Points of View - October 31

Happy Halloween!

At a time of the year when scary is the norm, as one commentator said yesterday, "What could be scarier than Congress debating our nation's health care reform?" All kidding aside, on to today's points of view.

Health Care

CBO Underestimates Benefits of Malpractice Reform - By Lawrence J. McQuillan - The Wall Street Journal - "Earlier this month, the Congressional Budget Office (CBO) said medical-liability reforms could save about $11 billion annually. This assessment is a gross underestimate of the potential benefits of reform and was intended to give cover to congressional Democrats who say malpractice-liability costs are trifling. But a full accounting shows the benefits would be a hefty $242 billion a year, more than 10 percent of America's health expenditures."

Back From the Dead - The Economist - "Though you would be forgiven for thinking otherwise, around half of all Americans get their health care courtesy of the government. There is Medicare, which provides for the elderly; Medicaid, which looks after the poorest; and a big federal programme that covers children in most of the country’s worse-off families. To their numbers must be added tens of millions of government employees, from the president and the members of Congress down to teachers, firemen, soldiers and veterans. The actual provision of health services, in hospitals, diagnostic labs and doctors’ surgeries is, with a few exceptions (veterans have a NHS-like network of their own), carried out by the private sector. But the government pays the bills."

Notable & Quotable - By Robert Reich - The Wall Street Journal - "While health reform, if done right, can help American families stay afloat in the economy, most Americans will not see any appreciable decline in the cost of health insurance nor clear improvement in the efficiency or quality of the health care they receive, and those who will benefit from the bill won't see it for several years. That's partly a result of Obama's sharpest break from Clinton—whose ambitious plan drew immediate fire from Big Pharma, the American Medical Association, and health insurers: The Obama White House bought off the medical-industrial complex by promising it fatter profits, bolstered by tens of millions of new paying customers."

Financial Reform

Another Misstep on the Road to Reform - The New York Times - "Draft legislation to regulate too-big-to-fail financial firms hit a wall of well-deserved dissent at a hearing on Thursday in the House Financial Services Committee."

Privatization

Postal Services: Sort It Out - The Economist - "With technology undermining the old monopolies that postal services used to enjoy, the obvious answer is to privatise them and let them sink or swim. But the post is not just another business knocked sideways by the internet. Post offices unite communities and the postal service connects remote regions to the centre, so voters are uncomfortable with radical change."

Quick Notes and Articles for the Day - October 30

Chicago PMI Rises Above 50 - The Chicago purchasing managers index (PMI) rose to 54.2% from 46.1% in September according to a survey of corporate purchasing managers released Friday. Readings over 50% indicate overall business expansion. Both new orders and production moved sharply higher in October. The Chicago PMI is considered a leading indicator to the national Institute for Supply Management (ISM) manufacturers' survey for October to be released on Monday.

Consumer Sentiment Improves in Late October - According to reports on the Reuters/University of Michigan index, consumer sentiment improved in late October to 70.6 in late October from 69.4 earlier in the month. Sentiment in September was 73.5.

Consumer Spending Falls After Cash for Clunkers - The Commerce Department estimated that consumer spending fell in September 0.6% (inflation, seasonally adjusted) after the government's cash-for-clunkers program ended. Real disposable incomes fell a seasonally adjusted 0.1%. In current-dollar terms (not inflation-adjusted), spending fell 0.5% in September. Current-dollar incomes were flat. With spending falling faster than incomes, the personal savings rate rose to 3.3% of disposable income from 2.8% in August.

Articles

The WellPoint Revelation - The Wall Street Journal - "At the request of Congressional delegations worried about their constituents—call it a public service—WellPoint mined its own actuarial data to model ObamaCare in the 14 states where it runs Blue Cross plans. The study therefore takes into account market and demographic differences that other industry studies have not, such as the one from the trade group America's Health Insurance Plans, which looked at aggregate national trends. In all of the 14 states WellPoint scrutinized, ObamaCare would drive up premiums for the small businesses and individuals who are most of WellPoint's customers. (Other big insurers, like Aetna, focus on the market among large businesses.) Young and healthy consumers will see the largest increases—their premiums would more than triple in some states—though average middle-class buyers will pay more too."

The House Health Reform Bill - The New York Times - "The Senate should pay attention to the health care reform bill unveiled on Thursday by House Democratic leaders. The bill would greatly expand coverage of the uninsured while reducing budget deficits over the next decade and probably beyond. It includes a public option that is weaker than we would like, but it still deserves to be approved by the House."

Quick Notes & Articles for the Day - October 28

Durable Goods Orders Rise 1.0% - The Commerce Department reported that orders for durable goods rose 1.0% in September on stronger demand for machinery, defense and capital goods. Excluding the 1.1% increase in transportation goods, orders rose 0.9%. It was the fourth increase in total orders in the past six months. Shipments rose 0.8% in September but were down 0.8% excluding transportation goods. Inventories fell 1.0%, the ninth consecutive monthly decline (a continued fall in inventories will eventually mean that output must rise to replace the inventory).

New Home Sales Fall - The Commerce Department estimated that new home sales fell 3.6% in September. The decline put new-home sales to a seasonally adjusted annual rate of 402,000. New-home sales in August were revised to a 417,000 level compared with the previous estimate of 429,000. This is the first decline in new home sales after five consecutive monthly gains. New-home sales are down 7.8% compared with a year ago. The supply of homes on the market fell to 251,000 in September which is the lowest level since November 1982.

Articles

U.S. Cracks Down on Promoters of Huge Tax Defiance - By Kim Dixon - Reuters - "U.S. authorities have filed lawsuits nationwide against promoters of schemes to help tax protesters collectively attempt to get fraudulent refunds of $562 million, the U.S. Justice Department said on Wednesday."

Home Tax Credit Audit Shows Abuses - By Jackie Calmes - The New York Times - "While government officials said many suspect claims could turn out to be simple errors, the report found examples of claimants who already owned homes or had not yet bought one. Some 582 taxpayers were under 18 years old — as young as 4. Of the 1.4 million people who have claimed nearly $10 billion in credits for 2008 and 2009, 60 percent had incomes below $50,000, raising questions about whether some could afford a home."

Quick Notes & Articles for the Day - October 27

Home Prices Rise in August - Standard & Poor's released information from the Case-Shiller home price index on Tuesday the showed the market value of homes in 20 major cities rose by 1.2% compared with July. This marks the fourth month in a row that home prices have increased. In August prices rose in 17 of 20 cities. In the past year, prices are down 11.3% in the 20 cities. Prices are down 29.3% from the peak. Prices in all 20 cities were lower in August 2009 than in August 2008.

Consumer Confidence Falls in October - The Conference Board reported that consumers became more cautious in October. The consumer confidence index fell to 47.7 in October from an upwardly revised 53.4 in September. The September confidence index was revised up from the initial estimate of 53.1. Consumers were more pessimistic about the labor market, with those claiming jobs are "hard to get" rising to 49.6% from 47.0% in the prior month.

IBM Approves $5 Billion Stock Buyback - IBM said Tuesday that its board of directors has authorized another $5 billion to use for stock repurchases.

The new funding is in addition to $4.2 billion remaining from an earlier stock-buyback authorization, giving IBM more than $9 billion to repurchase its shares. IBM said that it expects to request additional stock-repurchase funds at its board meeting next April.

Articles

Green Business News - Reuters - A few people have asked where they can find out information regarding "green news," so the link above is to Reuters's Green Business site. As we find more good sites, we will pass them along.

Vacation-day Allotment Varies Widely By Country - By Andrea Coombes - MarketWatch - Just one of those interesting stories that was forwarded to me this morning. I am not sure 8 weeks off is worth living in Lithuania though... - "How does eight weeks off per year sound to you? That's what workers in Brazil and Lithuania enjoy -- and Finland, France, Russia, Austria and Malta aren't far behind, according to a recent study comparing workers' holiday time in 41 countries."

Quick Notes for the Day - October 26

National Index Rises Above Recession Level - The Chicago Federal Reserve reported that the national activity index (includes 85 separate indices) rose to -0.63 over the past three months from -0.96 in the three months ending in August. This marks the first time the index's three-month average has been above the -0.70 level since early in the recession. For September, the index slipped to negative 0.81 from negative 0.65 in August. In September, production and income indicators were positive for the third straight month, but the other three main categories (employment, sales and consumption) remained negative.

Dollar Trades Higher, Oil Falls on Dollar's Strength - The dollar has traded higher Monday by about 0.6% reversing a trend against the Euro. On the news, oil traded below $80 (stronger dollar equals lower crude oil prices). Also adding to pressure on oil was an announcement over the weekend that Nigeria's main militant group declared an indefinite ceasefire which had put some possible supply pressure into the price.

Gold, Copper Fall on Stronger Dollar - Gold and other metals futures turned lower midday Monday as the U.S. dollar rose off earlier lows. Gold for December delivery was down about $10.10 (0.9%) at $1046 an ounce. Gold, seen as a safe place to park cash in uncertain times, often trades in the opposite direction of US stocks. But lately, both have been rising together as a drop in the dollar makes hard assets like gold and oil more valuable, and at the same time, supports profits at US companies with international earnings.

Romer: Health Care Reform Is Key to Deficit - Council of Economic Advisers Chair Christina Romer in prepared remarks said Monday morning that health care reform is "the most significant act" the U.S. can take to tackle its long-term budget deficit problem. "Done correctly, health care reform can genuinely slow the growth rate of health care costs and thus put us on a path to greatly reduced budget deficits in the long run."

Points of View - October 25

China & America - The Odd Couple - The Economist - "The heart of the problem is a profound uncertainty in both countries about where the relationship may lead. In many respects the two countries are in the same bed. Their economies have become interlocked, especially in the past decade. America is the world’s biggest debtor and China its biggest creditor. From climate change to the economic recovery, the world faces problems that demand China and America work in concert."

Financial Reform

Washington's Plans May Result in Even Higher Executive Pay - By Jonathan Macey - The Wall Street Journal - "Executive pay has emerged, once again, as a major issue in Washington. This week Treasury and the Federal Reserve announced new regulations designed to oversee and limit executive pay at thousands of financial institutions. This is deeply ironic, because today's pay woes are the direct result of prior government intervention. In 1992, Congress decided it would use the tax code to 'improve' (i.e., reduce) executive compensation in publicly traded companies."

The State of Financial Reform - The New York Times - "It sounded good when the Treasury’s pay czar, Kenneth Feinberg, announced that top executives at Citigroup, Bank of America and the other five institutions surviving at taxpayers’ expense would see their compensation packages cut in half this year and their cash salaries reduced by 90 percent."

Debt

Credit Card Chicanery - The New York Times - "The Credit Card Accountability, Responsibility and Disclosure Act would end a great many odious practices. The companies, for example, could no longer deluge broke and unemployed teenagers with credit cards, driving them deeply into debt that they have no way of paying off. Credit card companies will have to verify the young person’s ability to pay or get a signature from a responsible adult before credit is issued."

The Bad Debt Dance - By Jan Boucek - The Wall Street Journal - "It takes two to tango. For most bad loans, there's an irresponsible lender and an irresponsible borrower. But two years since the start of the credit crunch, and lenders are suffering all the opprobrium. That's easy to do: Bankers are slick, cocky and rich. Of course, this was overlooked before the crunch as bankers greased the over-reaching ambitions of governments, companies and consumers. Now that all have been caught out, those indentured to the banks are crying foul: 'The devil made me do it!'"

Why Congress Must Now Abolish Its Debt Limit - By Bruce Bartlett - Financial Times - "Any day now there is going to be a uniquely American political crisis when Congress must raise the limit on how much the federal government may borrow. If it fails to do so, the Treasury department loses the legal authority to issue new bonds."

Health Care

Public Opinion and Health Reform - By David Brady & Daniel Kessler - The Wall Street Journal - "Earlier this month, President Barack Obama said that an "unprecedented consensus has come together behind" health-care reform. As recently as June, public opinion polls supported such a proposition. That month a CBS News/New York Times poll found that 64% of Americans agreed that the federal government should guarantee health insurance for all."

Quick Notes for the Day - October 23

Existing Home Sales Rise 9.4% in September - The National Association of Realtors (NAR)estimated Friday morning that sales of existing homes rose sharply by 9.4% in September to a seasonally adjusted annual rate of 5.57 million which is the highest rate in more than two years. Sales as tracked by the NAR are up 24% from January's bottom and are up 9.2% year over year. The median forecast by economists surveyed by MarketWatch looked for a smaller gain to a 5.38 million annual rate from a downwardly revised 5.09 million in August. "Sales surged" in September, said Lawrence Yun, chief economist for the real estate trade group, who gave much of the credit for the increase to the federal government's soon-to-expire $8,000 tax credit for first-time home buyers.

Frank Opposes Consolidated Super Regulator of Banks - There was "no reasonable chance" that legislators would create a consolidated super bank regulator, House Financial Services Committee Chairman Barney Frank (D-MA) told reporters Friday. Frank reiterated his support of combining the Office of Thrift Supervision and the Office of the Comptroller of the Currency, but he opposed a proposal introduced by Senate Banking Committee Chairman Christopher Dodd (D-CT) which would create a consolidated regulator made up of all bank regulators.

Bernanke: Biggest banks will face more rules - By Greg Robb - MarketWatch - "Federal Reserve Board chief Ben Bernanke said Friday that the biggest banks will be subject to more rules and regulations in coming months in order to protect the financial system. 'With the financial turmoil abating, now is the time for policymakers to take action to reduce the probability and severity of any future crisis,' Bernanke said at a Cape Cod conference put on the Federal Reserve Bank of Boston."

Microsoft Beats Estimates - Shares of Microsoft rose 9% in pre-market trading after the software giant reported fiscal first-quarter earnings of 40 cents a share vs. 48 cents a year ago.

Whirlpool Raises Full Year Guidance - Whirlpool raised its guidance for full-year earnings to $4.25 a share compared with earlier forecasts of $3.50 to $4 a share Friday.

Quick Notes for the Day - October 22

Leading Indicators Up 1% in September - The Conference Board reported that their leading economic indicators rose 1% in September which marks the sixth straight month of increases and a strong signal that a "recovery is developing." According to the group, 8 of 10 indicators were positive in September. Over the past six months, the index of leading indicator has risen 5.7% which marks the fastest increase since 1983. The index of coincident indicators was flat in September after two small increases in July and August. "These numbers strongly suggest that a recovery is developing," said Ken Goldstein, an economist for the the Conference Board. "However, the intensity of that recovery will depend on how much, and how soon, demand picks up."

Initial Jobless Claims Rise - The Labor Department reported that initial claims for state unemployment benefits rose in the latest week after two weeks of declines. Initial claims rose 11,000 to 531,000 versus claims that had fallen 34,000 in the prior two weeks. The four-week average of initial claims inched lower by 750 to 532,250 which is the lowest since mid-January. Meanwhile, the number of Americans receiving state jobless benefits fell 98,000 to 5.92 million in the week ending Oct 10. That's the lowest level since the end of March. The four-week moving average of continuing claims fell 59.250 to 6.03 million, the lowest level since the week ended April 11.

House Financial Services Committee Passes Consumer Financial Protection Agency - Thursday morning, the House Financial Services Committee voted to approve the creation of a controversial Consumer Financial Protection Agency. The new agency would be responsible for writing rules for mortgage and credit card products and is a direct result of the credit crunch. In a partisan vote, lawmakers in the House Financial Services Committee approved the wide-ranging agency.

Home Prices Fall 0.3% in August - The Federal Housing Finance Agency reported that home prices fell 0.3% in August after rising the previous three months. Prices are down 3.6% year over year and down 10.7% from the peak. Prices rose in four of nine regions, fell in four and were flat in the other. The biggest gains came in the Pacific region (up 1.2%) and Mountain region(up 0.8%), where the housing bubble was the most intense. The largest declines in August were in the South Atlantic (down 1.6%) and New England (down 1.1%).

Natural Gas Gains on Inventory Data - Natural gas futures erased earlier losses Thursday after the Energy Information Administration reported inventories rose 18 billion cubic feet. After the data, natural gas rose 0.8% to $5.138 per million British thermal units.

Quick Notes for the Day - October 21

Crude Oil Rises on Supply Data - Oil futures rose after the Energy Information Administration reported a smaller-than-expected buildup in crude inventories as imports fell to the lowest level in two months. Crude inventories rose 1.3 million barrels. Imports fell to 8.7 million barrels a day which is the lowest level since August 14. The EIA also reported a decline of 2.3 million barrels in gasoline inventories and a decrease of 800,000 barrels in distillate stockpiles. After the data, crude for December delivery rose more than 0.5% to close to $80 per barrel.

Obama to Announce Small Business Aid Efforts - By Robert Schroeder - MarketWatch - "President Barack Obama on Wednesday will announce new efforts aimed at bolstering small businesses, including proposals to boost limits on government loans and to make it easier to access funds from the Troubled Asset Relief Program."

Bernanke: Don't Move Up New Credit Card Rules - By Ronald D. Orol - MarketWatch - "Federal Reserve Chairman Ben Bernanke contends that legislation to accelerate the effective date of credit card reform legislation would have a detrimental impact on small credit card issuers, according to excerpts from a letter to a key lawmaker released Wednesday."

Quick Notes for the Day - October 20

PPI Falls in September - The Labor Department reported that wholesale prices dropped 0.6% in September after seasonable adjustments with energy prices falling 2.4%. The producer price index (PPI) has fallen 4.8% over the past 12 months. The core PPI (excludes food and energy) dropped 0.1% in September. Core prices have risen 1.8% over the past 12 months which is the smallest year over year rise since July 2007. The PPI had risen 1.7% in August.

September Housing Starts - The Commerce Department's initial estimate of September housing starts came in at seasonally adjusted annual rate of 590,000 with a big drop in multifamily units that was offset by an increase in starts of single-family homes. August's final numbers reflected a downward revision to 587,000 from 598,000 thus August versus September were essentially even. In the past year, starts are down 28.2%. Building permits fell 1.2% to a seasonally adjusted annual rate of 573,000 in September. Building permits for single-family homes dropped 3% to a 450,000 rate.

Bank of Canada Leaves Rates Unchanged - The Bank of Canada on Tuesday said it kept its overnight rate target at 0.25% and repeated its conditional commitment to keep it there until the end of the second quarter of 2010. "Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report, although significant fragilities remain," the BOC said.

The BOC also said growth is expected to be slightly higher in the second half of this year than previously projected, but to average slightly lower over the balance of its projection period. The Canadian economy is expected to grow by 3% in 2010 and 3.3% in 2011, after contracting by 2.4 per cent this year.

Coca-Cola Reports Profit Rise - Coca-Cola said that its third quarter profit rose to $1.896 billion from $1.89 billion. Per-share amount was unchanged at 81 cents a share. The results included a 1-cent restructuring charge. Operating revenue fell 4% to $8.04 billion.

Points of View - October 18

Fall has obviously arrived with that distinct chill in the air, but the debates on several noteworthy subjects are just heating up. The Senate Finance Committee passed the Baucus heath care bill this week with help from Senator Olympia Snowe (R-ME) to make it a "bipartisan" bill - even though she said her vote may change in the future. As only Jon Stewart can do, he said on his show (The Daily Show), "So her vote made it 14-9 instead of 13-10? They didn't even need her vote? Well, good thing they gutted the whole ... bill." With that, on to the topics for this weekend.

Health Care

What a Waste - The Economist - "Last year, when he was still the head of the independent Congressional Budget Office, Peter Orszag used to warn bleakly that the rising costs of health care would, if not subjected to radical reform, one day bankrupt the government. Over the past few decades, these costs have risen at a consistent 2.5 percentage points above the growth rate of the economy."

The Public Plan, Continued - The New York Times - "In the debate over health care reform, no issue has produced more fury and sound bites than the question of whether to include a government-run insurance plan. It is not indispensable, and its role would be limited. Even so, we strongly support inclusion of a public option — the bigger and stronger the better. That is the best way to give consumers more choices, inject more competition into insurance markets, hold down the cost of insurance policies, and save money for the federal budget."

The ABC Dilemma of Health Reform - By Vernon L. Smith - The Wall Street Journal - "Health-care systems everywhere encounter cost overruns and rationing devices, like queues, in their diverse attempts to deliver products for which demand has long grown faster than other economic sectors. Why is it so difficult to find the private and public means, the combination of markets and government assistance, that enables a preferred outcome to emerge?"

Why Health Care Is So Expensive in New York - By Stephen T. Parante and Tarren Bragdon - The Wall Street Journal - "Back in the early 1990s, New York Gov. Mario Cuomo pushed reforms aimed at fixing the state's health-care system. Those reforms were supposed to reduce the ranks of the uninsured as well as prevent insurance companies from unfairly charging people with health problems more than others or dropping sick people from the insurance rolls. They were also supposed to spark greater insurance competition."

Climate Change

A Bit of Bipartisanship - The New York Times - "Senator Lindsey Graham, Republican of South Carolina, who has long resisted climate change legislation, has joined the ranks of those pushing for a bipartisan agreement to limit greenhouse gas emissions. We welcome his change of heart. Mr. Graham has sensibly decided that it helps neither the planet, the country nor his party to block efforts to solve the problem of global warming."

Bad Policy Will Boil the Planet - The Economist - "As the December Copenhagen conference on climate change approaches, the world’s attention is focused on international negotiations. But they are not, ultimately, what will determine whether the planet boils or not. International agreements are helpful only in so far as they encourage individual countries to control their own emissions. What matters most is the domestic policies which those countries put in place, and their governments’ success in implementing them."

Cash for Clubbers - The Wall Street Journal - "The golf-cart boom has followed an IRS ruling that golf carts qualify for the electric-car credit as long as they are also road worthy. These qualifying golf carts are essentially the same as normal golf carts save for adding some safety features, such as side and rearview mirrors and three-point seat belts. They typically can go 15 to 25 miles per hour."

Yes We Can (Pass Climate Change Legislation) - By John Kerry & Lindsey Graham - The New York Times - "Conventional wisdom suggests that the prospect of Congress passing a comprehensive climate change bill soon is rapidly approaching zero. The divisions in our country on how to deal with climate change are deep. Many Democrats insist on tough new standards for curtailing the carbon emissions that cause global warming. Many Republicans remain concerned about the cost to Americans relative to the environmental benefit and are adamant about breaking our addiction to foreign sources of oil."

Goldman Sachs

Blankfein Puts Mouth Where Goldman’s Profit Is - By David Reilly - Bloomberg - "Every quarter, the same question bedevils Wall Street: What’s in the secret sauce that Goldman Sachs Group Inc. uses to make so much money?"

To Avoid Crises, We Need More Transparency - By Lloyd Blankfein - Financial Times - "One lesson from the crisis is the need for more effective systemic regulation. There has been a focus on who should exercise this responsibility. But the most critical question is what the systemic regulator should do, and what responsibilities will make it effective – not who, so much as how?"

Goldman Can Spare You a Dime - By Frank Rich - The New York Times - "At the dawn of the progressive era early in the last century, muckrakers attacked the first billionaire, John D. Rockefeller, for creating capitalism’s most ruthless monster. 'The Octopus' was their nickname for Standard Oil, the trust that controlled nearly 90 percent of American oil. But even in that primordial phase of the industrial era, Rockefeller was mindful of his public image and eager to counter it. “His great brainstorm,” writes his biographer, Ron Chernow, 'was undoubtedly his decision to dispense shiny souvenir dimes to adults and nickels to children as he moved about.' Who could hate an octopus tossing glittering coins?"

Quick Notes for the Day - October 16

Industrial Production Rises in September - The Federal Reserve reported that industrial production rose 0.7% in September. Additionally, production jumped at an annual rate of 5.2% for the third quarter which is the fastest growth in four years and the first quarterly increase since late 2007. Output of the nation's factories, mines and utilities rose 0.7% in September after an upwardly revised 1.2% gain in August and a 0.9% increase in July, the Fed said. Manufacturing output rose 0.9% in September. Capacity utilization rose to 70.5% in September from a revised 69.9% in August.

Consumer Sentiment Falls in Early October - Consumer sentiment pulled back in early October, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index fell to 69.4 from 73.5 in September. Sentiment had jumped by 8 points last month to its highest level since January 2008. Many economists thought the gain was unsustainable given the tough economic climate and some retreat would occur.

Gold Falls on Dollar and Value - Gold fell Friday for a third straight session as the metal was looking at its first weekly loss in three weeks. The downward trend was fueled by a strengthening dollar and worries that gold's recent rally may have been overdone.

Gold has gained in seven out of the past eight weeks, and has rallied 10% in two months. It rose more than $60 in the first six sessions of this month, and topped $1,070 an ounce Wednesday, marking a new intraday high for front-month gold contracts.

On the Comex division of the New York Mercantile Exchange, the thinly traded October contract lost $6.10, or 0.6%, to $1,043.70 an ounce. The contract is set to end the week down slightly. The most actively traded December contract fell $4.60, or 0.4%, to $1,045.80 an ounce.

IBM's Profits Rise, Sales Decline, But Raises Guidance - IBM reported after the close on Thursday that its 3rd quarter earnings were $3.2 billion ($2.40 a share) with revenue of $23.6 billion versus a year over year profit of $2.8 billion ($2.04) on $25.3 billion in revenue. Additionally, its gross margins as a percentage of revenue were 45.1% up from 43.3% a year ago. In fact, IBM raised its full-year earnings forecast to a profit of at least $9.85 a share from $9.70 a share.

Quick Notes for the Day - October 15

Initial Jobless Claims Drop - The Labor Department reported that initial applications for state unemployment benefits fell by 10,000 to a seasonally adjusted 514,000 last week. This is the fifth decline in six weeks. The number of people collecting state benefits fell by 75,000 to a seasonally adjusted 5.99 million in the week ending Oct. 3, the lowest since March. Including federal programs, the number of people claiming benefits of any kind in the week ending Sept. 26 was 9.24 million, not seasonally adjusted, down 127,000 from 9.36 million in the previous week.

CPI Rises 0.2% - The Labor Department reported that the Consumer Price Index (CPI) increased a seasonally adjusted 0.2% in September due to higher prices for cars, energy and medical care that offset the first declines ever recorded in residential rents and home ownership costs. The core CPI (does not include food or energy) also increased 0.2% in September on a seasonally adjusted basis. In the past year, the CPI has fallen 1.3%, while the core rate has risen 1.5%. Prices for food have fallen for the first time in more than 40 years in a year over year comparison with priced dropping 0.2% from 2008 to 2009.

October's Empire State Index Highest in 5 Years - Manufacturing activity in New York rose to its highest level in five years in October, the New York Federal Reserve Bank said Thursday. The bank's Empire State Manufacturing index rose to 34.6 in October from 18.9 in September. The new orders index climbed in October, while shipments shot up 30 points. The employment index was positive for the first time in more than a year.

Quick Notes for the Day - October 14

JP Morgan Chase Profit Substantially Higher Than Estimates - J.P. Morgan Chase said Wednesday that its third-quarter profit jumped sharply on strong investment banking results to $3.6 billion (82 cents a share) versus $527 million (9 cents) a share a year ago. On the downside, the company said credit costs remain high, so the firm added $2 billion of reserves to cover possible soured consumer loans. Consensus estimates had been for 52 cents a share with the estimates polled by Thomson Reuters ranging from 41 cents to 65 cents a share.

Retail Sales Drop Less Than Expected Following Cash for Clunkers - The "Cash for Clunkers" program helped retail sales in past months, but analysts had been worried about the affect it would have when the program ran out. The Commerce Department reported that overall retail sales dropped 1.5% in September, but sales excluding autos rose at a very nice 0.5% pace. In September, sales of motor vehicles dropped 10.4% which reversed the 7.3% gain in August. The results beat economists estimates of a 2.3% decline and 0.3% gain ex-autos.

September Import Prices Rise 0.1% - The Labor Department reported that nonfuel prices drove import prices up by 0.1% in September. Import prices have risen 7.3% so far in 2009 but are down 12% year over year. Prices of nonfuel imports rose 0.6% in September based primarily on the weaker dollar. Imported fuel prices fell 1.8% in September but have declined 34.4% year over year. Import prices in August were revised to a 1.6% gain, down from the initial estimate of a 2.0% increase. Prices of exports from the United States fell 0.3%.

Inventories Drop at a Record Pace - The Commerce Department reported that business inventories dropped at a 1.5% pace in August (which matched the record drop from December 2008 and October 2001) - even with sales increasing 1%. It was the 12th consecutive month of falling inventories.

The inventory-to-sales ratio fell to 1.33 in August from 1.36 in July which is an indication that businesses are making significant progress in reducing their inventory which has slowed growth over the past year. The inventory-to-sales ratio averaged about 1.28 before the recession. As inventory levels get to "normal" levels, an increase in sales will spur on new production which would promote job growth and imports.

Quick Notes for the Day - October 12

Oil Rises on Demand Forecasts - The International Energy Agency on Friday raised its forecasts for global oil demand for both this year and 2010, citing more optimistic economic estimates issued by the International Monetary Fund as well as strong preliminary data from the Americas and Asia.

The agency raised its expectations by 200,000 barrels a day, to average demand of 84.6 million barrels a day, for 2009; and by 350,000 barrels a day, to 86.1 million barrels a day, for 2010.

Crude oil gained about $1.50 (2.2%) to $73.35 a barrel Monday morning.

Barclays Deal Signals Change in Credit - By David Weidner - "Barclays' plan to sell a $6.3 billion portfolio of once-unsellable assets is a small step for the company, but a big step for the industry... Valuing toxic assets always has been the holy grail of the credit crisis. Once a market for securities emerged, banks could start freeing up capital on the balance sheet for lending -- even if it took losses against the face value of the securities."

DOT Warns Airlines to Follow Rules on Lost-Luggage - Reimburse Quickly - travelpulse - "In its notice, the Department’s Aviation Enforcement Office said that a number of carriers have policies stating that they will reimburse passengers only for buying necessities purchased more than 24 hours after arrival and limiting such reimbursements to the outbound legs of trips. This is in violation of DOT regulations which require that airlines cover all expenses caused by lost or delayed baggage up to $3,300 per passenger on domestic flights, DOT said."

Gasoline Prices Slowly Moving Up - The average gasoline prices edged up to $2.48 a gallon on Monday versus $2.46 last week according to the AAA Daily Fuel Gauge Report. A month ago, gasoline sold for $2.58 a gallon. A year ago, gasoline cost an average of $3.25 a gallon.

Note, Points of View - October 10

Note - Please be aware that John Baker's book signing has been changed to October 19th at 7:00 p.m. at the Barnes & Noble located at 2900 Peachtree Road, NE, Suite 310, Atlanta, Georgia 30305.

Points of View

The Bank Everyone Loves to Hate - By Holman W. Jenkins, Jr. - The Wall Street Journal - "Rightly or wrongly, a business occasionally is picked out by the fates to serve as the "unacceptable face of capitalism"—a term coined by the late British Prime Minister Edward Heath. Goldman Sachs, for a lot of people, is today's UFC."

Health Care

Making Health Care ‘Accountable’ - By Michelle Andrews - The New York Times - "Experts largely agree on the need to change how health care providers are paid. Currently, most are reimbursed for every service they provide, but so-called fee-for-service payment systems do little to encourage cost control or, since often no one provider is in charge, to effectively coordinate patient care."

The Stressed German Model - The Wall Street Journal - "Germany's health-care system was brought to life in 1883 by Otto von Bismarck and became the model for virtually every such state-directed national insurance plan since. Alas, the German system is starting to come apart at the financial seams. Germany's system relies on a handful of state-supported health insurers. This week they informed the government that the system was on the brink of a financial shortfall equal to nearly $11 billion."

The Baucus Conundrum - By David Brooks - The New York Times - "The longer the health care debate goes on, the more I become convinced that the American system needs fundamental reform. We need to transition away from a fee-for-service system to one that directs incentives toward better care, not more procedures. We need to move away from the employer-based system, which is eroding year by year. We need to move toward a more transparent system, in which people see the consequences of their choices."

Paying the Health Tax in Massachusetts - By Wendy Williams - The Wall Street Journal - "My husband retired from IBM about a decade ago, and as we aren't old enough for Medicare we still buy our health insurance through the company. But IBM, with its typical courtesy, informed us recently that we will be fined by the state."

Quick Notes for the Day - October 9

Trade Deficit Declines on Oil Imports - The Commerce Department reported that the trade deficit declined in August to $30.7 billion on a drop in crude oil imports. Imports declined to $158.9 billion in August which was a $913 million (0.6%) drop from July. Exports climbed to $128.2 billion which was an increase of $228 million (0.2%). Exports were led by autos, metals and soybeans. Exports of capital goods fell to the lowest level in four years. Imports and exports were boosted by increased trade in autos and auto parts.

Bernanke Comments on Monetary Policy - Interest-rate futures on Friday indicated traders raised bets that the Federal Reserve will raise its target overnight borrowing cost for banks, known as the federal funds rate, by next spring after central bank Chairman Ben Bernanke said officials will tighten monetary policy "when the economic outlook improves sufficiently." The March fed funds contract indicated traders expect rates to rise to 0.33% by then, from the current range of zero to a quarter of a percent. Futures for April show traders expect the benchmark rate to be about 0.39% by then. A week ago, the March contract indicated no rate hike by then and April futures priced in rates of 0.32%. Analysts say raising the fed funds rate will come long after the Fed pursues other methods to remove liquidity from the financial system, with many not forecasting rate increases until later in 2010.

Gold Drops, Dollar and Oil Rise on Bernanke's Comments - Gold futures fell after reaching new record highs in the previous session after Federal Chairman Bernanke said loose monetary policy will end eventually. Gold was down 0.6% to $1,048.90 an ounce. Meanwhile, Bernanke's comments strengthened the dollar which boosted oil futures as it perceived them as meaning that the outlook is brightening for the economy both domestically and globally.

Quick Notes for the Day - October 8

Initial Jobless Claims Drops - The Labor Department reported that the initial claims for state unemployment benefits fell by 33,000 to a seasonally adjusted 521,000 last week. This is the lowest initial claims number since January 2009. Continuing state benefit claims dropped by 72,000 to 6.04 million which is the lowest number since March 2009. The number of people collecting extended federal benefits rose by 68,000 to 3.79 million. Including those federal programs, the number of people claiming benefits of any kind in the week ending Sept. 19 was 9.36 million, not seasonally adjusted, down from 9.42 million in the previous week.

Retail Stocks Up on September Sales Data - Retail stocks rose Thursday morning as the sector's main indicator gained traction following September sales results buoyed by the late Labor Day weekend and some signs of economic improvement.

Among 30 retailers that reported the September numbers, about 80% beat Wall Street's expectations, according to Thomson Reuters.

Target's sales fell 1.7%, slightly less than the 2% drop analysts estimated. Kohl's sales rose 5.5%, compared with a 0.1% estimate, after the company said all regions and all lines of businesses reported gains. Ross, TJ Maxx, Macy's, and Nordstrom's all also beat expectations.

Mortgage Rates Drop - Rates on fixed-rate mortgages fell again this week, with the average 30-year fixed-rate mortgage averaging 4.87% according to Freddie Mac's weekly survey of conforming rates. The 30-year fixed-mortgage rate averaged 4.94% last week, and 5.94% a year ago.

Fifteen-year fixed-rate mortgages also dropped, averaging 4.33% for the week ending Oct. 8, down from 4.36% last week and 5.63% a year ago. This week's average is the lowest on record, which dates back to 1991.

Consumer Debt Drops More Than Expected - The Federal Reserve said Wednesday that consumers cut $11.98 billion in borrowing in August, trimming their outstanding debt to $2.46 trillion, representing a 5.8% annual rate of decline and deeper than economists had expected. Credit-card debt dropped the most, falling 13.1%, or $9.91 billion, to $899.41 billion. It was the 11th uninterrupted month of declines, the longest on record.

Quick Notes for the Day - October 7

Oil Drops on Inventory Data - Oil futures reversed from earlier gains Wednesday morning after the EIA reported a surprisingly large increase in gasoline inventories last week. Demand for gasoline remained unchanged from previous weeks, but gasoline production and imports had risen from the previous week. Gasoline inventories increased by 2.9 million barrels according to the report. After the report, crude for declined about 0.2% to $70.76 a barrel versus being up close to 1% prior to the report. Distillate inventories, which include diesel and heating oil, rose by 700,000 barrels, the EIA said.

Fed Buys $1.3 Billion in Treasurys - The Federal Reserve Bank of New York bought $1.3 billion in Treasurys for the maturity range 2020 to 2026. This is the only scheduled buyback for the week. The Fed plans to finish the buybacks later this month which have been an effort to keep down borrowing costs.

HSBC Looking to Buy RBS Assets in Asia - HSBC is in advanced discussions to buy the retail and commercial banking assets of Royal Bank of Scotland in China, India and Malaysia, according to a Wall Street Journal report citing a person familiar with the matter. HSBC has emerged as the leading bidder after exclusive talks between RBS and Standard Chartered stalled over the price, the report said. HSBC said in September that its CEO would move his main office from London to Kong Kong as part of the bank's plan to target growth in Asia.

Quick Notes for the Day - October 5

ISM Index Rises Above 50 - The Institute for Supply Management released the ISM non-manufacturing index report this morning with a 50.9% number for September. This was the first time the service sectors of the economy had expanded since May 2008. The index had been at 48.4% in August. A number above 50% marks grow in the economy.

Goldman Sachs Upgrades Major Banks - Analysts at Goldman Sachs got more optimistic about large US banks Monday raising their coverage view on the sector to attractive from neutral. Among specific names, they upgraded Wells Fargo to buy and Comerica to neutral. They added Capital One to their conviction buy list, which also includes J.P. Morgan Chase and Bank of America. "The market has failed to recognize the dramatic improvement in earnings power at the large banks versus the regionals," they wrote, adding that, "We believe this difference in earnings power has not been fully reflected in share prices."

UK PMI Rises to Two Year High - Britain's services sector grew at its strongest pace in two years in September, according to the CIPS/Markit purchasing managers index released Monday. The index jumped to 55.3 from 54.1 in August. For the third quarter, the index averaged 54.2 which was its best quarter since the third quarter of 2007, Markit said.

ECB's Trichet Says Emerging Currencies Should Rise - Some emerging economies should let their currencies strengthen versus the euro and the U.S. dollar, European Central Bank President Jean-Claude Trichet told Bloomberg Television Monday on the sidelines of the International Monetary Fund and World Bank annual meetings in Istanbul. Without identifying individual countries, Trichet said some currencies "have in the medium run to appreciate vis-a-vis the dollar and the euro."

Announcements - October 3

We have two exciting announcements today!

The big announcement is that Rollins Financial and Rollins & Associates are happy to welcome our newest (and smallest) member, Harper Wilcox. Harper is the beautiful baby daughter of Eddie and Jennifer Wilcox. She arrived on October 1 weighing in at 8 pounds 14 ounces, and everyone is doing well. We extend our congratulations to the entire Wilcox family!

Second, Joe Rollins and Robby Schultz were named in the October issue of Atlanta Magazine as 2009 FIVE STAR Wealth Managers. The individuals who receive this award are selected based on a rigorous research process and represent less than 4% of Wealth Managers in the Atlanta area. If you know anything about Rollins, you know it is a team effort, so congratulations to the entire Rollins team. Click here to read the press release.

Quick Notes for the Day - October 2

September Payroll Losses Rise - The Labor Department reported that 263,000 payroll jobs were lost which triggered a 0.1% rise in the unemployment rate to 9.8%. Total hours worked in the economy fell by 0.5% with the average workweek now at 33 hours. Average hourly earnings rose just 1 penny (0.1%) to $18.67.

Factory Orders Fall 0.8% - The Commerce Department reported that factory orders decreased by 0.8% in August. Orders for durable goods decreased 2.6% in August, revised down from 2.4% estimated a week ago. Orders for nondurable goods rose 0.8%. Core capital equipment orders fell 0.9% in August which is higher than last week's estimate of -1.9%.

BofA Paying TARP Dividends - Bank of America said on Friday it will pay out about $713 million in dividends to the US government for its preferred stock that was purchased. BofA said it has paid $1.83 billion in dividends to the government this year through September.

Euro Zone PPI Rises - Producer prices in the euro area rose 0.4% in August versus July but fell 7.5% year over year according to the Eurostat statistics agency. Excluding energy prices, and PPI rose 0.1% on a monthly basis.

British Housing Prices Stable Year Over Year - British house prices rose for the fifth consecutive month in September which brought the average price even year over year to flat. This marks the first time the annual price change has not been negative since March 2008 according to mortgage lender Nationwide.

The average price saw a monthly rise of 0.9% to 161,816 pounds ($258,736). Previously, housing prices rose 1.4% in August which left the average 2.7% below its year-ago level.

Quick Notes for the Day - October 1

Consumer Spending Jumps on Cash for Clunkers - The Commerce Department reported that consumer spending jumped 1.3% in August which was the largest jump in eight years. The "Cash for Clunkers" program (government subsidies to buy cars) was considered the driving force behind the change. After adjusting for inflation, real consumer spending rose 0.9%, also the biggest gain since October 2001. Personal incomes edged higher by 0.2%. After taxes and after adjusting for higher prices, real disposable incomes fell 0.2%, the third decline in a row. Consumer prices rose 0.3% in the month. Prices excluding food and energy rose 0.1%. In the past year, these so-called core prices are up 1.3%, the slowest core inflation rate since September 2001.

Pending Homes Sales Rises Again - For the seventh month in a row, the pending home sales index rose with the latest figure being a rise of 6.4% in August to its highest level since March 2007 according to the National Association of Realtors. For the first time since the index was created in 2001, the index has risen for seven straight months. The pending-home-sales index has been stronger than existing-home sales (closing of sale). The pending-sales index has risen 19% since December versus closed sales that are up about 8%.

30 Year Mortgages Drop Below 5%, 15 Year Rates at Record Low - According to Freddie Mac, the 30-year fixed-rate mortgage averaged 4.94% for the week ending Oct. 1, down from 5.04% last week and 6.10% a year ago. The mortgage hasn't been below 5% since the week ending May 28, when it averaged 4.91%.

The 15-year fixed-rate mortgage averaged 4.36% this week, down from last week's 4.46% average. The mortgage averaged 5.78% a year ago. It hasn't been lower since Freddie Mac started tracking it in 1991.

ISM Index Drops Slightly to 52.6 - The Institute for Supply Management (ISM) reported Thursday that the ISM index dropped slightly to 52.6 in September versus 52.9 in August. While still an expansion (readings above 50 indicate expansion), most economists had predicted a reading closer to 54.

Bernanke - No Immediate Risks to Dollar's Status - The dollar is not at any immediate risk of losing its status as a reserve currency, Federal Chairman Ben Bernanke said Thursday during a question and answer session with the House Financial Services Committee. But if the U.S. doesn't put its "economic house in order," risk could eventually grow for the U.S. currency, Bernanke said, referring to a growing projected budget deficit.