Economic News

[Fivetears]

US Consumer Confidence Sinks to Record Low
Consumer confidence fell to an all-time low as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being. According to the RBC Cash Index, confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December -- and a benchmark of 100 -- and was the worst since the index began in 2002.
http://www.cnbc.com/id/22605631

 

[Fivetears]

Retail in a state of "anarchy" as consumers retreat
U.S. chain stores, reeling from the slowest holiday shopping season in five years, got some more bad news on Sunday: 2008 will not be any better and could see changes that may shift the retail playing field forever. As the National Retail Federation kicked off its annual convention in New York, two retail consultants offered negative outlooks for the U.S. retail industry, which has seen consumers pull back amid higher gasoline and food prices, a credit crunch and a prolonged housing market decline.
http://news.yahoo.com/s/nm/20080113/bs_nm/usa_retail_outlook_dc_1;_ylt=AgkbNtq1Seci3hcmqagnaSIE1vAI

 

[Fivetears]

Bush Stimulus Plan Includes $1,600 Rebate
The Bush administration is close to completing an economic-stimulus proposal that will include $800 rebates for individuals and $1,600 for households as well as tax breaks for businesses, people familiar with the plan said. The proposal is subject to revision as administration officials consult with Republican and Democratic lawmakers in Washington.
http://www.bloomberg.com/apps/news?pid=20601068&sid=auNopGrG0xcY&refer=economy

 

[Fivetears]

Bernanke Says Fiscal Stimulus Could Revive Expansion
Federal Reserve Chairman Ben S. Bernanke said fiscal stimulus of as much as $150 billion would help revive economic growth, while warning against any widening of the budget deficit in coming years. Bernanke's acknowledgment that the economy is weak enough to need stimulus validates forecasts that the Fed will lower interest rates by at least half a percentage point this month. President George W. Bush will tomorrow lay out the general principles he favors for a short-term stimulus.
http://www.bloomberg.com/apps/news?pid=20601068&sid=avxAdYrF5WkY&refer=economy

 

[Elgallo]

The income limitation mentioned of 85K Single and 110K joint. Is that gross income or AGI?

 

[Fivetears]

Difficult to field a question like this without a reference.

The income limitation mentioned of 85K Single and 110K joint. Is that gross income or AGI?

 

[Fivetears]

Odds are, U.S. is in a recession
It's much too soon for an official judgment on whether the U.S. economy has fallen into a recession, but early indications show that a recession may have already begun. Of the five monthly economic indicators used to judge whether the U.S. economy has fallen into a recession, three are declining and one other is flattening out. Three of the five numbers peaked in September. Only one has grown with any vigor over the past few months, but it's starting to look weaker. Calling a recession is as much art as science. The numbers now in hand are preliminary, subject to large revisions. What now seems very weak could be revised to show significant growth. That's why the academics who decide whether we've been in a recession wait a long time before making a judgment. In some cases, the most recent data are more than two months old, a frustrating delay for those who want to know what's happening right now. What now looks like a peak in activity could turn out to be a local peak or a false top, with the economy regaining strength in the next few months.
http://www.marketwatch.com/news/sto...x?guid={80BE41BE-BCF3-4EFB-82F7-D2649FB6B67A}

 

[Fivetears]

We're All Keynesians Now
So famously declared Richard Nixon back in 1971, in what we thought was a different economic era. But after yesterday, we're not sure what decade we're in. With Federal Reserve Chairman Ben Bernanke and President Bush both endorsing temporary tax cuts and more federal spending as "fiscal stimulus," an inflation-adjusted version of Jimmy Carter's $50 rebate can't be far behind.

Bernanke embraced the explicit Keynesian notion that the government should write checks to "low and moderate income people," who will spend it quickly and thus lift consumer demand. In the academic literature, this is called having a higher "marginal propensity to consume" than the more affluent, who tend to save more.

We're all for putting more money in the hands of the poor and moderate earners, especially via stronger economic growth that will give them better paying jobs. But the $250 or $500 one-time rebate check they may now receive has to come from somewhere. The feds will pay for it either by taxing or borrowing from someone else, and those people will have that much less to spend or invest themselves. We are thus supposed to believe it is "stimulating" to take money from one pocket and hand it to another.

Bernanke has his own political problems - namely Congressional and Wall Street demands that he rescue mortgage assets by easing money even further, despite an already weak dollar and Wednesday's December inflation report that prices rose 4.1% in 2007. Yes, "core" inflation rose only 2.4%, but don't tell that to Americans who are paying the higher food and energy prices that the Fed excludes from "core" readings. As the nearby table with recent polling results shows, three of the four main economic issues cited by Americans are price-related. The public thinks we have an inflation problem even if the Fed doesn't.

Bernanke can expect to get pressure no matter what he does, and perhaps he figured the way to get more monetary running room was to give Congress what it wants on spending. If so, it doesn't inspire much trust in us that he can hold fast on monetary policy either. And speaking of the 1970s, what markets may really fear is that we are entering another period of "stagflation," slower growth with rising prices, and without political or economic leaders who understand what to do about it.

One truth that Mr. Bernanke did speak yesterday is that it is a mistake to rely on monetary policy alone to spur economic growth. It's a shame, then, that his testimony makes it that much less likely that we'll get any genuine "stimulus" from fiscal policy.
http://online.wsj.com/article/SB120062129547799439.html?mod=opinion_main_commentaries

 

[Fivetears]

Americans: Recession near - or already here
More than three out of four Americans believe that a recession has already started or will hit in '08. Half have cut their spending, which could make a slowdown worse. Only 19 percent of 1,000 Americans surveyed believe the nation will avoid a recession, while 57 percent believe that there will be a downturn this year. Another 19 percent believe the nation is already in a recession. What's worse for the economic outlook, just about half of those surveyed say that they've cut back their spending compared to last year. These results indicate a far gloomier outlook than economists anticipated.
http://money.cnn.com/2008/01/18/news/economy/economy_poll/index.htm?postversion=2008011811

 

[Fivetears]

Job Data Passes Threshold Where Recessions Dwell
When the number of Americans out of work starts to rise sharply, a recession occurs. By that token, the latest figure for unemployed workers is, at the least, a danger sign. The Labor Department reported that in December some 7,655,000 people were unemployed, meaning they were both without a job and looking for one. That figure was 13.2 percent higher than the 6,760,000 figure in the previous December. In the past, a 13 percent annual rise has been the sign of a recession every time. Before December, there have been nine cycles in the United States since 1950 in which the annual change in unemployment rose to 13 percent or higher. In eight of those cases, by the time the rise got to 13 percent, the recession had already begun, according to later conclusions by the National Bureau of Economic Research. In the other one, the recession began three months later. The bureau does not, by the way, define a recession as two quarters of decline in the real gross domestic product, although that is a widely used shorthand. Instead, it says “a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real G.D.P., real income, employment, industrial production, and wholesale-retail sales.”
http://www.nytimes.com/2008/01/19/b...em&ex=1200891600&en=3e5ac12c1e69a872&ei=5087

 

[Fivetears]

A New, Global Oil Quandary: Costly Fuel Means Costly Calories
Rising prices for cooking oil are forcing residents of Asia’s largest slum, in Mumbai, India, to ration every drop. Bakeries in the United States are fretting over higher shortening costs. And here in Malaysia, brand-new factories built to convert vegetable oil into diesel sit idle, their owners unable to afford the raw material. This is the other oil shock. From India to Indiana, shortages and soaring prices for palm oil, soybean oil and many other types of vegetable oils are the latest, most striking example of a developing global problem: costly food. The food price index of the Food and Agriculture Organization of the United Nations, based on export prices for 60 internationally traded foodstuffs, climbed 37 percent last year. That was on top of a 14 percent increase in 2006, and the trend has accelerated this winter. A startling change is unfolding in the world’s food markets. Soaring fuel prices have altered the equation for growing food and transporting it across the globe. Huge demand for biofuels has created tension between using land to produce fuel and using it for food. In the last few years, world demand for crops and meat has been rising sharply. It remains an open question how and when the supply will catch up. For the foreseeable future, that probably means higher prices at the grocery store and fatter paychecks for farmers of major crops like corn, wheat and soybeans. There may be worse inflation to come. Food experts say steep increases in commodity prices have not fully made their way to street stalls in the developing world or supermarkets in the West.
http://www.nytimes.com/2008/01/19/b...em&ex=1200891600&en=065afe9782fe8f05&ei=5087

 

[Fivetears]

Debt Relief for Rich Americans
Just before Christmas, Congress and President Bush handed a $1.15 billion gift to the American public. And most of that gift will go to the wealthy. Here's the deal: On Dec. 20, the president signed the Mortgage Forgiveness Debt Relief Act of 2007. It got some news coverage, mostly in the vein of "this will help contain the slump in real-estate markets across the country." But the devil is in the details.

For most people, debt relief in a mortgage renegotiation or foreclosure won't be counted as taxable income. This is a laudable goal in an environment where home prices and sales are falling because of overbuilding, too much speculation and a ridiculous orgy of offering mortgages with terms a lot of people can't afford. However, the law makes as much as $2 million in debt relief tax-free.

Under prior law, if your mortgage lender forgave part or all of your debt, that relief was considered taxable income. You had borrowed money and no longer had to pay it back. Under the new law, debt forgiveness on your primary residence, up to the $2 million ceiling, escapes taxation for 2007, 2008 and 2009. The original House bill had sought permanent relief, but the Senate limited the exclusion to those three years.

At a White House signing ceremony, President Bush applauded the new law, saying it would help reduce market turbulence.

Why it's wrong

Too bad everybody was so busy playing to the media to think about what they were doing. Debt relief is appropriate for middle-class taxpayers whose interest rates exploded while their home values cratered. But because of the $2 million ceiling, that's not where the big money is going. There are few people making less than $250,000 a year who qualify for a $2 million mortgage. If you have a $2 million mortgage, you're more likely than not to be in the 35% bracket. That's a $700,000 reduction in your taxes -- paid for by the rest of us. That's more than what the average schoolteacher makes in a dozen years.
http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/DebtReliefForRichAmericans.aspx

 

[Fivetears]

Stimulus plan needs balance
The centerpiece of an economic aid plan should be a tax cut for the middle class, and the overall proposal could include relief for business and spending incentives for the unemployed. Any plan that does not carefully balance help for people making less than $50,000 with relief for those making $200,000 or more doesn't make much sense from either a fairness or economic point of view. The president said Saturday the aid "must be built on broad-based tax relief that will directly affect economic growth -- not the kind of spending projects that would have little immediate impact on our economy." Partisan fights and dithering could only make whatever recession we're going to have worse. There's a real spirit of compromise in Washington right now, a spirit of let's get together, put away the bipartisan differences, because the economy is in poor shape. In a balanced plan, the centerpiece would be a tax cut for the middle class and working families, and the bookends might be some business tax cuts as well as some spending stimuli for, say, people who are unemployed.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080120&id=8024968

 

[Fivetears]

Existing-home sales expected to fall again
Aside from the weekly numbers on jobless claims, retail sales and the like, the only numbers of any importance will come on Thursday when the National Association of Realtors releases its report on sales of existing homes in December. Economists surveyed don't expect the 0.4% increase in November to last. They expect sales fell by about 1% to a seasonally adjusted annual rate of 4.94 million from 5 million in November. It would be the lowest sales pace since the real estate trade group began tracking both single-family and condo sales in 1999. Few people expect any recovery in the housing market soon, although the Realtors have said they are encouraged that sales have been relatively stable for the past three months after falling 20% in the 12 months before that. Pending home sales, which track signed sales contracts, fell 2.6% in November after rising 3.7% in October. Sales typically close one to two months after a contract is signed. Cancellations have been rising. Inventories of unsold homes are expected to decline in December, which would be good news for a market that has more than 10 months' of supply sitting on the market. But the inventory figures are not seasonally adjusted, and a decline in December is typical.
http://www.marketwatch.com/news/sto...91A-4107-99C0-3E54E1FB40D6}&dist=MostReadHome

 

[Fivetears]

Consumers retrench as economy weakens
Across America, there are growing signs that consumers are worried about the weakening economy, which could slip into recession. While some say Americans are not famed for their belt-tightening tactics, there are signs that people are trying to improve their personal balance sheets so they're ready for tougher times. Jobs are getting harder to find, while the crisis in the mortgage industry has made it more difficult for homeowners to borrow against their houses, closing down what has been a major source of extra cash in recent years. Consumers' budgets have been squeezed by rising food and fuel prices. Credit card balances surged through the fall months, according to Federal Reserve figures. Now delinquency rates on consumer loans are rising, the American Bankers Association reported recently. Even companies that cater to higher-income families, such as American Express Co., are feeling the pinch.
http://news.yahoo.com/s/ap/20080121...umers_react;_ylt=AqOgn9S7k4jb.buLqXoKWRyb.HQA

 

[Fivetears]

Rebates: No big deal for stores
With 2008 expected to show the weakest growth for retail sales in years, Americans sorely need some incentive to keep shopping. But economists say President Bush's proposed tax stimulus - unveiled last week - would merely provide short-term relief for consumers without curing the problems in housing, credit, energy and the job market causing an economic pullback. Bush's plan would give refunds of up to $800 for single taxpayers and $1,600 for families. Congressional Democrats are also expected to come up with a stimulus plan, and the two sides have talked about a quick compromise to get the economy moving.

The National Retail Federation's (NRF) economic forecast calls for a 3.5 percent increase in annual retail sales in 2008. While that's above the 3 percent annual average, it would be the slowest pace of growth in six years. Given that consumer spending fuels 70 percent of the nation's economy, the trade group maintains that the fastest way to rev up the economy is through the consumer.

Richard Hastings, economic adviser with the Federation of Credit and Financial Professionals, was more critical of the stimulus proposal, calling it a "comfort patch." "Unfortunately we don't have the same context now that we had in 2001 to make this an effective stimulus plan," Hastings said. The big problem in his eye is inflation. "Health care costs are much higher than they were in 2001," he said. "Energy prices, food and services costs are much higher today." Hastings believes the nation's economic problems run much deeper than how much people are spending at the mall. "If the government is trying to prevent a recession with this plan, it's the silliest thing to do."
http://money.cnn.com/2008/01/21/news/economy/stimulus_retailsales/index.htm?eref=yahoo

 

[budnipper1]

(At least, this reporter's take is less pessimistic than most...)

Commentary: Several similarities between today's market and 1987 Crash
http://www.marketwatch.com/news/story/market-crash-1987s-offing/story.aspx?guid=%7BC34E308D%2D1D8F%2D468C%2D98D4%2DC43B017EA6F9%7D&dist=sp_inthis
By Mark Hulbert, MarketWatch
Last update: 7:26 p.m. EST Jan. 21, 2008

ANNANDALE, Va. (MarketWatch) -- The parallels between today's market and those preceding the 1987 Crash are several -- and disturbing.

Then, the dollar was in a free fall against foreign currencies. Today, as well. And then, as now, the U.S. government showed no signs of being particularly concerned. Furthermore, over the October 1987 weekend prior to what would eventually become known as Black Monday, foreign stock markets plunged. The same is happening today too. ( Read full story.)

It was obvious to almost everyone, prior to the market's opening on Oct. 19, 1987, that the Dow would have a terrible day. And sure enough, it did, losing 508 points. U.S. stock markets likewise appear poised to have just as big a point loss this time around. As this is written, on Monday afternoon, the futures contract on the Dow Jones Industrial Average is off by some 520 points. Of course, the DJIA today is at a much higher level than in 1987. So this benchmark would have to drop more than 2,700 points on Tuesday to match the percentage loss from the 1987 Crash. This contrast may prove to be only small solace to beleaguered investors, though.

More solace may be provided by another parallel with the 1987 Crash, however: The crisis then was primarily confined to the financial markets; the economy as a whole, as judged by the scorekeepers at the National Bureau of Economic Research, was not then in a recession; nor was it about to enter into one.

To be sure, it would be premature to declare that today's economic slowdown will not develop into a full-fledged recession. But some of the newsletter editors I monitor do believe that the extent of any economic weakness is being exaggerated.

One such editor is Norman Fosback, editor of Fosback's Fund Forecaster. The latest issue of his newsletter was emailed Monday afternoon. And though Fosback does not focus specifically in that issue on the global markets' freefall over the past two sessions, his analysis speaks directly to the question of whether or not the crisis the markets face currently will be primarily confined to the financial markets.

Fosback suspects it will be relatively narrowly confined. "The prospective business slowdown does not appear all that serious," he writes. This is for a variety of reasons, the most important of which, according to Fosback, is the strength in the global economy:
"The global economy is plugging along in reasonably good shape, thanks in no small part to the weak U.S. dollar (that is even now boosting foreign demand for U.S. products), and thanks as well to the economic boom in the developing world (most significantly the emerging economic giants of China and India, that are providing an awesome supply of low-priced goods and services to U.S. consumers). This global economic boom is the golden egg for us all."

What about the subprime mortgage crisis? Fosback says its impact is being exaggerated too.

"As horrendous as seems the current round of write-offs by financial companies, these same firms profited immensely from the subprime boom in the first place, and are now merely giving back some of their gains. The great myth is that individual Americans were reaping the windfall benefit of absurdly low interest rates on their mortgages. This belies the fact that not only are the borrowers' mortgage loans secured with their own homes, but the average adjustable-rate subprime mortgage borrower is paying a 9% interest rate. That hefty consumer cost has produced, and is still largely producing, a lot of annual profit for the loan financiers. In the long run, these yields will offset all of the defaults, and in a very real sense the current default losses are simply one of the foreseeable costs of making the higher-risk loans in the first place."

The bottom line, according to Fosback: "The recession, if one even comes, should prove to be relatively mild. Although corporate earnings will certainly fall, this is not the doomsday end of the global business expansion."

Fosback deserves to be paid attention to because he has been a newsletter editor since the mid-1970s, more than three decades ago, and has a creditable track record. Among his noteworthy accomplishments is the creation of the stock market timing system that, far and away, has the best long-term track record of any that the Hulbert Financial Digest tracks.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980

 

[Fivetears]

This is a gem too. :nuts:
https://www.fosback.com/Fosback's_Fund_Forecaster.htm
Reminds me of another system I bought into. It just didn't come with a money back guarantee.

 

[Fivetears]

Fed isn't finished by a long shot
Economists, investors are confident there's more easing in the pipeline. "Don't take today's move ... to mean that the FOMC is through," said Richard Moody, chief economist at Austin-based Mission Residential, in a note to clients. "We expect another funds rate cut at the scheduled January 29-30 meeting, with possibly more to come in the spring."
Investors seemed open to the idea of further reductions. Wall Street's key equity benchmarks battled back after suffering steep losses at the opening but remained broadly lower at midday, and the federal funds futures market now points to a 2% fed funds rate by September, Fed watchers said.

Tuesday's emergency rate move raises the immediate question: What the Fed will do at its formal meeting next week? Many Fed analysts point out that because the shaky state of global financial markets seemed to be the catalyst for Tuesday's inter-meeting rate cut, the size of any reduction next week will depend on whether the markets show signs of calming down in the interim. If the market returns to more normal conditions, a quarter-point cut is a possibility, said Dean Maki, chief U.S. economist at Barclays Capital.
http://www.marketwatch.com/news/sto...14C-4CC9-8F04-866CF0AB29DE}&dist=TNMostMailed

 

[Fivetears]

US moves to avert economic meltdown
Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday, and President Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upwards of $150 billion in tax cuts and government spending. The Fed, announcing its action after an emergency video conference Monday night, indicated further rate reductions were likely, aimed at encouraging people and companies to start spending again.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080122&id=8024968