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| Weekly Wrap Up |
The week started out with a nasty plunge for all the markets on Monday after The National Bureau of Economic Research announced that the nation has been in a recession since December 2007. However, stocks managed to improve slightly on Tuesday after Ford (F: Charts, News, Offers) reported that it may not need a bailout from the government. The market's positive momentum trickled over into Wednesday, but was quickly halted as stocks dipped on Thursday. Overall, the markets managed to close in positive territory by Friday's close. Wal-Mart (WMT: Charts, News, Offers) recorded a 3.4% increase in sales for the month of November, and Hartford Financial Group (HIG: Charts, News, Offers) increased its profit outlook after announcing that it has enough capital to combat future market turmoil. In other positive news, Johnson & Johnson (JNJ: Charts, News, Offers) acquired breast implant manufacturer Mentor. Unfortunately, rumors also circulated throughout the week that Goldman Sachs (GS: Charts, News, Offers) may post a $2 billion quarterly loss. Both the retail and automobile sectors continued to struggle as major players such as Toyota (TM: Charts, News, Offers), Honda (HMC: Charts, News, Offers), Target (TGT: Charts, News, Offers), and Nordstrom (JWN: Charts, News, Offers) reported a decline in sales. AT&T (T: Charts, News, Offers) and DuPont (DD: Charts, News, Offers) also announced that they will be cutting jobs in an attempt to reduce costs. U.S. light crude oil for January delivery fell $2.86 to settle at $40.81 a barrel on the New York Mercantile Exchange, and the dollar gained slightly on the yen and euro. More Market News
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| Economic News |
Amid the tumult in the U.S. banking and manufacturing sectors, there's been lots of apocalyptic talk about how the failure of certain banks or companies could drive the economy into a permanent ditch. According to certain politicians, economists and pundits, if the government fails to use money taken from the private sector in order to shore up the health of that same private sector, the U.S. economy will simply stop growing. A more faulty analysis than the above would be hard to find. Indeed, economic history is rife with far worse calamities that have befallen countries. But far from imploding, their economies have grown due to the natural desire of entrepreneurs to fix that which isn't working, or, in the words of Von Mises, to remove "uneasiness" wherever it reveals itself. (Source: Forbes.com) Full Story
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The U.S. Dollar has been holding up quite nicely during this credit crisis. In fact, it rallied significantly from deeply oversold levels against the Euro and British Pound (remember Dollar-Euro at 1.60 and Dollar-Pound at 2.10?). However, America has a number of structural problems which will inhibit further appreciation. Moreover, former buyers of U.S. Treasuries in the Middle East and Asia are going to have domestic economic worries of their own very shortly and will not be supporting U.S. assets. This means that the Dollar will be a weak currency in the not too distant future. Let's address the structural weaknesses of the United States. The first issue is savings. As the Anglo-Saxon countries of Australia, Canada, New Zealand, the U.K. and the U.S. prospered in the 1990s and earlier this decade, their savings rates dropped precipitously. In the U.S., we saw a drop from 7% at the beginning of the 1990s to near zero before the credit crunch hit in earnest. (Source: Credit Writedowns) Full Story
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Skittish employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 percent, dramatic proof the country is careening deeper into recession. The new figures, released by the Labor Department Friday, showed the crucial employment market deteriorating at an alarmingly rapid clip, and handed Americans some more grim news right before the holidays. As companies throttled back hiring, the unemployment rate bolted from 6.5 percent in October to 6.7 percent last month, a 15-year high. "These numbers are shocking," said economist Joel Naroff, president of Naroff Economics Advisors. "Companies are sharply reacting to the economy's problems and slashing costs. They are not trying to ride it out." The unemployment rate would have moved even higher if not for the exodus of 422,000 people from the work force. Economists thought many of those people probably abandoned their job searches out of sheer frustration. In November 2007, the jobless rate was at 4.7 percent. (Source: MSNBC) Full Story
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| Business News |
Ford Motor Co. (F: Charts, News, Offers) is considering selling Volvo Car Corp. as the beleaguered U.S. automaker seeks to raise cash and survive tight credit markets and a global automotive sales crisis. Goteborg-based Volvo Cars, which Ford bought in 1999, has been struggling with declining demand and a strong euro which made its products more expensive. Volvo sales through October are down more than 28% compared with the same period in 2007, according to Autodata Corp. Ford said Monday it expects its strategic review of the Swedish luxury automaker will take several months. The move is one of several actions Ford is taking to strengthen its balance sheet amid what it called "severe economic instability worldwide." "Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our One Ford plan," said company President and Chief Executive Alan Mulally in written statement, referring to a plan to standardize the company globally. (Source: CNN Money) Full Story
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General Electric Co. (GE: Charts, News, Offers) said Tuesday it expects fourth-quarter earnings to be near the low end of its guidance and will take a charge of up to $1.4 billion as it starts to shrink its struggling GE Capital finance arm next year because of the ongoing credit crisis. The diversified industrial, finance and media conglomerate said it expects 2009 to be a difficult year for GE Capital, which provides a wide range of commercial and consumer loans and has been battered by the global economic downturn. GE laid out plans to reduce the finance unit's exposure to the turbulent debt markets as it restructures next year. (Source: Yahoo! Finance) Full Story
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Sears Holdings Corp. (SHLD: Charts, News, Offers) posted its biggest quarterly loss since financier Edward Lampert combined Sears and Kmart into one retail company, due mainly to hefty charges related to store closures and disappointing U.S. sales. The company also withdrew its operating profit outlook because of the country's economic woes. Its stock soared nearly 17 percent, however, amid broader market gains after the retailer announced it was closing more underperforming stores and hiring a trio of new executives. Still, the $146 million third-quarter loss - worse than had been expected and the company's second quarterly loss in the past year - is another sign of how difficult it will be for the venerable retailer to right itself amid growing competition and customers who are shopping at its stores even less than before because of the recession. (Source: Forbes.com) Full Story
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| Technology Focus |
Chris Wysopal is the head of a four-iPod family. His wife and two kids all carry the pint-size nano music player from Apple (AAPL: Charts, News, Offers), while he uses a 2003-vintage device he got as a hand-me-down from his wife. But as much they love their iPods, the Wysopal family has no plans to buy any new ones in the foreseeable future. "They're all working, so there's no need to buy more," says Chris. Strange as it may sound, Apple may have an iPod problem. The iconic music player cemented the company's reputation for innovation and fueled its financial success in recent years. But those days appear to be over. Legions of iPod owners see little reason to upgrade, especially with the rocky economy. As a result, some analysts believe this will be the first quarter since the iPod was introduced in 2001 that sales will decline from the year-earlier quarter. (Source: BusinessWeek) Full Story
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Even internet superstars fall to earth eventually. While recent reports of layoffs and other cost-cutting measures at Google (GOOG: Charts, News, Offers) have been greatly exaggerated, the search giant's culture of unbridled spending is finally coming to a halt. And that's probably a good thing. "Hard times have forced discipline on them," says Sanford Bernstein's Jeffrey Lindsay, who predicts, "They'll come back really powerfully. They can emerge as a much leaner and more competitive player." (Source: Time) Full Story
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It has the curves of a Lamborghini, looks like something an astronaut might take into space and weighs only 10.3 ounces. Amazon.com's (AMZN: Charts, News, Offers) electronic Kindle reader -- a device meant to remove the paper from the page and make reading both more convenient and eco-friendly -- is celebrating its first birthday.Released in November 2007, the Kindle has sold more than a quarter million units. Its texts account for 10 percent of Amazon's book sales despite the fact that 200,000 titles -- a tiny fraction of the books offered on the site -- are available in digital form. (Source: CNN.com) Full Story
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| Your Money |
As the economic crisis continues to hammer Americans, many are turning to desperate measures by dipping into their retirement funds to make ends meet, according to a survey released Thursday.The 2008 Bank of America (BAC, Fortune 500) Retirement Savings Survey revealed that current financial conditions forced 18% of respondents to withdraw from their retirement accounts prematurely. (Source: CNN Money) Full Story
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