Thursday, December 31, 2009

Quick Notes for the Day - December 31

Holiday Hours - Rollins Financial and Rollins & Associates will be closed on Friday, January 1 in observance of New Year's Day. We will reopen on Monday, January 4 at 8:30 am.

Initial Jobless Claims Continue To Fall - The Labor Department reported that initial jobless claims for state unemployment benefits fell to a seasonally adjusted 432,000 while the four-week average of initial claims dropped 5,500 to 460,250. The number of continuing claims declined 57,000 to 4.98 million. The four-week average of continuing claims fell 122,500 to 5.1 million.

Mortgage Rates Rise to 5.14% - Freddie Mac reported that the 30-year fixed-rate mortgage average rose to 5.14% with an average 0.7 point versus last week at 5.05% and year over year at 5.10%.

Oil rises, poised for biggest yearly gain in decade - By Moming Zhou - MarketWatch - "Crude-oil futures rose Thursday and were poised for their biggest yearly gain in 10 years, helped by a weaker dollar and hopes for an economic recovery. Natural gas fell after data showed inventories fell less than expected last week."

Tuesday, December 29, 2009

Quick Notes for the Day - December 29

Consumer Confidence Rises in December - The Conference Board reported that their consumer confidence index rose to 52.9 in December versus 50.6 in November (originally reported at 49.5). This marks the second straight month the index climbed. Consumers were pointing to an improving economy for 2010 as the reason for the upward move.

Weekly Sales By Retailers Rises - The International Council of Shopping Centers and Goldman Sachs released survey results that showed that last-minute shoppers helped weekly sales rise by 2.3% year over year and 0.4% week over week. "The pre-Christmas sales wrap-up was strong as consumers hurried to finish off their gift buying, which was hampered by the super-sized storm during the prior week in the Southeast and Northeast and by a slower holiday-gift completion rate than last year," said Michael Niemira, ICSC's chief economist. "As such, consumers were out in force to finish shopping and the preliminary indications appear that sales are on track." For December, ICSC projects sales to rise about 2%.

Home Prices Flat for October - According to the Case-Shiller home price index, home prices in 20 major cities were flat in October. In October prices rose in just seven of 20 cities. In the past year, prices are down 7.3% in the 20 cities.

Note - Rollins Financial and Rollins & Associates will be closed on Friday, January 1 in observance of New Year's Day. We will reopen on Monday, January 4 at 8:30 am.

Monday, December 28, 2009

Quick Notes for the Day - December 28

Retail Sales Rise - According to MasterCard, retail sales for the holiday season rose 3.6% versus 2008 through Christmas Eve. This news was well received on Wall Street with retailers getting an early bump in price.

New Airport Security Measures - Just as most analysts believed that the airlines had finally turned the corner, the security scare over the holidays sparked new measures that some are saying will continue to weigh on airline stocks.

Economic Reports This Week - Even in a holiday shortened week, the economic reports continue. The Case-Shiller home price report for October and consumer confidence for December come out Tuesday, the Chicago purchasing managers index on Wednesday and weekly jobless claims on Thursday - the market is closed for New Year's Day on Friday.

Note - Rollins Financial and Rollins & Associates will be closed on Friday, January 1 in observance of New Year's Day. We will reopen on Monday, January 4 at 8:30 am.

Wednesday, December 23, 2009

Happy Holidays!

On Thursday, December 24 and Friday, December 25, Rollins Financial and Rollins & Associates will be closed to celebrate Christmas. Our office will reopen on Monday, December 28 at 8:30.

Announcement & Quick Notes for the Day

Announcement - Holiday Office Schedule - With Christmas fast approaching, we wanted to detail our holiday office schedule. On Thursday, December 24 and Friday, December 25, Rollins Financial and Rollins & Associates will be closed to celebrate Christmas. Our office will reopen on Monday, December 28 at 8:30.

Our office will also be closed on Friday, January 1 to celebrate New Year's Day. Our office will reopen for 2010 on Monday, January 4 at 8:30.

Consumer Sentiment Improves - According to the Reuters/University of Michigan consumer sentiment index, the US consumer was feeling better overall with the index reporting a 72.5 versus November's 67.4.

Wage Growth, Personal Income, Disposable Income Rise - The Commerce Department estimated that compensation to workers rose 0.3% in November which economists say is another signal that the US labor market is starting to improve. The increase in wages and salaries was the best since April, and helped to push up total personal incomes by 0.4% in November which is the biggest gain since May. After inflation, after-tax disposable incomes rose 0.2% for the third straight month. Inflation-adjusted real spending increased 0.2% in November after a 0.4% gain in October. The personal savings rate was steady at 4.7%.

New Home Sales Fall - The Commerce Department estimated that sales of new homes fell 11.3% in November to a seasonally adjusted annual rate of 355,000. The drop was largely due to the home purchase tax credit that had been expected to expire but was extended to June 30, 2010. The sales rate was the lowest since April and the previous months had sales boosted by the tax credit.

Treasury to Seek Easing of Bailout Fund Rules - By Glenn Somerville - Reuters - "The Treasury Department will ask Congress to ease restrictions on the use of bank bailout funds (TARP) so it can use some of the money to encourage more lending to small businesses, a department official said on Wednesday."

Tuesday, December 22, 2009

Quick Notes for the Day - December 22

Existing Homes Sales Jump 7.4% - The National Association of Realtors reported that on the back of the expiring federal tax credit, November existing home sales jumped by 7.4% to a 6.54 million seasonally adjusted annual rate. This marked the highest rate since February 2007 and was the third straight large increase. Existing home sales are up 28% since August. Buyers were rushing in November to finalize sales ahead of the Nov. 30 expiration for the tax credit, said Lawrence Yun, NAR's chief economist. The tax credit was subsequently extended and expanded to include repeat buyers.

Final Q3 GDP Revised to 2.2% - The Commerce Department revised the 3rd quarter GDP number to an annual growth rate of 2.2%. While the final rate was lower than initially reported, real gross domestic product increased for the first time since the spring of 2008 with higher consumer spending, a rebound in investments in homes, a slower pace of inventory reduction, more exports, and robust government spending. Analysts on Wall Street had expected a smaller revision to 2.7%. Futures responded positively to the news though.

Sturdy U.S. Home Sales Bolster Economic Growth Prospects - By Lucia Mutikani - Reuters - "Sales of previously owned U.S. homes jumped last month to their highest level in nearly three years, the latest sign that the economic recovery was gaining steam, after growing below expectations in the third quarter."

Monday, December 21, 2009

Health Care Bill Passes First Hurdle

Senate Bill Passes Procedural Test - In an effort to have a vote by Christmas, the Senate passed a key procedural motion on a controversial and landmark health-care reform bill, moving closer to allowing a vote on the legislation itself. The motion passed on strictly party lines, with all 60 Democratic and independent senators in support, and was seen as a major test for the bill. It moves the bill closer to a final Senate vote, which the Democrats want by Dec. 24, allowing the legislation to move to a conference with the House, which has already passed its own health-care reform bill. A reconciled version would then need to be approved by both houses of Congress.

U.S. Health Bill Passes Crucial Senate Test - By Eric Walsh - Reuters - "In a middle-of-the-night vote in a snowbound U.S. capital, Democrats unanimously backed the first in a series of three procedural motions to cut off debate and move the bill to a final vote by at least Christmas Eve.

'We'll get this passed before Christmas and it will be one of the best Christmas presents this Congress has ever given the American people,' Democratic Senator Tom Harkin said."

The Hardest Call - By David Brooks - The New York Times - "The first reason to support the Senate health care bill is that it would provide insurance to 30 million more Americans."

Saturday, December 19, 2009

Announcement & Points of View - December 19

Below the announcement is today's Points of View section. The two main topics for today cover financial regulation (primarily banks) and climate change (following the close of the Copenhagen Summit). There are some very good points made for both topics, and as always, it is good to understand varying points of view.

Announcement - Holiday Office Schedule - With Christmas fast approaching, we wanted to detail our holiday office schedule. On Thursday, December 24 and Friday, December 25, Rollins Financial and Rollins & Associates will be closed to celebrate Christmas. Our office will reopen on Monday, December 28 at 8:30.

Our office will also be closed on Friday, January 1 to celebrate New Year's Day. Our office will reopen for 2010 on Monday, January 4 at 8:30.


Not All Banks Are Created Alike - By Robert G. Wilmers - The Wall Street Journal - "Congress is moving rapidly toward new financial-services regulation, focused on limiting the sort of 'systemic risk' said to have helped bring on the current recession. But we are also in a period where there is great concern about the limited availability of credit to fund companies whose growth could bring down the country's persistent high unemployment."

Even Bigger Than Too Big to Fail - The New York Times - "Asserting that it 'is among the strongest banks in the industry,' Citigroup announced on Monday that it would soon repay $20 billion of federal bailout money. This from a bank that has been in the red for most of the past two years, that is expected to limp through 2010 amid a torrent of loan losses, that saw its stock price close after the announcement at a measly $3.70 a share — and that, like other big banks, is still reluctant to lend."

London as a Financial Centre: The Real Windfall - The Economist - "BRITISH AIRWAYS lost £292m ($465m) in the six months to the end of September and its pension fund has a £3.7 billion deficit. Its cabin crew responded by voting to strike over the Christmas period, alienating the millions of customers that pay their wages and fund those pensions. Similarly, London now risks losing its reputation as a hub of international finance, driving away mobile capital and taxpayers at a time when the government’s deficit is above 10% of GDP. There will be no immediate exodus. But the impression that tax policy is now designed to maximise the number of Labour votes rather than the state’s revenue should worry Britons as well as financiers."

Climate Change

Global Warming and an Odd Bull Moose - By Daniel B. Botkin - The Wall Street Journal - "Most of the major forecasting tools used in global-warming research, including the global climate models (known as general circulation models of the atmosphere) and those used to forecast possible ecological effects of global warming, paint a picture of nature more like a Hudson River School still-life than like the moose that kicked at the shore. These forecasting methods assume that nature undisturbed by people is in a steady state, that there is a balance of nature, and that warnings the climate is at a tipping point mean that the system is about to lose its balance. In fact, however, nature has never been constant. It is always changing, and life on Earth has evolved and adapted to those changes."

Goodbye, Copenhagen - By Tobin Harshaw - The New York Times - "Let’s play Double Jeopardy. Presidential Headaches for $2,000, please, Alex.

It was the contentious debate over which Barack Obama declared on Friday, 'The time to talk is over.'

What is the Copenhagen Summit? Of course. But before we get to Final Jeopardy, let me ask a serious question: Wasn’t two weeks of talk exactly what most everyone involved expected from the great environmental get-together? "

Copenhagen's Lesson in Limits - The Wall Street Journal - "Mr. Obama's inexplicable injunction yesterday that 'the time for talk is over' appears to have produced an agreement to continue talking. The previous 12 days of frantic sound and pointless fury showed that there isn't anything approaching an international consensus on carbon control."

Thursday, December 17, 2009

Quick Notes for the Day - December 17

Senate Committee Approves Bernanke Nomination - The Senate Banking Committee on Thursday approved the nomination of Federal Reserve Chairman Ben Bernanke for a second term 16 to 7 which now means it will go to the full Senate for a final confirming vote.

The Senate is not expected to take up the nomination until some time in January (his term expires on January 31). While approval is widely expected, Bernanke faces an unusual amount of opposition from lawmakers who are disgruntled over the Fed's bailout of financial firms.

Leading Indicators Rise 0.9% - The Conference Board reported that the index of leading economic indicators rose 0.9% in November versus 0.3% in October. This rise marked the eighth straight month of rising indicators. Overall, six of the 10 leading indicators were positive, and the index is up at a 9.6% annual pace over the last six months.

"Looking ahead, we can expect a slowly improving economy through 2010," said Ken Goldstein, an economist at the Conference Board.

In November, six of the 10 leading indicators improved: the interest-rate spread, stock prices, jobless claims, average hours worked in manufacturing, the real money supply, and building permits. Three indicators were negative: consumer expectations, delivery times, and capital equipment orders. The index for new orders for consumer goods was unchanged.

Initial Jobless Claims Rise - Initial jobless claims rose by 7,000 last week to 480,000 which was more than expected by Wall Street. Most analysts had predicted a drop to around 465,000. The news put a damper on the morning to start the session.

Gold Down on Stronger Dollar - On the jobless claims news, gold futures fell close to 2% to about $1,114 an ounce.

Manufacturing Improves - According to data released by the Philadelphia Federal Reserve, manufacturing improved in November. The Philadelphia Federal Reserve's index on manufacturing improved more than expected to 20.4 this month from 16.7.

Natural Gas Rises Sharply - Natural gas rose 7% after the Energy Information Administration reported a drop in natural gas supplies. After nearly nine months of build-ups, natural gas in storage fell for the second week in a row, this time by 207 billion cubic feet, the EIA said. The drop was much bigger than expected. Analysts surveyed by Platts expected no more than a 4 billion cubic feet withdrawal.

Wednesday, December 16, 2009

Quick Notes for the Day - December 16

Required Minimum Distributions for 2009 - Just a reminder that for 2009 there are no required minimum distributions necessary from IRA's or Inherited IRA's. As such, Rollins Financial has not sent the usual annual distribution paperwork. If there are no changes, in 2010, the required minimum distribution laws will go back into effect.

CPI Rises for November - The Labor Department reported that the consumer price index (CPI) rose a seasonally adjusted 0.4% in November primarily due to a rise in energy prices (PPI rose on energy prices too). The core CPI (excludes food and energy prices) was flat in November. Year over year, the CPI has risen 1.8% while the core CPI has risen 1.7%.

Housing Starts Rise 8.9% in November - The Commerce Department estimated that construction of new homes rose 8.9% to a seasonally adjusted 574,000 annualized units. The 8.9% increase was the largest increase since May. Starts of new single-family homes rose by 2.1% to 482,000 in November, while starts of large apartment units jumped 67.3% to 92,000. Building permits, a leading indicator of housing construction, rose 6.0% to a seasonally adjusted annual rate of 584,000.

Bernanke - TIME Person of the Year - Time magazine on Wednesday named Federal Reserve Chairman Ben Bernanke its person of the year for 2009. In an editor's letter, the magazine noted that Bernanke had once written that the Great Depression could have been avoided if the Fed hadn't taken some of the actions it did back in the 1930s. "We've rarely had such a perfect revision of the cliche that those who do not learn from history are doomed to repeat it," wrote Managing Editor Richard Stengel. "Bernanke didn't just learn from history; he wrote it himself and was damned if he was going to repeat it."

Tuesday, December 15, 2009

Quick Notes for the Day - December 15

PPI Rises 1.8% in November - The Labor Department reported that the Producer Price Index (PPI) rose 1.8% in November with the vast majority of the increase coming from energy prices. This new data marks the first rise in the PPI since November 2008. The core PPI (excludes food and energy prices) rose 0.5% in November. Year over year, the PPI is up 2.4%, and the core PPI is up 1.2%.

Oil Rallies - Oil rallied, although only slightly, after OPEC announced that it was increasing the estimate of demand for oil in 2010. Oil has had nine straight down days previously which is the worst run since 2001.

Industrial Production Rises - The Federal Reserve reported that industrial production from factories, mines and utilities rose 0.8% in November. Manufacturing activity alone jumped 1.1% after falling 0.2% in October. Industrial production was revised down to no change in October from the prior estimate of a 0.1% gain. Capacity utilization rose to 71.3% in November from 70.6% in October.

Wells Fargo Sells $10.65 Billion Shares to Exit TARP - By Elinor Comlay - Reuters - "Wells Fargo & Co sold $10.65 billion in stock on Tuesday, raising funds to help repay a $25 billion bailout received from the U.S. government last year. Wells Fargo and Citigroup -- which expects to raise $20 billion on Wednesday to help repay its bailout money -- were the last of the largest banks to repay the funds, which were forced on banks amid the height of the financial crisis last year."

Monday, December 14, 2009

Articles for the Day - December 14

AT&T Takes the Blame, Even for the iPhone’s Faults - By Randall Stross - The New York Times - "I LOVE my iPhone. I just wish it were matched with Verizon Wireless, the carrier with the most envied reputation as fast, ubiquitous, reliable, nigh perfect. Consumer Reports has just released its annual survey of cellphone service, and its respondents collectively agree with me about the rankings: AT&T occupies the bottom and Verizon, the top."

Exxon Mobil to buy XTO Energy in big U.S. gas bet - By Matt Daily and Anna Driver - Reuters - "Exxon Mobil Corp will buy XTO Energy Inc in an all-stock deal valued at about $30 billion, in a move that thrusts the U.S. energy giant to the forefront of North America's fast-growing natural gas industry."

President Meets with Bankers After Televised Blast - By Ronald D. Orol - MarketWatch - "President Barack Obama is sitting down Monday with the top executives of the nation's largest banks at the White House, with echoes of "fat cats" ringing in everyone's ears. On the eve of the meeting, Obama slammed bankers on network television, calling them "fat-cat bankers" on CBS's "60 Minutes" program."

Sunday, December 13, 2009

2009 Year End Tax Planning Items

As 2009 comes to a close, there are several items that we wish to remind our readers about before 2010 rolls around:
  • Charitable Donations - Please make sure you give your charitable donations (whether cash or non-cash) prior to December 31 and get a receipt or letter from the charity acknowledging the gift. Donations can be cash (via cash, check, or credit card) or non-cash (stocks, household items, cars, etc.). You will need the receipts for your 2009 tax return.

  • Annual Gifts - If you are in the habit of giving annual gifts to your children, grandchildren, etc. for estate reasons, those "annual" gifts need to be made prior to December 31 also. The limit for 2009 is $13,000 each gift. Call or email us with questions if you need more information.

  • 2009 IRA Contributions - Have you made your 2009 IRA contribution? If not, why are you waiting? This is something that is best to get done early in the year instead of waiting. In fact, the best thing to do is to make your 2009 contribution now and make your 2010 contribution in three weeks. The limit for 2009 is $5,000 except for those that are 50 and older where the limit is $6,000. The same limits will apply for 2010.

  • Contributions & Investments in Your 401(k) - Are you contributing the max to your 401(k)? Have you reviewed the investments that you have? Do you have a 401(k) from an old job that you need to rollover? These are all things that you should be considering, and these are all things that we are here to help you with. Let us help you review your current 401(k) contributions and allocations, and if there are old 401(k)'s out there, it is definitely time to consolidate them.

  • Bonus Depreciation - If you are self-employed or an owner of a business, the stimulus bill extended the first-year depreciation of 50% of the cost of new equipment purchased and put into service in 2009. This bonus provision is in addition to normal depreciation and tax deductions available under Section 179 of the tax code. It applies to purchases of tangible personal property such as equipment, computers, telephone systems, and office furniture. This is highly technical though and prior to purchasing anything, we recommend discussing this with your accountant to make sure your purchase will qualify.

  • Need an Accountant? - If you are wondering about how the new laws and provisions in the tax code will affect your taxes and you, then you may very well need an accountant. There is a huge difference between a Certified Public Accountant (CPA) and just a tax preparer at a some local office. Our sister company, Rollins & Associates, is a CPA firm and can discuss the issues above as well as your particular tax situation with you. Call our office at 404.892.7967 to discuss your specific questions or make an appointment.

Friday, December 11, 2009

Quick Notes for the Day - December 11

November Retail Sales Rise Again -The Commerce Department released an estimate that retail sales rose 1.3% in November for third monthly increase in the past four months. The gains came from almost all areas of the economy including autos, gasoline, department stores and hardware stores with only clothing and furniture store sales to the downside. Excluding autos sales, retail sales rose 1.2%, the biggest gain since January.

Consumer Sentiment Jumps in December - The Reuters/University of Michigan consumer sentiment index rose to 73.4 in early December from 67.4 in November. This is the highest level of consumer sentiment since September. The change in sentiment was attributed to the strong stock market and last week's improved job report.

Government to Make $936 Million on JP Morgan - The Treasury Department announced that the government expects net proceeds of $936 million from the sale of warrants to purchase common stock of JPMorgan Chase (the warrants came as part of the TARP investment). The secondary public offering of 88.4 million warrants was priced in an auction at $10.75 per warrant and is expected to close on December 16.

Dollar Stronger After Retail Sales and Consumer Sentiment, Gold and Oil Down - The dollar continued stronger today versus major rivals on after data showed retail sales and consumer sentiment were better than expected. The dollar index, a measure of the dollar against a trade-weighted basket of rival currencies, traded as high as 76.73 versus Thursday's close of 75.996.

Crude and gold futures remained lower due to the stronger dollar. Crude for January delivery fell about 0.5% to around $70 per barrel, and December gold also lost 0.5% to about $1,120 an ounce.

Thursday, December 10, 2009

Quick Notes for the Day - December 10

Initial Jobless Claims Rise - The Labor Department reported that the number of people filing claims for state unemployment benefits rose by 17,000 to a seasonally adjusted 474,000. This marked the first rise in initial claims in six weeks. The number of people collecting state benefits fell by 303,000 to a seasonally adjusted 5.16 million in the week ending Nov. 28.

Trade Gap Narrows in October - The Commerce Department reported that trade deficit narrowed by 7.6% in October to $32.9 billion since exports rose faster than imports during the month. Crude oil imports were down in the month and contributed to the decrease. The deficit for the year now totals $304 billion, down sharply from $610.8 billion in the same period one year ago.

Bank of England Leaves Rates Unchanged - The Bank of England left its key lending rate unchanged at a record low of 0.5%. The central bank said its Monetary Policy Committee made no changes to the bank's 200 billion pound ($324 billion) asset-purchase program.

Natural Gas Inventories Drop - The Energy Information Administration reported that natural gas inventories fell for the first time in nine months, down 64 billion cubic feet. On the news, natural gas futures spiked up 7%.

AT&T May Have to Limit iPhone Users - By Charley Blaine - MSN - "OK, you truly wild and crazy iPhone users.

You know who you are: the ones who check out every application, play every game, call up every piece of news and check out every restaurant within 100 miles.

You are causing AT&T (T) a big problem. You're swamping the system, and AT&T, which has an exclusive right to market the iPhone in the United States, wants you to get a life and dial back. "

Wednesday, December 9, 2009

Quick Notes For the Day - December 9

Treasury extends bailout program to October 2010 - By David Lawder - Reuters - "Treasury Secretary Timothy Geithner on Wednesday moved to extend the government's $700 billion bailout fund into October 2010 and pledged to deploy no more than $550 billion of it."

Britain to Impose a 50% Tax on Banker Bonuses - Chancellor of the Exchequer Alistair Darling said in his annual pre-budget report (outlines budget and deficits) that he wanted to give the banks a choice since all benefited directly or indirectly from massive government aid. "They can use their profits to build up their capital base. But if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer," he said. Essentially, any bonuses above 25,000 pounds would be taxed at 50%.

Industry and banker associations in the UK immediately opposed the idea. Richard Lambert,director general of the Confederation of British Industry, said the threat of top bankers leaving the U.K. is real. "A headline-grabbing tax on bankers' bonuses may have populist appeal, but the government needs to take care not to put the U.K.'s financial services sector at a comparative disadvantage internationally," Lambert said in a statement. Meanwhile, Angela Knight, chief executive of the British Bankers' Association, stated, "The U.K.'s banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this." "Only concerted international agreements will succeed in reforming remuneration in the financial sector," she added.

Oil Down After Data - The Energy Information Administration reported crude inventories fell 3.8 million barrels in the week ended Dec. 4, . Gasoline inventories, however, rose 2.2 million barrels, as more gasoline was produced than what's needed. Distillate stockpiles, which include heating oil and diesel, also rose 1.6 million barrels. Crude fell since refiners used more oil to produce petroleum products while crude imports declined.

Sunday, December 6, 2009

Points of View - December 6

Two main topics continue to be the hot items this week - health care and climate change. Read some of the varying views below...

Health Care

No Way, No How, to the Public Option - An Interview with Joe Lieberman - By Kimberley A. Strassel - The Wall Street Journal - "The senator from Connecticut doesn't look sorry. Sitting in his office on Wednesday, he looks like he's having the time of his life. Ever since his bruising 2006 re-election, in which he quit the Democratic Party to run as an independent, Mr. Lieberman has been a man unleashed. He's caucused with Democrats yet campaigned for John McCain. He's enthusiastically supporting President Barack Obama's Afghanistan surge and just as spiritedly criticizing his decision to try 9/11 terrorists in U.S. courts. He's joined Democrats to reform health care, even as he's promised to torpedo their government-run insurance option."

Senate Health Care Follies - The New York Times - "The first week of debate on the Senate’s health care bill was a depressing mixture of foolish posturing by members of both parties and blatant obstructionism by Republicans. If this is the best the Senate can do, we are in for very rough going."

Blue Cross Blue Patients - The Wall Street Journal - "Another day, another study confirming that ObamaCare will increase the price of health insurance. The Blue Cross Blue Shield Association has found that premiums in the individual market will rise on average by 54% over the status quo, which translates into an extra $3,341 a year for families and $1,576 for singles. The White House denounced the report as a 'sham' before it was even released, which shows how seriously it takes such concerns."

Climate Change

Stopping Climate Change - The Economist - "At a time when they are not short of pressing problems to deal with, the presence of 100-odd world leaders at the two-week meeting that starts in Copenhagen on December 7th to renew the Kyoto protocol on climate change might seem a little self-indulgent. There will be oceans of planet-saving rhetoric, countless photographs of politicians wearing dark suits and serious faces and, if things go according to plan, an agreement to cut emissions to avert a rise in temperature that might anyway have turned out to be marginal and self-correcting."

Will Big Business Save the Earth? - By Jared Diamond - The New York Times - "There is a widespread view, particularly among environmentalists and liberals, that big businesses are environmentally destructive, greedy, evil and driven by short-term profits. I know — because I used to share that view. But today I have more nuanced feelings. Over the years I’ve joined the boards of two environmental groups, the World Wildlife Fund and Conservation International, serving alongside many business executives."

Friday, December 4, 2009

Quick Notes for the Day - December 4

Jobs Data Points to Slowing Job Losses - Unemployment Improves to 10% - The Labor Department reported that the labor market has dramatically improved over the past several months with the unemployment rate improving to 10%. Nonfarm payrolls dropped by a seasonally adjusted 11,000 in November which is the fewest since December 2007. Payroll losses in September and October were both revised lower by a total of 159,000 which helped lead to the revision in the unemployment figure. Analysts had expected job losses to be over 100,000 jobs and the unemployment rate to remain at 10.2%.

Oil, Gold Both Drop on Stronger Dollar and Jobs Data - Well, it looks like the continued rise in gold was put on hold for at least one day as gold futures dropped more than 4% or $50 on a stronger dollar and a much better jobs report. Crude oil also had fallen on the stronger dollar by about 1%.

October Factory Order Rise - The Commerce Department reported that orders for factory goods increased 0.6% in October. October marks the six month out of the last seven that factory orders have risen. Factory orders were led by a 1.6% rise in nondurable-goods orders. Core capital equipment orders fell 3.4% in October, revised down from a 2.9% fall estimated a week ago, the government said. Inventories rose 0.4% in October, the first gain following 13 straight declines.

Fed Futures See Interest Rate Increases in August - Interest-rate futures indicated traders expect that the Federal Reserve will increase its target rate by August 2010 on the basis of the better than expected jobs data this morning. The August 2010 fed funds contract indicated traders expect rates to rise to 0.50% by then, compared to a 0.34% rate a week ago and from the current range of zero to 0.25%. Futures for December 2010 show traders expect the benchmark rate to be 0.94% by then, compared to 0.81% on Thursday.

Obama Says Jobs Data Good - But Not Good Enough - "We have a lot more work to do before we can celebrate," Obama said at previously scheduled Allentown, PA town hall event to discuss jobs. "Too many members of our American family have felt the gut punch of a pink slip."

"Every one of us knows someone who has been swept up by this storm." The steps taken earlier this year "have helped turn the tide," he said, promising to announce more ideas "to help jumpstart private sector hiring and get Americans back to work."

In the Q&A section of the event, he was pressed on small business credit issues and healthcare which he stated he was working with Congress to address both issues.

Thursday, December 3, 2009

Quick Notes for the Day - December 3

Initial Jobless Claims Drop 5,000 - The Labor Department reported new claims for state unemployment benefits dropped by 5,000 to 457,000. This marks the fifth straight week of declines. This is the fewest initial claims since September 2008. The total number of people claiming benefits rose by 527,000 to 9.61 million, as a new program for extended benefits kicked in.

Productivity Revised Down - Still Best in 6 Years - The Labor Department reported that nonfarm business productivity increased at an 8.1% annual rate in the third quarter which is a revision from last month's 9.5% estimate. Unit labor costs fell 2.5% which is higher than the negative 5.2% decline. In manufacturing, productivity increased at a record 13.4% annual rate and unit labor costs fell 6.1% annualized.

Service Sector Contracts in November - The Institute for Supply Management reported that the service sectors of the economy contracted in November to 48.7% from 50.6% in October. This followed two months of expansion in the service sector. Six of 18 industries were expanding in November, the ISM said. The employment index rose to 41.6% from 41.1%. The new orders index fell to 55.1% from 55.6%.

Natural Gas Inventories Rise - The Energy Information Administration reported that natural gas inventories rose 2 billion cubic feet last week. At the current level, stocks were 470 billion cubic feet higher than last year at this time and 487 billion cubic feet above the five-year average.

NBC deal seen as a step toward more focused GE - By Scott Malone - Reuters - "The long-expected sale of the media business, which accounted for about 10 percent of GE revenue, focuses the world's biggest maker of jet engines and electricity-generating turbines more tightly on its core business of selling heavy equipment and financing the purchase of it."

Tuesday, December 1, 2009

Quick Notes for the Day - December 1

Cyber Monday a Big Hit - According to Coremetrics, sales from "Cyber Monday" rose 13.7% from last year and beat Black Friday's sales figures - 24.1% higher.

Cyber Monday shoppers spent about $180.03 per online order, up 38.2% from the 2008 level when consumers spent an average of $130.24. Cyber Monday shoppers also bought nearly 10% more items than this year's Black Friday shoppers, and 30% more than during last year's Cyber Monday.

Pending Home Sales Index Rises - The National Association of Realtors reported that the pending home sales index rose a seasonally adjusted 3.7% in October from September - the ninth straight month of increase. The index is up 31.8% year over year and 6% from September. The index tracks sales contracts on pre-owned homes.

ISM Still Shows Expansion - The Institute for Supply Management reported that the ISM manufacturing index fell to 53.6% from 55.7% in October - still the fourth straight month of improvement though. Readings over 50% indicate more firms said they were growing than said they were contracting. In November, 12 of 18 industries were expanding. The new orders index rose to 60.3% from 58.5% in October. The production index fell to 59.9% from 63.3% in October. The inventories index fell to 41.3% from 46.9% n October.

Fed's Plosser Calls For Higher Rates - In a speech on Tuesday, Philadelphia Fed President Charles Plosser said the Fed needed to start raising interest rates sooner rather than later and had to begin withdrawing excess cash from the financial system. If the Fed does not act soon "the inflation rate is likely to rise to levels that most would consider unacceptable," he warned. Plosser will not be a voting member of the Fed interest-rate committee until 2011. Plosser was estimating GDP growth to average around a 3% annual rate over the next two years.

Sunday, November 29, 2009

Points of View - November 29

Family, food, fun, and football is pretty much what every Thanksgiving has always been about with my family, and this year was no different. We all hope that everyone enjoyed Thanksgiving and the traditional long weekend of shopping and decorating.

For today's post, the main subject is climate change with the world's leaders meeting in Copenhagen next week, and this issue will take center stage in the media. There are definitely some varying opinions, so sift through and enjoy.

Climate Change

A Heated Debate - The Economist - "'WHAT is truth?' That was Pontius Pilate’s answer to Jesus’s assertion that 'Everyone that is of the truth heareth my voice.' It sounds suspiciously like the modern argument over climate change."

Rigging a Climate 'Consensus' - The Wall Street Journal - "The climatologists at the center of the leaked email and document scandal have taken the line that it is all much ado about nothing. Yes, the wording of their messages was unfortunate, but they insist this in no way undermines the underlying science. They're ignoring the damage they've done to public confidence in the arbiters of climate science."

Before the Climate Conference, a Weather Report - The New York Times - "President Obama and other world leaders will gather in Copenhagen next week to discuss climate change. Though this is a global issue, it’s also a profoundly local one. For this reason, the Op-Ed editors asked writers from four different continents to report on the climate changes they’ve experienced close to home. Here are their dispatches."

Health Care

A Modest Public Plan - The New York Times - "It is astonishing, but the question of whether a small slice of Americans should be able to choose between a government-run health insurance plan and private health insurance plans is threatening passage of much-needed health care reform."


The Jobless Gender Gap - By David Paul Kuhn - The Wall Street Journal - "The unemployment rate for men, 11.4%, based on seasonally adjusted data from the Bureau of Labor Statistics, outpaces the rate for women, 8.8%. We now have the largest jobless gender gap since tracking became possible in 1948. The gap reached its previous peak, 2.5 points, in 1967 and 1978. Today's gap has exceeded that for three months. It's endured at two points or above for an unprecedented length, eight months and counting."

Thursday, November 26, 2009

Happy Thanksgiving

We wish all of our clients, readers, and their families a very happy and healthy Thanksgiving.

NOTE - Rollins Financial and Rollins & Associates will be closed for the Thanksgiving holiday on Thursday, November 26 and Friday, November 27. Our office will reopen for business on Monday, November 30.

Tuesday, November 24, 2009

Quick Notes for the Day - November 24

NOTE - Rollins Financial and Rollins & Associates will be closed for the Thanksgiving holiday on Thursday, November 26 and Friday, November 27. Our office will reopen for business on Monday, November 30.

Retailers' Weekly Sales Rise Versus 2008 - According to a survey by the International Council of Shopping Centers and Goldman Sachs, chain-store sales for the week ended Nov. 21 rose 3.3% year over year. "So much of the monthly performance rides on bargain Friday shopping--the day after Thanksgiving," said Michael Niemira, ICSC's chief economist, adding he expects sales to be strong on both Friday and Saturday. ICSC also said 15% of households completed half or more of their holiday gift buying by the week before Thanksgiving. Niemira said he believes that November sales will rise 4% to 6% over 2008.

Consumer Confidence Rises - The Conference Board reported that November's confidence index rose to 49.5 versus a revised 48.7 for October. "The moderate improvement in the short-term outlook was the result of a decrease in the percent of consumers expecting business and labor market conditions to worsen," noted Lynn Franco, the Conference Board's director of consumer research.

Q3 GDP Revised to 2.8% - The second estimate of the third quarter GDP came in at 2.8% which was 0.7% lower than the first estimate of 3.5%. The revision was primarily due to downward revisions in consumer spending and business investment in nonresidential structures as well as changes to imports and exports. Final Q3 GDP numbers will be released at the end of December.

S&P Case-Shiller Index Shows Continued Gains - The S&P Case-Shiller report stated that home prices rose 0.3% in September versus August. Year over year, home prices across 20 major metropolitan areas dropped 9.4%. For the third quarter, the S&P Case-Shiller U.S. National Home Price Index was up 3.1% versus the second quarter.

Monday, November 23, 2009

Quick Notes & Articles for the Day - November 23

Existing Home Sales Jump 10.1% - Sales of existing homes increased 10.1% in October to a seasonally adjusted annual rate of 6.10 million, the National Association of Realtors estimated Monday.

ECB President Trichet Agrees with US Call for Stronger Dollar - European Central Bank (ECB) President Jean-Claude Trichet on Monday said a strong U.S. dollar is important for the stability of the world economy, Dow Jones Newswires reported. Asked at a conference in Madrid whether he was concerned about the current level of the euro against the dollar, Trichet said he considers it "extremely important that the U.S. authorities" say a strong dollar is in their own interests, he said. Trichet has often used similar language when asked about the value of the euro.

Dimon Successor to Geithner? - According to the New York Post's sources, several US policy makers consider JPMorgan Chase CEO Jamie Dimon as a potential successor to US Treasury Secretary Timothy Geithner.

Dimon "would love to serve his country," the paper quoted people familiar with his thinking as saying.

Taking Taxpayers for a Ride - By Edward Niedermayer - The New York Times - "General Motors raised more than a few eyebrows last week by announcing plans to repay what it describes as $6.7 billion in outstanding loans to taxpayers. So provocative was this announcement that it all but overshadowed the real news of the day: G.M. had lost $1.2 billion since exiting bankruptcy in July, and its fourth-quarter results were expected to be worse."

Sunday, November 22, 2009

Announcement & Points of View - November 22

After a quick announcement below, we have a variety of topics to share: financial reform, employment, health care, and climate change. Things are moving on all fronts, so it is a busy time in our nation's capital.

Announcement - With the Thanksgiving holiday on Thursday, Rollins Financial and Rollins & Associates will be closed for both Thursday and Friday. The office will reopen on Monday, November 30 at 8:30.

Financial Reform

Another Round of Regulatory Reform - The New York Times - "Throughout the fall, lawmakers in the House have been drafting and reworking legislation to reform the financial system. Senate Democrats weighed in last week with a plan that is stronger than the House bills on aspects of derivatives regulation and consumer protection. It also invites healthy debate on other issues, like the role of the Federal Reserve in a reformed system."

Frank, Dodd Will Fix Banking Regulation But Good - By Caroline Baum - Bloomberg - " Members of Congress are plumping their feathers, holding press conferences and congratulating themselves for a job well done. Not that they need an excuse. This time, though, they’re celebrating the completion of a draft bill to overhaul the financial regulatory system."

Don't Let Banks Hide Bad Assets - By Roderick M. Hills, Harvey L. Pitt, and David S. Ruder - The Wall Street Journal - "Independent accounting standards have helped make American capital markets the best in the world. In making financial decisions, investors rely heavily upon the integrity of corporate financial reports prepared in accordance with accounting standards established by the independent Financial Accounting Standards Board (FASB). That board is supervised by the Securities and Exchange Commission (SEC). Now, the Obama administration is on the verge of transferring accounting standards responsibility from the SEC to a systemic risk regulator. Such a radical move would have extremely negative consequences for our capital markets."


On the White House Jobs Forum - By Jackie Calmes - The New York Times - "The White House forum will take place as Congressional Democrats have begun casting a wide net for ideas to include in a jobs bill. The flurry of activity reflects a sense of urgency now that the unemployment rate has breached 10 percent. With wary employers reluctant to expand their workforces despite the recession’s apparent end, economists say the jobless rate is likely to remain high through next year — when lawmakers’ own jobs are on the line in next November’s election."

The Phantom Jobs Stimulus - The Wall Street Journal - "Jonathan Karl of ABC News deserves credit among Beltway reporters for committing journalism and actually fact-checking White House claims. Head Start in Augusta, Georgia claimed 317 jobs were created by a $790,000 grant. In reality, as Mr. Karl reported this week, the money went toward a one-off pay hike for 317 employees."

Has Europe Got the Answer? - The Economist - "At first sight, the idea that Europe has anything to teach America about tackling unemployment seems preposterous. America has some of the most flexible labour markets in the developed world, while continental Europe, in the popular imagination, is a sclerotic place with powerful unions, rigid labour markets and high entrenched joblessness. Over the past quarter-century America’s unemployment rate has averaged 5.8%, compared with 9.5% in France and 9.1% in Germany. This picture may be changing."

Health Care

A Ban on Genetic Discrimination - The New York Times - "The Genetic Information Nondiscrimination Act ushers in a new era. The law prohibits employers from asking for genetic tests or taking into account an employee’s genetic background in hiring, firing or promotions. It prohibits discrimination on the basis of genetic background in group and individual health insurance plans."

The End of HSAs - The Wall Street Journal - "Start with its attack on flexible spending accounts that are an important part of many employer plans. Flex accounts let employees set aside some portion of their pre-tax pay for out-of-pocket costs or medical services that their insurance plan doesn't cover, such as a child's orthodontics or testing supplies for diabetics. The Reid bill caps these now-unlimited accounts at $2,500 per year and imposes new restrictions on qualifying medical expenses, raising some $5 billion by exposing income above the non-indexed cap to taxes."

The Health-Care Buffet - By Allysia Finley - The Wall Street Journal - "According to the Centers for Disease Control, obesity was responsible for $147 billion of medical costs in 2008. Mr. Thorpe calculates that obesity accounted for 27% of the rise in health-care costs between 1987 and 2001. But here's the real whopper: If current obesity trends continue, obesity-related health-care costs will total $343 billion in 2018. Who knew that fat could weigh so heavily on our health-care system?"

Climate Change

Bio-Diversity - By Christoph Niemann - The New York Times - A funny little take on the changing leaves...

The Senate’s Duty on Climate - The New York Times - "Our own candidate for criticism is the United States Senate. We cannot rewrite the Bush years any more than we can persuade the Chinese of the merits of a binding treaty to control greenhouse gases. What the United States can do is assume responsibility for its own emissions, and this the Senate has manifestly failed to do."

White House Adviser Rejects Idea of Limited Climate Package - By Siobhan Hughes - The Wall Street Journal - "The Obama administration's top climate adviser on Friday called for "comprehensive energy reform" and threw cold water on the idea of a more modest climate package that would apply mandatory reductions in greenhouse-gas emissions only to electric utilities."

Duke’s Rogers: Why Nuclear Power Will Probably Trump Coal - By Keith Johnson - The Wall Street Journal - "Duke Energy boss Jim Rogers is a big voice on energy and climate change for a couple of simple reasons. He runs a big utility, heavily invested in coal power, and he’s an outspoken proponent of climate-change legislation that spooks many of his peers. So his take on America’s energy future is usually interesting. No exception in this recent interview with the Council on Foreign Relations, where he makes the case for why nuclear power will likely beat coal in a country still heavily reliant on the black stuff."

What Drives China? Soon, Cleaner Fuel - By Chen Aizhu - Reuters - Lorry driver Zhang Jianwei isn't worried about cleaner fuel requirements that come into force in China next year, raising the price of motor fuels -- he will just keep buying cheaper, dirtier diesel at smaller stations. Zhang's example underscores the cautious approach the world's second largest oil consumer is taking to introducing tougher diesel and gasoline specifications, and shows why there will be little initial impact on China's fuel trade."

UK Small Wind Blows Strong Despite Recession - By Nao Nakanishi - Reuters - "Britain's small wind sector is booming despite the recession as many rural homes, farms or small businesses are putting up turbines in the yard to counter higher energy prices and blackouts."

Friday, November 20, 2009

Quick Notes for the Day - November 20

Bank of Japan Comes Out Upbeat on Economy - The Bank of Japan offered an upbeat outlook on the nation's overall economy and maintained its interest rates at 0.1%. The BOJ stated that financial conditions were continuing to improve, exports and production were still increasing, and the decline in corporate-capital outlays appeared to be ending. All of that being said, the BOJ continued to stress that the downside risks had decreased, but the current measures and policies were still needed to support a continued growth in the economy. This has essentially been the exact same statement voiced by central bankers around the world recently.

"Cash for Caulkers" Could Deliver $23B for Home Energy Efficiency - By Justin Moresco - Reuters - "Step aside 'Cash for Clunkers,' and make way for 'Cash for Caulkers.' The White House is reportedly considering rolling out a two-year, $23 billion program to encourage homeowners to undertake weatherization projects such as adding air sealing, insulation and energy-saving light bulbs. The program would be called Home Star -– playing off the name Energy Star, the Environmental Protection Agency’s widely recognized energy efficiency program. The New York Times, in a story published last night, reported Rahm Emanuel, President Obama’s chief of staff, as saying that it’s one of the 'top things he’s looking at.'"

Thursday, November 19, 2009

Quick Notes for the Day - November 19

Leading Indicators Rise for October - The Conference Board reported that the index of leading economic indicators rose for the seventh consecutive month in October and said that a recovery is "unfolding" in the economy. The leading indicators rose 0.3% in October following a 1% gain in September. Six of the 10 indicators were positive. The index is up at a 10.2% annual pace in the last six months.

Initial Jobless Claims Are Unchanged - The Labor Department reported that initial filings for jobless claims was a seasonally adjusted 505,000 which was flat compared to the prior week. The level of initial claims in the week ended Nov. 7 was revised up by 3,000 to 505,000. The four-week average of initial claims dropped 6,500 to 514,000.

Philly Fed Manufacturing Index at Highest Level Since 2007 - The Federal Reserve Bank of Philadelphia reported that manufacturing activity expanded for the fourth consecutive month in the Philadelphia region in November. The Philly Fed index improved to a seasonally adjusted 16.7 from 11.5 which is the highest reading since June 2007. At the lowest point, the index was a negative 41.3.

Natural Gas Inventories Rise - The Energy Information Administration reported that natural gas inventories rose 20 billion cubic feet. Current inventories are 3,833 billion cubic feet which is 347 billion cubic feet higher year over year and 419 billion cubic feet above the five-year average.

Congressman Asked Geithner to Resign - Treasury Secretary Timothy Geithner rejected a request from a Republican lawmaker that he resign for his handling of the economy. In a heated exchange during a hearing of the Joint Economic Committee of Congress, Rep. Kevin Brady, Republican of Texas and the top House Republican on the panel, said Geithner had failed as the Obama administration's point-man on the economy. "Will you step down from your post,?" Brady asked. Geithner replied that he served at the pleasure of President Barack Obama. Geithner said he agreed "with almost nothing" that Brady had said. (Marketwatch)

Geithner: Largest Firms Need Single Regulator - By David Lawder - Reuters - "U.S. Treasury Secretary Timothy Geithner said on Thursday that no financial firm should be able to escape regulation, and the largest institutions need oversight from a single, strong regulator. 'The regulation of the largest, most interconnected firms requires tremendous institutional capacity, clear lines of authority and single-point accountability. This is no place for regulation for council or by committee,' Geithner said in testimony to the congressional Joint Economic Committee."

Wednesday, November 18, 2009

Quick Notes for the Day - November 18

CPI Rises 0.3% in October - The Labor Department reported that the consumer price index (CPI) rose a seasonally adjusted 0.3% in October as energy prices increased for the fifth time in six months to offset a decline in rents. Year over year, the CPI has declined 0.2%. The core CPI rose 0.2% in October on the back of cars and trucks with the core CPI up 1.7% year over year. New car prices rose 1.6% which is the most in 28 years. Used car prices also increased at a rate of 3.4%.

Housing Starts Drop - The Commerce Department estimated that construction of new houses fell in October by 10.6% to the lowest level since April. Starts of new single-family homes fell by 6.8% to 476,000 and starts of large apartment units fell 34.6% to 53,000. Building permits, a leading indicator of housing construction, fell 4% to a seasonally adjusted annual rate of 552,000.

Oil Moves Higher After Supply Data, US Oil Output Data at a High - Crude oil rose 1% after the Energy Information Administration reported that crude inventories declines by 900,000 barrels. Crude imports fell 0.9% to 8.58 million barrels a day, and total petroleum demand rose 1% to 18.5 million barrels a day, the EIA data showed. The data also showed a decline of 1.7 million barrels in gasoline stockpiles and a drop of 300,000 barrels in distillates.

The American Petroleum Institute reported that US crude oil production for October averaged 5.36 million barrels per day which is the highest level since 2005. "The October production figures continue to detail the industry's success story in the Gulf of Mexico, particularly the deep waters, as well as the way new technologies have helped bring on new production both offshore and onshore," said API Statistics Manager Ron Planting in a statement.

Tuesday, November 17, 2009

Quick Notes for the Day - November 17

PPI Rises 0.3% - The Labor Department reported that the producer price index (PPI) rose a seasonally adjusted 0.3% on higher food and energy costs. The core PPI number (excludes food and energy) fell 0.6% which is the largest decrease in three years. The PPI has dropped 1.9% year over year while the core PPI has risen 0.7%.

Industrial Output Rises 0.1% - The Federal Reserve reported that industrial production rose just slightly by 0.1% in October after the previous three months had been very strong. Industrial production has fallen 7.1% over the past year with a slow Q4 and Q1 to blame.

October's rise was based mostly on a 1.6% jump in utility output due to cooler temperatures in the nation. Capacity utilization rose to 70.7% in October from 70.5% in September.

Foreign Asset Purchases Rise in September - The Treasury Department reported that net foreign purchases of long-term securities increased to $40.7 billion in September from $34.2 billion in August. When short-term securities and bank lending data are included, $133.5 billion worth of capital flowed into the US in September which is a substantial rise from $25.3 billion in August. Net foreign purchases of long-term U.S. securities were $55.7 billion in September.

New Financial Fraud Task Force - A new financial fraud task force was created on Tuesday with the Department of Justice heading it up with the Treasury Department, HUD and the SEC serving as the steering committee. The group replaces the Corporate Fraud Task Force established in 2002.

Saturday, November 14, 2009

News - November 2009

Equity markets have breezed through two of what are historically the most tumultuous months for stock investors – September and October. Stocks held in October and continue to climb the wall of worry, moving up to “lofty” levels not seen since October of a year ago. The Dow Jones Industrial Average eclipsed the 10,000 point mark during the month, before slipping back below that milestone as the month came to a close. The tone of the move through the 10,000 level on the DJIA is far more positive this year compared to last, when markets were heading lower and the 10,000 mark was eclipsed on the down side. Despite sitting at roughly the same level from October 2008 to this October, investors know that the equity markets have been anything but flat during the past 12 to 13 months.

Guarded optimism is reigning supreme for many economists, and Wall Street employed investment strategists. Our unscientific poll suggests most are expecting a strengthening of the economy over the next several quarters. Many of the leading economic indicators are showing positive trends, which will hopefully be confirmed by economic strength in the months to come. Manufacturing, industrial production and productivity are all pointing to accelerated economic activity over the near term. The preliminary 3rd quarter GDP report indicates the economy grew by 3.5%, with most forecasting further economic growth over the next several quarters.

The number of jobs created by the economy is still the most widely followed indicator by the general public and is often the chosen barometer for economic performance. The much publicized jobs number reports have been abysmal as the U.S. economy has shed over 7 million jobs since January 2008. There are some signs of improvement as the rate of job losses is slowing considerably in recent months, which is consistent with a slowing of weekly initial jobless claims. But make no mistake – those seeking employment are finding the worst job market since the early 1980’s.

The most recent employment report showed that the economy lost another 190,000 jobs during the month of October, while the unemployment rate reached 10.2%, the highest since 1983. Amazingly, the recent employment reports are indicating improvement, as the trajectory suggests the economy may again start producing jobs sometime in the next few months. Some analysts are even suggesting job growth as early as December. Yet, it is likely that the unemployment rate will continue to tick higher for some time as new entrants joining (or rejoining) the job market exceed the number of new jobs created.

In addition to the poor – but improving – jobs situation, the other overhang in the recent optimism has been the falling U.S. dollar. Despite the impression of many casual observers, the U.S. dollar has done little when you analyze the change over the past 17 months. However, the ride has been anything but flat for an index of dollar denominated currencies. The dollar actually soared as the financial crisis hit its zenith and has been falling back to the pre-crisis levels. In fact, a close look at the dollar chart reveals steady weakening against a basket of world currencies since 2002, with sporadic counter trend strength, particularly during the recent financial crisis.

We have opined that the falling dollar has benefits as well as detriments. The largest beneficiary of a falling dollar would be U.S. exporters and U.S.-based multinational firms that do a significant portion of their business overseas. A falling dollar will inflate foreign income earned by U.S. multinationals and also makes U.S. goods less expensive to foreign buyers. While commodities priced in U.S. dollars, like oil and foreign made products, are consequently more expensive for U.S. consumers. Given the persistent trade imbalance, some would argue that suppressing imports and encouraging exports is good economic policy.

For the month of October, the Equity indices were moderately lower, but the gains for the year are holding steady. The S&P 500, NASDAQ, and the Russell 2000 were all lower for the month of October at -1.9%, -3.6% and -6.8%, respectively. The Dow Industrial Average bucked the negative trend and eked out a small gain of 0.2% for October. For the year, all of the major averages remain in positive territory with the widely followed S&P 500 gaining 17.0% for the year through October 31, 2009.

Commodities were some of the strongest performers during the month of October as oil gained 9.5% for the month and gold added 3.8% for the month of October. Oil has more than doubled from its $37.87 price on December 31, 2008, while holding an investment in gold has produced a comparatively modest 20% return since the beginning of 2009. The well documented negative correlation between these commodities and the U.S. dollar held in tact as the U.S. dollar index was down slightly in October.

International stocks were also lower in October, but have generally outperformed the U.S. markets over the first ten months of 2009. Emerging market stocks have surged nearly 60% for the year, while the developed international stocks have added 21% though October 31, 2009.

Consumer stocks were positive standouts during the month of October as retailers, consumer staples and energy stocks produced positive returns for the month. Financials and REITs were notable losers for the month as each sector gave back nearly 5% for the month. Technology, natural resources and consumer discretionary stocks have outperformed for the year to date. Utilities, Health Care, and industrial stocks have produced positive returns for investors, but have significantly underperformed the broader indices this year.

While there are certainly some headwinds for the economy, we remain cautiously optimistic. Stocks may be the best indicator of future economic conditions. The continuing rally is indicating that significant strengthening in the general economy is likely. In addition, recent housing price reports have even shown that home prices have not only stopped falling, but are starting to move higher.

The poor employment data steals most of the economic headlines, as many investors follow the jobs benchmark as a gauge for general economic strength. Historically, the unemployment rate continues to rise even as the economy transitions from recession into expansion. In fact, it would be consistent with past recessions if unemployment were to rise for at least six months after the recession has ended. Employers are always reluctant to hire additional workers until an economic recovery is well under way and the current employees reach their productivity limit.

Friday, November 13, 2009

Quick Notes for the Day - November 13

Consumer Sentiment Falls in Early November - The Reuters/University of Michigan consumer sentiment index fell to 66.0 from 70.6 in October. The main factor behind the drop seems to be the rise in the unemployment rate to 10.2%. Unemployment is a lagging indicator and generally does not rise until 6-9 months after the economy has turned around. Even with history and statistics to prove otherwise, the public almost always fails to see the recovery until unemployment starts to drop. The continued fall of the initial jobless claims reported earlier this week is a move in that direction.

Import Prices Rise - The Labor Department estimated that the price of goods imported into the US rose by 0.7% in October. This marks the third monthly rise for imports, but they are still down 5.7% year over year. Fuel prices rose 1.8%, natural gas prices jumped 24.1%, and imported petroleum prices rose 0.9%. Nonfuel import prices rose 0.4%.

Trade Deficit Widens - The Commerce Department reported that the trade deficit widened by 18.2% in September to $36.5 billion. Imports rose faster than exports in September. The U.S. trade deficit with China widened to $22.1 billion which is the largest since last October. The deficit for the year-to-date now totals $274.58 billion versus $551.44 billion in the first nine months of 2008.

Thursday, November 12, 2009

A Must Read & Quick Notes for the Day - November 12

The Lowdown on Home-Buyer Tax Credits - By Laura Saunders - The Wall Street Journal - This a MUST read for anyone wanting to know about the new law regarding home-buyer tax credits.

Fed Adopts Rules Blocking Overdraft Fees - The Federal Reserve approved rules that will prohibit financial institutions from charging consumers fees for paying overdrafts on ATM or one-time debit card transactions unless a consumer agrees to the protection first. Most consumers automatically receive overdraft protection currently, and many are charged fees as high as $35 per overdraft transaction. With the changes, consumers will be unable to withdraw funds from an ATM machine if they have a zero balance and have opted out of the overdraft protection. According to studies by the Fed, most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions. The rule takes effect August 15 for consumers that have existing accounts and choose to opt out of the protection and July 1 for new accounts.

Initial Jobless Claims Fall 12,000 - The Labor Department reported that initial claims for state unemployment benefits fell by 12,000 to a seasonally adjusted 502,000. Initial jobless claims have been above 500,000 for 52 straight weeks. Continuing state claims declined 139,000 to a seasonally adjusted 5.63 million which is the lowest report since March.

Oil Falls After Data - The Energy Information Administration (EIA) reported that crude oil inventories rose last week by 1.8 million barrels on weakened demand, and oil futures feel in response to about $77.50 a barrel. Gasoline inventories rose 2.5 million barrels and distillate stockpiles added 300,000 barrels. According to the EIA, demand for gasoline dropped 1.9% from a week ago to 8.8 million barrels a day.

Freight Index Declines - The Bureau of Transportation Statistics reported that the freight traffic within the US fell 0.5% in September following three straight months of gains. The Freight TSI index, which measures changes in freight shipments in ton-miles, was 95.7.

Wednesday, November 11, 2009

Quick Notes & Articles for the Day - November 11

Fed Looks to Keep Rates Low - A number of Fed officials gave speeches yesterday and the themes that they pointed to were the same - low inflation, slow recovery, jobs. The Fed is looking to keep rates low for an extended period since there is virtually no inflation, they predict a slow recovery, and lower rates should help some with the job market. The job market was the biggest concern, but they all pointed to a recovery that was just starting. The overall theme could be to "be patient."

Citi's Kelly Says Sale of Assets Have Not Produced Losses - Speaking at an investor conference, Citi Vice Chairman Edward "Ned" Kelly responded to a question about Citi's efforts to sell about $900 billion of assets. His response was that he was "reasonably certain" that the sales had not yet produced a dollar of losses.

Last year, Citi stated that it would sell or close $898 billion in assets to shrink its operations. Through the third quarter, the bank had sold $281 billion of those assets.

China's Economic Data - China reported industrial production and retail sales continued to accelerate at a faster-than-expected pace, but consumer and producer prices fell more than expected. Industrial production for the month rose 16.1% year over year, and retail sales rose a similar 16.2%. The consumer price index (CPI) fell 0.5% year over year and the producer price index (PPI) fell 5.8%.


U.S. and Japan on Same Page of Strong-Dollar Book - By Lisa Twaronite - MarketWatch - "And both probably tried hard to keep a straight face when they met and paid lip service to the U.S.' strong dollar policy, knowing full well that a weaker dollar is in the best interests of both countries for the time being, despite its very real and painful side effects."

Geithner Wants Strong Dollar, Will Tackle Deficit - By Glenn Somerville - Reuters - "Treasury Secretary Timothy Geithner said on Wednesday he believes strongly in the need to maintain a strong dollar and said the United States was determined to get its budget deficit down."

Monday, November 9, 2009

Quick Notes for the Day - November 9

Employment Trends Rise for 2nd Straight Month - By Rex Nutting - MarketWatch - "'The employment trends index has likely turned a corner in September, and the historical relationship between the index and employment suggests that job losses will end in early 2010,' said Gad Levanon, senior economist at the Conference Board. 'While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase.'

Oil Futures Rise on Weak Dollar, Hurricane Ida - Oil futures rose to close to $78 a barrel on the dollar weakening against other foreign currencies and Hurricane Ida. Ida had weakened to a Category 1 hurricane, and the forecast is that it will continue to weaken. If this persists, any run up in prices due to weather could quickly be erased.

GE, Comcast Agree on NBC Universal Value - According to reports from Reuters, GE and Comcast have agreed that a NBC Universal-Comcast deal would be valued at $30 billion. What remains in question is how much Vivendi's stake in NBC Universal would be worth.

So the basic agreement looks to be that Comcast would own 51% of joint venture with NBC Universal (49%), and GE would spin-off the NBC Universal part. GE would also like to buy Vivendi's share of NBC Universal, but that has not been valued either. Comcast will bring its cable assets and some channels to deal plus cash. In the end, this could still take a while...

McDonald's Same Store Sales Rise 3.3% - McDonald's reported that its October same store sales rose 3.3%. Comparable sales were down 0.1% in the US, up 6.4% in Europe and climbed 4.7% in Asia, Middle East and Africa. Total system wide sales rose 10.3% and were up 5.2% excluding the impact of currency translations.

Saturday, November 7, 2009

The New (and Improved) Home Buyer Tax Credit

With the stroke of a pen Friday, President Obama made more than two-thirds of the current homeowners and essentially all first-time home buyers eligible for a tax credit when they purchase a house. The "Worker, Homeownership, and Business Assistance Act of 2009" was signed into law on Friday, and it became effective today.

The new law had heavy backing by the homebuilder and realtor associations, and it did look to "fix" some of the previous problems with the initial first-time home buyer tax credit.

The following a breakdown of the bill and what it means to each group:

First-Time Home Buyers - The tax credit ($8,000) remains the same, but the new law pushes back the deadline to qualify. A contract must be signed before May 1, 2010, and the purchase must close by June 30, 2010. The definition of "first-time home buyer" remains as anyone who has not owned a principal residence in the three years prior to making the purchase. Income limits have been raised to $125,000 for singles (previously $75,000) and $225,000 for married couples (previously $150,000).

Expanded to Current Homeowners - Current homeowners can potentially now qualify for a tax credit of up to $6,500 when they purchase their next primary residence. The new law states that current homeowners must have lived in their home for five consecutive years over the previous eight to be eligible. Qualified home buyers can obtain the credit on homes purchased between Nov. 7 and the end of April 2010 (signed contract by April 30 - close by June 30). The income limits for current homeowners are the same as those for first-time home buyers. Estimates are that up to 75% of current homeowners are now eligible for this credit.

Fraud Prevention - We have seen the examples of the 4 year old that purchased a home and thousands of questionable credits, and the new law is trying to combat those issues too. Anyone claiming the credit must now provide documentation (copy of the HUD-1 Settlement Statement attached to the return) to prove that the sale has closed. Also, a minor (under 18) cannot purchase a home and apply for the credit.

Price Limit, Usage - The new law allows the credit to be used only on primary residences purchased for less than $800,000. Also, the purchasers must use the new property as their primary residence for three or more years after the purchase, and if they do, they do not have to pay the credit back. Finally, buyers can claim the credit on their 2009 taxes, even if the purchase was made in 2010 by filing an amended return.

Thursday, November 5, 2009

Quick Notes for the Day - November 5

3rd Quarter Productivity Jumps to 9.5% - The Labor Department estimated Thursday that companies increased their output in the third quarter to a 9.5% annual rate in the quarter even with some working hours being cut thus driving productivity. Unit labor costs fell at a 5.2% annual rate in the quarter (unit labor costs can be a predictor of future inflation) and was greater than expected. The jump to the 9.5% increase in productivity was the highest in six years and much more than economists estimated. In manufacturing, the gains were even more impressive with productivity surging at a record 13.6% annual rate and unit labor costs falling 7.1%.

Initial Jobless Claims Fall - The Labor Department reported that filing for initial claims for state unemployment benefits fell by 20,000 to a seasonally adjusted 512,000 which is the lowest since January. Initial jobless claims have been above 500,000 for 51 straight weeks. Continuing state claims fell by 68,000 to a seasonally adjusted 5.75 million which is the lowest since March. The number of people claiming benefits of any kind in the week ending Oct. 17 was 9.53 million (not seasonally adjusted) up 136,000 from 9.36 million in the previous week.

ECB Holds Rate at 1%, Trichet Comments on Economy - The European Central Bank (ECB) on Thursday left its key lending rate unchanged at 1%, as expected.

ECB President Jean-Claude Trichet said Thursday at his monthly news conference re-stocking of depleted inventories, a recovery in exports and aggressive stimulus measures should provide support for the euro-zone economy. Trichet said interest rates remain "appropriate." Trichet said inflation expectations remain "firmly anchored" in line with the ECB's annual target near but just below 2%. Trichet said the economy is set to recover at a "gradual pace" in 2010, while risks to the economic outlook remained "broadly balanced."

BOE Expands Asset Purchase Plan, Holds Rates - The Bank of England's (BOE) Monetary Policy Committee on Thursday expanded its asset-purchase program by 25 billion pounds ($41 billion) to a total of 200 billion pounds. As expected, the bank left its key lending rate unchanged at a record low 0.5%, where it has stood since March.

How Ford Is Making Its Comeback - By Paul Ingrassia - The Wall Street Journal - "A year ago, Ford Motor Co. steered clear of the auto industry's version of the 'public option.' You know, a government-funded bankruptcy. Maybe the decision wasn't entirely altruistic. Plan B, as in bankruptcy, would have ended more than a century of Ford family control.

Whatever the motives, Ford chose a private solution for regaining its corporate health, and today the patient is walking without a government crutch. Last week Consumer Reports gave the company quality ratings comparable to those of Honda and Toyota..."

Retail Sales Figures - Source CNBC

October Same-Store Sales

October 2009 Same-Store Sales Est.
October 2009 Same-Store Sales Actual
Costco Wholesale (total sales)
BJ's Wholesale
JW Nordstrom
Ross Stores
Stein Mart
American Eagle
Children's Place
Hot Topic
Wet Seal
The Buckle
Rite Aid
source: Thomson Financial, Company reports. Figures in parenthesis are losses.