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| Weekly Wrap Up |
The Dow Jones Industrial average ended in positive territory for the week. On Monday, markets closed mixed as a rally from tech companies boosted the Nasdaq to positive territory in late trading. Investors were greeted with positive news on Tuesday that pending home sales in December increased by 6.3 percent. On Wednesday, President Obama took action to limit the salary of high-powered executives. If it goes according to plan, senior managers of financial institutions receiving TARP funds will have a salary cap of $500,000. Markets rallied on Thursday and Friday even after job loss data indicated that 598,000 jobs were lost in January. Investors responded positively to this news on Friday hoping it would motivate Congress to reach a quicker resolution on the economic stimulus bill. In business news, Macy's (M: Charts, News, Offers) announced on Monday that they would be cutting 7,000 jobs and reducing dividends as a result of lower consumer spending. Bad news was also abundant in the auto industry, as Ford (F: Charts, News, Offers) and General Motors (GM: Charts, News, Offers) reported further declines in sales today. They have not posted weak sales like this in over 26 years. Kenneth Lewis, CEO of the Bank of America (BAC: Charts, News, Offers) mentioned in a CNBC interview on Friday that they would not be needing more TARP funds sending the stock soaring after trading below $4. Crude oil was relatively flat for the week closing at $40.17 per barrel. Gold closed at $914.30 after falling to $907.20 per troy ounce on Monday. The dollar ended the week mixed rising against the Yen and the Australian dollar, but falling against the Euro and the British Pound. More Market News
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| Economic News |
Enticed by tumbling housing prices, more Americans signed contracts to buy homes in December despite concerns about the economy, an industry group reported on Tuesday. The National Association of Realtors said that pending home sales rose 6.3 percent in December from a month earlier, with strong gains in the South and Midwest. The number of pending home sales -- those in which a buyer has signed a contract but not closed -- were up 2.1 percent from December 2007. But economists cautioned that December could prove to be nothing more than a bump in real estate's long slide. (Source: NYTimes.com) Full Story
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The days when subprime mortgages were what kept bankers awake at night are long gone--though thanks only to the barrage of explosions in other corners of finance. In terms of toxicity, however, subprime has had no equal. Until now, perhaps. Even as credit markets, particularly corporate-debt markets, show some signs of improvement, mortgage loans to supposedly better-heeled Americans are souring at a gut-wrenching rate. Of particular concern are "Alt-A" mortgages, offered to borrowers sandwiched between subprime and prime. This market was trumpeted as a means of extending home ownership to those, such as the self-employed, with a reasonable credit standing but unsteady income. Its practitioners specialised in loans with scant documentation and exotica such as negative-amortisation mortgages, which allow borrowers to pay less than the accrued interest, with the difference added to the loan balance. That Alt-A has troubles comes as no surprise. Last summer, for instance, it helped to bring down IndyMac, a Californian bank. But the speed with which loans have soured in recent months, and the reaction of rating agencies, have been startling. Delinquencies rocketed in the final months of 2008. They even rose sharply for loans made in 2005, before underwriting turned really sloppy. (Source: Economist.com) Full Story
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Now it's really crunch time. On Monday, President Obama and Treasury Secretary Tim Geithner are expected to unveil the new administration's plan to mitigate foreclosures and revive the banking system - two tenets of Obama's campaign. The plan will overhaul the existing financial sector rescue program, a senior administration official told CNN. Some analysts believe the plan may include a much-discussed government-funded "bad bank," which would remove toxic mortgage-backed securities from bank balance sheets. Also next week, Congress will continue to work on the stimulus package, trying to meet its self-imposed deadline to pass the bill by next Friday. House Speaker Nancy Pelosi, D-Calif., said if the legislation is not passed by then, Congress will continue to work through its planned Presidents Day recess.(Source: CNNMoney.com) Full Story
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| Business News |
The Oracle of Omaha is unlikely to have predicted this. Berkshire Hathaway (BRK.A: Charts, News, Offers), Warren Buffett's holding company, said Thursday that it would pour an extra $2.6 billion into Swiss Re to prop up the company's capital base after the reinsurer posted an $861.3 million loss for 2008. The shock news sent Swiss Re's shares down 14.2%, or 4.28 Swiss francs ($3.69), to 25.88 francs ($22.30), during morning trading in Zurich. In addition to the extra cash raised from Buffett, who currently owns a 3.0% stake, Swiss Re said it would have to raise an extra 2.0 billion Swiss francs ($1.7 billion) from shareholders to re-establish a "strong level" of capital. The company said its current surplus capital was at least 1.5-2.0 billion ($1.3-$1.7 billion) Swiss francs below the minimum to keep its "AA" financial-strength rating. Buffett's official statement was typically contrarian. "We are delighted to have this opportunity to increase our investment in Swiss Re," he said. "I am very impressed by [chief executive] Jacques Aigrain and his management team." (Source: Forbes.com) Full Story
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State Street Corp (STT: Charts, News, Offers) the world's largest money manager for institutions, said it was slashing its dividend and cutting its forecast for 2009 to reflect a gloomier market outlook. State Street shares, pummeled last month after the company reported worse-than-expected losses on investments and commercial paper, were down 5.5% in premarket trading. State Street, whose management is due to make a presentation to investors and analysts later in the day, said it was cutting its quarterly dividend to 1 cent per share from 24 cents as part of a plan to boost its tangible common equity ratio - a closely watched barometer of financial strength. (Source: CNN Money) Full Story
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The U.S. Postal Service tried to push the envelope. Then it folded. Postal officials, seeking savings to reduce losses that totaled $2.8 billion last year, proposed moving the transparent window on business envelopes a fraction of an inch higher and to the right to improve mail handling. They also said Jan. 22 that they were considering requiring commercial mailers to reduce static cling so letters won't stick together. The agency separately revealed that it was in such bad financial shape that mail deliveries may have to be reduced to five days a week from six. The outrage was immediate -- about the envelopes and static cling. (Source: Bloomberg) Full Story
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| Technology Focus |
By most measures, iPhone owners should have been pleased this year. Apple (AAPL: Charts, News, Offers) sped up the phone, slashed its price and introduced a revolutionary App Store. But ask iPhone users how they would improve the device and most will have suggestions at the ready, including a longer-lasting battery, a higher-quality camera and cut-and-paste functionality. The same is true of every phone on the market. No matter how many features manufacturers manage to pack into their pocket-sized devices, consumers inevitably want more--or less--or something just a bit different. Some phone fanatics even dream up concept designs and post them online, hoping that manufacturers and operators will take note. (Source: Forbes.com) Full Story
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For years, the computer industry has made steady progress by following Moore's law, derived from an observation made in 1965 by Gordon Moore, a co-founder of Intel (INTC: Charts, News, Offers), now the world's biggest chipmaker. His original formulation was rather technical, and was based on the number of transistors that could be crammed onto a chip, but it was adopted as a road map by the industry, so that it became a self-fulfilling prophecy. In practice, it boils down to the following: the cost of a given amount of computing power falls by half roughly every 18 months; so the amount of computing power available at a particular price doubles over the same period. This has resulted in a geometric increase in the processing power of desktop computers, laptops, mobile phones, and so forth. Constant improvements mean that more features can be added to these products each year without increasing the price. A desire to do ever more elaborate things with computers -- in particular, to supply and consume growing volumes of information over the internet -- kept people and companies upgrading. Each time they bought a new machine, it cost around the same as the previous one, but did a lot more. But now things are changing, partly because the industry is maturing, and partly because of the recession. Suddenly there is much more interest in products that apply the flip side of Moore's law: instead of providing ever-increasing performance at a particular price, they provide a particular level of performance at an ever-lower price. (Source: Economist.com) Full Story
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For the past few years, Microsoft (MSFT: Charts, News, Offers) has been losing share in PCs to Apple (AAPL: Charts, News, Offers). It's been losing huge money on the Web. And it's been badly shown up in mobile phones, where Apple and Research In Motion (RIMM: Charts, News, Offers) have far more momentum and even Palm (PALM: Charts, News, Offers) seems to have more mindshare. But now, the company is preparing plans to do what no other company is as well-positioned, at least on paper, to do: tie the PC, Web and phone together. On Feb. 16 at the Mobile World Congress, CEO Steve Ballmer will announce the outlines of the plan. He'll unveil a service called My Phone, that allows anyone with a Windows Mobile phone to automatically have their photos, contacts, calendar items, favorite websites and other data backed-up on a web-site hosted by Microsoft. The service, which will be a beta version, will be free to anyone that has a phone running a version of Windows Mobile 6. (Souce: BusinessWeek.com) Full Story
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| Your Money |
Investors shell-shocked by two nasty bear markets in stocks in less than a decade are starting to look elsewhere for good returns. In the wake of the worst credit crunch since the Great Depression, some analysts suggest they might take a look at, believe it or not, credit. Their reasoning: Bonds and other credit instruments have arguably suffered much more than stocks during this downturn, meaning they could have further to climb when the economy starts to recover. What's more, as credit led the economy and stocks into the valley, it might have to lead them back out, meaning it could recover before stocks do. Stocks "are historically first out of the block" in a recovery, says Binky Chadha, chief U.S. equity strategist at Deutsche Bank, "but given the credit crisis this time, credit has to recover before we can get equity returns." (Source: Wall Street Journal) Full Story
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