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."

Unemployment

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."

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.

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.

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."

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."

Employment

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."

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.'"

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."

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.

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.

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.

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.

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.

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%.

Articles

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."

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.

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.

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

Retailers	October 2009 Same-Store Sales Est.	October 2009 Same-Store Sales Actual
Costco Wholesale (total sales)	4.7%	5.0%
Target	Breakeven	(0.1%)
BJ's Wholesale	(0.3%)	3.5%
JCPenney	(2.3%)	(4.5%)
Kohl's	6.2%	1.4%
Dillards	(8.0%)	(8.0%)
JW Nordstrom	3.0%	6.5%
Saks	(3.6%)	0.7%
Macy's	(0.1%)	(0.8%)
Gap	1.6%	4.0%
TJX	10.1%	10%
Limited	(2.7%)	(4.0%)
Ross Stores	7.3%	9%
Stein Mart	(6.5%)	(4.9%)
Abercrombie	(14.7%)	(15%)
American Eagle	1.7%	(5%)
Children's Place	(3.1%)	(2.0%)
Aeropostale	13.8%	3%
Hot Topic	(3.5%)	(2.6%)
Wet Seal	(7.8%)	(1.3%)
The Buckle	5.3%	4.3%
Zumiez	(6.7%)	(8.9%)
Walgreen	4.8%	4.9%
Rite Aid	0.1%	(0.5%)

source: Thomson Financial, Company reports. Figures in parenthesis are losses.

Quick Notes for the Day - November 3

Factory Orders Rise - The Commerce Department estimated that orders for manufactured goods increased a seasonally adjusted 0.9% in September on gains in machinery, autos, defense goods and chemicals. Factory orders have risen in five of the past six months, but are down 13.9% in the first nine months of 2009 compared with the same period a year ago. Orders for durable goods increased an upwardly revised 1.4% in September versus the 1% gain estimated last week. Orders and shipments for nondurable goods increased 0.6%. Inventories fell 1%, the 13th consecutive decline.

UK PMI Rises - The CIPS/Markit manufacturing purchasing managers index (PMI) rose to 53.7 from a revised reading of 49.9 in September. A figure of more than 50 means a majority of managers saw a rise in activity, while a figure of less than 50 signals a decline.

October ISM Jumps to 55.7% - The Institute for Supply Management (ISM) reported Monday that the ISM index jumped to 55.7% in October from 52.6% in September. Readings above 50 indicate expansion. Below the headline, the key employment index improved to 53.1 in October from 46.2 in the prior month.

Pending Home Sales Rise 6.1% in September - The National Association of Realtors reported Monday that the index that tracks pending sales of existing homes rose a seasonally adjusted 6.1% in September for its eighth consecutive monthly increase. Pending sales are up 19.8% compared with September 2008. Buyers were rushing to beat the expiration of an $8,000 federal tax credit for first-time buyers, according to Lawrence Yun, chief economist for the real estate lobbying and advocacy group. Sales activity typically drops in the fall. On a non-seasonally adjusted basis pending sales fell 7.8% in September.

Berkshire Hathaway to Buy Burlington Northern - "Warren Buffett's Berkshire Hathaway Inc will pay $26 billion to buy out railroad Burlington Northern Santa Fe Corp in what the billionaire investor called a bet on the U.S. economy. The deal, Buffett's biggest-ever acquisition, is priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion."