|
| Weekly Wrap Up |
Equities had another solid week and most of the action was again in the green. The blue chip DJIA rose 2.23% and the broader S&P 500 gained 2.45%. The summer rally has extended beyond the Labor Day weekend as the Dow is just shy of the psychologically important 10,000 level mark. A few weeks ago, the sentiment was that the market had gotten too much ahead of itself and a pullback was is in the offing. But now traders are less certain of a correction and definitely not one in the 10% range that was previously forecast. Some of the underlying fundamentals are gradually improving and nothing has worsened dramatically and at this point, that’s enough to keep stocks headed north (but keep in mind that they are still below the pre-Lehman collapse levels from just over a year ago). Stocks ended in the green each day last week save for Thursday. A rally in commodity stocks was a major boost on Monday, Tuesday saw some positive data on retail sales and improvement in regional manufacturing activity, while bank stocks led the charge on Wednesday. Yet another sector, consumer stocks led the way on Friday after some analyst upgrades in the space and a better than expected number on jobless claims. Therefore, there was broad-based strength in the markets all the week with different sectors rising up to the occasion Ben Bernanke gave a small boost by opining that the recession is technically over. Adobe (ADBE: Charts, News, Offers) bought Omniture (OMTR: Charts, News, Offers) last week and Dell (DELL: Charts, News, Offers) announced the acquisition of Perot Systems (PER: Charts, News, Offers) this morning as dealmaking continues to return to the street.
Looking ahead, this week will see a Fed meeting (Tuesday and Wednesday) and leaders of the G-20 will gather in Pittsburgh (Thursday and Friday) to discuss how to pull back some of the stimulus that was extended during the crisis. The economic data on tap includes existing home-sales (Thursday), consumer sentiment and new-home sales (Friday). General Mills and Autozone will be among the notables to report earnings (Thursday). More Market News
|
|
| Economic News |
Markets are mad, long live markets
While all around us are hailing the death of free markets and the end of capitalism, nobody seems to have noticed how ugly capitalists are now rekindling the global economy. For people who don't know how markets work and how self-interest drives business activity, two good examples of capitalist-like greed in action include the mini-boom in the North American auto market and the emerging bubblet in Canadian housing. More broadly, the U. S. financial sector, responding to market signals, is also back in the business of cranking out fancy investment instruments and paying bonuses to people who do. Business investment is picking up. Stock prices are rising, and gold is setting price records.
Capitalism is dead, eh? Well, long live capitalism--or at least as much capitalism as we are allowed to enjoy. (Source: National Post) Click here to read the full article
|
The Stimulus Didn't Work
Is the American Recovery and Reinvestment Act of 2009 working? At the time of the act's passage last February, this question was hotly debated. Administration economists cited Keynesian models that predicted that the $787 billion stimulus package would increase GDP by enough to create 3.6 million jobs. Our own research showed that more modern macroeconomic models predicted only one-sixth of that GDP impact. Estimates by economist Robert Barro of Harvard predicted the impact would not be significantly different from zero.
Now, six months after the act's passage, we no longer have to rely solely on the predictions of models. We can look and see what actually happened. (Source: Wall Street Journal) Click here to read the full article
|
The Hazard of Moral Hazard
When someone insures you against the consequences of a nasty event, oddly enough, he raises the incentives for you to behave in a way that will cause the event. So if your diamond ring is insured for $50,000, you are more likely to leave it out of the safe. Economists call this phenomenon "moral hazard," and if you look around, you will see it everywhere. "With automobile collision insurance, for example, one is more likely to venture forth on an icy night," writes Harvard economist Richard Zeckhauser. "Federal deposit insurance made S&Ls more willing to take on risky loans. Federally subsidized flood insurance encourages citizens to build homes on flood plains." (Source: Commentary Magazine) Click here to read the full article
|
| Business News |
Bank of America Shareholders Find Their Champion
God bless Judge Rakoff. Somebody with clout is speaking up for the company owners.
U.S. District Court Judge Jed Rakoff in New York this week rejected Bank of America Corp.'s (BAC: Charts, News, Offers) settlement with the Securities and Exchange Commission in the case of the surreptitious bonuses paid by Merrill Lynch & Co. before the nation’s biggest bank by assets bought the stockbroker in January.
Rakoff said the $33 million Bank of America agreed to pay was "trivial." For goodness' sake, the SEC had charged the bank with defrauding its own stockholders by not disclosing $3.6 billion in Merrill bonus payments when the owners voted on the takeover that cost them about $29 billion. (Source: Bloomberg) Click here to read the full article
|
Advertising: Waiting for a Rebound
Starting in the springtime, the outlook for advertising suddenly began to get a whole lot brighter.
Rays of light appeared in May in the form of Macy's (M: Charts, News, Offers) chief financial officer noting that the big department-store chain was much better able to project sales than it had been six months previously. Another glimmer: Software giant Microsoft (MSFT: Charts, News, Offers) revealed in May that it would spend $100 million to promote Bing, its new search engine competing against mighty Google (GOOG: Charts, News, Offers) .
A sign the darkest days were past came when General Motors filed for bankruptcy in June, but noted that it would stop slashing its advertising budget. Indeed, soon after emerging from bankruptcy in July, the world's second-largest car maker, and one of the country's top-10 advertisers, announced that its ad budget for 2009 and 2010 would rise significantly. (Source: SmartMoney) Click here to read the full article
|
Prosecutors Fumble Wall Street Probes
It's hard to imagine that for all the misinformation spread from the senior ranks of Wall Street about the alleged health of the financial business during the run-up to last year’s meltdown, the best our regulators and prosecutors can come up with as "culprits" for this abuse is two measly hedge fund-managers. But that's exactly what our government has produced so far on the one-year anniversary of Lehman Brothers' bankruptcy and the government bailout to save the country’s financial system--a pair of hedge-fund managers whose role in the greatest financial debacle of our time was minimal at best. (Source: The Daily Beast) Click here to read the full article
|
|
| Technology Focus |
Mint.com: Nurtured by Super-Angel VCs
Intuit's (INTU: Charts, News, Offers) purchase of Mint.com was a big win for Mint CEO Aaron Patzer and the rest of the 38-person staff he assembled to run the personal finance Web site. Yet the $170 million acquisition also vindicated a new breed of early-stage investor that is betting aggressively on startups while big-name venture capital firms conserve capital and shy away from risk. These so-called super angels are trying to reinvigorate venture capital by taking it back to its roots, when firms were smaller, nimbler, and more adept at helping to build companies from the ground up.
Mint.com owes much of its success to one such investor, First Round Capital, which opted to back the fledgling company at a time when other VCs demurred. (Source: BusinessWeek) Click here to read the full article
|
Be Like Gmail
On Tuesday, Facebook launched Prototypes, a service that lets users test out new tools and features before they become fixtures on the site. The first small batch offers nothing revolutionary: a search feature for photo tags, a way to better sync events with Outlook and other programs, and an app to let Mac users monitor their profiles from their desktop. But for a site with a history of unveiling huge makeovers with little notice -- like the March 2009 redesign that got a 5 percent approval rating its first week -- this is good news. Using Facebookers as beta testers is a great PR move and a positive sign for the future of the social networking site. By enlisting a huge, devoted focus group, Facebook will likely ensure that nothing that nine out of 10 users hate will become a part of the site's permanent design. (Source: Slate) Click here to read the full article
|
The Internet is proof that government doesn't bungle everything
Since it's so fashionable these days to question whether government can do anything right -- whether it's regulating banks, bolstering the economy or overseeing healthcare -- it's worth noting that we're about to celebrate the 40th anniversary of one of the most important federal initiatives of our time.
The event was the launch of the Internet, which we date from Oct. 29, 1969, when a refrigerator-sized special-purpose computer in Leonard Kleinrock's engineering lab at UCLA transmitted its first message to a twin machine in Menlo Park, Calif. (The message was the first two letters of the command "Login.")
That was the first exchange over what was then known as the ARPAnet, which evolved, after many intermediate steps, into what we know today as the Internet. (Source: LA Times) Click here to read the full article
|
| Your Money |
How one family eliminated $106,000 of debt
Five years ago, the Hildebrandt family of New Richmond, Wis., was juggling more than $100,000 in credit card and personal debt. Through frugality, determination and hard work, they are now -- other than a mortgage -- debt-free. At the time, Russell and Kandy Hildebrandts' credit card balances totaled about $89,000, and they owed $17,000 to a family member. While they were current on all the payments, the card companies had begun raising their interest rates, adding hundreds to their minimum monthly payments. Kandy acknowledges that they presented a higher credit risk, given how their balances had ballooned. Even so, with the bump in the required payments, covering the monthly payments was a struggle. "We had to change," Kandy says. Change they did. (Source: MSNBC) Click here to read the full article
|
Investors are thrilled yet anxious about stock market rally
Dania Leon's portfolio has surged 55% during the stock market's booming rally over the six last months -- and she couldn't be more nervous.
After suffering deep losses last year, the 41-year-old Pasadena resident is grateful to recoup some of her money. But she fears that stock prices have shot up far more than is warranted given the country's still-weak economy and nearly double-digit unemployment rate.
"I'm scared, I'm scared, I'm scared," Leon said. "Why are we up, especially with unemployment as high as it is? I don't feel great because I worry that we could have a 500- or 600-point drop in a day and I won't be quick enough to pull out of it in time." (Source: Los Angeles Times) Click here to read the full article
|
|
|
|
|
