World Economy

how debt deal can effect you

2011-08-03T11:20:00.000-07:00

After much drama, lawmakers may have finally settled on a deal to raise the nation's debt ceiling. But for everyone from the retirees figuring out their future to students paying off their debt loads, the work and the headaches have just begun.

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Financial advisers and other experts say the full impact of the headline-grabbing bill may not be known for weeks or months, especially with so many more details of the legislation passed yesterday still being worked out and interpreted. But many think it's going to force many folks to rethink everything from their portfolio allocations to their tax movements. Two areas of concern already have emerged: Social Security and Medicare beneficiaries have been spared so far, for example, but experts say seniors could still be hit in phase two of the deficit-reduction plan. Investors, meanwhile, worry that the deal will further drag down the sputtering economy -- and take the stock and bond markets with it. From the standpoint of economic growth, the cuts are "one more thing going in the wrong direction," says Chad Stone, the chief economist for the Center on Budget and Policy Priorities.

In general, most pros recommend against any knee-jerk moves. Still, there are certain areas that are more likely to be impacted than others. Below are seven -- from retirement planning to the fate of the dollar -- that could require new strategies in the months ahead. These are by no means definitive, but think of them as a starting point for how to adjust your portfolio and finances.

Retirement planning. It's not what the bill did -- it's what it didn't do. Namely, it failed to extend the payroll tax cut passed in 2010, "which means unless separate legislation is enacted, workers will see their paychecks shrink in January when they have to start paying an additional tax of 2% on their earnings," says James Horney, vice president of federal fiscal policy for the Center on Budget and Policy Priorities. (The cut was a one-year relief measure, so take-home pay ought to be about where it was a year ago.) In recent times, strapped workers have made up for their income shortfalls by taking out 401(k) loans: Vanguard reported a 14% uptick in 401(k) loans from 2009 to 2010; T.Rowe Price an 11% increase. And it might be also be tempting to make up for that cash shortfall by contributing less to your 401(k), but that can be a big mistake, says Michael Wall, founder of Wall Financial Group in Altoona, Penn. "It's a compounding effect, so not saving that extra money can have a big impact on your total retirement savings," he says.

Retirement income. For retirees who rely on municipal bonds for income, the cuts are a cause for concern. Any decrease in federal spending will mean less aid for states and local government -- making many already-weak states even more vulnerable to downgrades, budget deficits and layoffs, says Matt Fabian, managing director of Municipal Market Advisors, an independent research group. And while the U.S. dodged a default on its debt, a downgrade by the major credit rating agencies hasn't been ruled out. Such a move would likely lead to lower ratings for several states that are dependent on the federal government, says Chris Ryon, managing director for fund company Thornburg Investment Management. Investors would be smart to spread their bets across all kinds of municipal bonds, focusing less on state general obligation bonds, which are more dependent on federal aid, and more on essential service revenue bonds, or those funded by revenue from water, sewer and electric services, he says.

The dollar. The resolution of the debt crisis brought an immediate rally in the dollar, with the U.S. dollar index rising 0.49% on Monday as a deal seemed imminent, but the rally was already slowing down by Tuesday morning, and the longer-term picture for the greenback isn't so great. For one thing, the deal doesn't appear likely to produce the kinds of savings that Standard & Poor's had said were necessary to avoid a downgrade, according to a report by Camilla Sutton, the chief currency strategist for Scotiabank. The work that remains to be done on the debt problem combined with weak economic growth suggests the dollar will continue to weaken through the end of the year, Sutton writes. That's bad news for travelers, but it could help some investors, says Kate Warne, U.S. investment strategist at Edward Jones. Investors who own stocks or funds in other currencies will see the dollar value of those investments rise if the dollar falls against other currencies, Warne says.

Student loans. The deal is good news for undergrads -- they can still get subsidized federal student loans, which allow them to pay no interest on their loans as long as they're currently enrolled in school more than half-time -- but not such good news for grad students, who can no longer get them as of July 1, 2012. It also went a long way towards funding the shortfall of the Pell Grant program, which helps low- and moderate-income students. But "we're not out of the woods yet," says Pauline Abernathy, the vice president of the Institute for College Access and Success. In fact, the Pell Grant program is still facing a $1.3 billion deficit, she says. To make up for this, Congress may consider changing eligibility for the grants from up to 18 semesters to just 12 semesters, or by increasing enrollment requirements, says Mark Kantrowitz, publisher of FastWeb.com and FinAid.org.

Mortgages and housing. The passage of the debt deal is likely to keep mortgage rates low for now, says Keith Gumbinger, vice president HSH.com, a mortgage information website. But prospective homebuyers could soon find themselves with fewer incentives once the details of the debt deal are ironed out. Lawmakers have been debating a simpler tax system with lower tax rates and fewer tax breaks that could include reducing the generous mortgage tax deduction as part of the long-term spending cuts that must be agreed on this fall, says Brian Gardner, senior vice president at Keefe, Bruyette & Woods. The takeaway for prospective homebuyers: Act soon. "If you're kind of thinking about it of course it's always better to move forward more quickly," says Gumbinger. "Right now you're working in known market conditions rather than tomorrow's unknown market conditions."

Your portfolio. Wherever the actual cuts come from, the debt deal is likely to be a drag on the economy: Most estimates suggest that the deal will reduce economic growth by about one-tenth of one percent. Investing pros say the deal itself doesn't radically change their asset-allocation recommendations, but reinforces the need to diversify your portfolio with international stocks and debt. "In a world where growth seems challenged everywhere, we still think diversification is a good thing to do," says Warne, who recommends investors have at least 30% of their stock portfolio in foreign markets, mostly developed, with about a 5% allocation to emerging markets. Stephen Wood, chief market strategist for Russell Investments, urges even more weighting to international: Investors should match their portfolios to the overall makeup of the global economy, which would mean keeping only about 45% of assets here at home.

Health care. Medicare will be protected in the first round of the debt deal, but it looks more vulnerable in phase two, in which a special joint committee is tasked with finding at least $1.2 trillion in additional savings. If the committee cannot do this, Medicare provider payments are scheduled to be automatically cut by up to 2%. If this happens, consumers may find that some doctors will stop accepting Medicare patients and that hospitals will close units, says Mary Johnson, a senior policy analyst for the Senior Citizen's League, a non-profit seniors rights advocate. And in looking for savings, the committee may consider plans like lifting the Medicare eligibility age from 65 to 67 or increasing co-pay amounts, says Joe Baker, president of the Medicare Rights Center.

Debt, not debt ceiling deadline, is the problem

2011-08-02T11:59:00.000-07:00

Balancing the budget using the accounting practices currently used by our legislators is a myth. We the people need to understand the truth. The goverment uses what is refered to as baseline budgeting; from Wikipedia:

"Baseline budgeting is a method of developing a budget which uses existing spending levels as the basis for establishing future funding requirements. The concept assumes that the organization is generally headed in the right direction and only minor changes in spending levels will be required. The baseline is normally enhanced by adding adjustment factors based on issues such as inflation, new programs and anticipated changes to existing programs."

That sure doesn't sound like this is the way we ought to be doing our budgeting.

When you or I cut our budget we actually reduce the amount we spend, if we spend $100 and cut 2 percent we then spend $98. When the government, using baseline budgeting, cuts 2 percent, it first assumes an 8 percent growth rate, so it cuts 2 percent from 108 percent for a total of 106 percent. That is a cut in government spending.

Welcome to the wonderful world of federal accounting, meant to deceive and practiced as an art form by the men and women elected by us to uphold the constitution and represent us.

Remember the debt ceiling deadline is not the problem, the debt is the problem. At this rate in a short time every dollar that comes in will go to service the debt, nothing for anything else.

it’s time for platinum to start getting the attention

2011-07-29T11:17:00.000-07:00

Move over gold and silver — it’s time for platinum to start getting the attention it deserves as a precious metal.

Year to date, gold prices have scored a climb of 14% and silver’s gained 29%. Platinum prices, however, trade just 1% higher, so while gold and silver have proven their worth as stores of value in these uncertain economic times, platinum has been left in the dust.

Reuters

That’s not so tough to make sense of, knowing that investors view gold as a monetary asset and platinum is most well known as an industrial metal. Read about gold’s investment risks.

But “all three metals have a history of money,” said Nick Barisheff, president and chief executive officer of Bullion Management Group Inc. “While gold and silver have been used as money for thousands of years, platinum too has served as an economic store of value for over 300 years.”

Platinum is also worth more than gold and it’s tougher to produce.

At $1,792 an ounce, platinum PL1V -0.52% is worth nearly $200 more than goldGC1Z +0.64% at $1,616 an ounce and it costs 45 times more than silver SI1U +0.45% at $40.

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It takes about 10 tons of ore requiring six months of mining to produce a single ounce of platinum, according to Barisheff, who points out that platinum is 30 times rarer than gold. Since 1997, demand for the metal has exceeded mine production and global demand has continued to record highs in 2011.

“Platinum is the rarest of the precious metals and its price reflects this,” said Barisheff.

The metal also offers investors the opportunity to diversify their precious metals holdings.

“The precious metal component of a properly diversified portfolio should include an allocation to platinum,” said Mark O’Byrne, executive director at international bullion dealer GoldCore. “Full diversification within the precious metal group is important in order to reduce volatility.”

Besides, “the only asset class that is better than gold as an inflation hedge is a basket that includes silver and platinum,” he said, adding that platinum may even be a better inflation indicator than oil.

And given the scale of currency debasement being seen in the U.S. and globally, platinum’s inflation-adjusted high of about $3,000 an ounce should be reached in the coming years, he said.

Unpopular precious metal

Even so, platinum hasn’t been winning any popularity contests in the precious metals sector lately — at least not as a monetary asset — for lots of good reasons.

James Turk, founder and chairman of GoldMoney, said that of the $1.8 billion of gold, silver, platinum and national currencies held by GoldMoney’s customers, only $15 million is platinum.

“So platinum is not popular,” but it’s also not neglected, he said. “Rather, it is just not liquid nor is the market as deep as gold or silver …. The big hedge funds and other institutions rarely buy platinum because the market is so thin,” said Turk.

And given that it’s a thinly-traded market, it is also the most volatile of the precious metals, said James Carrillo, account executive at precious metals investment firm Swiss America Trading Corporation.

Platinum’s industrial ties can also feed erratic moves.

show must go on

2011-07-29T11:16:00.000-07:00

More unemployed managers and executives are deciding to pack their bags and move for a new position, according to a report released this week by Challenger, Gray & Christmas.

During the first half of the year, about 9.4% of job seekers relocated for a job, up from 7.6% within the same window of time in 2010, according to the outplacement consultancy firm. That’s from a survey of about 3,000 job seekers; many of the respondents are managers and executives.

“The 9.4% relocation rate in the first half of 2011 is still low by historical standards, but the increase does indicate that job seekers are finally beginning to loosen the stakes that have kept them tethered to a specific region,” said John A. Challenger, chief executive of Challenger, Gray & Christmas, in a news release.

“Since there has been little improvement in the housing market in 2011, one might conclude that the increased relocation in the first half of the year is due to the fact that prolonged unemployment is compelling more job seekers to relocate, despite the challenges of selling a home in this market,” Challenger said.

“At some point, the job seeker may simply conclude that it is worth taking a loss on a home sale to get back on the payroll,” he said. It’s also possible that employers are becoming more willing to help employees relocate.

Before the recession it was more common for people move for a job, according to the report. About 16.1% of people who found jobs each quarter between the first quarter of 2005 and the third quarter of 2007 relocated for the position. But at that time, selling a house wasn’t nearly as difficult as it is in today’s climate.

Read more real-estate news in this week’s pages, including why the foreclosure rate is on the rise in Seattle and a Realty Q&A about one reader’s struggle with his lender.

Employment markets in some parts of the country are recovering faster than others, and in a job search, “when you cast a wider net, you are more likely to catch more fish,” Challenger said.

But these days, if you’re a homeowner, casting a wider net often means you also have to be OK with taking a loss on the sale of your home.

Gross domestic product expanded at a paltry 1.3% annual rate in the second quarter

2011-07-29T11:14:00.000-07:00

A new government report on the nation’s output showed the economy in much weaker shape than anticipated, casting doubt on the strength of the expected recovery in the final six months of the year.

Gross domestic product expanded at a paltry 1.3% annual rate in the second quarter, the Commerce Department said Friday, below the 1.6% growth rate that economists anticipated. See MarketWatch economic calendar.

But it was a drastic downward revision to first-quarter GDP growth that stole the show — and set economists on edge.

The new data on the inflation- and seasonally-adjusted value of all goods and services produced in the United States showed the economy barely grew at all in the January-through-March quarter, rising just 0.4% as opposed to the initially reported 1.9% improvement. At the same time, the government said the recession proved to be deeper than initially projected.See related story about the depth of the ‘Great Recession’.

Mark Vitner, senior economist at Wells Fargo, called the GDP report a “game-changer.”

Congress might have to temper its zeal to slash government spending as part of any increase in the debt ceiling, he said.

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Should investors panic over default?

Despite the ongoing nervousness over the debt negotiations, there’s no disputing that U.S. Treasurys remain some of the safest investments there are. (Photo: Reuters.)

“It does raise some legitimate questions how quickly we can rein in government spending without doing more harm than good,” Vitner said.

Stocks stayed in negative territory Friday but rose off their session lows. The Dow Jones Industrial Average was recently down 57 points to 12,183. The DJIA has lost about 4% for the week, the largest decline in about a year.

In the bond market, Treasury prices10_YEAR -3.97% extended gains, pushing 10-year note yields under 2.90%.

included revised growth estimates for the last three years.

And in currencies, the dollar DXY -0.42% felt pressure in the face of buying in the Japanese yen and the Swiss franc. Read more on debt fears weighing on the dollar and the euro.

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doller index craw back

2011-07-27T11:48:00.001-07:00

The dollar index DXY +0.82% , which tracks the greenback's performance against a basket of six other currencies, clawed its way back above 74 on Wednesday on hopes of an imminent U.S. debt ceiling deal. The index is trading at 74.032, recovering from 73.709 earlier.

U.S. stocks fall on debt debate, data

2011-07-27T11:45:00.000-07:00

source----marketwatch.com U.S. stocks fell sharply on Wednesday as the political sparring over the nation’s debt limit continued and after the government reported orders for durable goods fell in June.

“The disappointing data add to the theme of a slowing global economy, which has been somewhat forgotten by some, with the markets’ focus on European and U.S. debt concerns,” Peter Boockvar, equity strategist at Miller Tabak, wrote in an emailed note.

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How would oil react to default?
Find out how the price of oil might be affected by either a debt-ceiling resolution or a default.
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Extending losses into a fourth session, the Dow Jones Industrial Average DJIA -1.35% declined 106.68 points, or 0.9%, to 12,394.62, with all but two of its 30 components sliding.

The Standard & Poor’s 500 IndexSPX -1.79% shed 15.95 points, or 1.2%, to 1,315.99, with industrials the heaviest weight of the index’s 10 industry groups and telecommunications the sole sector on the rise.

Helping fuel worries about industrials firms, conglomerate Emerson Electric Co.EMR -6.85% warned on Wednesday of slowing economies in the U.S. and in Europe.

Juniper Networks Inc.’s JNPR -21.01% shares fell 20% a day after it warned its second-quarter results would fall below expectations.

Investors did embrace the market debut of Dunkin’ Brands Group Inc. DNKN +43.74% , with shares of the initial public offering rising 44% to $27.40 a piece.

The Nasdaq Composite Index COMP -2.40% fell 49.15 points, or 1.7%, to 2,790.81.

Treasury prices fell as traders readied for the government’s auction of $35 billion in five-year notes in the afternoon, with yields on the benchmark 10-year Treasury note 10_YEAR +1.12% rising to 2.966%.

Gold futures GC1Z -0.20% were lately off 50 cents at $1,618.80 an ounce, after rising to a record high of $1,1631.20 an ounce in New York, while crude-oil futures CL1U -2.26% slid $1.48 to $98.11 a barrel after government data showed a rise in inventory last week.

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U.S. markets gird for downgrade

Traders prepare for the likelihood of a U.S. credit downgrade. Plus, Amazon beats estimates, the muni and money markets are trying to stave off uncertainty and how the U.S. is trying to avoid the largest municipal bankruptcy in history. (Photo: AFP / Getty Images.)

For every stock on the rise three fell on the New York Stock Exchange, where 399 million shares traded as of 12:15 p.m. Eastern.

The Commerce Department on Wednesday said orders for U.S. durable goods unexpectedly dropped in June.Read full story on decline .

Wall Street’s nerves were further frayed as the deadlock over raising the debt limit showed few signs of abating in Washington, with a House vote on Speaker John Boehner’s plan to raise the debt ceiling and trim the deficit delayed at least a day.

Adding further fodder to the debate, the Congressional Budget Office said Senate Majority leader Harry Reid’s deficit-reduction plan would cut projected deficits by $2.2 trillion over 10 years, $500 billion less than the $2.7 trillion in future cuts estimated by the Nevada Democrat.

The CBO found a competing plan sponsored by Ohio Republican Boehner would cut the deficit by $850 billion over 10 years, $350 billion short of the $1.1 trillion he projected.See more of the CBO’s analysis .

Euro-zone leaders are expected Thursday to sign off on a new aid plan for Greece

2011-07-21T10:11:00.001-07:00

Euro-zone leaders are expected Thursday to sign off on a new aid plan for Greece that would cut the nation’s debt burden and increase the flexibility of the region’s rescue fund in a bid to keep the debt crisis from spreading, news reports said.

A draft plan expected to be published at the conclusion of Thursday’s closely-watched summit of euro-zone leaders would see the European Financial Stability Facility, or EFSF, charge loan rates as low as 3.5%, Dow Jones Newswires reported, citing a draft copy of conclusions. The plan would also reduce debt burdens for Ireland and Portugal.

The maturities of EFSF loans would be extended to at least 15 years from an average of 7.5 years, the report said, and the EFSF could be used to recapitalize banks through loans to euro-zone governments, including governments that haven’t sought a bailout. Financial firms will be given a menu of options on how to help finance Greek debt, the report said, including debt exchanges, rollovers and buybacks.

The Wall Street Journal reported that discussions were also under way to allow the EFSF to provide precautionary credit lines, loans to governments and debt buybacks in the secondary market.

The news boosted stocks and lifted the euro, which has seen choppy trading as headlines flowed from Brussels. The 17-nation shared currency changed hands at $1.4304, up from $1.4230 in late North American trading on Wednesday.

Hopes for a comprehensive agreement at the summit were boosted early Thursday morning after German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed to a “common position” after seven hours of discussions in Berlin.

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Greek taxi drivers clash with police

Protesting taxi drivers clash with riot police outside the transport ministry after government talks fail. Video courtesy Reuters.

Germany and France are Europe’s two largest economies, but any deal will need the approval of all 17 euro-zone leaders.

Market jitters were triggered after Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels ahead of the closely-watched summit that leaders were attempting to avoid a “selective default,” but that a new bailout plan could potentially trigger such a designation by ratings agencies.

Merkel’s spokesman said the leaders discussed the situation with European Central Bank President Jean-Claude Trichet and European Council President Herman Van Rompuy. Trichet has repeatedly warned that any default would result in Greek bonds becoming ineligible to be used as collateral for ECB funding, potentially starving Greek banks of financing unless national governments come up with a funding solution.

The agreement between France and Germany comes amid mounting pressure on Merkel, as leader of Europe’s largest economy, to reach agreement on a second bailout for Greece and take steps to prevent the further spread of the region‘s long-running debt crisis . Read more on Thursday’s euro-zone summit.

Merkel last weekend had said she might not attend the summit unless a comprehensive deal was on the table.

Rising bond yields for Spain and Italy have triggered alarm in world markets and among world leaders that the euro-zone crisis could run out of control, threatening global growth.

U.S. President Barack Obama had a telephone conversation with Merkel earlier this week to discuss the situation. European Commission President Jose Manuel Barroso on Wednesday warned that a failure to respond to the crisis would produce “negative consequences [that] will be felt in all corners of Europe and beyond.”

Italy, Spain also in focus

Although Greece is at the top of the agenda, “any decision taken today must be made with one eye on Italy and Spain,” said Gary Jenkins, head of fixed-income research at Evolution Securities in London. “It was always likely that the contagion would spread to these countries at some stage and, because of the size of their debt, that they would be the line in the sand that could not be crossed.”

Germany, in the face of growing taxpayer resentment over bailouts, has previously insisted that private bondholders must share some of the cost of a new Greek bailout and has previously resisted calls to use the euro zone’s rescue mechanism, the European Financial Stability Facility, to purchase government bonds or fund buybacks of government debt.

France and the European Central Bank have resisted calls for private-sector participation, saying such an approach could cause the crisis to spread by spooking bondholders.

While the ECB has maintained that Greece and other debt-strapped countries should focus on austerity measures, many economists have viewed some form of debt restructuring for Greece — and potentially fellow bailout recipients Ireland and Portugal — as inevitable.

Greece’s economy has contracted sharply, sparking civil unrest and doubts about the government’s ability to press ahead with further austerity measures. The government last month barely won passage of a fresh round of austerity and privatization measures deemed a prerequisite for a delayed tranche of aid under last year’s bailout and for a new bailout package.

News reports Thursday morning said the negotiations saw France drop calls for a bank tax that had been estimated to raise as much as €50 billion over five years that would have been used to finance buybacks of Greek government bonds.

Markets are likely to remain in a wait-and-see mode as an agreement between France and Germany must still convince the other 15 euro-zone leaders, analysts noted.

“The markets will be keen to know how the EU intends to tackle the issues beyond Greece, in particular how the role of the EFSF will change,” said Gavan Nolan, director of credit research at Markit in London, in emailed comments. “Until the details are clear they will be wary; memories of past disappointments are still fresh

Double-Dip Recession Or War of Aliens (ufo)

2011-07-20T20:35:00.000-07:00

Double-Dip Recession Or War of Aliens, its not a windy its not ice creme one said and happened but it will we are developing , rising growing but all in negative direction what is going on on the green world knows every man here is my few dangerous lies one can say economically which can push us to double-dip recession.

A slow-growth decade is already raging. You feel it everywhere. And it’s going to get worse, much worse. A recession is virtually certain for 2012, in an angry, volatile presidential election year. May morph into a 1930’s-style depression.That’s the clear message we get from Gary Shilling, one of the world’s foremost economic forecasters, long-time Forbes columnist and author of “The Age of Deleveraging,” where you’ll find tips and warnings: The American economy is facing a huge shortfall in the 2011-2020 decade. We need real GDP growth of at least 3.3% just to keep unemployment stable.Click to PlayFive stocks you wish you boughtSome stocks have done well this year and still have room to the upside. Paul Vigna talks with Simon Constable about five stocks you wish you had bought earlier this year.But that’s impossible. America will be lucky to get an average 2% real growth, says Shilling. In fact, it’s worse: America faces the possibility of 10 long years of no growth. Or, more accurately, a decade of less-than-zero growth. Plus high-stress chronic unemployment. Plus accelerating global unrest, regional conflicts, increasing Pentagon budgets.In his latest newsletter, one of his scariest ever, Shilling’s scenarios for 2012 and the long years ahead feel more like a summer blockbuster that’s come alive with a vengeance.Wall Street greed worse since 2008 … will soon self-destructYes, a 2012 recession is coming, says Shilling, because “much of the excesses and financial leverage built up in past decades, especially in the financial sector globally and among U.S consumers, remain to be worked off.”Reagan and the Bushes expanded government, added debt: “The federal deficits and Fed excess bank reserves” fueled the Fed and Treasury’s failed “attempts to bail out the nearly collapsing U.S. private sector” just made matters worse for the economy by focusing on banks not jobs.As a result of the blunders by our fiscal and monetary leaders, the “private and public deleveraging will take years to complete and keep economic growth subdued.” As a result, in coming decades “recessions will be deeper and more frequent.” Yes, worse.Gary ShillingShilling exhibits his usual coolly cautionary yet wisely analytical tone: “The usual trigger” for a recession, “a tightening of monetary policy,” raising rates as former Fed Chairman Paul Volcker did a generation ago, “is unlikely in today’s weak climate, but others are at hand.”So which trigger will plunge America into a deeper, double-dip recession, and take the global economy down with it? “A further 20% drop in house prices because of the depressing effect of 2 million to 2.5 million excess inventories” is setting up a crisis.Yes, the housing sector. Remember how Wall Street’s excessive greed grew for several years, then triggered the 2008 meltdown? That disaster’s never ended. Why? Because another 20% drop in housing “would push underwater mortgages from 23% to 40% of the total, seriously depressing consumer spending, and wreak havoc among mortgages and related securities.”Perfect storm: 10 reasons for a slow-growth decade, 2011-2020It gets worse. Look around. Warfare? We are in a virtual mine field of triggers merging into a perfect storm, triggers that individually and together can and will plunge America into a double-dip recession. More accurately, a global depression: Another big “spike in energy prices due to Middle East trouble could also drive a weak U.S. economy into recession” and “force a Washington response in the 2012 election year.”No QE3 says Fed Chairman Ben Bernanke? But more “fiscal stimulus is likely since even Tea Party folks like to get reelected.” So stay tuned to Fox News and MSNBC for updates in this accelerating “War on the New Planet of the Apes.”Shilling summarizes the 9 reasons investors had better prepare for “Slow Global Growth in Future Years.” Not just for a temporary, double-dip recession in 2012, but a deeper depression-era slow growth likely till the election of 2020. So start by committing Shilling’s “9 Causes of Slow Global Growth” to memory, plus the 10th one we added:More and more consumers are shifting from a 25-year borrowing-and-spending binge to a saving spree. This trend will spread across the globe. Why? Because American consumers will import less from developed and emerging nations that are dependent on exports for economic growth.

Financial deleveraging is already reversing economic trends that financed much of the world’s new growth in recent years.

Developed countries in Europe and others are moving toward fiscal restraint and spending less.Throughout the world, increased government regulations and involvement in major economies will reduce innovation and increase economic inefficiencies.Nationalism and protectionism will also slow, possibly eliminate, economic growth throughout the world.Declining commodity prices will further limit consumer spending by commodity-producing nations across the world.Excessive inventories and reduced interest from investors will continue to suppress an already weak housing market.Deflation will cut spending as buyers wait for lower prices and negotiate harder.State and local governments across America are losing revenues, cutting services.But perhaps most of all, certainly impacting everything, the extreme, accelerating irrationality driving our angry political wars will undermine an already stagnant economy … until a 1930s-style crash takes down the American economy.

Investment opportunities: What should you buy? Sell?
So where can you put your money in this increasingly unstable world? First, let’s check out the bad news. Five risky “sells.” Then we’ll look at Shilling’s recommendations: Five-plus “buys” extracted from his recent Insight newsletter and “The Age of Deleveraging,” opportunities for the 2012 recession and the slow-growth decade, 2011-2020.
1. Emerging nation stocks. Warning: Behind the smiles, American banks, brokers and financial advisers are running scared. They can’t find enough solid domestic companies, so they’re frantically chasing higher returns in risky, unstable emerging nations all across the planet. Sound familiar? Yes, this is an exact repeat of the build-up to the 2008 meltdown, when Wall Street chased subprime derivatives off a cliff. China’s the biggest risk out there, a new Humpty Dumpty headed for a great fall.
2. Sell commodities. This bubble’s blowing big, will pop. Commodities are not an asset class for your portfolio. They’re a gambler’s bet taking you off your game. In the coming years of weak demand, expect excessive capacity and soft prices. China is buying up long-term supplies across the world, playing games, speculating, living dangerously.
3. Sell U.S. major and regional banks. Regulation uncertainty. Taxes. Gridlock. Huge impact on capital. Vulnerable: Fannie, Freddie, regionals, community banks. In next four years bank portfolios have $800 billion more mortgages coming due, majority underwater.
4. Sell your house, second home or single families investment realty. Most families have the bulk of their net worth and retirement funds tied up in their home equity. That’ll hurt Americans as underwater mortgages increase from 23% to 40% of the national total. Shilling’s been warning of this for a long time: If you do plan to sell any time soon, do it now, before inventories depress prices another 20%.
5. Sell home builders. Our disastrous housing market says sell builders, sell, sell.
Now what should you buy? Shilling highlights several key areas of investment opportunity to counterbalance the risks and insanity driving the above sell suggestions:
6. Income-producing stocks. The stock market’s gone nowhere for 12 years, says Shilling. Inflation-adjusted returns say Wall Street’s a loser. Buy direct or ETFs. Pick selective income-producers: utilities, drugs, telecoms, high-grade munis, preferreds.
7. Treasury bonds. America is the long-term winner. Yes, banks, brokers and stockholders may hate them. But this is your safe haven in the coming deflationary storm. Long maturities. Zero-coupons. Lower commissions. Trust in America.
8. The American dollar. The American dollar is as good as gold in a vast sea of risky black-swan currencies, and that includes China’s yuan. Have faith, the almighty dollar will continue strong. Bet on ETFs, futures, the index.
9. Rental apartments. The American dream of homeownership is a nightmare thanks to a depressed housing market. REITs are overpriced. Rental properties are looking real attractive.
10. North American energy. America has a new national policy: Reduce dependency on foreign oil. And since there’s never enough, the future for American energy is bright.
Want more? Read Shilling’s “The Age of Deleveraging.” He has detailed lists of buys and sells in many sectors: Health care’s 16% of GDP. Going up. Medical office buildings solid. Food and other consumer staples. You gotta eat, wash clothes. Also small luxuries that folks indulge no matter what. And more. Check out his book:
“Some of these are already unfolding. Others may do so only in future years.” Either way, Shilling’s lists are guaranteed to “help you prepare for the investment climate over the next decade.” Buy it. Read it. Whether bull or bear, optimist or pessimist, “The Age of Deleveraging” is essential if you want to be prepared for a volatile, risky, dangerous 2011-2020 decade dead ahead.

China should continue to withdraw stimulus in part to combat risks of higher-than-expected inflation.

2011-07-20T20:33:00.000-07:00

The International Monetary Fund on Wednesday said China should continue to withdraw stimulus in part to combat risks of higher-than-expected inflation.

In its annual review of China’s economy, the IMF directors “saw room for further tightening of monetary conditions” and suggested “greater reliance on interest rates and nominal exchange rate appreciation.”

Click to Play
Chinese consumers have global impact
Millions of young Chinese consumers are bumping up China's apparel sales, worth around $225 billion last year. Growing demand is one factor pushing up prices and production costs in China and around the world. WSJ's Angela Yeoh reports from Beijing.

This year, the People’s Bank of China has increased loan and deposit rates in three quarter-point moves.

In addition to possible inflation risks from food supply shocks, the IMF staff said China also faced the risk of a possible property bubble and a decline in credit quality in the lending undertaken to protect the economy from the financial crisis.

“Our view is that inflation is close to peaking in the next month or two, and we believe by the end of this year, inflation will start moving on to a downward trend,” said Nigel Chalk, a senior advisor in the IMF’s Asia and Pacific department, during a conference to discuss the report.

The IMF said consumer price inflation would average 4.7% in 2011 and then moderate to 3.3% next year.

The IMF directors welcomed steps by China to cool down property price inflation.

“The administrative measures that the government has been taken over the past year or two have been effective, they seem to have calmed down things in the real estate sector,” Chalk said.

But any “durable” solution to property bubbles would need to involve “a significantly higher cost of capital, financial development and higher real estate taxation,” the IMF directors said.

“Certain cities, particularly some of the largest cities, do look bubbly from a price perspective,” Chalk said.

Chinese consumers are impressive savers but putting money in the bank is not attractive given the low interest paid for deposits. There are few non-bank alternatives for savings and there is also no taxation of real estate in China.

“As long as those factors are in place, we think the system is going to have a strong propensity toward bubbles. The government will have to continue to step in from time to time,” Chalk said.

The IMF board repeated its recommendation that China should allow its currency, the yuan, to strengthen further.

The currency USDCNY -0.13% has appreciated by 5.5% against the dollar over the past year.

“In order to get household income rising as a share of GDP, which is an important part of rebalancing...a stronger currency would be needed,” Chalk said.

A stronger currency would also trigger an expansion of the domestic service economy, he added.

The IMF staff said it was time for China to immediately embark on a path to liberalize the financial system.

The first step is to allow the currency to strengthen, and then the central bank can begin to absorb the “significant liquidity overhand” that is currently present. The central bank would have to adopt a new framework for monetary policy decision making.

This would be followed by strengthened regulation, development of nonbank channels for credit, interest rate liberalization and finally capital account liberalization.

“This is a risky undertaking. It needs to be managed very carefully. It needs to be sequenced correctly,” Chalk said.

China’s representative at the IMF, Jinxiong He, had the rare opportunity to rebut the report. He disagreed sharply with the suggestion that the yuan was below fundamentals, saying the staff analysis is based on a flawed benchmark.

The Chinese official also complained that the IMF did not mention that the U.S. Federal Reserve’s quantitative easing had fueled inflationary pressures and constrained options regarding the policy mix.

Euro-zone leaders are hurtling toward a Thursday meeting designed to finalize a bailout package for Greece and prevent the region’s debt crisis from d

2011-07-18T13:45:00.000-07:00

Euro-zone leaders are hurtling toward a Thursday meeting designed to finalize a bailout package for Greece and prevent the region’s debt crisis from deepening, while they attempt to overcome a long-running battle between Germany and the European Central Bank over the role of private bondholders.

“If there’s nothing conclusive that makes sense to the markets and eases the burden on the [peripheral nations], the market is not going to be too impressed” and could send borrowing costs for the likes of Spain and Italy to unsustainable levels, said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

10YR_ITA 5.85, +0.21, +3.75%

Spreading contagion
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Italian government bond yields have jumped in recent weeks on fears the euro-zone's sovereign debt crisis could engulf the region's third-largest economy.
Thursday’s meeting may mark a “last chance” for European leaders to take action needed to avert a breakdown of the economic and monetary union, he said.

A conference call among European Union officials on Wednesday will be closely watched for signs of progress.

Fears of a deepening debt crisis pressured the euro on Monday, contributed to weakness in equity markets worldwide and again sent government bonds issued by Italy and Spain jumping on Monday. The two countries are seen as the next dominoes likely to fall in a crisis that has forced Greece, Ireland and Portugal to seek bailouts.

Bond yields rise

The euro fell versus major rivals and traded at $1.4042 versus the dollar EURUSD +0.05% , a loss of 0.5%. The yield on 10-year Italian-government bonds IT:10YR_ITA +3.75% jumped 0.29 percentage point to 5.97%, after briefly topping 6%, according to FactSet Research data.

Click to Play
Italy passes austerity package
Italy's parliament approves 48 billion euro austerity package that is set to balance country's budget by 2014.

Monday’s yield rise pushed the premium investors demand to hold Italian 10-year bonds over German bunds to 3.32 percentage points.

Spain’s 10-year-bond yield ES:10YR_ESP +4.10% rose 0.21 percentage point to 6.29%, pushing the yield premium versus bunds to more than 3.6 percentage points.

Strategists note that the 7% yield level has been a dangerous one for borrowing costs in the euro zone, marking the point where Greece and other bailout recipients have faltered.

“With contagion already a reality, the greatest danger is to see new delay at the summit,” said Michala Marcussen, global head of economics at Societe Generale in London, in a research note.

Merkel and Trichet remarks

Economists fear the euro zone would be unable to cope with a rescue of Italy, the region’s third-largest economy, or Spain, the fourth-largest.

The jitters come after German Chancellor Angela Merkel on Sunday told state television she won’t attend a special summit of euro-zone leaders set for Thursday in Brussels unless there is an agreement on the table to make private-sector bondholders share in the cost of a new Greek bailout.

Also, in a newspaper interview published over the weekend by Financial Times Deutschland, ECB President Jean-Claude Trichet reiterated that the central bank won’t accept as collateral the bonds of any government declared to be in default. That leaves it up to national governments to come up with a way to ensure financing of Greek banks.

That indicates neither Germany nor the ECB has veered from a collision course as Berlin continues to insist that private bondholders must share in the cost of a new bailout expected to top 100 billion euros (around $140.5 billion).The ECB has warned that such measures would undermine confidence in other euro-zone countries, thus spreading the crisis. Credit-rating firms have warned that recent proposals for voluntary debt rollovers would likely result in some form of default designation for Greek debt.

Such an action would put the onus on national governments to ensure that Greek banks would be able to find liquidity to meet their day-to-day funding needs if they’re unable to pledge Greek debt as collateral for ECB funding, Trichet said.

“If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral,” Trichet said. “The governments would then have to step in themselves to put things right. That would then be their duty.”

No ECB intervention

The ECB on Monday said it settled no bond purchases through its Securities Market Program last week, showing that it remained on the sidelines despite market rumors that it had intervened to stem a sharp rise in Italian bond yields last week.

Click to Play

Stress tests don't pass with markets

European bank stocks, peripheral bonds and the euro itself have still been hammered after a second round of bank stress tests.

The lack of action is further evidence “that the ECB is not willing to budge in the controversy with euro-zone governments on how to proceed in the sovereign-debt crisis,” said Carsten Brzeski, senior economist at ING Bank.

Germany has insisted that further aid for Greece can’t be implemented without the private sector sharing in the burden.

And recent comments indicate that Germany is likely to get its way, Marcussen said.

In a statement on Sunday, a spokesman for the Institute of International Finance, an organization representing global banks, said discussions late last week in Rome between private investors in Greek bonds and public-sector officials continued to explore several options related to Greece’s financing needs and the sustainability of its debt burden.

The talks made progress and will continue, the spokesman said.

One particular option

Strategists on Monday increasingly focused on an option that’s previously met opposition from Germany: a buyback of Greek government debt financed by the European Financial Stability Facility, the bailout mechanism put in place by euro-zone countries after last year’s Greek bailout.

“Although there are still likely to be significant obstacles to its implementation ... the solution most likely to be sought for the Greek bailout will be one based on buybacks of outstanding bonds at their present distressed prices, belatedly recognizing that Greece’s problem is one of solvency and not just liquidity,” wrote Chris Scicluna, economist at Daiwa Capital Markets in London.

Bond buybacks have the “major advantage” of not being seen as a credit event, which would trigger payments on credit-default swaps, and are also unlikely to see Greek debt downgraded to selective default by the ratings firms, Marcussen said.

The big question is whether the buybacks would be sufficiently below the par value of the bonds to help reduce Greece’s debt burden and impose a big enough share of the burden of a new bailout on private bondholders, she said.

Scicluna said it would also remain to be seen whether the confirmation of haircuts for private-sector bondholders would contain contagion around the periphery or merely raise expectations for similar action elsewhere.

At the other end of the spectrum of options, bond holders could be forced to swap existing Greek debt while taking write-downs on their holdings, Marcussen said.

Such a move would go a long way toward slashing Greece’s debt burden, but would run the risk of triggering “wildfire contagion” through the euro zone as holders of other peripheral bonds head for the exits, she said.

Toronto’s main stock index declined Monday, as debt-driven fears on both sides of the Atlantic

2011-07-18T13:43:00.000-07:00

Toronto’s main stock index declined Monday, as debt-driven fears on both sides of the Atlantic pushed investors out of riskier equity markets in favor of such safe havens as gold.

“Concerns in the U.S. and Europe are weighing on Canada, too. With commodity markets and oil down, there’s less confidence with the pace of recovery,” said Royal Bank of Canada economist Nathan Janzen.

The S&P/TSX Composite Index CA:$ISPTX -0.34% lost 72 points, or 0.5%, to 13,228.30.

$ISPTX 13,254.14, -45.40, -0.34%

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The S&P/TSX Capped Materials Index XX:TTMT +1.20%tempered the broader losses, climbing 1.2% as gold futures GC1Q +1.01% breached $1,600 an ounce for the first time to close at $1,602.40 an ounce. Shares of Barrick Gold Corp. CA:ABX +2.00% ABX +0.04% , Canada’s largest gold producer, tacked on 2.3%.Read more about gold’s rally to new record high.

The S&P/TSX Capped Energy Index XX:TTEN -0.33% lost 0.6% as oil futures CL1Q -1.24% lost 1.8% and shares of Suncor Energy Inc. CA:SU -1.21% fell 1.4%.Read more on trading in crude oil.

“Often if you get a big movement in oil prices it will be reflected in the Composite Index,” Janzen said. The Energy Index makes up approximately 30% of the Composite Index.

The S&P/TSX Capped Industrials Index XX:TTIN -1.29% fell 1.4% as data showed the number of new vehicles sold in Canada in May declined 6.1% to 126,000. According to Statistics Canada, North American-built passenger cars accounted for most of the decrease.

Click to Play

Gold hits $1,600-an-ounce record

Another century mark falls for the yellow metal. (Reuters/Arnd Wiegmann/Files.)

The S&P/TSX Capped Financials IndexXX:TTFS -1.42% shed 1.6%, while shares of Bank of Nova Scotia CA:BNS -1.81% fell 1.9%.

The S&P/TSX Capped Information Technology Index XX:TTTK -0.75% lost 1% as shares of BlackBerry maker Research In Motion Ltd. CA:RIM -2.44% RIMM +2.67%lost 2.6%. Research In Motion makes up nearly one-half of the Information Technology Index.

In currencies, the Canadian dollar weakened, with the U.S. dollar USDCAD +0.45% up roughly 0.6% to buy 96.02 Canadian cents. Read more on currencies.

People buying homes in the country’s most expensive housing markets will face pricier mortgages starting in the fall.

2011-07-18T13:39:00.000-07:00

People buying homes in the country’s most expensive housing markets will face pricier mortgages starting in the fall.

That’s when the current conforming mortgage limits are scheduled to expire, with limits for the most expensive markets falling to $625,500 from $729,750 in the contiguous U.S. (Keep in mind that Congress may decide to keep the higher loan limits. Read more about how lawmakers on Friday introduced a bill in the U.S. House of Representatives that would do just that.)

Mortgages over the conforming limit are considered jumbo loans, and can’t be purchased and securitized by Fannie Mae or Freddie Mac. As such, they carry higher interest rates. The limits apply to both first mortgages and refinancings.

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How to get your house a TV makeover
Vern Yip, interior designer and star of several TV home improvement shows, tells MarketWatch's Amy Hoak about his latest design ideas and how to get your house on a TV makeover show.

Limits vary by market, and the lower limits are equal to 115% of the median single-family home price, ranging from $417,000 to as much as $625,500.

“The fact that the limits are changing is going to raise the cost of homeownership for homes priced in that range between the old and the new limit,” said Greg McBride, senior financial analyst for Bankrate.com. While the change officially takes effect Oct. 1, it may be reflected in loan quotes as early as the end of July, he said.

Now, if you’re sitting in Chicago, this doesn’t mean much to you because the limit in that area will remain $417,000. But in high-cost ZIP codes, including Washington, D.C., New York and San Francisco, mortgages will get more expensive.

The loan-limit reduction will affect 250 counties in the country, according to the Federal Housing Finance Agency. That’s just 8% of the counties in the U.S., according to Capital Economics, an economic analysis firm.

But many of those areas are highly populated. “About 60% of the U.S. population lives in a market where either the conforming loan limit or the FHA loan limit will be declining,” McBride said. The Federal Housing Administration also has loan limits for the loans it will insure, and those will be changing in the fall as well.

A boon for adjustable-rate loans?

A few years ago, the difference in interest rates between a jumbo and conforming mortgage was much greater. Today, borrowers can expect a spread of between one-half to three-quarters of a percentage point between a conforming and jumbo mortgage, said Robert Van Order, professor of finance and chairman of George Washington University’s Center for Real Estate and Urban Analysis.

On July 12, rates on a 30-year fixed-rate mortgage for $200,000 in California were about 4.5%, according to Bank of America’s website. For a 30-year jumbo mortgage of $750,000, rates were at 5%. Rates on a seven-year adjustable-rate mortgage for a $750,000 mortgage in California were 3.75%, while a five-year ARM for that amount was 3.375%, according to Bank of America. Read more about mortgage rates.

Because fixed-rate mortgages will be somewhat higher for some jumbo borrowers, “more people will take out these adjustable-rate mortgages,” Van Order said.

“But it’s not like [jumbo] mortgages won’t be available,” he said. In fact, more lenders have been making jumbo loans in the past couple of years.

“Large banks will take advantage of their portfolios to lend in this environment,” said Matt Vernon, who heads up Bank of America’s retail mortgage division. “From a credit-availability perspective, the large banks that have portfolios allow for customers to continue to buy homes in this space.” (“Portfolio lending” refers to when banks make loans and hold them on their books, as opposed to securitizing them.)

Credit questions

But just because the money is available doesn’t mean it will be easy to get.

Often, lenders require jumbo borrowers to have a FICO score of at least 760, according to Capital Economics. A score of 720 is often needed to qualify for a conforming mortgage, it says.

Also, jumbo borrowers often have to come up with bigger down payments, possibly as much as 30%, McBride said. A 35% down payment for a jumbo mortgage isn’t unheard of either, said Scott Sheldon, a loan officer with Sonoma County Mortgages, in Petaluma, Calif.

“Some people are blowing it off like it’s not a big deal,” Sheldon said of the loan-limit changes on the way. He said in markets like his, there will be a negative effect.

“It’s going to price people out of the market,” he said, especially those who are looking for a competitively priced 30-year, fixed-rate mortgage above the loan limit. Most 30-year, fixed-rate jumbo mortgage quotes he is seeing lately have rates of nearly 6%.

But the higher loan limits were always considered temporary, and were never intended to be a permanent fix, Vernon said.

“If you’re looking at buying a house for $875,000, putting 20% down and taking a $700,000 loan, a couple of months from now it will come at a higher interest rate and you will have to put more money down,” in some high-cost markets, McBride said.

That’s not enough to cause borrowers to rush into a home purchase before they’re ready, he said. But for those looking to refinance in areas where the limits are dropping, McBride said, the time to take action is now.

Amy Hoak is a MarketWatch reporter based in Chicago.

Bulls, bears and … zebras? A top-performing letter says don’t panic.

2011-07-18T13:38:00.000-07:00

Editor Charles Mizrahi has the engaging habit of leading each issue of Hidden Values Alert with something interesting, perhaps because his fully invested, number-crunching fundamentalist technique is a bit, well, B-O-R-I-N-G.

Recently he reflected on recent brain research into physiological changes caused by threat: “When we panic, the blood-flow activity shifts from the prefrontal cortex (front of the brain), where we rationalize and make decisions, to the middle brain (periaqueductal gray). That’s the area of the brain that gives us the ‘fight-or-flight” response.” Ah.

Mizrahi’s investment conclusion: “My suggestion for when you have the urge to do something — especially during periods of fear — is to take a time-out. If the conditions that existed when you originally made the investment still exist, then don’t do anything. Does it make sense to sell out of your position if the company’s balance sheet is stronger than it was when you bought the stock and the valuation is currently lower?”

Click to Play

White House says still time for big debt deal

White House budget director Jack Lew tells Meet the Press that there is still time "to get something big" done as lawmakers grapple with debt. Video courtesy Reuters.

“Keep in mind that we’re hardwired to panic when our brain senses danger to our survival. Put investing in perspective: You’re not a zebra being stalked by lions on the plains of Africa … so don’t allow your brain to act as if it’s so.”

What’s particularly interesting is that Mizrahi said this in Hidden Values Alert’s current monthly issue, published June 20, when stocks were at the bottom in their six-week swoon.

So not panicking worked for Hidden Values Alert then — and something has been working for it for quite a while.

Over the year to date through June, Hidden Values Alert is up 11.2% by Hulbert Financial Digest count vs. 6.09% for the dividend-reinvested Wilshire 5000 Total Stock Market Index — making it seventh-best performer of the 180-plus that HFD follows. Over the past 12 months, Hidden Values Alert is up 46.49% vs. 31.99% for the total-return Wilshire 5000.

Over the past three years, the letter is up 15.95% annualized vs. 3.96% annualized for the total-return Wilshire. Over the past five years, the letter was up an annualized 9.67% vs. 3.44% annualized for the Wilshire 5000.

Mizrahi used to lead his letter with a quote from values guru Warren Buffett, although he seems to have backed off as Buffett has come under attack. (See “Buffett fan barreling along.” )

Nevertheless, Mizrahi expressed the fundamentalist faith forcefully at June’s lows.

He wrote: “I don’t know what will happen to the stock market over the next few weeks, but I do know that buying stocks that have strong balance sheets when they are trading for bargain prices is an approach that has withstood the test of time.”

Mizrahi gave an example: “Over the past month, the technology sector has been falling. Companies in the semiconductor industry that we have in our portfolios — such as Intel Corp. INTC +0.58% (-11%), Kulicke & Soffa Industries Inc. KLIC -3.13% (-16%), and Vishay Intertechnology Inc. VSH +0.07% (-17%) — have fallen more than the broad market. In spite of such companies’ rock-solid balance sheets and low valuations, investors are panicking and selling when they should be buying.”

Hidden Values Alert’s “Prime Time Selection” in its current issue exemplifies its value-oriented philosophy: Leucadia National Corp. LUK -3.12%

Mizrahi writes approvingly: “Leucadia tends to seek assets and companies that are out of favor or troubled and, as a result, are selling substantially below the values the company believes to be present.”

Rebekah Brooks quits amid phone-hacking scandal

2011-07-15T09:52:00.000-07:00

News Corp.'s AU:NWS -2.83% top U.K. executive Rebekah Brooks resigned Friday amid mounting pressure for her to step down over the phone hacking scandal at the media giant's now defunct tabloid newspaper News of the World.

Brooks, chief executive of News Corp.'s U.K. division News International, said she feels "a deep sense of responsibility for the people we have hurt and I want to reiterate how sorry I am for what we now know to have taken place."

As a result, Brooks told staff in an internal memo seen by Dow Jones Newswires that she has given her resignation to News Corp. Chief Executive and Chairman Rupert Murdoch and his son James Murdoch, and it has been accepted.

Brooks said that she will now "concentrate on correcting the distortions and rebutting the allegations about my record as a journalist, an editor and executive.

"My resignation makes it possible for me to have the freedom and the time to give my full cooperation to all the current and future inquiries," Brooks said in the memo. These include a police investigations and an appearance in front of the Culture, Media and Sport Committee due to take place Tuesday.

News Corporation said in a statement Friday that Tom Mockridge will replace Brooks as CEO of News International with immediate effect. Mockridge joins from Sky Italia where has been CEO since the company launched in 2003

Is is time to short euro

2011-07-15T09:49:00.000-07:00

Getty Images

With Europe's debt woes mounting, some savvy currency investors are shorting the euro against the dollar -- a bold bet considering the greenback's own shaky status.

After months of battering, Europe's economy may receive yet another jolt of bad news on Friday: The European Union's banking regulator is scheduled to release the results of bank "stress tests," aimed at showing which banks have enough cash to withstand another crisis. About 12 to 15 banks are expected to fail the tests, but any additional failures are likely to fuel doubts about the euro, says Brian Dolan, the chief currency strategist for Forex.com. Retail currency traders at forex brokerage firm FXCM had been largely betting on the euro against the dollar until this morning, when they flipped to being net short the euro, says David Song, a currency analyst for the firm's daily commentary site, DailyFX.com.

The stress tests are only the latest in a long series of tests for the euro. The region's sovereign debt crisis has been unfolding for more than a year, with both Greece and Ireland receiving bailouts and rising fears that Spain and Italy will soon need them, too. On Thursday, an Italian bond auction saw yields on the country's five- and 15-year bonds hit three-year highs, indicating growing concern about sovereign debt that extends beyond Greece. The euro fell to a seven-week low this week, but is still up 6% for the year over the struggling U.S. dollar.

To short the euro, investors with a foreign-exchange trading accounts could simply sell the euro against the dollar leading into Friday's announcement. "More people are coming around to the view that Greece has to default," says Andrew Busch, a global currency strategist for BMO Capital Markets. "That's why I want to continue to try to sell euros on rallies," Busch says. Keep in mind that currency trades use leverage, and that currency markets move quickly and significant moves can appear small to new traders. For example, at the maximum 50-to-1 leverage offered by U.S. forex dealers, a typical trader could be making or losing thousands of dollars on one-cent moves in exchange rates. For his part, Busch recommends taking profits after about a 4-cent slide and setting a stop-loss to exit the trade after about a 1-cent rise in the euro.

Investors without forex accounts can use a currency exchange-traded fund like thePro-Shares Ultra Short Euro (EUO: 17.55, -0.04, -0.23%) or the Market Vectors Double Short Euro (DRR: 39.32, 0.11, 0.28%). Experts caution: These are leveraged ETFs that track daily moves in the currency, so they also can generate significant losses or gains on seemingly small moves. For example, the Market Vectors product should rise 2% for every 1-cent drop in the price of the euro against the dollar.

Despite the significant troubles facing the euro zone, betting against the currency is far from a sure thing. The fact that retail traders have started shorting the euro is actually a contrarian indicator that might suggest the euro is due for another rally, Song says. Some pros also warn against betting on the dollar, considering the U.S.'s escalating troubles, including the fast-approaching deadline for raising the debt ceiling and signals that the Federal Reserve won't raise interest rates any time soon, Dolan says. That's creating something of a see-saw between the dollar and the euro, as fresh bad news hits one currency or the other in turn, Busch says. "It's what I'd call dueling debt banjos," he says. The third, and perhaps safest option, say some traders: The yen. "Given the uncertainty in this environment it's probably better to be selling risk," Dolan says, meaning selling currencies that fall when investors get nervous, like the Australian or New Zealand dollars, or the iffy euro, versus the relatively safer yen.

The time to buy is when the blood is running the streets, right?

2011-07-15T09:47:00.000-07:00

Well, what about housing? It’s been dead for so many years that its blood long ago stopped flowing. Surely this famous piece of advice from Nathan Rothschild doesn’t apply to that sector?

Don’t be too quick to dismiss the possibility.

Consider the iShares Dow Jones U.S. Real Estate Index fund IYR +0.73% , an ETF that is designed to represent the real-estate sector. Just one week ago, it traded at a 52-week high. The same goes for the iShares Cohen & Steers Realty Majors fund ICF +0.77% .

What does the market know that the rest of us don’t?

Real-estate stocks signal recovery for housing
A rally in real-estate stocks suggest investors see more signs of recovery for housing that reports on prices suggest, Mark Hulbert tells MarketWatch's Laura Mandaro.

For answers, I turned to an investment service called Sound Advice, which is edited by Gary Cardiff and Steve Horwitz. The service regularly devotes a couple of pages of each issue to an in-depth analysis of the real-estate market.

And we should pay attention to their analysis because their service has a superb long-term record: Over the last 15 years, according to the Hulbert Financial Digest, it has outperformed a buy-and-hold by two percentage points per year on an annualized basis.

According to Cardiff and Horwitz, there are several good fundamental reasons for not dismissing the real-estate market out of hand.

A key one is the steady decline in foreclosure rates. They say that this is an early indication that the real-estate recovery is about to begin. Indeed, they point out, “in the late 1980s [in the wake of the S&L crisis], this was the best indicator for knowing when the recovery was near. As foreclosure rates dropped, the ensuing recovery began.”

According to these two advisers, foreclosure rates began to ease in last year’s fourth quarter. To be sure, that decline has been dismissed by many as being merely temporary, caused by various banks’ freezes on foreclosure actions and massive delays in the processing of foreclosures.

But Cardiff and Horwitz detect at least one straw in the wind that suggests the declining foreclosure rate might be more enduring.

This straw is the falling number of new default filings. Since a foreclosure has to begin with a default filing, such a decline must eventually translate into a more lasting drop in the number of foreclosures.

Compared to around 100,000 new default filings that were recorded each month in the spring and summer of 2010, they dropped to less than half that level beginning last October and have remained that low each month since.

In light of this, Cardiff and Horwitz say that they “believe we are witnessing the beginning of the end of the entire crisis.”

This, then, may be what the recent 52-week highs among real-estate ETFs are reflecting. Though those highs may seem counterintuitive, given how awful the news headlines about real estate have been in recent months, it’s worth remembering that the stock market is forward looking. By the time we read about something in the newspapers, it has long since been reflected in stock prices.

Of course, the market is not a perfect discounting mechanism, by any means. But it’s also true that most who bet against the market end up regretting it.

So don’t be surprised if the news in the real-estate sector is better than expected in coming months.

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

Google Inc.’s stock got a strong bounce Friday

2011-07-15T09:45:00.002-07:00

Google Inc.’s stock got a strong bounce Friday following the company’s second-quarter results, though most analysts who cover the Web search giant say its shares remain undervalued.

GOOG 597.26, +68.32, +12.92%

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By midday, the shares traded up more than 12% to nearly $595 — having touched $600 briefly after the open.

The gains put the stock back into territory it held before the company’s last earnings report in mid-April, when higher-than-expected expenses caused a selloff. The stock previously traded above the $600 mark in early March.

Late Thursday, Google GOOG +12.92%reported a 36% jump in net income for the second quarter, as revenue growth topped Wall Street’s expectations thanks to strength in the company’s core advertising market. Google also moderated the growth of its operating expenses, which comprised 33% of revenue in the second quarter compared to 39% for the March period.

“There are very few negatives to point to in one of Google’s best quarters in three years,” wrote analyst Ross Sandler of RBC Capital Markets in a note to clients, in which he boosted his price target on the stock to $790 from $680.

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Google soars after quarterly results

Google's shares soared after a strong earning report, based in part on ad sales although the company still faces strong competition from rivals.

Still, Google’s shares remain below nearly every price target set by analysts, and about 19% below the current median target price of $730.

Its current valuation multiple, about 15.9 times estimated earnings for the next four quarters, is near a record-low — even below that of smaller rival YahooYHOO +0.81% , which trades at 18.3 times estimated earnings, and well below other Internet peers such as Amazon.comAMZN +0.40% , which trades at more than 75 times earnings.

Newly public social network LinkedIn LNKD +3.38% , which competes with Google’s new Google+ service, trades about 325 times estimated earnings for 2012; the company is still expected to generate net losses for the next four quarters.

Scene’s set for multiple expansion

“We think these circumstances should allow Google shares to move from the 10-15x earnings multiple range back up to the 15-20x range,” Sandler wrote.

Several analysts noted that the company’s past investments to diversify its revenue base away from search ads seem to be bearing fruit. While Google didn’t disclose specific metrics for revenues coming from segments like YouTube and its Android mobile operating system, analysts said at least part of the top-line growth appears to be coming from these newer segments.

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Google CEO Larry Page.

“Google’s investment strategy appears to be paying dividends, with new initiatives (Android, Chrome, AdX, YouTube, Local, and Plus) driving a higher growth rate in 2011 than in 2010,” wrote Jordan Rohan, analyst with Stifel Nicolaus. He maintained a $750 price target on Google.

Analyst Ben Schachter of Macquarie Securities wrote that the shift to mobile Internet access appears to be benefiting the company, writing that “we think more investors will agree that the aggressive investments are sensible and that the strategy is sound.”

Most of Wall Street’s bullish on the stock, with 87% of brokers rating the shares as a buy. Those with a less-enthusiastic view note that Google continues to face uncertainty over the massive growth of social network rivals such as Facebook and the competition in the mobile market from Apple Inc. AAPL +0.77%

“The return on Google’s prior investments (Mobile, Display) have been very good, but the return on Google’s new investments (Social, Commerce and Local) are still uncertain — and the social investments ARE catchup defensive,” wrote Citigroup analyst Mark Mahaney, who bumped up his price target to $690 from $650 but maintained a hold rating.

Eight banks fail European stress tests

2011-07-15T09:45:00.001-07:00

The European Banking Authority said Friday that eight banks failed its stress tests, with a combined capital shortfall of 2.5 billion euros ($3.5 billion). A further sixteen banks narrowly passed the tests. The capital shortfall was even smaller than the 3.5 billion euro shortfall of the seven banks that failed the tests last year. But the authority said this was in part because banks have raised significant amounts of extra capital since the start of the year. In total, around 50 billion euros of capital was raised between January and April. If capital levels from the end of 2010 were used, 20 banks would have failed the tests. The EBA didn't immediately name the banks that failed, but individual banks will release their own results.

Bank of America ,U.S. industrial activity continues to deteriorate.Economy,

2009-01-02T08:50:00.000-08:00

U.S. industrial activity continues to deteriorate. Manufacturing activity has deteriorated again in December in the United States, according to the index of purchasing managers published by the Institute for Supply Management (ISM) showed that at 32 , 4 in December against 36.2 in November. This is the lowest level since June 1980, when the index reached 30.3. An index below 50 indicates a contraction of activity: it is more down below this bar, over the pace of deterioration is strong. By sub-index, the new orders and production fell by 5.2 and 6 points respectively, that of employment fell by 4.3 points and the price dropped by 7.5 points . Bank of America The number one U.S. banking sector in terms of deposits, Bank of America, completed the acquisition of Merrill Lynch. The U.S. bank stressed that it now has the largest wealth management with about 20 000 financial advice and more than 2000 billion dollars in assets under management. Under the agreement, each shareholder of Merrill Lynch received 0.8595 share Bank of America per share Merrill Lynch. With this transaction, Bank of America expects to achieve savings of $ 7 billion before taxes in 2012. In December, Bank of America announced the abolition of 30 000 to 35 000 posts in three years. These job cuts, which corresponds to about 10% of its workforce, are justified by the "bad economic climate" and the desire to eliminate duplication resulting from the absorption of Merrill Lynch. It was not until the beginning of 2009 to have a clearer idea of the number of posts, had said Bank of America. The institution added that all societies and all branches of activity of the bank will be affected. Economy Wall Street opened slightly higher for the first meeting of 2009, investors primarily in mind the plan for the new U.S. administration must implement soon to try to revive the economy. President-elect Barack Obama, who will take office on January 20, is scheduled to meet Monday the leaders of Congress to discuss his plan which provides for massive investments in infrastructure. The markets also expect the release at 15:00 GMT sole indicator of American days, the ISM manufacturing index could fall to 35.5 and sinking lower and still under the threshold that delineates growth and contraction in activity. Volumes should remain weak, many investors making the bridge in the aftermath of New Year In the early exchanges, the Dow Jones index gaining 23.74 points or 0.27% to 8800.13 points while the S & P 500 took 1.32 point or 0.15% to 904.57 points. The Nasdaq composite yields 1.47 point or 0.09% to 1575.56 points. Later values, banks Bank of America and Wells Fargo cede every two 0.64% Thursday after concluding the acquisition of Merrill Lynch for the first and Wachovia Wednesday for the second

Obama will submit its response to the economic crisis

2008-11-07T09:24:00.000-08:00

Barack Obama was preparing Friday to present its response to the economic and financial crisis during his first press conference since his election as head of the United States, which seemed to come a little closer to recession.

The task is immense. The market for U.S. jobs has deteriorated again in October: unemployment jumped to 6.5%, its highest level in more than 14 years. Wall Street nonetheless rebondissait Friday, after two meetings in free fall.

The elected president should give at the first press conference, scheduled for 19H30 GMT from its stronghold of Chicago (north), the outline of his plan of action, in response to the worst financial crisis since 1929.

He had to meet before its main economic advisers, including former secretaries of the Treasury Bill Clinton, Lawrence Summers and Robert Rubin, the former boss of the Federal Reserve Paul Volcker and the boss of Google, Eric Schmidt.

It should not announce the name Friday eagerly awaited the next Treasury Secretary, according to his team.

Four are in line for this crucial position which will oversee the implementation of the rescue plan of 700 billion dollars in October adopted by Congress: MM. Volcker, Summers (now a professor at Harvard), Rubin (director of the bank Citigroup) and Timothy Geithner, president of the Federal Reserve in New York.

Before his appointment to the crucial day, Barack Obama Friday morning to attend another important meeting ... a meeting between parents and teachers at the school of his daughters, Malia, 10, and Sasha, 7, with his wife Michelle.

The 44th U.S. president, 47 years, will take office on January 20 but began this week to set up its management team, appointing one of its Thursday close, the pugnacious Rahm Emanuel, 48 years, as Secretary General to the White House.

The elected president spoke by phone with leaders of several countries - Germany, France, Great Britain, Israel, Japan, Mexico, South Korea, Canada and Australia - rushed to mark the distance with the policy Past President George W. Bush.

The financial crisis, but also Afghanistan, global warming and the nuclear issues of Iran and North Korea have dominated these discussions.

The reform of financial system has been at the heart of Mr. Obama talks with French President Nicolas Sarkozy, British Prime Minister Gordon Brown and Prime Minister of Japan Taro Aso.

Many of these heads of state and government are expected on November 15 in Washington for a summit of G20 on the financial crisis and bringing together the leaders of industrialized countries and emerging economies.

The Bush administration calls for short-term measures to increase financial transparency and risk management. Europeans, beginning with the French, demanding that the summit would produce more substantive results.

The Democratic chairman of the House of Representatives, Nancy Pelosi, voted Friday in the Wall Street Journal for a quick vote of a plan to revive the U.S. economy in two areas: 60 to $ 100 billion in the first Meanwhile, in November, then a measure early next month which could include a "tax cuts permanent."

Mr. Obama must also receive Friday its second daily report of the CIA, ultra-secret and reserved exclusively to the President on the situation in the world and the dangers that threaten the United States.

President Bush, who will meet Monday at the White House with his successor, warned Thursday against the risk of terrorist attacks in the United States during the transition period.

U.S. promises of lower sales in September.

2008-11-07T09:22:00.001-08:00

- The index of promises in real estate sales in the U.S. fell 4.6% to 89.2 in September, according to figures published today by the Association of Promoters American Realty (NAR).

The index announced for August 2008 was revised to 93.5.

The Association said in a statement that it was a difficult for sellers than for buyers.

'It is for this reason that funding affordable, reasonable prices and professional expertise are the success factors in the market', says Richard Gaylord, president of the NAR.

General Motors may be short of cash in early 2009

2008-11-07T09:20:00.000-08:00

General Motors may be short of cash in early 2009

The U.S. automaker General Motors announced Friday that it might find itself at the beginning of 2009 with a level of liquidity does more to allow its normal operations.

"The estimated cash for the remainder of 2008 approaching the minimum required to run the company. For the first two quarters of 2009, even with the planned measures, liquidity will fall far below this level, except the strong recovery market or foreign aid, the manufacturer said in a statement.

This grim diagnosis was provided during the publication of losses much worse than expected for the third quarter.

Net loss for the number one U.S. amounts to 2.5 billion dollars for the three months completed by the end of September. But excluding the favorable impact of an agreement with the UAW union, the loss of manufacturer stands at 4.2 billion dollars, while a year ago it was limited to 1.6 billion.

Turnover has flowed from 13% to 37.9 billion dollars, slightly less than expected by the market waiting 39.41 billion.

Sanofi Aventis: challenges and a new strategy.

2008-09-17T11:35:00.002-07:00

In mast in the image of all pharmaceutical values for months ..., Sanofi Aventis was buoyed this week by the appointment of Chris Viehbacher the post of director general. In the wake of this shock, the title has jumped more than 7% in the space of a meeting. In charge of pharmaceutical operations at GlaxoSmithKline for North America, Chris Viehbacher take up his duties with effect from 1st December.

Aged 48 years and having dual nationality Canadian and German, the Anglo-Saxon will succeed Gerard Le Fur whose appointment ago just 18 months at the helm of the pharmaceutical group has not convinced Total and L’Oreal, the two main shareholders of the group. Neither the Exchange. In two years, Sanofi Aventis and unscrewed by 30%.

Four years after the merger between Sanofi-Synthelabo and Aventis, the goal is to reinvigorate the strategy of the pharmaceutical company, which has been badly affected by the refusal in June 2007, U.S. health authorities, the FDA (Food and Drug Administration), to authorize the marketing of the treatment against obesity by Sanofi Aventis, Acomplia (Rimonabant). This decision was all the more unexpected that Acemplia is a genuine star in Europe.

These setbacks could have weighed in the decision to replace Gerard Le Fur whose skills have been widely shown in the research departments of Sanofi and Rhone Poulenc ... His detractors argue against it is not a big sponsor, which has been able to play against the group ...

Sanofi Aventis is more generally deal (like the big pharmaceutical companies) to lower drug prices and the loss of patents, including growing competition from generics. Moody’s has indicated early September that the European sector of the pharmacy could lose 18% of its turnover over the next three years.

Drug flagship of the group french used against arterial complications in the case, for example ... infarction, including Plavix will face from 2012 the marketing of several generic drug competitors. The Taxotere, used to treat breast cancer and lung cancer, for its part will lose its patent from 2010 in Europe and the USA ...

Sanofi Aventis was therefore obliged to react as quickly as possible to prepare the response to these deadlines ...

At the appointment of Chris Viehbacher, the Board of Directors of Sanofi-Aventis has recommended a strategy articulated around three pillars: (1) the search for innovative products better suited to the new regulatory and economic market (2) strengthening the position of the group on growth markets and (3) the further development of other activities in the fields of medicine and health.

For the new CEO of Sanofi Aventis, will therefore find a successful attempt at redemption, so far failed, laboratory Czech Zentiva, which has the double advantage of being specializes in generic drugs and strengthen the presence french group in the country to strong growth.

In early September, the direction of Zentiva, which Sanofi Aventis already holds 24.9% of the capital, in any case rejected pleas to the offer of french, which enhances the approximately 1.6 billion euros.

Sanofi Aventis intends to put a new string to its bow, by engaging more actively in health foods, such as Danone Actimel ... The first stone of the building has already been raised with the completion of the purchase of the Australian Consumer Symbion for an amount of 560 million Australian dollars (about 340 million euros) at the beginning of the year ...

Maybe you just have that Sanofi Aventis reaches to strengthen in what remains its core business, namely the ‘major’ drugs ..

The Cac 40 in lowest since May 2005, saves 4,000 points

2008-09-17T11:34:00.001-07:00

What meeting! What volatility! Once again, the magnitude of change in the Parisian market of over 169 points between the two demonstrates the extreme volatility of investors to any news. In increase of more than 1% in early trade, the Paris market has quickly risen to 4.160,26 points before returning test on several occasions the helm of 4,100 points. It will ultimately not be required! Emportée by the stall Wall Street, bad news from industry (Arcelor-Mittal), with American technological Nortel, new doubts on the side of the bank (HBOS confirmed consider a rapprochement with the British Lloyds), the Stock Exchange Paris flanché. However, AIG is saved, Morgan Stanley issued reassuring results but doubts remain, the crisis persists. At the close, the CAC 40 Index falling 2.14% to 4.000,11 points in a significant volume of 7.66 billion on components of the index. At worst time of the meeting, the market fell to 3.990,86 points. In Frankfurt, the Dax lost 1.75% in London, the Footsie fell by 2.25% and Wall Street, the Dow Jones abandons 2.71%. Oil prices leave from the front, a barrel of WTI October delivery stood at 93.79 dollars, up 2.61 dollars compared to its closing levels of the previous day. After two days of plummeting prices of black gold, this movement occurs naturally on the bottom of allaying fears about the U.S. banking sector. It is expected this afternoon the U.S. oil stocks. The greenback is for its part resistant facing the European currency, trading at 1.4149 dollar. On the statistical front, housing starts of housing for the month of August the USA emerged a decrease of 6.2% annualized pace of 895,000 units, far below that of 950,000 units expected by analysts. Compared to August 2007, housing starts fell by 33.1%. On the side of values, Alcatel-Lucent fell by 8.43% to 3.15 euros after the words of Nortel Networks. The United States has reduced its forecast for the third quarter of 2008 and for the full year, due to a decline stronger than expected investment of its major customers. Also attacked, ArcelorMittal stumbles by 7.96% to 39.67 euros. The group announced a plan to reduce costs for a total of $ 4 billion over five years. The plan economies of the world's largest steel producer, will focus on increasing staff productivity, reducing energy consumption and lower production costs, to increase efficiency and d ' improve product quality. " Capgemini won by 7.30% to 32.75 euros. The title suffers from lowering the target over the firm. The intermediary buyer rest of the file but does more than 45 euros against 48 euros. As far as financial values are experiencing mixed fortunes. Dexia lost 5.64% to 8.22 euros while BNP Paribas was down 3.27% to 56.19 euros. The bank has estimated at 400 million its total exposure to Lehman Brothers, including 200 million in net claims arising from derivatives transactions and 180 million corresponding to a bank loan. General Company (-2.86% to 54.37 euros) to evaluate its share to 479 million euros, 76 million of senior debt and 400 million potential replacement on return. Finally, the exposure of Credit Agricole (-2.52% to 11.77 euros) to the bank put under the protection of Chapter 11 bankruptcy is less than 20 million euro for the debt, but 250 million for the risk of replacement counterparts. Outside the index, concedes Natixis 0.4% to 2.49 euros. The capital increase of the subsidiary of Banques Populaires and Caisses d'Epargne ends tomorrow evening. Alstom Hydro, the joint company Alstom and Bouygues has won a contract of 500 million euros in Brazil. The group will provide the electromechanical and hydraulic equipment for hydroelectric power Santo Antônio. The title resists, it concedes that 0.3% to 62.14 euros.

The info Forex of the week

2008-09-14T21:41:00.000-07:00

While the situation in the USA seems to be improving, with many figures released better than expected in the euro zone prospects appear increasingly poor. Taken by the German indicators, the economic climate in Europe darkens over the week. An example: the Ifo index on business climate in Germany is a sharp decline during the month of August to 94.8, down from 97.5 in July. As a result, the euro lost ground against the dollar and the yen last week.

The USA are undergoing a fairly complex situation: economic indicators are good but many pressures persist. The equities market is still shaken by the bank values, the price of a barrel of oil is subjected to threats of Hurricane Gustav approaching American interests in the Gulf of Mexico but also the Lousiane and New Orleans, where 'On fears a new Katrina. However, the greenback has managed to maintain against the euro last week with convincing figures. Already Monday and Tuesday, the figures on housing reassured: sales of dwellings for July came out a sharp rise to 3.1% -2.8% against the month before, and sales of new homes have experienced same fate (2.4% in July vs -2.1% in June). May consumer confidence, confirmed by the Michigan Friday, was far better than analysts' forecasts to 56.9 against 53.0 expected. But the release of U.S. GDP which has allowed the greenback to remain despite the threats.

In the euro area, many announcements last week were disappointing. Already Tuesday, the Ifo index has set the tone for the week. Exited well below forecasts, this figure, very watched by the market decline was the single currency. Only a good figure may be chosen: the consumer price index (CPI) German has slightly declined, it rose to 3.1% on annual basis (against 3.3% in July). In this context, figures to be published this week are to follow closely, including the announcement of rate of the ECB and the European GDP. It will also look at the evolution of oil prices which remains very correlated to the EUR / USD.

In Japan, several good grades are noted: firstly, the CPI fell by 1.6% to 1.3%, which bodes well for inflation. Household spending fell less than expected to -0.5%, while analysts predicted a drop of -1.8%. The retail, industrial production and business confidence SMEs are also out above expectations. The lights are green for the yen, which is also the concern in markets that leads to a decline in operations carry trade. The Japanese currency is bought and therefore appreciated against the major currencies.

Trade of the week: Short EUR / CAD

The price of EUR / CAD continued its upward movement that had begun early last week. The evolution of 330 pips the increase is easily explained. We have on one side a euro remains stable. In addition to the German CPI published better than expected, no figure has actually influenced its course. In contrast, the Canadian dollar has a strong current. Rumors of recession plainaient on Canada have not been finally confirmed. The contraction in GDP of 0.8% in the first quarter has not renewed the second (+0.3%). But this development remains weak, and analysts predicted an increase of 0.6%. More broadly, the Canadian finance minister says that the foundations of its economy are stronger than those of the rest of the G8 countries to cope with the current slowdown. In this context, forecasting a growth rate of 1% over 2008 is maintained. So there are strong signals retreat on this pair.

The expectations for this week

EUR / USD: the price stabilizes around 1.47 last three weeks. The technical analysis gives us a signal to buy following testing support oblique on a weekly scale (see chart below). Besides, this Monday, new threats to the spread of Hurricane Gustav, Louisiana, New Orleans and the Gulf of Mexico. These threats to push the price of a barrel could play on gender and back to 1.50. If the situation calms down, following the bearish trend is expected on parity. The ECB is expected to announce a status quo on Thursday.

GBP / USD: The cable continues its fall. Following the difficulties facing the British economy, we must be attentive to the announcement of rate of the Bank of England on Thursday. If threats to the USA are confirmed, the price could recover significantly, even consolidate just above 1.80.

USD / JPY: The cross has undergone a correction last week from 108.43 to 107.71. In the current configuration, it should continue its decline as the yen is in great demand in situations of concern in the markets. A first media can be identified at 107.30 and a second at 106.70.

Euro, yen jump vs dollar on Lehman unrest

2008-09-14T21:37:00.000-07:00

The euro jumped to a 10-day high against the dollar on Monday while the yen seemed set for its biggest daily gain since early 2002, spurred by the prospect of the collapse of U.S. investment bank Lehman Brothers
The moves came as Lehman's troubles pushed U.S. yields down and as the Federal Reserve and major U.S. banks tried to boost liquidity and mitigate volatility.
"If the market is dropping its assumption that the Fed's next move will be a hike, then euro / dollar starts to look oversold," Sean Callow, a strategist at Westpac Bank, said.
By 0330 GMT, the euro was quoted at $ 1.4453 per dollar, just off a high of $ 1.4479 and nearly 1.7 percent higher than Friday's close of $ 1.4227.
The yen was quoted at 105.50 per dollar, taking its gains since Friday to 2.25 percent.
Analysts said the steps to calm markets, which are braced for the collapse of Lehman Brothers, underscore the depth of the financial market problems and could reverse the dollar's rally since July.

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