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| Weekly Wrap Up |
Equities had some ups and downs but they managed to the end the week up fairly significantly. This continued the upward trend that stocks almost suddenly embarked upon since the lows of mid-March. The blue chip heavy DJIA rose 241 points during the week (breaking the 8,000 barrier) while the tech heavy NASDAQ was up 76 points. Stocks are up over 20% since their recent lows and that by traditional definition is a new bull market. However, there are plenty of traders that suspect that this is just a bear market rally and not the start of a new secular rise in equities. The week got off to a shaky start with the government announcing that it had forced the resignation of GM CEO Rick Wagoner, and that banks may need substantial amounts of additional capital. But things picked up during the middle of the week as investors took some solace in some strong economic data on the housing and factory orders fronts. Financials, as they have over the last couple of weeks, continue to generate optimism on the street, especially after FASB eased the rules on mark-to-market accounting mid-week. Research in Motion (RIMM: Charts, News, Offers) came out with a very strong earnings report and the stock jumped significantly. Traders were reminded of the deep recession that we are still in when the March employment report released on Friday showed that the economy lost 663,000 jobs in March and the number for January was revised higher to 741,000. This unnerved the markets a little bit but nearly not enough to spoil what was a pretty solid week.
Looking ahead, this week will see the start of the Q1 earnings season with Alcoa (AA: Charts, News, Offers) reporting on Tuesday, Wednesday will see the release of the minutes from the last Fed meeting, retail same store sales are out on Thursday along with trade deficit numbers. The markets will be closed on Friday in observance of Good Friday. More Market News
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| Economic News |
Mark-to-market accounting rules are being brought a little closer to economic reality -- accompanied by misplaced howls of outrage.
True, the ostensibly independent Financial Accounting Standards Board yesterday agreed to alter a portion of the rules only under extreme pressure from Congress, and that’s unfortunate. Still, the standards have forced many financial institutions to overstate losses on trillions of dollars worth of assets, intensifying the global financial crisis.
Defenders of the rules say they protect bank investors and changing them will allow institutions to hide future losses. To the contrary, they have helped drive down the value of bank stocks, made shorting the shares much easier and caused bank stockholders to lose hundreds of billions of dollars in such companies as Citigroup Inc. (C: Charts, News, Offers) and Bank of America Corp. (BAC: Charts, News, Offers). (Source: Bloomberg) Full Story
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Team Obama fired GM CEO Rick Wagoner Sunday afternoon, just a short time after Treasury man Tim Geithner told the television talk shows that some banks will need large amounts of new TARP-money government assistance -- even though the bankers don’t want it. Does this smack of big-time government planning and industrial policy? Another lurch to the left for economic policy?
Remember, as bad as Wagoner's performance has been over the years, it was the federal government -- not shareholders or the board of directors -- that threw him under the bus. (By the way, GM's board is being thrown under that same bus.) And I'm not arguing in favor of Wagoner or his board; they’ve made a zillion mistakes. But I am wondering if we’ve officially entered a new era of government-controlled business. (Source: National Review Online) Full Story
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The G-20 economic summit fell short of expectations - and that's probably just as well.
President Obama did not get a coordinated, massive global stimulus initiative and with it the threat of global inflation. The summit did approve $1.1 trillion in lending authority and cash for the International Monetary Fund and that sum alone, coursing through the smaller economies of Eastern Europe and Latin America, will have to be carefully monitored for its inflationary impact as the recession begins to ease, which it will.
France and Germany were instrumental in blocking the Obama initiative but then they did not get their main objective either - a global supranational regulatory body to oversee the world's largest financial institutions. Instead, they got the Financial Stability Board to offer advice and guidance as the G-20 nations go about reforming their individual financial institutions. (Source: Boston Herald) Full Story
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| Business News |
While many are rallying around Michigan State to win it all tonight, hoping that a championship will at the very least boost morale, it's our job to look into whether or not the Spartans run to the last game of the NCAA men's basketball championship was a boon or a bust to the city of Detroit.
In case you didn't know, the city just happens to be hosting the Final Four, which makes the Spartans the first team since Duke in 1994 to play the final game in its home state and they're hoping to become the first team since UCLA in 1972 to win it all under those circumstances.
Last week, we brought up the idea that Michigan State making the Final Four might have actually diminished the returns the city of Detroit. The rationale was that, by eliminating an out-of-town team, the more robust ticket sales market from the local fans would be negated by slower business downtown. The thought being that fans that came from Louisville, who MSU beat, would have had to stay in the city, while Spartans fans could see the game and drive home. (Source: CNBC) Full Story
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New-vehicle sales fell in March for a 17th consecutive month, but carmakers said that proposed federal incentives and reports from dealers of increased sales in the last week of the month could mean the market was bottoming out. Sales were generally better than analysts expected, even for General Motors (GM: Charts, News, Offers) and Chrysler, which are fighting to avoid bankruptcy with the help of billions of dollars in government loans.
The two companies reported another month of lower American sales; G.M.'s were 45 percent lower than March 2008, and Chrysler's were down 39 percent. But the two automakers said showroom traffic improved considerably the last week, as the potential for a G.M. or Chrysler bankruptcy rose. (Source: New York Times) Full Story
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Where Tim Geithner sees a confluence of public and private interests, some people see a torrent of potential abuse.
The public-private investment plan Geithner outlined last month would provide cheap federal funding for private investors to buy bank assets. The arrangement aims to set a market price for banks' troubled loans and securities, avoiding government price setting -- the source of much criticism of Henry Paulson's original Troubled Asset Relief Program.
But while market participants embrace private-sector pricing, some fear the Geithner plan - known as the Public-Private Investment Partnership plan, or PPIP - could pave the way for chosen financial firms to rip off taxpayers. (Source: Fortune) Full Story
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| Technology Focus |
IBM (IBM: Charts, News, Offers) reportedly withdrew its offer Sunday to buy Sun Microsystems (JAVA: Charts, News, Offers) for about $7 billion after the companies failed to agree on a deal over the weekend. Whether the deal is dead is unclear. Neither Sun, a server and softwaremaker in Santa Clara, nor IBM, in Armonk, N.Y., returned calls on Sunday.
Sun and IBM failed to agree on terms and a price, which IBM reportedly had dropped from $10 to $11 per share three weeks ago to as little as $9.40 in the past few days.
Sun's board said it would no longer negotiate with IBM exclusively, according to a report from the Associated Press, prompting IBM to walk away. (Source: San Francisco Chronicle) Full Story
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If a deep global recession has eroded consumer confidence, you wouldn't know it by looking at the millions of people who are snapping up flashy BlackBerry smartphones made by Research In Motion (RIMM: Charts, News, Offers).
RIM revealed on Thursday that 70 percent of the 3.9 million subscribers it added in the three months ended Feb 29 were "non-enterprise" -- the company's term for the broader consumer market.
About half of RIM's 25 million-strong subscriber base now falls in this category. That's a huge shift for a company that has pushed hard to diversify its user base beyond the corporate executives, lawyers, politicians and other professionals that have been its mainstay. (Source: Reuters) Full Story
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The market and the Valley are all a-titter about the theory that Google (GOOG: Charts, News, Offers) might buy Twitter. As I noted earlier, All Things D this morning took a sledgehammer to a post by TechCrunch which said the two companies were in late stage talks about a deal. But I have a different question. Not will they buy Twitter, but rather, should they?
Before you answer, I would recommend talking a look at a research note today from Credit Suisse analyst Spencer Wang on the current state of the economics of YouTube, which GOOG bought in November 2006 for $1.76 billion, most of that in stock. There is no question that the acquisition has made Google the leading provider of online video; Wang notes that ComScore data shows YouTube had close to 41% of the domestic Web video market in February by videos watches, and no one else was even close. (Video from Fox Interactive Media, mostly MySpace, was second with 3.5% share.) Neilsen data gives YouTube an even bigger share, at 58%, with Hulu.com next at 3.5%. The specific numbers are not the issue; the point is they totally dominate the category. But here’s the thing: the site by Wang's estimates continues to lose an enormous amount of money. (Source: Barron's) Full Story
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| Your Money |
The clock is ticking down to April 15 and it's time to pay the tax man.
But if your 1040 form says you owe more than you have in your bank account, what should you do?
"Don't bury your head in the sand and hope it goes away," warned Chas Roy-Chowdhury, head of taxation for the Association of Chartered Certified Accountants. If you owe taxes and you don't pay, the Internal Revenue Service can eventually go after your bank account, your paycheck or other assets. But cash-strapped taxpayers have options that won't result in a padlock on your front door. The key is not waiting for the IRS to act first. (Source: MSNBC) Full Story
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Make no mistake about it: The news for investors is really rotten this quarter. The average stock fund fell 9.1% the past three months.
And it gets worse: A $10,000 investment in the average stock fund has lost $3,789 the past 12 months. You could have had more fun using your money to light the barbecue. But sooner or later, you're going to have to tiptoe back into the stock market. You can't afford not to, given today's savings rates. If you're terrified, we'll give you three ways to tiptoe back into stocks.
Compared with a 9.1% loss, a money market mutual fund or bank CD looks pretty tempting. But here's the problem: Savings rates are so low that you can't afford to park your money on the sidelines. The average money fund, for example, yields 0.23%, according to iMoneyNet, which tracks the funds. At that rate, you'll double your money in a bit more than 300 years. (Source: USA Today) Full Story
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| Trivia Question |
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What was the longest period of time it ever took the Dow Jones Industrial Average to reach a new high?
(answer below) |
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| Market Overview |
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| DJIA |
8,017.59 |
+241.41 |
| S&P |
842.50 |
+26.56 |
| NYSE |
5,318.75 |
+222.11 |
| NASDAQ |
1,621.87 |
+76.67 |
| 10Yr |
2.907% |
+0.146 |
| Dollar |
84.56 |
-1.02 |
| More market statistics |
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| April 3, 2009 |
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| Trivia Answer |
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| 17 years. The DJIA was 874.12 on Dec. 31, 1964, and 875.00 on Dec. 31, 1981. |
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