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| Weekly Wrap Up |
Equities were stuck in neutral for the most part of the week as the major indices could only tack on minor gains. The blue-chip heavy DJIA rose 0.41% and the broader S&P 500 gained 0.65%. Lack of a consensus on the future course of the economy and the stock market resulted in many traders playing the waiting game. There are sure signs that the economic picture is worsening at a slower rate (e.g. jobless claims data released last week showed that 24,000 fewer claims were made even though the Fed beige book survey painted a less positive picture but retail sales were higher) which indicates recovery in the relatively near future but the ferocity of that recovery is up in the air. Stock traders have tended to focus a lot on the Treasury auction market and last week was no different. The stock market took a hit when an auction of 10-year notes resulted in a high yield of 3.996% (i.e. an indication that demand for US debt is waning and the government is having to offer a higher interest rate to find buyers) but a stronger than expected auction of 30-year notes the next day calmed fears about the viability of US debt (atleast temporarily). Oil prices rose last week ending at $72.04 a barrel, putting a question mark over the ability of the US consumer to start spending again. Other commodities have also been on the rise recently in expectation of increased economic activity post-recession and the weak dollar. That trend was somewhat halted this week as the dollar gained on reports that the Fed is not going to expand its program of buying up Treasury and mortgage debt (and hence, not increase the supply of dollars on the open market further). More Market News
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| Economic News |
The U.S. Treasury bond market has been feeling distinctly unloved. A 10-year bond auction went badly on June 10 after Russia, Brazil and China said they were taking steps to diversify their foreign currency reserves.
Worries that Thursday's $11 billion auction of 30-year bonds would follow suit rattled the market. But central banks flocked to buy the bonds, meaning dollar diversification fears were overblown -- at least for now.
Treasury officials may be relieved, but they shouldn't relax. The factors that could push up the cost of issuing U.S. government debt continue to mount. (Source: Fortune) Full Story
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Every crisis comes to an end--and, bleak as things seem now, the current economic crisis too shall pass. But no crisis, especially one of this severity, recedes without leaving a legacy. And among this one’s legacies will be a worldwide battle over ideas--over what kind of economic system is likely to deliver the greatest benefit to the most people. Nowhere is that battle raging more hotly than in the Third World, among the 80 percent of the world's population that lives in Asia, Latin America, and Africa, 1.4 billion of whom subsist on less than $1.25 a day. In America, calling someone a socialist may be nothing more than a cheap shot. In much of the world, however, the battle between capitalism and socialism--or at least something that many Americans would label as socialism--still rages. (Source: Vanity Fair) Full Story
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Over the past two years, we have faced the most severe financial crisis since the Great Depression. The financial system failed to perform its function as a reducer and distributor of risk. Instead, it magnified risks, precipitating an economic contraction that has hurt families and businesses around the world.
We have taken extraordinary measures to help put America on a path to recovery. But it is not enough to simply repair the damage. The economic pain felt by ordinary Americans is a daily reminder that, even as we labor toward recovery, we must begin today to build the foundation for a stronger and safer system. (Source: Washington Post) Full Story
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| Business News |
For Larry Fink, persistence paid off. Eight years after he first approached Barclays (BCS: Charts, News, Offers) with the idea that his BlackRock (BLK: Charts, News, Offers) group could buy Barclays Global Investors and turn itself into the biggest money manager in the world, Mr Fink has realised his dream.
It was a logical deal in strategic terms, following a pattern in recent years for banks to sell off their asset management businesses.
But it was also a deal of its day. The truth is that the BlackRock chief executive has the turmoil in the banking sector - and Barclays' need to boost its capital strength - to thank for triggering this transaction.
Back in January, two months before the rest of the world, Mr Fink heard that Barclays was looking to sell iShares, the exchange-traded fund arm of BGI.
On a business trip to the Middle East, he put in calls to both Bob Diamond, the head of Barclays' investment banking and asset management operations, and John Varley, Barclays' chief executive. The snag was that Mr Fink wanted the whole of BGI, not just iShares. (Source: FT.com) Full Story
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Six Flags (SIX: Charts, News, Offers) will not sell assets or reduce its workforce as a result of its Chapter 11 bankruptcy filing this weekend, the theme park operator's chief executive told CNBC Monday.
"This isn't a liquidation," said CEO Mark Shapiro. "This is about the past. This is about debt that's been around for just too long." Six Flags, which operates or owns 20 parks in North America, filed for Chapter 11 bankruptcy protection in the early hours of Saturday morning. The company was saddled with a $2.4 billion debt load and faced a looming cash $300 million payment to preferred stock holders in August. (Source: CNBC) Full Story
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The U.S. Treasury Department is facing mounting pressure to ensure that taxpayers get a fair return on banks' warrants as the largest firms prepare to shake off government ownership stakes.
At the same time, Treasury is mired in negotiations with the banks, who want to lower the warrants' multi-billion dollar price tag and avoid another big hit to their capital position.
"The pricing of the warrants held by Treasury ... will be critical to ensuring an appropriate return on investment for the government and, consequently, American taxpayers," the two chief watchdogs of the financial rescue wrote this week in a letter obtained by Reuters.
A financial industry source said banks' negotiations with Treasury over the value of the warrants are "calm" but said "the price ranges are all over the place." (Source: Reuters) Full Story
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| Technology Focus |
It was like waiting for Godot: in the end, the great man did not come. The crowd at Apple's (AAPL: Charts, News, Offers) jamboree in San Francisco this week was visibly disappointed when Steve Jobs, the computer-maker’s legendary chief executive, did not even put in a brief appearance after a six-month medical leave. But another no-show was perhaps more important. Proving many techno-pundits wrong, Apple did not present a "tablet"--a pared-down computer in both size and abilities, with a touch screen. Had it done so, it might have helped settle a question that has preoccupied the personal computer (PC) industry for some time: are netbooks--cheap and basic laptops that are flying off the shelves--just a fad, or the future?
The answer is probably both, as an "iPad", or whatever Apple's device may be called, would have demonstrated. Netbooks are already being supplanted by a plethora of new gadgets, including tablets and increasingly computer-like mobile phones (see article). But the idea they embody, that a near-permanent connection to the internet permits simpler technology, is already changing the economics of the PC business. (Source: Economist) Full Story
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Every time you swipe your credit card and wait for the transaction to be approved, sensitive data including your name and account number are ferried from store to bank through computer networks, each step a potential opening for hackers.
And while you may take steps to protect yourself against identity theft, an Associated Press investigation has found the banks and other companies that handle your information are not being nearly as cautious as they could.
The government leaves it to card companies to design security rules that protect the nation's 50 billion annual transactions. (Source: Washington Post) Full Story
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For a company whose iPhone products have set the agenda for the mobile phone industry for the past two years, Apple's (AAPl: Charts, News, Offers) announcements last week at its Worldwide Developers Conference in San Francisco were underwhelming.
Maybe I'm jaded or have been following things too closely, but there was little in what the company had to say about the iPhone that surprised me. The event certainly lacked one of the company's ''one more thing'' moments, which company CEO Steve Jobs has used so famously in the past to make an unexpected announcement.
Much of what Apple Senior Vice President Scott Forstall had to say about the update to the iPhone's underlying software, for example, was merely a rehash of what the company unveiled in March. Turn-by-turn direction, background notifications for third-party software, the ability to make purchases of updates or add-ons within applications; Apple had announced all of it before. (Source: Ohio.com) Full Story
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| Your Money |
Your beverage might soon contain the cost of universal healthcare. When President Reagan announced a war on drugs, crack cocaine was public enemy number one. Now our government has a different kind of coke in sight--this time it's "the real thing."
Congress is desperate to find money to pay for its ambitious healthcare reform. More access to healthcare services for all Americans, better quality care, and more efficiently provided services are the lofty goals but they come at a cost; perhaps more than $1 trillion over the next decade. With the U.S. fiscal deficit already set to exceed $1 trillion annually, finding a way to pay for this expansion of government is a critical, yet challenging, task. (Source: The American) Full Story
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There comes a point in every good book where you're convinced you know how the plot goes. And then you turn the page and something unexpected happens that changes all your assumptions. Well, that's where we are now.
Since the early 1980s, after the war against stagflation was won, our script has gone something like this: A growing economy starts with low tax rates. Left with more of your own money to spend, you're emboldened to take risks by investing in stocks, buying homes, even starting your own business - all of which serve to expand the economy without necessarily leading to high inflation or interest rates. And a healthy economy coupled with cheap money prods you to spend aggressively as well, fueling yet more growth. (Source: CNN Money) Full Story
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