U.S. Money Matters blog says let's get real: has the economic recovery really arrived?  After a year of negative GDP growth, U.S. GDP growth finally returned, registering a better-than-expected 3.5 percent growth rate in Q3.

Doesn’t it seem like it’s been years since economists and analysts have talked about GDP growth? That’s because the recession actually started in December 2007 – with only a modest level of growth occurring during Q4 2007. In other words, the U.S. economy registered five consecutive quarters of sub-par growth or negative growth: that is a long time. In fact, the U.S. economy registered four straight negative growth quarters during the recession – the first time that’s occurred since the Great Depression.

Further, in the past 12 months, the economy has contracted 2.3 percent, including a 0.7 percent contraction in Q2 and a 6.4 percent plunge in Q1.

The rebound in Q3 was broad-based: government spending (including the $786 billion fiscal stimulus package), a slowdown in the reduction in business inventories, an increase in residential investment, and higher consumer spending, all contributed to the 3.5 percent gain.

Recession is not over, yet ... Read more from the Money Matters blog.

Fri Oct 30

Investors are watching the Fed — and the overnight interest rate — closely.  And, as SmartMoney explains below, with good reason.

Chalk it up as yet another “historic” aspect of our Great Recession: short-term interest rates that have hovered around zero since last December. Investors will learn next week whether the government intends to keep them there when the Federal Open Markets Committee meets on Tuesday and Wednesday.

Investors closely watch the eight annual meetings of the FOMC, a group that includes Federal Reserve Chairman Ben Bernanke and 11 other members of the Federal Reserve. Stocks briefly rallied on Sept. 23 after the last statement the group released noted, “economic activity has picked up following its severe downturn.” The FOMC sets what’s known as the federal funds rate, the overnight interest rate at which banks lend one another money. This rate influences the short-term interest rates, foreign exchange rates and ultimately the rates consumers receive on mortgages and other loans. (While the market sets long-term rates, they usually move in tandem with the federal funds rate.)

The FOMC uses loan rates as a lever to control the flow of money in the economy. Despite some improvement in the overall economy, investors expect the FOMC will leave rates at the current level of between zero and 0.25%. This low level stimulates loan activity, which in turn encourages business to expand. Banks are less eager to loan money when rates are high and they can make less on what’s known as “spread,” or the difference between the rates at which they borrow and lend money. Ultra-low rates represent one way that the federal government has propped up the flagging economy, along with purchases of Treasury and mortgage-backed bonds and other measures.

The big question looming beyond next week’s rate decision is how successful the federal government will be in withdrawing its massive stimulus from the economy and letting the private sector take over.
Keep reading...

 Fri Oct 30

Bloomberg Terminal on the wall, who's the wisest investor of all?

Bloomberg polls its terminal subscribers, and this round, among 1,452 voters, Buffett came in first place for the answer to “who is the best assessor of financial markets?”

Warren Buffett took a quarter of the votes, followed by fixed income investor Bill Gross of PIMCO who received 16% of the votes cast.

Fewer than 1 in 10 cited Federal Reserve Chairman Ben Bernanke, despite high marks for his performance as a central banker. Only 3 percent pick Alan Greenspan, the former Fed chairman. 

Douglas A. McIntyre says Buffett’s reputation is going through a renaissance. Berkshire Hathaway, the company he runs and which holds many of his investments, had a very bad year last year, particularly by Buffettian standards. Buffett has been on the media circuit since then offering his opinions on the credit crisis, government regulation of the financial markets, and the recession and potential recovery.  Those media appearances have probably enhanced his “oracle” reputation. Berkshire’s investments are also gaining value as the markets recover.  Buffett-mania has been going on for decades. His track records in the market justifies that. He often talks about replacing himself as the CEO of Berkshire Hathaway. The is not likely, at least anytime soon. The stock would lose a lot of value if he retired, and it probably should.

Fri Oct 30

Happy Halloween.  Here is a story that may give you a bit of a chill, appropriate for All Hallows' Eve.  The price of being dead just dropped.  If you're the Adam's Family, the good news means Christmas shopping won't break the bank this year.  Get your caskets at Wal-Mart's everyday low prices.

24/7WallSt has the morbid low-down:

Wal-Mart is beginning to sell caskets and urns at walmart.com. Some of the caskets are prices as low as $999 and ship within 48-hours. It is a shame when a family won’t pay the full $1,00o when a loved one dies.
Wal-Mart, of course, sells everything on line and has the second most visited e-commerce site in the country, so caskets and urns are just an extension of making walmart.com the internet destination for all shopping. And some of the products are pretty attractive. Who could pass up the ”Pieta and Last Supper Steel Casket” for only $1,599 or the “Dad Remembered Steel Casket” for $995? Does that come with free shipping?
It won’t be long until Wal-Mart is in the business of selling burial plots.
The Wal-Mart casket business may simply be an example of what happens in a recession. People will shop for almost anything based on price. Most families do not want to go all the way down-scale and buy or build a pine box. A bad economy probably makes cremation more attractive.

The kicker:
Wal-Mart’s slogan is “Save Money. Live Better.” The world’s largest retailer is going to have to add “Die Better” to the slogan, too.

Boo!


Fri Oct 30

Test your relationship with your phone: are you two meant to be together? This chart plots your compatibility and cost of owning the Motorola Droid vs iPhone 3GS vs Palm Pre vs MyTouch 3G.

Courtesy of BillShrink.

Fri Oct 30

We already speculated that Tim Geithner slyly bailed out Wall Street at the expense of taxpayers.  Now Bloomberg is rocking the facts of  the whole sickening story:

BUT, before we grow even more disdainful towards those who bailed out the big banks, let's at least read the statements made to The Washington Post by representatives of the NY Fed and in defense of their actions.  Government and industry sources familiar with the matter questioned the 40 percent figure and said it was not proper to apply it across all the contracts. These sources spoke on the condition of anonymity because the discussions were private. Few of these sources disputed that the payments by AIG were expensive for taxpayers:

New York Fed officials explained that the main reason creditors were willing for a time to accept less than full reimbursement was their fear of an AIG bankruptcy. The government's rescue of the company removed that threat and left the company with virtually no way to wrestle concessions from the banks.

"In its negotiations with its counterparties, AIG just didn't have the same bargaining power that it did with the Federal Reserve standing in the background," said Thomas C. Baxter, New York Fed's general counsel. "The only sensible outcome was to give them what they were legally entitled to."

Moreover, AIG's foreign creditors told the Fed that they were barred by their governments from accepting partial reimbursement unless AIG faced bankruptcy, because doing so would amount to giving a gift to a U.S. company, according to officials at the New York Fed. Because the law prohibits the central bank from favoring some banks over others, New York Fed officials said they had determined that all of the creditors, foreign and domestic, had to be paid in full. They also decided it would be improper for the Fed to use its power as the banks' regulator to pressure them into taking less money.

Baxter said that the New York Fed "engaged a couple of institutions as to whether they would contemplate a discussion of taking a couple of points less than what they were entitled to." But he said officials were also racing to prevent AIG's collapse and did not have time to get involved in protracted negotiations with each creditor. 

So, are these excuses or reasons?  Was the Fed Res being protective of the country, or using politics to prey on the taxpayers?  Now you've heard from both sides...

Thu Oct 29

If you are somewhat wealthy, you might want to mind your p's and q's extra carefully this year. The IRS has a new "squad" out in force.

From SmartMoney: In a speech before the American Institute of Certified Public Accountants, or AICPA, IRS Commissioner Douglas Shulman announced the recent formation of a new unit, dubbed Global High Wealth Industry Group, which will focus on the nation’s wealthiest individuals and their entities.

The group’s work will go way beyond screening tax returns and your garden-variety audit. “We will take a unified look at the entire web of business entities controlled by a high-wealth individual, which will enable us to better assess the risk such arrangements pose to tax compliance and the integrity of our tax system,” Shulman said in his speech.

The following four criteria could mean a red flag next to your name, and these are broad categories:

1. Income or assets over $10 million
2. Complex financial arrangements
3. Offshore income or tax residency
4. Movie and rock stars, athletes, expats

If you, in any way, fit into any of the above four groups, make sure you trust the person who does your taxes and do whatever you can to preemptively ease the headache of an audit.


Thu Oct 29

23/7WallStreet put solar power companies into an interesting light:

First Solar's earnings report only reiterates the notion that solar power companies are in many ways just leveraged bets on the price of oil through time.  First Solar posted $1.79 EPS on $480.9 million in revenues (excluding the Sarnia project with $58 million not recognized in Q3).  Thomson Reuters had estimates pegged at $1.74 EPS and $528.78 million in revenues.  The company noted a cost per watt drop of 2.3%, but the gross margin dropped faster by 5.8%.  And there are other reasons to be cautious here.

First Solar (NASDAQ: FSLR) is roughly 11% of the key solar ETF in the Claymore/MAC Global Solar Energy (NYSE: TAN), and that is down 3.7% at $8.32 in the after-hours session.  The Market Vectors Solar Energy ETF (NYSE: KWT) is much thinner in trading volume and is indicated lower without much volume, but First Solar is about 8.6% of its weighting.  Many have been hoping for a recovery in Energy Conversion Devices, Inc. (NASDAQ: ENER), but that is down almost 4% at $11.02 in the after-hours session and that is on the heels of a 4.5% drop during the normal trading session.  Keep reading...

Thu Oct 29

It's very possible that you aren't making the most of your dividend investments. This article by Matt Trogdon is especially good at explaining why not, and what you can do to turn that around.  Says Matt:

If you're a dividend investor, chances are you've been pretty aggravated this past year. Since the banking crisis started last September, dividend payments have been sliced and diced like veggies at a Japanese steakhouse. To make matters worse, a lot of the dividends that are still out there might not be sustainable.

And with all of these cuts, one of the best arguments for top dividend stocks -- that reinvested dividends buy more shares in down markets, thus softening your downside and positioning you better for the eventual rally -- has been shot to pieces.

But are you making things worse?

I was.

My own personal dividend sucker punch came on April 15, when I got my tax bill. Because I keep most of my dividend stocks in a regular brokerage account, and because my dividend income didn't stop when the market hit the skids, I ended up in the ... umm ... annoying position of owing Uncle Sam about $500.

That's a tough pill for any investor to swallow, especially when portfolios are shrinking.
There are some easy ways to make sure you don't make the same mistake:

• Double-check your tax forms to see that you're taking the right number of allowances. If you think you might be underpaying, you can elect to have extra cash withheld from your monthly paycheck to account for your dividends.
• If you'd rather not touch your monthly income, make sure your brokerage firm is taxing your dividends as they occur. Doing so on the front end could protect you from an unwanted April surprise.

But there's another, bigger-picture solution. We here at The Motley Fool call it "asset location," not to be confused with its flashier, more popular cousin "asset allocation."  (Keep reading...)

Thu Oct 29

Money Matters: Boeing (BA) announced Wednesday that it’s chosen North Charleston, S.C. for its second plant for the next-generation 787 Dreamliner, over Seattle.

What would be even better news? Boeing announcing that the much-delayed 787 is rolling off the assembly line and is being delivered to airlines, worldwide. If only the latter were true, today!

To say there’s a lot riding on the 787 would be the understatement of the year.

First, this is Boeing’s first composite plane, with composite materials replacing heavier steel and aluminum components. Those lighter materials are a major reason why the 787 will be more fuel-efficient than comparable commercial jets.  Read more from the Money Matters blog….

Thu Oct 29

Green energy seems like the newest, most innovative investment these days.  But even as superstar companies like Apple and General Electric expand their solar and wind energy ventures, it is still risky and relatively uncharted terrain.

There has already been one bankruptcy, which no amount of federal grant money could prevent.  The  Daily Camera in Boulder, Colorado had a piece yesterday about the fall of Entegrity Wind Systems Inc., a Canada-based wind turbine manufacturer that has based some operations in Boulder.

While there is safety in the big companies just branching into green energy, be weary to invest too heavily in the smaller, specialized green energy companies.  Entegrity Wind Systems' fate spells out the potential and ongoing risks for three smaller companies:

• Zoltek Companies Inc., which makes carbon fibers for wind turbines and other key infrastructure;
• Otter Tail Corporation, a small conglomerate in Minnesota with wind operations;
• Broadwind Energy, Inc., which manufactures and sells high precision gears for wind turbines.

Wed Oct 28

"Chindia" is majorly conflicted.  The two countries race to become the next biggest world power, but they don't want to be a power couple.  China resents being lumped together or compared to India because India only has about one-third of China's per-capita income.
And India resents that China keeps trying to take a slice of its pie: over the years, China insists on pushing its border further and further into what has always been internationally recognized as India terrain.

It's no secret that China is amplifying its defenses for conflict. Over the past four years, it doubled its defense budget to $60 billion in 2008, while India was still at $20 billion, not much more than it spent back in 2004.

As said in the Wall Street Journal yesterday, "In the brewing discord between two giant, ambitious nations, even a remote meadow in the Himalayas is worth fighting over."

Also, the trade between the two countries is very lopsided: in China's favor. India exports far less than it imports from China, just look at the chart.

And here is the U.S., trying to remain democratic, perhaps feeling like a child caught in a custody battle.  After all, China practically owns a great deal of the U.S. since it is our main creditor.  And at the same time, we have our own major trade deficit issues with China.

Wed Oct 28

This just in: they are extending the first-time home buyers deal into 2010, and sweetening it with an additional "move-up" deal for non-first-timers.

• Income eligibility for first-time home buyers stays at $75,000 for individuals and $150,000 for couples.
• For move-up buyers, income eligibility is $125,000 for individuals and $250,000 for couples.
• There is a minimum 5 year residency requirement in their current home for move-up home buyers.
• The tax credit is the lesser of $7,290 or 10% of the purchase price.
• The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)
• Expect bill to be signed by Friday.
  

CalculatedRisk cleverly points out how this questionably bubble-inducing plan will be surely passed: Apparently this tax credit will be combined with the extension of the unemployment benefits to avoid a veto (the real reason the extension was being held up). 
Ah ha!

Wed Oct 28

Think you're game for it?  Joseph L. Shaefer gives the advice and a thumbs-up to investors who think they are ready to cut out the middleman and start a hedge fund of their own.   He writes:

The “standard” fee arrangement at most hedge funds is 2% of the assets they place at risk for you and 20% of any profits they make. Losses? That’s your problem. Supposedly the smartest kids in the classroom are running your hedge funds so they will always make money. Riiiiggghhhhttt.  

There are as many types of hedge funds as there are clever pitches on how to separate a fool from his money, but there must be a better way. One of the earliest types of hedge fund was a “long/short” hedge fund where the manager would decide to enter, say, the airline sector, and would go long the airline he thought most highly of and short the worst. So he might have gone long Southwest and shorted US Air. If you want to establish your own long/short hedge fund, I can suggest two possibly “better ways.”

The Lazy Man’s way is to buy shares of the ProShares Credit Suisse 130/30 ETF which is a publicly-traded variation of a long/short hedge fund called a 130/30 fund. The portfolio managers of this actively managed ETF use margin to buy 130%, rather than merely 100%, of the positions they believe will do best on the long side, then short for 30% of the combined portfolio those firms’ stocks they believe will do best on the short side, giving them a net net 100% long exposure. If they are among the brightest lights in the night sky, they will earn hedge fund-like returns for you without hedge-fund fees.

The second way intrigues me even more. Sy Harding is a friend and competitor who takes technical analysis as seriously as I take fundamental analysis and his results show that fact. Sy is consistently ranked #1, 2 or 3 for market timing by Timer Digest. He is among the best of the best. Sy’s flagship publication and financial website StreetSmart Report and his free daily market blog are must reading for a great market timer’s take on current markets. But to these two, Sy has added a new, subscription publication, The Street Smart Long & Short Stock Advisory, which has a fine grasp of both technical and fundamental analysis.

Keep Reading...

Wed Oct 28

Damn, I knew there was probably a catch.  Marshall Auerback explains why "pay curbs are a trick on the taxpayer, not a treat."  Happy Halloween indeed:

How appropriate that with Halloween just around the corner, the Fed and Treasury have announced a coordinated effort that will put the central bank at the forefront of pay regulation on the zombie firms now kept alive courtesy of US government largesse. Trick or treat for the US taxpayer?

The new pay regulations are ostensibly designed try to align the financial incentives of managers with the longer-term performance of their firms. The Federal Reserve will have direct oversight over the pay of tens of thousands of executives, bankers, and traders. The oversight is being justified as a “safety and soundness issue“, according to Fed Chairman, Ben Bernanke.

Had the Fed and Treasury demonstrated similar concerns about the overheating housing market, the degeneration of lending standards, and the proliferation of dangerous Over The Counter (OTC) derivatives during the past 10 years, it could have done much to alleviate today’s still profound financial instability.

This measure, by contrast, reeks of bogus populism.  Keep reading...

 Tue Oct 27

Can Congress do two things at once? Can it think and act at the same time? Money Matters knows it’s a lot, but we have confidence in our national lawmakers.

While also putting the final touches on health care reform bills about to be debated in the House and Senate, respectively, Congress is also getting set to extend the $8,000 federal income tax credit for first-time home buyers.

And, as Money Editors noted earlier, the United States needs both health care reform and an extension of the first-time home buyers’ credit.

Ideally, Congress should extend the program, which expires November 30, through the end of next year, or December 31, 2010. However, it appears Senate support will only go as far as extending the program on a tapered-basis, Bloomberg News reported. The full credit would be extended for homes that close before April 1. The credit would then be decreased to $6,000, then $4,000, then $2000 etc. for homes that close in each following quarter, until the end of 2010, at which time the program would end.
Read more from the Money Matters blog….

Tue Oct 27

Moody’s has a rather upsetting chart graphing how the US bank debt write-offs are so out-of-control now, they exceed the beginning of the Great Depression... my worry is that this chart looks like if things continue, we may run parallel to the Great Depression numbers and actually be on our way up to a high peak.

The chart shows how the pace of charge-offs (write-offs on bad debt) for rated US banks now exceeds the early years of the Great Depression.

The banks incurred $45bn of loan charge-offs in the third quarter, collectively, which means they’ve racked up $116bn so far this year. That translates to an estimated annualised rate of 3.4 per cent in Q3, or 2.9 per cent year to date, Moody’s says. Annual charge-offs hit 2.25 per cent in 1932 before peaking at 3.4 per cent in 1934.

 Click here to read more, and see a similar chart comparing loan loss provisions.

Tue Oct 27

The first rule of Insider Trading, is there are no rules.  Seriously though, if there are rules, can you really call it insider trading?  The following editorial is by John Tamny:

In the past week reports about alleged "insider trading" on the part of billionaire Galleon Group founder Raj Rajaratnam have been splashed all over the pages of major financial publications. But amid all the overdone hysteria, one question remains unposed: Is any of this actually news?

Never mind that the empowerment of federal bureaucracies to regulate the stock markets is unconstitutional (nowhere does the Constitution grant such a right to the federal government)--the simple truth is that neither the Securities and Exchange Commission, Congress nor the courts have ever really been able to define insider trading. That's the case because it's nearly impossible to distinguish between material and non-material information.

According to Daniel Fischel's 1995 book Payback, it wasn't until 1962 that the SEC "even asserted authority to regulate trading by corporate insiders possessing valuable information." Furthermore, the courts didn't even consider "insider trading" until 1968. Fischel notes that there was no less confidence in our securities markets prior to that point. Then the film Wall Street came out. Just as the 2004 film Sideways taught striving Americans that Merlot was low-rent, Oliver Stone's 1987 film about Wall Street traders demonized "insider trading" in the eyes of Americans, despite very little evidence supporting such a notion.

It seems the transformation of "insider trading" to the ugly term it is today is rooted in the absurd and politically correct belief that there should be a "level playing field" when it comes to the securities markets. A nice thought, but not one we should take seriously.

Keep reading in Forbes...

Tue Oct 27

If you love Suze Orman, you will love these ten simple steps to being safe and smart with your money.  Click here for the original post and additional details on CNBC.

1. Listen to Your Gut —Women are compassionate towards those in need. Instead of going with their gut they sometimes overlook the obvious and make an emotional money mistake.

2. NEVER Co-Sign for ANYONE — If a friend or family member asks for you to co-sign on a loan, it’s probably best to say “No.”

3. Save Yourself First — If you don’t have enough to save for your children’s college funds and your retirement, then your retirement takes precedence.

4. Don't Hand Over Finances to your Husband or Partner — Suze says women often hand over their family financial matters to their partner either because they are scared, lazy, or following an old fashioned role.

5. Don’t Put Yourself on Sale — Don’t treat yourself like you’re on sale. If you’re reluctant to put a real value on what you do, then it diminishes who you are. As Suze explains, women tend to devalue what they do.

6. Protect Your Assets: Get a Pre-nuptial Agreement The basic rule is that you are jointly entitled to assets accrued during a marriage and you are on the hook for debts accrued during the marriage.

7. No Blame, No Shame — Two of the heaviest weights women carry (invisible twin obstacles of the past) are the burden of shame and the tendency to blame. Suze explains: “If you don’t feel confident in your knowledge of how money works, you hide behind the shame of it, deferring decision to others or staying stuck in a pattern of inaction.

8. Take Care of Your Money — Women nurture people and things that are important to them. So, take care of your money the way you do your husband/partner, family, friends, pets, plants, and clothes.

9. Don’t Make Your Under-Aged Children Life Insurance Beneficiaries - It's a No-No! — Life insurance companies will not make payout to children under eighteen years of age. Suze suggests you create a trust account and name the trust as the beneficiary of your life insurance policy.

10. Own the Power to Control Your Own Destiny — Give to yourself as much as you give of yourself. Power comes from who you are, not what you have, and the transformation starts with how you allow others to treat you. Do what’s right, rather than what’s easy.

Boo! Gas prices through the roof again, now that's scary.  David Kotok, of Cumberland Advisors writes:

"The $80 oil price is starting to worry me a little. Translate it into gasoline and you get somewhere around $2.50 per gallon or a little higher, depending on where in the US you fill up your tank. Add to that a little cold weather and expanding crack spreads in refineries, and the price will edge toward $3.
History-derived economic models show that the US consumer starts to change behavior as the price of gas approaches $3, and then goes into a more pronounced state of shock when it ranges higher, in the $3 to $4 corridor. The reaction is to cut spending and retrench if the consumer thinks the price is going to stay at the new higher level for a while. When the consumer thinks the price will not stay higher, he keeps on spending and buying on credit.

BUT –

That history is derived, and has been modeled, from a time period when household balance sheets were relatively solid and when credit was flowing easily and when the unemployment rate was close to 5%, not 10%. So that is why I am starting to worry."

Keep reading...

Mon Oct 26

Seven more banks failed last week.  That brought bank failures for 2009 to a grand total of 106.  That's bad, and even worse is the fact that RBC Capital Markets has estimated ten times that many banks (a total of over 1,000) will fail within the five years or sooner. 

If you are an investor, it is a dangerous game you are playing with bank stocks.  However, if you insist on investing in banks, please proceed with great caution.  If you don't have a top-notch resource you already use, get at least two.  If you have one, get a second opinion.  Here is one website to check in on regularly:

ml-implode.com gives a full list of the institutions which have failed, along with lists of who is healthy, and who is most likely to implode next.

The FDIC lists the seven latest failures, several were in Florida. 

Mon Oct 26

We're still stuck in the thick of the mess caused by the first housing bubble, but they're already blowing up the next one. It now goes by names like FHA and first-time homeowner credit, but call it what you wanna call it, the new subprime will blow up in our faces just the same.

To illustrate just how loose the banks are with their lending still, watch the following video.  It's short, sweet, and insane.  Prepare to seriously shake your head, roll your eyes, and wonder why it's harder to find common sense than it is to find a home loan.

Denise bought a home in San Francisco at the ripe age of 20.  Her brother Wilmer also bought himself a house before his 22nd birthday.   A good deal does not equal a good return if you can't make your payments in the meantime...


The math of a mistake waiting to happen:

• Denise got an FHA loan to buy her home for $155,000. She took out a second loan (called a 203-K loan) to refurbish the place. The total loan amount is about $183,000. She says, “In total, I gave the bank $5,087 + $1,500 which were all deposit and closing costs.”
• So her “down payment” was no more than 4% of the value of the home when she bought it. She will get all of that back and then some with the first-time home buyer tax credit.

Mon Oct 26

You know the phrase, if you can't beat 'em, join 'em?  Well, we can't join the bankers in all their seedy fun, so let's beat them with humor.

This video from the British comedy duo, Bird and Fortune, will make your Monday (at least seven minutes of it) a bit more bearable.

Enjoy!

Bird and Fortune explain what bankers really do:


Ok, I know you don't want to return to work, so here's another one...

Bird and Fortune explain the subprime crisis.


Mon Oct 26

Money Matters blog says the scariest sight this Halloween may be at the gas station.

The following is not a pleasant sight for U.S. motorists: gasoline prices have jumped 17.8 cents in two weeks to an average of $2.66 per gallon for regular unleaded, according to data compiled by the Lundberg Survey, Bloomberg News reported.

The increase is due entirely to higher oil prices, Analyst Trilby Lundberg told Bloomberg News, with profits margins for refiners and gasoline retailers shrinking in the process.

Refiners and gas stations are caught in a bind. Demand is sluggish, due to the fact that more than 7.2 million Americans have been removed from the workforce as a result of lay-offs, and that makes it hard to pass on cost increases. At the same time, high oil prices mean their feeder costs are up, squeezing margins. Oil, which is trading close to $80 per barrel, is up more than 100 percent since December 2008, and is up about 20 percent in the past six weeks. Read more from the Money Matters blog….

Mon Oct 26

Sheila the great: the head of the FDIC is making it clear that she wants the power to ban all future bailouts from ever happening.  Now that would be a truly free market, right?

This week, Bair and the other 4 board members voted unanimously to terminate the FDIC's debt-guarantee program, which has been a lifeline for failed financial institutions and their automotive brethren.

TheDailyBail has pulled together a montauge of her statements from recent Reuters interviews.  As of October 14, there was $309.4 billion in FDIC-guaranteed debt outstanding.  Whew! Her response to this outrageous bailout-induced debt is clear — give her the power to veto, and just say no to bailouts.

• Tuesday: U.S. regulators voted to end a government program that guarantees some debt issued by banks, but also to set up a 6-month safety net facility. "It should be clear that this is not a continuation of the program but an ending of the program," FDIC Chairman Sheila Bair said at an open meeting.
• Wednesday: she reiterated her call for legislative resolution authority to seize any troubled institution regardless of size and place that firm into receivership, while holding the creditors (bank bondholders) financially responsible for their misjudgement.
• "Some of it is just you're going to have to rely on the industry's own self-restraint, and unfortunately a lot of them don't seem to be too self restrained right now," she said. 
•  She went so far as to request specific legislative language precluding even temporary bailouts, which Treasury (Geithner) has opposed (on grounds that they won't be able to help their friends if such legislation is passed.)  Go get 'em!
• Bair has been a strong advocate for measures that could combat the moral hazard of "too big to fail." She said financial firms and their investors and creditors cannot make judgments based on the belief that government will step in to insulate them from their mistakes.
• "On an individual institution basis, I do not think you should make capital investments, provide credit support, do any of that," she said. "I think if a bank gets in trouble or any large financial organization gets in trouble because of its own mismanagement, I believe it should be put in to receivership."  YES!
• "It distresses me," Bair said, referring to news that some large financial institutions are returning to pre-crisis bonus levels. "I think it is in the enlightened self-interest of these large financial organizations to, you know, suspend these outsized bonuses at least, if not permanently, (and) realign compensation to more rational levels, shall I say."  Shall we all say, hell yes!

She is representin' taxpayers!

P.S. Did you hear?  Sheila Bair would rather eat worms than ask Tim Geithner (her "nemesis") for help... which is why the FDIC is looking to fill their hole with paybacks from those banks they bailed out, rather than going to the Treasury.  In fact, NYMagazine has this colorful qoute: “Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,” said Camden R. Fine, president of the Independent Community Bankers. “She’d do just about anything before going there.”

Going to the ones who owe you money for the money they owe you, rather than taking from taxpayers.  Makes sense to me...

Fri Oct 23

Hyundai are the hottest cars of 2009: sales drove straight off the charts in the past year.  Beyond just being "recession-proof," Hyundai Motors has done what no other global car company has: it actually has grown through the recession.

24/7WallSt reports: the Korean company believes it will sell over three million cars this year compared to 2.8 million in 2008.  Hyundai’s third quarter global market share rose to 5.5% compared to 5.2% in the second. Hyundai’s third quarter profit tripled to $827 million from the same period in 2008. 

Even the Japanese motor companies wish they were Hyundai right now. 

What is their secret?  Not really a secret.  Remember all those commercials back in January, where Hyundai guaranteed that if you lost your job, "it's no problem," they will make your payments for you?  That marketing, combined with the new fuel-efficient lines (even SUVs!) were all sold for a fraction of the price of other brands.

Fri Oct 23

This post from Cityfile is too funny to pass up on a Friday.  Fashionista, recessionista, whatever-you-may-be-sista, can you even begin to pretend that the latest Louis Vuitton opening is anything but futile? 

It wasn't long ago that Louis Vuitton was scrapping plans to open glitzy new stores around the world. But times have changed! The French luxury giant opened its latest outpost this week. And it just so happens to be located in the Mongolian capital of Ulaanbaatar. (If you're headed in that direction and you'd like to stop by, ask your taxi driver to take you to Sukhbaatar Square. You can't miss it. Really.) To pay tribute to Mongolia's "strong horse riding culture," the company says it's putting some Louis Vuitton equestrian gear on sale. Does this mean residents of Beirut will finally get the LV-emblazoned falafel fryer they've been waiting for when the company descends on the Lebanese capital for the first time later this year? We will soon find out!

 I love the photo and the accompanying caption beneath it...

















So screwed up ... Louis Vuitton Building overwhelms Sukhbaatar Square in Ulaanbaatar. Sukhbaatar would turn in his grave, but they already moved his tomb out of the square.

Fri Oct 23

U.S. Money Matters blog is also relieved to finally see the Wall Street pay being curbed:

The Obama administration has decided to cut the pay of Wall Street executives at companies bailed out by the federal government, and Money Matters says, “It’s high time!”

The banks and financial institutions are against the crackdown, arguing that they need to continue to pay large salaries and bonuses to attract the top talent that they say is essential to running their operations.

Nothing could be further from the truth. There are thousands of unemployed investment bankers who would jump at the opportunity to work for a ‘mere $300,000 per year’ with a modest bonus.  Read more from the Money Matters blog….

Fri Oct 23

Finally, some compensation regulation.  While I wouldn't call this a victory necessarily, it is a baby step in the right direction.
From the New York Times:

Responding to the furor over executive pay at companies bailed out with taxpayer money, the Obama administration will order the firms that received the most aid to slash compensation to their highest-paid employees, an official involved in the decision said on Wednesday.

The plan, for the 25 top earners at seven companies that received exceptional help, will on average cut total compensation this year by about 50 percent. The companies are Citigroup, Bank of America, American International Group, General Motors, Chrysler and the financing arms of the two automakers.

Some executives, like the top traders at A.I.G., will face tight limits on their pay. In addition, the top-paid employees at all the affected companies will face new limits on their perks.

The plan will also change the form of the pay to align the personal interests of the executives with the longer-term financial health of the companies. For instance, the cash portion of the executives’ salaries will be slashed on average by 90 percent, and the rest will be replaced by stock that cannot be sold for years.

Sounds like progress...  but here are the shortfalls, because, unfortunately, this is not a perfect plan:

• While the plan takes down the highest-paid people's compensation a notch,  it still permits multimillion-dollar pay packages.  
• And it only affects those who received a bailout, so it doesn't check the rest of Wall Street or corporate America, still free to run wild with greed.

Thu Oct 22

Just when we had forgotten all about Bing, they found a way to one-up Google: Microsoft announced that its search engine Bing will be the first first to let users search the deluge of tweets flowing across Twitter, along with similar status updates on Facebook, in real time. 

However, Google moved quickly to counter its arch-rival’s advantage, hurriedly announcing later in the day it had reached an agreement with Twitter for an instant search service of its own. It did not say when the service would be launched, but promised it would be “relatively soon”.  

FT says that Google, however, claimed that the quality of the search results, rather than speed of launching the service, would prove more important, particularly given the difficulty of finding relevant information among the mass of short messages on Twitter.

Perhaps you hadn't heard the two different heated conversations concerning the Web, both topics affect your internet access and experience: net-neutrality and metered-usage.

First, let me explain net-neutrality and why it is an issue.  Tomorrow, the Federal Communications Commission takes its first vote on plans to write so- called net neutrality rules governing Internet traffic. Net-neutrality means an internet service provider cannot cater or favor internet service.  For example, these rules will make sure that providers led by AT&T, Verizon Communications Inc. and Comcast Corp. cannot block Web content from companies such as Google, Amazon.com Inc. and Twitter Inc.  According to Bloomberg, Google’s Richard Whitt and AT&T’s Jim Cicconi are at each other's throats over it, with Google pushing for net-neutrality rules to be passed.  I'm all for nuetrality—how about you?

Secondly, the all-you-can-eat Internet for a flat rate buffett may be taken away from us.  Internet carriers are looking into a return to the pay-as-you-go Internet.  I don't know about your computer habits, but that would really stink for me, as I am virtually online at all times!

The WSJ reports "Carriers including AT&T Inc. and Time Warner Cable Inc. say they may have to switch amid a surge in Internet traffic as more people go online to watch videos and download movies. And a new push by the federal government to adopt rules that would force Internet providers to treat all Web traffic equally, no matter how much bandwidth they take up, could give ammunition to the broadband providers that want to change how they charge for Web access."

And if the carriers aren't allowed to charge for usage, the alternative will stink: they are threatening to simply cap everything.  So, either metered-usage or limited-usage.  Boo.

Wed Oct. 21

What will be the big breakthoughs that finally rid us of our dependence on the fossil fuels that create pollution?

WSJ lists five new technologies that could propel us into the new world:

1. SPACE-BASED SOLAR POWER — For more than three decades, visionaries have imagined tapping solar power where the sun always shines—in space. If we could place giant solar panels in orbit around the Earth, and beam even a fraction of the available energy back to Earth, they could deliver nonstop electricity to any place on the planet. The technology may sound like science fiction, but it's simple: Solar panels in orbit about 22,000 miles up beam energy in the form of microwaves to earth, where it's turned into electricity and plugged into the grid. 
2. ADVANCED CAR BATTERIES — Electrifying vehicles could slash petroleum use and help clean the air (if electric power shifts to low-carbon fuels like wind or nuclear). But it's going to take better batteries. Lithium-ion batteries, common in laptops, are favored for next-generation plug-in hybrids and electric vehicles, but they don't go far on a charge. One alternative, lithium-air, promises 10 times the performance of lithium-ion batteries and could deliver about the same amount of energy, pound for pound, as gasoline. A lithium-air battery pulls oxygen from the air for its charge, so the device can be smaller and more lightweight. 
3.  UTILITY STORAGE — Everybody's rooting for wind and solar power. How could you not? But wind and solar are use-it-or-lose-it resources. To make any kind of difference, they need better storage. Battery packs located close to customers can store electricity from renewable wind or solar sources and supply power when the sun isn't shining or the wind isn't blowing, again, possibly lithium (big) batteries.
4. CARBON CAPTURE AND STORAGE — Keeping coal as an abundant source of power means slashing the amount of carbon dioxide it produces. That could mean new, more efficient power plants. But trapping C02 from existing plants—about two billion tons a year—would be the real game-changer. Techniques for modest-scale CO2 capture exist, but applying them to big power plants would reduce the plants' output by a third and double the cost of producing power. So scientists are looking into experimental technologies that could cut emissions by 90% while limiting cost increases.
   
5. NEXT-GENERATION BIOFUELS — One way to wean ourselves from oil is to come up with renewable sources of transportation fuel. That means a new generation of biofuels made from nonfood crops. Researchers are devising ways to turn lumber and crop wastes, garbage and inedible perennials like switchgrass into competitively priced fuels. But the most promising next-generation biofuel comes from algae.

Wed Oct 21

While I have to share this post from Douglas A. McIntyre, I must admit I am not one bit surprised.  It goes hand-in-hand with Phil LeBeau's editorial today: The Ugly Truth: GM and Chrysler Were In Worse Shape Than Many Thought.  Ugly, ugly, waste of a bailout.

The Troubled Asset Relief Program inspector Neil Barofsky has almost nothing good to say about the way the Treasury has handled the TARP. He released his latest report to Congress today.

His first criticism. which echoes a previous one, is that taxpayers are unlikely to ever get their investments in GM and Chrysler back.

Chrysler’s sales problems are so severe that some auto industry analysts believe that the company cannot make it. The government’s $49 billion investment in GM will only be returned should GM’s “market cap” goes above $100 billion if the company goes public again. That would mean that GM would have to be worth nearly as much as Toyota.

The more stinging criticism from Barofsky is that the Treasury has been secretive about how banks that received TARP money used the capital. The Administration promised taxpayers that their investment in turning around the economy would be tracked and fully transparent. Members of Congress and the public have certainly hoped that some of the money put into troubled banks would come back out as loans to people and businesses. Instead, the capital appears to be going to management bonuses.

“Despite the aspects of TARP that could reasonably be viewed as a real success, Treasury’s actions in this regard have contributed to damage the credibility of the program and the government itself,” Barofsky wrote in the 256-page report that the public is about to see.

The problems with the transparency of the TARP goes back to its earliest days. It was never clear why Henry Paulson, then the head of Treasury, made a number of big banks take money that they may not have needed. It is equally unclear why institutions like Citigroup and Bank of America, which were deeply troubled, were not forced to take more.

Paulson has an excuse. The credit systems was failing as he pushed money into banks as a ham-handed way of saving the system. That need has gone away. The Treasury should not find it difficult to report on what is happening to the TARP funds now.

Wed Oct 21

Nobody defends Goldman's greed when Ratigan is around.  Dylan Ratigan is like the rebel boy on the block who will stand up to anyone.  Be sure to check out minute 2, because he really gets personal around 2:30.



Wed Oct 21

Don't be kept in the dark.  If you want to hold your own in investing, or just being able to converse about the economy you ought to know what the 90/10 rule is. 

There are only two essential figures that will decide in large part whether the economy will continue to recover or not. One is whether unemployment will go over 10% and stay there for two quarters and the other is whether crude will rise above $90 and stay there for the same period. The period in both cases is the first two quarters of next year.

The odds of a new recession in America are astronomically high if oil trades above $90 and unemployment stays above 10% for any period of time.

From 24/7WallSt:

Last summer showed that both businesses and consumers can hold on for a while if crude prices are extraordinarily high, but a protracted period of two quarter or longer would be much different.
 
It is nearly certain that the economy in both America and abroad cannot whether long periods of high unemployment and high energy price. Some experts would argue that rising unemployment cuts crude demand. That is only true if the US is looked at in isolation. Oil supply and demand only rely modestly on American consumption now. The number of large oil consuming and producing nations is higher than they have ever been. The life of crude oil prices no longer goes hand-in-hand with US business activity.

 Tue Oct 20

Numbers don't lie.  More money for bankers and investment banks means Main Street gets a smaller piece of the pie.  The pie baked with their own sweat and tears.

Here is a great clip of two guys who aren't afraid to tell it like it is: Michael Moore and Dylan Ratigan.  Together on the Today Show, interviewed by Matt Lauer.



Tue Oct 20

If China is any indication of which metal to bet your money on, Platinum may be the next best commodity investment.  

The first half of 2009, demand for platinum jewelry in China went up 81 percent year-over-year. That's a big deal: According to platinum company Lonmin, China accounts for over 60 percent of the world's total platinum jewelry demand. SeekingAlpha reports:

Gold has scored a lot of press lately, and for good reason: Its price just keeps on making new records and breaking them. Just last week, the yellow metal recently struck a new all-time high of $1,072/oz.

But on a year-to-date basis, another precious metal has quietly outshone gold's returns: platinum.

As we've discussed before, platinum is both an industrial metal and an investment vehicle, used to make jewelry, construct automobile catalytic converters and as a safe haven for bullion investors. Last year, the white metal was still in hot demand: According to Platinum Today, in 2008, miners across the globe produced 185.7 metric tons of platinum, but consumers used 197.4 metric tons of the white metal—a deficit of 11.7 metric tons.  Keep reading...

Tue Oct 20

The SEC may be trying to compensate for the scandals that went unstopped: the Bernie Madoffs and the Alan Stanfords that slipped through the system and shattered many people's nest eggs.  Picking up their own slack, the Securities and Exchange Commission seems to be hunting insider trading perpetrators with a vengeance.

24/7WallSt. says:

The SEC has not had any real success and the adulation that accompanies that since the options dating scandal that went as far as looking into the business practices of Apple and its CEO Steve Jobs. The CFO of Apple lost his job in the process and the SEC was viewed, at least temporarily, as an agency with teeth.

The SEC has found a new cause which is likely to bring it a great deal of positive attention. It is scouring hedge funds for evidence of insider trading. It already has billionaire hedge-fund manager Raj Rajaratnam in its net. According to Bloomberg, the agency has been watching may other investors and is likely to bring many more insider trading charges in the weeks ahead.

Hedge-fund managers are not viewed with much sympathy on Main Street or in Congress. They have the image of  being greedy investors who push around money to make profits but do nothing to create jobs or wealth for the general economy. They are parasites, many in Washington say, feeding on the weaknesses in the financial system.

A successful prosecution of Rajaratnam will put the SEC back in the good graces with the public that it enjoyed during the backdating and Enron scandals. The SEC will and probably should milk that for all it is worth. It means the hedge fund industry will be under the microscope until the agency can charge every last inside trader it can find.

Of course, it is something that the agency should have been doing all along ... and hopefully they will turn over every rock, and look under every Martha Stewart collection bedspread for the crooks.

Mon Oct 19