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| Weekly Wrap Up |
Equities had an impressive run during the holiday-shortened week. The markets entered last week after a strong rally on Friday, 11/19, i.e. the day word leaked out that New York Fed President Timothy Geithner is going to be the next Treasury Secretary. And they continued their gains on Monday, Tuesday and Wednesday. The markets were closed on Thursday and managed to end higher during Friday's shortened trading session. The DJIA gained 9.73% during the week and the S&P 500 jumped 12.03%. Financials performed well throughout the week driven by the Citigroup (C: Charts, News, Offers) bailout announced last Sunday night which saw the government put $20 billion into the bank and agree to backstop about $300 billion worth of assets. Stocks also got a lift from a new Fed plan announced Tuesday that will see the central bank loan up to $200 billion to holders of consumer-backed securities, in order to free up the market for consumer and small-business debt. Traders also realized that the stock market is oversold and bought equities even in the face of the poor economic data released last week which included a 17.4% year-over-year fall in the S&P/Case-Shiller home price index. However, consumer confidence numbers seem to indicate that fall in oil prices is making the average household more optimistic. The holiday shopping season seems to have gotten off to a decent start with one survey from the National Retail Federation indicating that shoppers spent 7.2% more this weekend. But the final tally of retail sales could paint a different picture given the deep discounts retailers are having to offer to lure people in. More Market News
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| Economic News |
The prognosis is looking ever more grave. What began 15 months ago with a seizure of the credit markets has become a disease with an alarming list of real economic symptoms. America, Britain, the euro zone and Japan are already in a recession that threatens to be the worst, in some places, for a quarter of a century and possibly since the Depression. American consumers, unable to borrow and fearful for their jobs, are cutting spending; so are firms, short of cash and worried about sales. German business confidence is at a 15-year low. Japan's exports to both rich countries and emerging ones are falling. Emerging economies are suffering too, as commodity prices fall and capital flees faster than in those countries' own crises of a decade ago. (Source: Economist) Full Story
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New economic stats on consumer spending and business durable-goods investment show an economy that's sinking fast across-the-board. Wall Street economist John Ryding expects a 4 percent drop in fourth-quarter real GDP.
Of course, the Fed is pouring in new cash hand-over-fist. And plunging retail gas prices to about $1.85 per gallon nationally amounts to a huge consumer tax cut of perhaps $320 billion, according to Mark Perry of the University of Michigan. So we've moved from tight money and an energy tax hike a year ago, to easy money and an energy tax cut today. The former mix has generated a nasty credit crunch and a recession. But the new monetary/energy mix will generate recovery next year. I hope. (Source: National Review Online) Full Story
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Add another acronym to the U.S. government's alphabet soup of financial relief programs: TALF. Under the Term Asset-Backed Securities Loan Facility, announced Nov. 25, the Federal Reserve will extend up to $200 billion in nonrecourse loans to holders of asset-backed securities (ABS) backed by consumer and small business loans in a bid to free up the ABS market. The Treasury Dept. said it will extend $20 billion in funds under the Troubled Asset Relief Program (TARP) to support the initiative.
Also on Nov. 25 the Fed announced it will initiate a program to purchase up to $100 billion in the direct obligations of housing-related government-sponsored enterprises (GSEs)-Fannie Mae, Freddie Mac, and the Federal Home Loan Banks- and up to $500 billion in mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae to ease the strains in the mortgage market. (Source: BusinessWeek) Full Story
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| Business News |
In its latest move to prop up the nation's flailing financial system, the U.S. government unveiled plans on Monday to rescue one of the world's biggest banks, plowing $20 billion of new capital into Citigroup (C: Charts, News, Offers) and shouldering up to tens of billions of dollars in losses tied to the bank's soured assets. After a brutal week for Citi - marked by pink slips for tens of thousands of workers and a 60% drop in its stock price - news that the government would step in propelled its shares, which rose 58% from Friday's close. "Equity investors were panicked about the company's viability," says David Trone, who follows Citi at the investment bank Fox-Pitt Kelton. "This takes away the remote possibility that the company could find itself in bankruptcy." (Source: Time) Full Story
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Stores and online merchants were busier this weekend than they were a year ago, according to figures out Sunday, but signs persist that holiday shopping will suffer in the weakest economic climate in decades.
The National Retail Federation (NRF), an industry trade group, said shoppers spent $41 billion in the 4-day Thanksgiving weekend. The average shopper spent $372.57, up 7.2% from the $347.55 spent last year.
"Pent-up demand on electronics and clothing, plus unparalleled bargains on this season's hottest items helped drive shopping all weekend," said NRF President and CEO Tracy Mullin, in a statement. "Holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again." (Source: CNN Money) Full Story
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The Detroit automakers have been lumped together for decades as the Big Three, and for good reason; their goals have usually been aligned. But this week, as the automakers take a second run at Congress, hoping to persuade lawmakers to give them $25 billion in federal aid, their agendas are diverging as they contemplate futures as drastically different car companies.
Those differences will become clear as they deliver more detailed plans for how they would use that money not just to survive, but also to turn themselves around to be competitive in the long term. (Source: New York Times) Full Story
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| Technology Focus |
One car of the not-so-distant future is powered in part by a battery weighing more than two fully grown men. Another lacks side doors in the interest of reducing drag. And dozens of teams from around the world - both amateur and professional - are racing to build sleek, ultra-fuel efficient cars powered by alternative energy and attractive to cash-conscious consumers.
But what about the cars we already own?
Amid the push toward plug-in electric hybrids, hydrogen fuel cells and biodiesel-friendly roadsters, new research suggests that impressive increases in fuel economy could be obtained by integrating innovative devices into the nation’s fleet of gas-guzzling vehicles. (Source: MSNBC) Full Story
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You know times are tight when even Steve Jobs starts cutting prices.
Apple (AAPL: Charts, News, Offers), which keeps the tightest reins on list prices in the business, seems to have loosened them significantly this holiday season. Authorized resellers who normally wouldn't dare chop a nickel off Apple's suggested retail are cutting prices, offering rebates and plastering the Web with gaudy ads.
By Wednesday morning, the white MacBook that still lists for $999 on the Apple Store was selling for $899.99 at BestBuy (BBY: Charts, News, Offers), $899.95 at B&H Photo, $899.00 at Amazon (AMZN: Charts, News, Offers) and $868.99 at Club Mac and Mac Mall. (Source: Fortune) Full Story
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| Your Money |
Common sense and mathematics make it a straightforward call in the eyes of many financial planners: Even if college looms soon for your child, retirement savings has to be the top priority. As a wise maxim goes, you can take out a loan for college but you can't take out a loan for your retirement.
But cold financial logic doesn't always prevail when decisions involving children's goals are involved. "I've seen too many horror stories where people feel this obligation to pay for their children's college because maybe their parents paid for theirs," said Drew Denning, vice president of income solutions for Principal Financial Group Inc. "They're five to ten years from retirement and it jeopardizes their retirement income." (Source: MSNBC) Full Story
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The Great Depression created a generation of Americans that abhorred waste and considered debt the devil's playground. Long after the economy recovered, they hoarded tin foil, saved little pieces of string and insisted on paying cash for their purchases.
Few economists believe this downturn will become another Great Depression. But the economic slump could have a lasting impact on Americans' savings habits, particularly young people who may be witnessing the worst economy they've seen in their lifetimes.
The personal saving rate, which measures how much people save out of disposable income, was 1.3% in the July-September quarter. Although that's low in comparison with other countries and a far cry from the double-digit percentages seen most recently in 1985, it's more than twice last year's rate. (Source: USA Today) Full Story
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