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 - June 10

Treasurys & Interest Rates in the News - Treasury prices stabilized Wednesday after Federal Reserve Bank of Richmond President Jeffrey Lacker reiterated The Fed's resolve to fight inflation. He also said the government's stimulus plans are not really boosting growth.

Meanwhile, Russia's central bank plans to cut the proportion of U.S. Treasurys in its foreign exchange reserves based on media reports citing the bank's First Deputy Chairman Alexei Ulyukayev. Ulyukayev said that Russia would switch some of its reserves into bonds issued by the International Monetary Fund (IMF), according to the reports. In late May, the IMF's managing director said in a statement that Russia intends to invest up to $10 billion in the first-ever notes to be issued by the fund. As of late May, Russia's international reserves stood at $401.1 billion, the third biggest in the world.

In Europe, ECB Governing Council member Axel Weber said central banks may need to raise interest rates before inflation risks appear in order to choke off potential dangers during a a speech in Frankfurt. "The symmetrical approach to monetary policy demands that risks linked to faster money and credit growth, booming asset markets -- particularly a boom on the real estate market -- and low risk premia, need to be confronted decisively," said Weber, who also heads the German Bundesbank, according to Dow Jones Newswires. Weber said his comments shouldn't be seen in the context of the ECB's current monetary policy stance. *** Note - The ECB's focus is only on inflation, and this past Fall they were heavily criticized for not lowering rates. At the time, they continued to focus solely on inflationary pressures.

Home Depot - "The worst of the correction is behind us..." - Home Depot raised its full year profit forecasts on Wednesday. CEO Frank Blake said at the company's analyst and investor conference Wednesday that the "worst of the correction is behind us" in the housing market. Home Depot had previously forecast profit to be down 7%, and readjusted its forecast to flat to down 7%. The improved forecast was based on merchandising, operational changes, and sales that will still be down year over year, but at a better rate than previously expected.

Chrysler Deal Final - Chrysler Group LLC said Wednesday that it has finalized its global strategic alliance with Italian auto maker Fiat. The deal will see Fiat provide Chrysler with technology, platforms and powertrains for small- and medium-sized cars, as well as Fiat's international distribution network, especially in Latin America and Russia. Fiat named its chief executive, Sergio Marchionne, as the new Chrysler CEO. After coming through bankruptcy court, Chrysler is now 20% owned by Fiat, 55% by its workers' union, 8% by the U.S. government and 2% by Canada. Fiat's share could rise to 35% depending on certain milestones, though it can't obtain a majority stake until all taxpayer funds are repaid.

Gasoline Prices Slightly Higher - According to the AAA Daily Fuel Guage Report, the average retail price for a gallon of unleaded gasoline in the U.S. climbed a penny to $2.63 a gallon on Wednesday and $0.08 higher than a week ago. Gasoline sold for $2.55 a gallon a week ago and $2.23 a gallon a month ago. A year ago, gasoline cost an average of $4.04 a gallon.

Trade Gap Widens Slightly for April - The trade deficit widened by 2.2% in April to $29.2 billion, the Commerce Department said Wednesday. Exports fell faster than imports in January. Exports are now at their lowest level since July 2006 while imports have sunk to their lowest level since September 2004. Through the first four months of this year, the trade deficit was $120.4 billion, down significantly from $244.8 billion over the same period last year. The U.S. trade deficit with China narrowed to $16.75 billion in compared with $20.30 billion in the same month last year.

Quick Notes for the Day - June 4

Fed Buys Treasurys - The Federal Reserve Bank bought $7.494 billion in Treasurys maturing between 2011 and 2012 on Thursday, the second operation this week and the latest in the central bank's attempts to keep a lid on borrowing costs and spur economic activity. Dealers offered $36.628 billion to be purchased. The last three times the Fed bought from this maturity range, it purchased about $7.3 billion.

Continuing Claims Fall, Productivity Rises - After reaching new weekly record highs since January, the number of continuing claims for state unemployment benefits has started to decline. The Labor Department reported a decrease of 15,000 to 6.74 million in the week ended May 23. First-time applications for benefits fell 4,000 to 621,000 in the week ended May 30, reaching the lowest level since early May. Additionally, the Labor Department report that productivity rose 1.6% in the first quarter as U.S. firms cut their workforces, outpacing the drop in output. An earlier estimate by the Labor Department had been for a 0.8% advance.

30 Year Mortgage Rates Jump - The 30-year fixed-rate mortgage averaged 5.29% for the week ending June 4, up from last week's 4.91% average. The mortgage averaged 6.09% a year ago.

Foreign Banks Keep Rates Unchanged - The Bank of England (BOE), Bank of Canada (BOC), and the European Central Bank (ECB) each decided to keep interest rates unchanged.

Quick Notes for the Day - May 7

The Fed & Regulations - The Federal Reserve will be a more forceful bank regulator in the future as a result of the current banking crisis, Federal Reserve Board Chairman Ben Bernanke said this morning. The crisis generated "extensive introspection" at The Fed, Bernanke said. The conclusion was that there is a need for "heightened vigilance and forcefulness" on the part of supervisors, he said. Bernanke defended the bank stress tests as "rigorous." Despite its failings, the Fed doesn't want to give up any of its regulatory powers, Bernanke said. The Fed chairman repeated that Washington needs new powers to address the risks to the financial system as a whole. Some members of Congress want this authority to be given to the Fed.

ECB Cuts Its Rate - The European Central Bank (ECB) cut its key interest rate by a quarter point to 1%, a new low for the Frankfurt-based central bank that sets interest rate policy in the euro zone.

Bank of England Purchasing Bonds - The Bank of England on Thursday held interest rates at record-low levels at 0.5%, as anticipated, but surprisingly increased its bond purchase program to 125 billion pounds from 75 billion pounds.

Wal-Mart April Sales Up - Wal-Mart said Thursday that its April sales rose 5%, exceeding its own projection and analysts' 2.9% average estimate. Sales at Wal-Mart stores in the U.S. rose 5.9%, exceeding estimates, helped in part by the Easter calendar shift and an acceleration of traffic and strength in seasonal and discretionary items. Home products had positive sales. The company expects second-quarter to face "challenging comparisons" to the year-earlier quarter, which benefited from the stimulus checks. Sam's Club sales were up 0.3%, missing estimates of a 1.8% gain as jewelry and furniture sales remained soft. The wholesale club chain also was hurt by the closing of stores on Easter Sunday. Meanwhile, the H1N1 swine flu outbreak has affected operations at Walmex in Mexico, Wal-Mart said. Looking forward, Wal-Mart said it will no longer report monthly sales.

Initial Jobless Claims Drop - First-time claims for state unemployment benefits fell to the lowest level since late January, the Labor Department reported Thursday, in a sign that a peak may have been passed. The number of initial claims in the week ending May 2 fell 34,000 to 601,000. The four-week average of these initial claims fell 14,750 to 623,500. However, the level of ongoing claims continues to reach record highs, with a gain of 56,000 to reach 6.35 million in the week ending April 25. The four-week moving average of continuing claims also hit yet another record high, rising 125,250 to 6.21 million. The U.S. insured unemployment rate, which represents the portion of all workers covered by unemployment insurance who are collecting benefits, rose to 4.8% (the highest level since December 1982).

Productivity Rises in 1st Quarter - Productivity rose in the first quarter as firms slashed their workforce, outpacing the drop in output, the Labor Department reported Thursday. Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% (the largest drop in hours since 1975). Economists had expected no change in productivity, and a 3% gain in unit labor costs. Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%. Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.

Quick Notes & Good Articles - April 2

After our little technical hiatus, we should be back up and running today. Google (which owns the blog service and the e-mail service) has apparently fixed all of the problems, so the feed and e-mails should be back up now.

In the interim, there have been some interesting news stories such as the repayment of TARP funds by some banks, a G20 meeting, and the mark-to-market issue. Since we have not posted anything substantial since Monday, take some time to go through the notes and the articles.

Financials Continue to Rise on Mark-to-Market Ease - Financial stocks have been rising on an expected decision from the nation's accounting board to ease guidelines and help bolster the bottom line at troubled banks. The Financial Accounting Standards Board (FASB) is expected to vote Thursday to give auditors more flexibility in valuing illiquid assets that may have a long-term value and strong cash flow -- in other words, they are not distressed assets, but they can't be sold in the markets today.

ECB Cuts Rate by 0.25% to 1.25%; Not Unanimous - At a post-rate decision press conference, European Central Bank (ECB) President Jean-Claude Trichet said the decision to cut rates by a quarter-point to 1.25% wasn't unanimous, it was by "consensus." Further, at the next meeting, non-standard measures akin to quantitative easing will be discussed. He said the main refi rate of 1.25% could go lower, but said the deposit rate of 0.25% probably would not.

ConocoPhillips Refineries Running at 80% Capacity - ConocoPhillips said Thursday its total first-quarter production is expected to be approximately 30,000 barrels of oil equivalent per day higher than the fourth quarter. The company's exploration and production results will be impacted by losses in the U.S. lower 48 states and Canada mainly because of lower realized natural gas prices. Refining and marketing results for the first quarter are expected to be lower due to a decrease of more than 50% in worldwide marketing margins. The company said its domestic refinery utilization rate is expected to be approximately 80%, "reflecting significant planned turnaround activity in the U.S. Gulf Coast and East Coast regions."

Economic Articles

Four Small Banks Are the First to Pay Back TARP Funds - By Eric Dash - The New York Times - "Four small banks became the first to return millions of dollars of emergency aid, and more may soon follow as the industry tries to escape what it considers the onerous conditions attached to the government’s money. Signature Bank of New York said on Tuesday that it had repaid $120 million to the Treasury Department. Old National Bancorp of Indiana returned $100 million, Iberiabank of Louisiana paid back $90 million, and Bank of Marin Bancorp of Novato, Calif., repaid $28 million. All of the banks paid 5 percent interest on the money they had received."

Treasury's Very Private Asset Fund - By The Wall Street Journal - "Why write the rules to favor only a handful of bidders? - The Obama Administration insists it wants to "partner" with private investors for its new toxic-asset purchase plan. But the more details that emerge, the more it seems Treasury wants to work with only a select few companies. This is no way to conduct a bank clean-up."

Miscellaneous Articles

Reminders From Out of the Blue - By David Pogue - The New York Times - For everyone that is too busy to remember everything... "In a nutshell, Reqall is an effortless personal reminder system. You speed-dial its toll-free number and dictate whatever it is you want to remember."

Sources: The Wall Street Journal, The New York Times, Marketwatch

Blast From the Past

From the Desk of Joe Rollins

When President-elect Obama announced his financial consultants last week, I felt a “blast from the past.” One of those consultants is the 81-year old financial giant and former Federal Reserve Chairman Paul Volcker. Many have called Volcker a “giant,” but they’re often referring to his physical size and not his standing in the financial community. However, I have always had great respect for him since he was willing in the 1980’s to take the political heat for his controversial efforts to improve the economy, which ultimately led to an economic boom that arguably continued until this year.

Much can be learned by Volcker and the mistakes made by his successor, Dr. Alan Greenspan. Everyone knows that if you don’t learn from the past, you’re destined to fail in the future.

It may be difficult to imagine, but Paul Volcker used to testify before Senate while smoking a large cigar. His physical size – all 6 feet 7 inches – dwarfed the desk he sat behind. He looked as if he was sitting behind a grade school desk! In many cases, the hearings became extremely confrontational, but the giant in the room never backed down, not even for a minute.

When Ronald Reagan was elected President in 1980, inflation was in the double-digits. The United States – while under the economic direction of President Gerald Ford and President Jimmy Carter – was bordering on hyperinflation and suffering from a lack of public confidence. Federal Reserve Chairman Volcker convinced Reagan that tough medicine needed to be administered in an effort to cure the economy and for business to move forward. In the intervening years, the Federal Reserve increased the prime rate of interest all the way to 20%. Coupled with the tax cuts pushed through Congress by President Reagan, economic prosperity ensued for nearly 20 years.

Volcker recognized that the economy had to endure the bitter pill of higher interest rates and lower expansion in order to recover. He was a giant of a man in that he took the political pressure from Congress in order to cure the economy. Interestingly, Paul Volcker is a long-time Democrat (even though he never discussed his political affiliation during his years as Federal Reserve Chairman) who was able to successfully work with a Democrats and Republicans alike. It has always been interesting to me that the thanks he got for doing such an excellent job as Federal Reserve Chairman was being replaced by Dr. Alan Greenspan in 1987.

Dr. Greenspan’s first action as Federal Reserve Chairman was to increase interest rates dramatically, creating the stock market crash of 1987. After that, he slowed down the growth of money and choked off the economy, creating the recession in 1990. He created a poor economy by slowing money and creating higher interest rates, which effectually guaranteed the election of Bill Clinton. Ironically, by the time President Clinton entered office, the economy had already started recovering and we had several great business years.

After September 11, 2001, Greenspan lowered interest rates and kept them at such historically low levels that they helped to create our current economic crisis. In many respects, the financial chaos that we’re seeing today is directly attributable to the actions of Dr. Alan Greenspan.

Arguably, Greenspan’s actions were some of the major factors responsible for the election of Barack Obama, a Democrat. Isn’t it ironic that a lifelong, staunch Republican, Dr. Greenspan, was instrumental in getting two Democratic presidents elected?

There’s no doubt that these are extraordinary times. The last 90 days have been incomprehensible – not to mention excruciating. Nearly every day a new record is established either on the upside or the downside. Here are some examples of recent astounding events:

Today the 30-year Treasury bond is quoted at 3.04%. In my post from two weeks ago, “Fixing the Housing Crisis,” I wrote that the 30-year Treasury was yielding 3.48%, which was a 50-year low on the 30-year Treasury. Today, it’s only 15% better – in two weeks!

A two-year Treasury bond today is yielding 0.8% annually – not 1%, but 80% of 1%. Therefore, you could invest your money with the Treasury for two years and basically get nothing more than the amount of your original investment. Rates this low have never been seen before in the United States.

The Bank of England reduced their equivalent to the Federal Funds Rate this week to 2%. This is the lowest rate for the Bank of England since 1951 and matches the lowest since 1694! The European Central Bank (the “ECB”) reduced their benchmark interest rates 2.5% annualized. This is the lowest rate ever for the ECB.

The U.S.’s federal funds rate is presently 1% annualized. The Federal Open Market Committee (the “FOMC”) meets next week, and there is wide speculation that they may reduce the federal funds rate to 0.5% annualized. If they do, that will be the lowest rate ever in the United States.

In June of 2008, a barrel of oil was selling for nearly $145. A barrel of oil is selling today for $41. Therefore, in only five months the price of oil has declined almost 72%. In actuality, not only has oil decreased in price, but a broader list of commodity prices has also been cut in half. A period of disinflation is occurring everywhere at the current time. What makes this so remarkable is the speed at which these changes have occurred.

It is important to understand that stock market investing relies heavily upon interest rates. The lower interest rates become, the more attractive stocks are. With money market accounts at major banks now generating less than one-half of 1% annualized, we will soon see a tremendous movement away from commercial money market accounts into the stock market by investors seeking higher returns. The only superior alternative to money market funds is stock market investing.

Also this week we received word that the Federal Reserve is proposing a major program to offer new home mortgages at 4.5%. It appears that the Federal Reserve read my “Fixing the Housing Crisis” post, where I suggested exactly the same program. In my post, I recommended that mortgage interest rates be cut to 4% given the rate on the current 30-year Treasury bond. The Federal Reserve recommended a 4.5% rate, but that included the fees for brokers and other closing-related expenses. Because the 30-year Treasury bond has fallen to such a low level, it should now be doable for the Treasury to offer mortgages at 4.0%. I would appreciate it if Dr. Bernanke would give me some credit for the idea...

If this program is approved, it would make homeownership available to almost all Americans. In theory, any credit worthy individual who can afford rent would be financially able to purchase a home at a price within their means. This program will be totally different from the sub-prime mortgage fiasco. The rates on these loans will be fixed for 30 years and will only be extended to credit-deserving individuals. This will not only benefit the homebuilding industry but also the homeowners themselves. I cannot envision a more win-win situation.

Just two weeks ago in my post of November 22nd, I indicated that stocks had gotten so cheap that it was worth looking into purchasing some, especially General Electric and Goldman Sachs. As mentioned in that post, General Electric was at $12.84 per share and Goldman Sachs was at $52 per share. Those same two stocks are selling today for $18 and $70, respectively. Accordingly, General Electric has had a total gain over the two-week period of an astonishing 40% and Goldman Sachs is up a cool 35%. I know it’s hard to believe that these gains occurred in only a two-week period, but I want to assure new investors that these are not normal times.

I understand that the news on the economy is terrible; that is not unusual during a period of severe economic contraction. But I am also sure that the time to invest in the stock market is when things look grimmest. I cannot imagine things looking grimmer than they look today.

The purpose of today’s post is to illustrate that things really are getting better. Interest rates have decreased dramatically and credit is becoming more and more available. The Federal Reserve is buying mortgages and credit card receivables. The new program to directly fund homeownership will make a dramatic difference. There will be a significant positive turn in confidence when some of this money starts reaching the consumer.

The public in general and Wall Street in particular should appreciate the appointment of President-elect Obama’s financial team. Each and every single appointee is experienced in the hard knocks of the financial world. It is encouraging to see that there will be a smooth transition of power between the Bush administration and the Obama administration. In fact, some of the key positions are actually holdovers from the Bush administration.

When public confidence is restored, there will be a rush for those who are currently invested in low yielding money market funds to get back into the stock market. It’s hard to even imagine another period of time where an investor felt more comfortable being in a money market account paying one-half of 1% per year, taxed at 35%, instead of owning stock in something like Southern Company, which is now paying a dividend of 4.6% annualized at a tax rate of 15%. One day soon these money market funds will migrate back to the stock market, which will create a spectacular buy of stocks.

The issues regarding the U.S. economy today have not been solved, but never in the history of finance has there been such a coordinated worldwide attempt to stimulate the economy. It is estimated now that the U.S. and other countries will be injecting close to $4 trillion in new liquidity over the next 12 months. This influx of money will create better credit, more jobs and higher income to consumers. The inevitable result will be higher stock prices!

I find it incredibly ironic that the culprit of the current bad economy is the consumer. For years and years, the financial press criticized consumers for spending and borrowing too much. In mid-September, when they announced that all the banks were suffering severe financial difficulties, consumers rightly shut down and quit spending. Purchasing items like automobiles came to a halt, and consumers were only purchasing necessities. I keep hearing that consumers are deleveraging, but I honestly think they’re just being conservative.

The end result is that because consumers weren’t spending, the car companies suffered, the retail stores had poor sales, and people got laid off. In real terms, a bad economy was created by bad publicity. No one will ever know whether the economy would have survived without all the negative press, but I cannot at this point believe that the economy is really as bad – or will stay as bad – as the financial press touts.

A broad band of economists is currently projecting positive economic events by the second half of 2009. Stock markets tend to rally approximately six months prior to the economy improving. Given that six months is in January of 2009, we should be looking for better financial results shortly.

Bank of England, ECB Cut Inteest Rates

Britain slashed borrowing costs by a surprising 1.5% points on Thursday and the European Central Bank (ECB) also cut rates as part of concerted efforts to revive world commerce.

The ECB met market expectations by reducing its interest rate by 0.5%, a move political leaders hope will limit any move into recession and curb job losses. The ECB move took its benchmark rate to 3.25 percent.

The Bank of England, faced with a slumping housing market, a decline in manufacturing and increased unemployment, astonished analysts by announcing a hefty 1.5 percentage point cut, the biggest since the Bank gained independence to set rates 11 years ago and a mark of the gravity of concern over the economy.

Matthew Sharratt, UK economist at Bank of America, echoed widespread sentiment in calling the British cut "astonishing." Jonathan Loynes of Capital Economics called it "spectacular."

"There is still more to do," Loynes said. "At 3%, UK interest rates are still well above U.S. ones when economic conditions suggest they should be as low if not lower ...Our view remains that UK rates will fall to 1% or below."

Last month, the Bank of England joined forces with the U.S. Federal Reserve and European Central Bank to make an emergency half-point cut in interest rates. Politicians in the 15-country euro zone hope a rate cut from the ECB, possibly half a point, will help stave off recession and limit unemployment.

The 15-nation euro zone's economy, which had grown steadily since the bloc's creation in 1999, contracted by 0.2% in the second quarter this year and most economists expect further shrinkage in third quarter GDP figures on November 14.

Banks infected by a collapse of confidence within the financial system are still wary of extending loans and are reluctant to pass cuts on to borrowers. But the sheer scale of Thursday's cut will put pressure on British banks to conform and back smaller businesses.

The Swiss national bank also cut its rates by 50 basis points.

Markets looked to U.S. President-elect Barack Obama to name key members of an economic team that must tackle a crisis that originated in the U.S. housing market 15 months ago before enveloping the banking system of the global economy.

"After the world rally on the day of the presidential election, investors have now shifted their focus to how fast, and how well the new administration will address the current economic issues," said Yoo Soo-min, analyst at Hyundai Securities.

U.S. crude oil lost 2% to $63.96 a barrel, against a record high above $147 set in July. The fall will reduce inflationary pressure on national economies and ease rate cuts.

Falling world oil prices and ebbing economic activity have effectively banished fears of inflation that dominated policy thinking only a year ago.

The first black U.S. president has to wait until January 20 to move into the White House. In the meantime, though, he must decide on a successor for Treasury Secretary Henry Paulson, one of the architects of a $700 billion state rescue package inconceivable before the crisis broke.

Timothy Geithner, president of the Federal Reserve Bank of New York, former Treasury Secretary Lawrence Summers and former Fed Chairman Paul Volcker are among those mooted for the Treasury post. Obama may announce his pick on Thursday.

A Swedish central bank official said the shape of a Nordic aid package to crisis-hit Iceland had been decided. Norway said earlier this week it would provide Iceland with a 500 million euro ($643 million) loan to help the country rebuild an economy in tatters following the collapse of its biggest banks.

Source: Reuters

Global Central Banks Cut Rates by 50 Basis Points - England Announces Financial Support Plan for Banks

It has been a busy night and morning around the world. On Wednesday morning, the British announced a financial support plan to give capital and liquidity to its banks. Then at 7:00 am EDT, there was an announced global central bank rate cuts. This sparked a rally in equities around the world.

Central Banks Around the World Cut Rates

The Federal Reserve led a coordinated round of global official rate cuts on Wednesday, easing by a half percentage-point, as did the European Central Bank, Bank of England and Swiss, Canadian and Swedish central banks. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and also lowered its discount rate by the same amount to 1.75 percent.

The ECB also cut by a half-point to 3.75 percent as did the Bank of England, taking its rate to 4.5 percent.

China also joined the effort, cutting its key rate 27 basis points.

The Bank of Japan, with rates at just 0.5%, did not ease but the Fed said the BOJ expressed its strong support for the coordinated policy action.

"Incoming economic data suggests that the pace of economic activity has slowed markedly in recent months," the Fed said in a statement. "Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

The Fed said that while inflation has been high, recent declines in energy and other commodity prices had tempered inflation risks.

It said the vote to cut U.S. rates was unanimous and that inflation expectations appeared to be diminishing which could help support price stability. "The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability (inflation)," the Fed said.

England's Financial Support Plan

The British government said on Wednesday it was "bringing forward specific and comprehensive measures to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers."

At least 200 billion pounds ($350 billion) will be made available to banks under a special liquidity scheme, and banks will increase their total Tier 1 capital by 25 billion pounds.

Also, the government will provide an incremental minimum of 25 billion pounds of further support for all eligible institutions, in the form of preferred shares, PIBS or as assistance to an ordinary equity fund-raising.

The move was overwhelmingly supported in the UK and around the world. The Royal Bank of Scotland (RBS), HBOS, Barclays, and Lloyds were all eligible for the plan.

The comments were outstanding from analysts, and one analyst, Jeroen Van Den Broek with ING, seemed to sum it up best. "It seems to be a well thought-out plan. I like the Tier 1 component and it seems to be a relatively secure plan. At least there is some action and it could be something that other countries could use as well. Shares and credit default swaps on UK banks have rallied, but they're not doing that in the rest of Europe. The facility to provide capital will be in the form of preference shares. Tier 1 is subordinate to senior, it's the closest you can get to equity. The Tier 1 market is essentially closed but if the UK government is offering Tier 1 capital to its banks, it really does improve balance sheets. That is very positive. For shares, it's also better than if the government took a direct equity stake."

RBS issued the following statement: "We welcome this comprehensive package of measures in response to unprecedented conditions in the financial systems. The government has increased support in a number of important areas. The proposals will enable us to strengthen our position and to support our customers across the economy."

HBOS issued the following statement: "HBOS welcomes today's announcement by the government about banking capital and a significantly enhanced wholesale money funding initiative. The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system. HBOS believes that this initiative is very much in the interests of its shareholders and customers."

On a lighter note, one trader gave the following quote: "The first thing I did was email my colleagues at Barclays and RBS to congratulate them on being civil servants now."

Sources: Reuters, Yahoo, MSN, CNBC