide their time in determining whether more monetary stimulus is needed.
Many economists expect they will eventually decide on another spurt of Fed bond buying – probably one focused on mortgage debt.
Comments »Fed delays rate hikes from “never” to “never ever”
Comments »WASHINGTON (Reuters) – The U.S. Federal Reserve on Wednesday said it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.
Without making major shifts to its outlook for the economy, the central bank described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices.
It depicted business investment as having slowed, dowgrading its assessment from the December meeting.
Economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the central bank said in a statement.
Richmond Fed President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He preferred to omit the description of the time period for ultra-low rates.
Davos Consensus: Europe Will Create More Shocks Hampering Business Confidence and Development
Roubini Joins Soros in Dystopia Commentary and Social Unrest
Thailand Cuts Interest Rates to Help With the Ongoing Flood Recovery
How markets perform after the State of the Union speech
Comments »Of 52 such addresses since 1961, the Dow Industrials DJIA -0.26% have risen 26 times the day after and fallen 26 times, according to data compiled by the WSJ Market Data Group and Dow Jones Indexes. (Some years have seen both the outgoing president, and the newly elected president address Congress.)
The best market performance came the day after the elder President Bush’s address in 1991. The Dow rose 50.5 points, or 1.9% the next day, to 2,713.
The second best performance was after the younger President Bush’s address in January, 2002 when the index rose 145 points, or 1.5%, to 9763.
The worst market performance after a State of the Union Address came following President Clinton’s speech in January 2000. The Dow fell 2.6% the next day to 10,739.
Click here for the top 10 and bottom 10 market reactions following major presidential speeches to Congress since 1961.
Housing and fairness don’t work well together
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Comments »If the theme of tonight’s State of the Union address is fairness, then President Obama would be wise to steer clear of housing; most of the proposals to fix the nation’s still struggling real estate market are intrinsically unfair to a large majority of Americans.
From a mass refinance plan to mass mortgage principal forgiveness, the supposed “fixes” will reward some at the expense of far more.
Let’s start with that principal forgiveness. Some Democrats have been hounding the regulator of Fannie Mae and Freddie Mac (the FHFA and its leader Ed DeMarco) to initiate a program to reduce the value of mortgages where the mortgage is larger than the value of the home, i.e. “underwater”. The idea is that this will keep those borrowers from defaulting on these mortgages.
DeMarco is against this, so Democrats, or at least Rep. Elijah Cummings, the ranking Democrat on the House Oversight Committee, went so far as to request proof of Demarco’s contention that such a program would do more harm than good. This after the Federal Reserve officials, in a recent “White Paper,” suggested, “some actions that cause greater losses to be sustained by the [GSE’s] in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.”
The losses to Fannie and Freddie, according to DeMarco, would be somewhere around $100 billion, if they were to write down principal on all 3 million underwater mortgages backed by the two. That money, DeMarco noted in a letter back to the Congressman, would come from taxpayers, who have already footed a $150 billion bill from Fannie and Freddie.
Then there’s that pesky refi plan that’s been floating around for a few years now. The idea is that Fannie and Freddie would refinance about 14 million of their own borrowers to 4 percent or less, as long as the borrowers are current on their loans. This would supposedly juice the economy with household savings of about $36 billion a year. Administration officials have already told me they are not considering such a program as it is too expensive in too many ways. And then there’s that fairness issue again, as in why should the government fund refinances for borrowers with Fannie and Freddie loans but not for the other half of American borrowers who don’t have Fannie and Freddie loans?
We can, however, look for the president to say something about the current expansion of the government’s refinance program for underwater borrowers, and we’re eager to hear how he thinks it’s going, given that it has fallen under harsh criticism for helping too few borrowers. Perhaps he might want to change/expand that program, but then again details are not exactly popular in State of the Union addresses historically.
Fed openness is actually very confusing
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Comments »Federal Reserve Bank of Philadelphia President Charles Plosser was answering reporters’ questions two weeks ago when he paused to seek their assistance on the Fed’s campaign to open up to the public.
“Help me out here,” Plosser said after a Jan. 11 speech in Rochester, New York. “There’s a huge confusion about this,” he said, referring to Fed plans to start releasing policy makers’ forecasts for the benchmark interest rate tomorrow.
Plosser said he was concerned investors might misinterpret the projections as a pledge to keep borrowing costs low for a specified period. That could make it harder for the central bank to raise interest rates should the need arise, said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
“It’s not at all clear how people are supposed to react” to the Fed’s new communications policy, Stanley said. “If it does start to take on that sense of being a commitment,” he said, “it runs a great risk in terms of their credibility when they end up not being able to stick to it.”
The Federal Open Market Committee plans to release all 17 policy makers’ rate projections for the fourth quarter of 2012, the next few years and the long run, as well as an explanation for their assessments. The Fed will provide the information at the conclusion of a two-day meeting tomorrow. The FOMC convened today at about 10 a.m.
Views Voiced
The decision to announce the projections is the latest effort by Chairman Ben S. Bernanke to increase openness and public understanding of the Fed. Since becoming chairman in 2006, Bernanke has begun holding regular press conferences and voiced his views in television interviews and at town hall meetings. He’s also announced forecasts on economic growth, unemployment and inflation four times a year, up from twice annually under his predecessor, Alan Greenspan.
Chicago Fed President Charles Evans, who this month reiterated his call for adding more stimulus, said on Jan. 13 that the central bank’s “enhanced communications” mark a “substantial, first-order improvement” over the Fed’s previous efforts. Publishing the projections will help the public better evaluate the committee’s views, while allowing monetary policy to “respond more strongly in the medium-term when adverse economic shocks impede growth and employment,” he said.
Policy makers want to telegraph their expectations for the appropriate path for the overnight lending rate between banks, Plosser said. That shouldn’t be confused as a commitment on the level of interest rates.
WARREN BUFFETT’S POOR, OLD TAX-PAYING SECRETARY WILL SIT IN FIRST LADY BOX AT POTUS STATE OF THE UNION SPEECH
Billionaire Warren Buffett’s longtime secretary will be joining first lady Michelle Obama in her box at tonight’s State of the Union, White House communications director Dan Pfeiffer announced on Twitter.
Debbie Bosanek, who has worked for Buffett for nearly two decades, has become a symbol in the White House’s fight over the tax code and economic fairness. Obama is expected to renew his push for the so-called “Buffett rule” that would bring investment taxation levels into line with income taxation levels — and ensure that upper income earners pay rates as high as middle-class Americans.
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett,” President Obama said in September, when he unveiled his American Jobs Act proposal. It’s a trope that Buffett himself has repeated, as he has campaigned for higher taxes on investment income.
It’s common practice for presidents to invite guests to sit next to the first spouse that fit with the theme of their address — and Bosanek’s presence is a big hint that the address will tilt heavily towards economic issues of fairness.
Annie Lowrey, writing in Slate, reports that Bosanek has traditionally been very wary of the limelight — acting as a gatekeeper to the billionaire investor, not as a newsmaker. While she does acts as the press liaison for Buffett and his company, she’s tight-lipped. She reportedlyonce wore a t-shirt with the caption: “Hi, I’m Debbie B. Warren is not available, and I have no comment.”
Comments »Beware of the Suze Orman Card!
(via Gerri Willis at FoxBusiness.com)
If I had to rank pre-paid debit cards in terms of their value to consumers, they would be pretty darn low. Right up there with the PedEgg and the Flowbee. Ultimately, these cards are glorified gift cards laden with fees that find an audience because they are backed by a celebrity. Consumers love brand identity and buying a celebrity card is just another way to get closer to your favorite reality talk show star or radio talk show host. But for anybody who cares about their money, these cards are just a money waster.
And, so it is with Suze Orman’s pre-paid debit card, the Approved Card. The card is laden with fees – 20 of them – starting with a $3 a month charge for using the card. Some of the fees can be avoided, but it begs the question of why I would buy such a card if I had to spend all my time reading the fine print to make sure I avoid the trip wires? The Approved Card has more fees than the Rushcard, backed by Russell Simmons, which has 17, and the Lil Wayne prepaid Discover card which has seven. In fact, the Approved Card makes American Express look like a not-for profit institution. Amex’s pre-paid card has just one fee.
The Approved Card, though, purports to do more than just give you a place to stash your money. Orman maintains consumers’ use of the ‘Suze Card’ will be shared with one credit bureau with the hope it will eventually help you build credit. The card does this by offering free credit reports, scores and free credit monitoring. (By the way, the scores are not from the industry score standard, FICO, but from a lesser known player in the field.) Savvy consumers, though, know that these services are already available for free on the web from websites like CreditKarma.com. The government requires that your three credit reports be available for free from AnnualCreditReport.com.
And, this claim that the Approved Card is intended to be a credit-builder makes little sense on its face. Consumers aren’t evaluated for credit on the basis of how they spend their money. For example, you don’t get points for going to the pet store rather than the grocery store or the other way around. It makes no sense to use your spending history as a way to estimate your creditworthiness, unless, I guess, you’re the Kardashians. (More on the Kardashians in a moment.) The big credit reporting agencies evaluate how you handle debt. Do you pay it off quickly? Do you miss payments?
Look, by Suze’s own standards, pre-paid debit cards are a waste of money because of the fees they charge. But, to me, the problems are even bigger than that. I’ve been highly critical of the nation’s largest banks. But that doesn’t mean I want consumers to leave the banking system. Having a relationship with a banker and being inside “the system” helps establish you as a viable candidate for loans. What’s more, you can still find banks offering free checking accounts. Suggesting that people remove themselves from the banking system and operate on its periphery doesn’t do anyone any favors. The old Suze knows that. I’m not sure who this new Suze is. And, I am tempted to ask just how much money she is making on this debit card scheme. As my friend Chuck Jaffe wrote recently, “The problem with Suze is that you don’t know when the advice ends and the advertising begins.” Suffice it to say that maybe what we know now is that the advertising never stopped.
By the way, we’ve asked Suze and the Approved Card team to come on the show and talk about the card and why they believe it’s a positive for consumers. That was back on Jan. 12. Since then, we’ve talked to several personal finance experts who agree the card is of little benefit to consumers. Here’s what Suze’s people had to say to our request for an appearance, “[You’ve done three segments] without any input from Suze or The Approved Card team. At this point we will just leave it there and respectfully decline your offer to appear.”
Oh, and about the Kardashians: Suze slammed the reality stars’ pre-paid debit card saying it ‘swindled’ teens with ‘outrageous fees’ and that its marketing was misleading. The Kardashians, ultimately, pulled the card. Suze should do the same.
Read more: http://trade.cc/acex#ixzz1kOoYjmTc
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Japan Expected to Enter a Long Lasting Trade Deficit
Japan is expected to report their first ever trade deficit…well a first in a very long time. Analyst expect this new trend to be long lasting; especially if the Yen remains strong.
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A Surprise Upturn in Europe’s Service Sector May Indicate a Recession Can be Avoided
BoJ Cuts GDP Growth Estimates
Rattner: The Dangerous Notion That Debt Doesn’t Matter
By STEVEN RATTNER
Published: January 20, 2012
WITH little fanfare, a dangerous notion has taken hold in progressive policy circles: that the amount of money borrowed by the federal government from Americans to finance its mammoth deficits doesn’t matter.
Debt doesn’t matter? Really? That’s the most irresponsible fiscal notion since the tax-cutting mania brought on by the advent of supply-side economics. And it’s particularly problematic right now, as Congress resumes debating whether to extend the payroll-tax reduction or enact other stimulative measures.
Here’s the theory, in its most extreme configuration: To the extent that the government sells its debt to Americans (as opposed to foreigners), those obligations will disappear as aging folks who buy those Treasuries die off.
If that doesn’t seem to make much sense, don’t be puzzled — it doesn’t. Government borrowing is still debt that must eventually be paid off, just as we were taught in introductory economics.
Failing to repay the debt would mean not only the ugliness of default but also depriving the next generation of whatever savings their parents parked in government bonds.
Read the rest here.
Comments »Why are Politicians Blaming Fannie and Freddie ?
Is it to take the heat off politicians in general ? Is it just a campaign energizer touching on anger Americans have for the debacle ? Stop blaming two quasi government entities and get tough on the real issue at hand.
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