Bonds/Economy

Market Preview: Retrace or Retreat?

twocents@thestreet.com (Michael Baron) — Wed, 16 May 2012 23:49 GMT

NEW YORK (TheStreet) -- Where you think the U.S. stock market ends up this year likely depends on your view of the current action.

Or more precisely, the determining factor could be viewed as which of these 'R' words you think is most accurate in describing the near-constant selloff in equities since the calendar flipped over to May: Retrace or retreat.

John Stoltzfus, Oppenheimer's new chief market strategist, is in the retrace camp. ...

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Politicians May Want to Heed Fed's Warning

twocents@thestreet.com (Joe Deaux) — Wed, 16 May 2012 22:41 GMT

NEW YORK (TheStreet) -- President Barack Obama and House Speaker John Boehner both gabbed this week about budget showdowns, but the only words that mattered Wednesday were uttered by the Federal Reserve.

The Fed warned of fiscal tightening in 2013 if Congress doesn't reach agreement on a plan for the federal budget.

House Speaker John Boehner ...

FED Warns of Fiscal Tightening in 2013

twocents@thestreet.com (Joe Deaux) — Wed, 16 May 2012 18:28 GMT

NEW YORK (TheStreet) -- The Federal Reserve warned of fiscal tightening in 2013 if Congress doesn't reach a plan for the federal budget.

The announcement came Wednesday as part of the Federal Open Market Committee meeting in April, as the central bank also stated that it would consider QE3 if the recovery falters.

...

Why and How Greece Must Exit the Euro

twocents@thestreet.com (Peter Morici) — Wed, 16 May 2012 15:54 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Austerity is imposing intolerable unemployment and political chaos in Greece and won't permit it to repay its debts. Athens must abandon the euro and reintroduce the drachma.

After the euro was adopted in 1999, productivity growth was slower and prices rose faster in Southern Europe than in Germany and other northern states. The more competitive north enjoyed growing trade surpluses while the Mediterranean states ran deficits. ...

April Housing Starts Rise 2.6%

twocents@thestreet.com (Joseph P. Woelfel) — Wed, 16 May 2012 12:38 GMT

NEW YORK (TheStreet) -- Housing starts in April rose 2.6% to a seasonally adjusted annual rate of 717,000, the Commerce Department said Wednesday.

Housing starts for March were revised higher to a pace of 699,000 units from a previously reported 654,000-unit rate. ...

Cramer: More Damage to Come From Europe

twocents@thestreet.com (Jim Cramer) — Wed, 16 May 2012 12:29 GMT

NEW YORK (Real Money) -- When will Europe not matter to prices? We know that we are in very different places. Our banking system is strong. Theirs is weak. Our employment situation is improving. Theirs is worsening. Our housing crisis seems to be on the mend. Theirs is just beginning. Our companies have terrific, refinanced balance sheets. Theirs are opaque and weaker.

We have optimism, as expressed by a USA Today poll in the front of the paper expressing a very optimistic belief in the future of this country. Over there, pessimists abound. We have one currency that works. They have another currency that keeps the ne'er-do-well countries from taking the radical action they need to stop pulling down other countries and get their assets cheap enough that they are attractive.

So why can't we just shrug off Europe? Why are we simply "not as bad" as they are, and our stocks "don't go down as much as they do"? ...

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Market Preview: That Sinking Feeling

twocents@thestreet.com (Michael Baron) — Wed, 16 May 2012 00:35 GMT

NEW YORK (TheStreet) -- It feels like the skittishness is palpable on Wall Street right now, and that's never a good thing for retail investors.

Bank of America Merrill Lynch described the mood this way before Tuesday's sour session that pushed all three major U.S. equity indices back to levels unseen since early February.

"Investor sentiment is bearish on growth and risk, assets are allocated defensively and cash levels are high," the firm said early Tuesday. "But the dominant mood is one of paralysis as investors wait for a 'bad' event to provoke the policy panic and market capitulation that contrarians want to buy." ...

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Brown's Plan for California: 4-Day Workweek

twocents@thestreet.com (Newser) — Tue, 15 May 2012 19:00 GMT

By Kevin Spak, Newser Staff

California Gov. Jerry Brown unveiled a painful slate of budget cuts yesterday, including shifting all state employees to a four-day, 38-hour workweek, in an effort to reduce the state's yawning $15.7 billion budget gap.

The plan also includes cuts to courts, health services, and welfare in what Brown terms a stab at "real, increased austerity." The plan also assumes the public will in November pass a new tax initiative designed to raise $6 billion, the San Francisco Chronicle reports. ...

Romney Pits His Jobs Record Against Obama's

twocents@thestreet.com (Joe Deaux) — Tue, 15 May 2012 14:35 GMT

NEW YORK (TheStreet) -- Mitt Romney's campaign shifted Tuesday to one number: 23 million.

A day after Barack Obama's campaign slammed the presumed GOP nominee for shuttering a steel mill in 2001 that once employed 4,500 people, Romney returned fire with a message that hit the president for some 23 million people who are currently unemployed, underemployed or not actively seeking work.

...

Make Money Trading U.S. Treasuries

twocents@thestreet.com (Richard Suttmeier) — Tue, 15 May 2012 14:09 GMT

NEW YORK (TheStreet) -- U.S. Treasury yields have been declining since the new millennium began. With yields at or near record lows, there's a misperception about the U.S. Treasury market among Wall Street analysts and by investors. Most strategists have told investors to avoid U.S. Treasuries over the past few years because of what they describe as a bond bubble. They assume that investors just buy and hold bonds to maturity.

I have not been in the bearish camp for Treasuries given the opportunities to "buy and trade." Yields are reluctant to rise significantly as long as the Federal Reserve keeps its pledge to keep the federal funds rate at zero to 0.25% until late 2014. The FOMC cut the funds rate to zero to 0.25% in mid-December 2008.

...

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CPI Flat in April; Retail Sales Rise 0.1%

twocents@thestreet.com (Joseph P. Woelfel) — Tue, 15 May 2012 12:34 GMT

NEW YORK (TheStreet) -- The Consumer Price Index for April was flat from March, the Labor Department said Tuesday. The core number, excluding food and energy, rose 0.2%

The CPI numbers matched the estimates of most economists. ...

Producing Employment

twocents@thestreet.com (Fisher Investments) — Tue, 15 May 2012 10:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet ) -- When April's U.S. unemployment came out, one headline perfectly captured the news and popular reaction: "Unemployment Rate Hits Three-Year Low. Hooray? No, Boo!" Headline unemployment fell to 8.1%, but payroll gains slowed and missed expectations, fueling fears of weaker employment growth from here.

In our view, it's a touch premature to extrapolate a coming employment slowdown from April's data. While payroll gains have slowed since February, that could be partly due to the late 2008/early 2009 sharp slowdown's skewing the seasonal adjustment -- data suggest it artificially inflated January and February payrolls and deflated March and April. Plus, while weekly jobless claims rose in early April, a sharp drop last week suggests the uptick may have been simply temporary volatility amid a longer-term downward trend....

Market Preview: Risk Appetite Spoiled

twocents@thestreet.com (Michael Baron) — Tue, 15 May 2012 00:17 GMT

NEW YORK (TheStreet) -- It's starting to look like all anyone is going to do is sell in May.

The first day of the month was a sunny rally but the weather's been ugly since then. The Dow Jones Industrial Average is down in eight of the past nine trading sessions, losing 4.4% since closing at 13,279 on May 1.

The S&P 500 finished at 1406 on May 1, and has now surrendered 4.8% since then, while the Nasdaq rallied in the first two sessions of the month, closing at 3060 on May 2 but it's subsequently pulled back the most, losing 5.1%. ...

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Moody's Begins Euro-Bank Downgrade Tour With Italy

twocents@thestreet.com (Christopher Westfall) — Mon, 14 May 2012 21:43 GMT

NEW YORK (TheStreet) - Over two dozen Italian banks were downgraded by Moody's Investors Services Monday as the rating agency kicked off a promised multi-week revision of its assessment of Western-European financials.

The downgrades ranged from one to four notches, with banks such as Cassa di Risparmio di Ferrara scraping the ratings basement with a D- and Intesa Sanpaolo SpA hitting the top of the range with a C+. UniCredit SpA -- one of the country's largest institutions -- had its rating cut to C-.

Overall 26 banks were cut, with ratings declining by one notch for 10 banks, two notches for eight banks, three notches for six banks and four notches for two banks, Moody's said. ...

Morgan Stanley: Financial Loser

twocents@thestreet.com (Philip van Doorn) — Mon, 14 May 2012 20:22 GMT

NEW YORK (TheStreet) -- Morgan Stanley was the loser among the largest U.S. financial names on Monday, with shares sliding over 4% to close at $14.30.

While the aftermath of JPMorgan Chase's disclosure late on Thursday of a $2 billion second-quarter trading loss continued, with executive changes at the company and additional reaction from analysts, concerns over Europe predominated.

Greek politicians continued to struggle to form a new government following elections over a week ago, putting years of European bailout efforts at risk and leading to increased fears of a massive sovereign default and a possible exit from the euro. ...

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U.S. Treasuries and the Mythical Land of Us: Opinion

twocents@thestreet.com (Jeff Nielson) — Mon, 14 May 2012 18:32 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet ) -- If ever we needed proof of the saturation-level brainwashing to which the Western masses are now subjected (and to which they have succumbed), there is no clearer evidence than the U.S. Treasuries market.

The U.S. economy has never been less solvent in its entire history, meaning the U.S. Treasuries have never been less valuable. The new supply of U.S. Treasuries grossly exceeds any level of paper the U.S. has ever pumped into global markets before. And yet we see (alleged) buyers being permanently willing to pay (by far) the highest prices in history for these mountainous stacks of paper. ...

Obama Recycles Romney Steel Mill Closure in New Ad

twocents@thestreet.com (Joe Deaux) — Mon, 14 May 2012 17:22 GMT

NEW YORK (TheStreet) -- Barack Obama's campaign appears to have dug up an attack from Mitt Romney's 2002 gubernatorial race.

The president launched an ad on Monday that criticized Romney's handling of a steel mill that went bankrupt under the management of Bain Capital.

...

China's Yuan Remains a Drag on U.S. Economy

twocents@thestreet.com (Peter Morici) — Mon, 14 May 2012 11:56 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Recently, Beijing announced it would permit the yuan to rise in value as much as 1% each day. This was greeted by China watchers as an important indication Beijing would finally permit the yuan to rise against the dollar significantly enough to reduce the U.S. trade imbalance with the Middle Kingdom.

Although the Obama administration views the yuan as terribly undervalued and the resulting advantage this offers Chinese manufacturers in U.S. markets as a major drag on the U.S. economic recovery, nothing has happened. ...

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The Real Story Behind the U.S. Auto Bailouts

twocents@thestreet.com (Joe Deaux) — Mon, 14 May 2012 10:00 GMT

NEW YORK (TheStreet) -- Detroit's relationship with local boy Mitt Romney is ... complicated.

The son of a former Michigan governor and automobile industrialist finds himself in a critical battle to gain trust among American blue-collar voters that perceive him as a wealthy, private-equity businessman who was open to letting an icon of American manufacturing take an unprecedented fall.

Mitt Romney must cure his auto-sector headache ...

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At Least 100,000 March in Spain

twocents@thestreet.com (The Associated Press) — Sat, 12 May 2012 19:28 GMT

By Alan Clendenning

MADRID -- At least 100,000 Spaniards angered by grim economic prospects and the political handling of the international financial crisis turned out for street demonstrations in the country's cities Saturday, marking the one-year anniversary of a movement that inspired similar pressure groups in other countries.

Tens of thousands of protesters in Madrid flooded into the central Puerta del Sol plaza in the evening and aimed to stay for three days. But authorities warned they wouldn't allow anyone to camp out overnight, and up to 2,000 riot police were expected to be on duty. ...

China Cuts Bank Reserve Ratio

twocents@thestreet.com (The Associated Press) — Sat, 12 May 2012 11:57 GMT

BEIJING -- China's central bank announced Saturday a reduction in the amount of reserves that banks must hold in an effort to spur lending and revive a sharply flagging economy.

The 0.5 percentage point cut in the banks' required reserve by the People's Bank of China starting May 18 frees up billions of dollars for lending. It follows the release of statistics in the past week that showed the economy slowing more rapidly than economists -- and perhaps the government -- expected.

A slowdown in China, the world's second-largest economy, threatens to ripple across the globe, which is already struggling to ward off continued economic weakness in Europe. China has been an engine of global growth in recent years, and its robust purchases of iron ore, raw materials and industrial components have buoyed economies from Australia and Brazil to Japan and Zambia. ...

Bonds a Safe Bet? 'Complete Baloney,' Paul Singer Says

twocents@thestreet.com (CNBC) — Fri, 11 May 2012 18:29 GMT

By Jeff Cox, CNBC.com Senior Writer

NEW YORK (CNBC) -- Investors pouring their money into long-term government bonds are deluding themselves into thinking they're getting safety against economic turmoil, hedge fund titan Paul Singer said.

In market parlance, strong demand for U.S. debt is generally considered a "safe-haven" trade because of the unlikelihood that the government will ever default on its obligations. ...

Lessons to Learn from JPM's Trade

twocents@thestreet.com (Tom Graff) — Fri, 11 May 2012 17:02 GMT

Jamie Dimon didn't disclose much, but we do know JPMorgan's losing trade involved the CDX IG 9 index. The CDX IG indices are a tradable basket of credit default swaps on 125 invest-grade companies.

The contract is typically five years until expiration, although other maturities trade in much smaller volume. Every six months a new IG index is created with some of the names changing to reflect the current market. Right now we are CDX IG 18, the 18th.

The old indices continue to exist, but, not surprisingly, volume is heavily concentrated in the current index. The CDX IG 18 trades many billions of dollars every day. The 17 still has reasonable volume, but after that, trading is sporadic at best. ...

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Producer Prices for April Decline 0.2%

twocents@thestreet.com (Joseph P. Woelfel) — Fri, 11 May 2012 12:32 GMT

NEW YORK (TheStreet) -- The producer price index for April fell 0.2%. Excluding food and energy, PPI rose 0.2%, according to the Labor Department.

Long Live the 1%: Buy Whole Foods

twocents@thestreet.com (Rocco Pendola) — Fri, 11 May 2012 11:38 GMT

NEW YORK (TheStreet) -- As an investor, you have got to leave your political and social convictions at the door. It took me a long time to learn this.

Here's a confession: I used to be a socially conscious investor. I'm no longer exactly sure what that means, after finding out that most socially responsible funds hold everything from Starbucks to Walmart to McDonald's. Needless to say, prospectuses for "green" mutual funds no longer litter my desk. Occupy Your Portfolio

I will be heading to San Francisco this weekend. I can only hope the city has cleared the Occupy protesters from downtown's Justin Herman Plaza. ...

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Market Preview: Look Out Below!

twocents@thestreet.com (Michael Baron) — Thu, 10 May 2012 22:47 GMT

NEW YORK (TheStreet) -- This could get ugly. Really ugly.

JPMorgan Chase and its fortress balance sheet are recording a very real $2 billion loss because of a "flawed, complex, poorly reviewed" trade in its synthetic credit portfolio, and shares of the Dow component were being taken to the woodshed in Thursday's extended session, plunging nearly 7% at last check.

And just like that, when stocks found some footing (at least for a day), mustering a mixed finish despite a 10%-plus haircut for Cisco, the financials are suddenly a big fat question mark again. What other surprises are lurking where? Remember, the banks were finally providing some market leadership in the first quarter, one of the hallmarks of a healthy bull market. ...

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Banks 'Too Big to Fail,' Bank Shareholders Not

twocents@thestreet.com (Philip van Doorn) — Thu, 10 May 2012 19:19 GMT

NEW YORK (TheStreet) -- Shareholders of failing financial holding companies will take it on the chin -- but healthy subsidiary businesses will have a better chance of surviving -- under the Federal Deposit Insurance Corp.'s new resolution authority.

Acting FDIC Chairman Martin Gruenberg says the agency is ready to move beyond its traditional role of resolving failing federally insured banks and thrifts, with staff and processes in place to resolve large failing financial holding companies.

The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 expanded the FDIC's traditional role, to allow the resolution of entire financial holding companies, rather than just subsidiary banks and thrifts, and Gruenberg said at the Federal Reserve Bank of Chicago Bank Structure Conference on Thursday that the agency's new Office of Complex Financial institutions was ready to "monitor risk within and across these large, complex financial firms from the standpoint of resolution," conduct resolution planning for "potential crisis situations," and "coordinate with regulators overseas regarding the significant challenges associated with cross-border resolution." ...

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6 Bank Revenue Winners and Losers From Jefferies

twocents@thestreet.com (Philip van Doorn) — Thu, 10 May 2012 14:27 GMT

NEW YORK (TheStreet) -- Over the next year, continued commercial loan growth and expense reduction will be key for large regional banks to growth their revenues.

Boiling down first-quarter financial results for banks in his firm's coverage universe, Jefferies analyst Ken Usdin named three large banks in his firm's coverage universe that are "best-positioned" to grow pre-provision net revenue over the next year, with three others facing a "tougher fight."

Bank earnings are, of course, continually distorted by a seemingly ever-growing list of one-time items, and at this point in the credit cycle, most large banks are releasing loan loss reserves, by making quarterly provisions for loan loss reserves that total less than their loan charge-offs. This is why it pays to focus on pre-provision net revenue, which nets the one-time items and provisions for loan losses from gross revenue, less expenses. ...

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3 Financial Stocks With Huge Dividends for Weak Growth

twocents@thestreet.com (Dan Freed) — Thu, 10 May 2012 14:12 GMT

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NEW YORK (TheStreet) --Mortgage REITs have posted strong gains in recent weeks amid what has otherwise been a sharp selloff in financial stocks.

Over the past month, Market Vectors Mortgage REIT Income ETF has risen 4.05% while the Financial Select Sector SPDR has fallen by 2.48%. Throw in a double digit annual dividend yield for MORT (it was 12.80% as of the end of March) and mortgage REITs' outperformance is even more marked. ...

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Fix the Trade Deficit to End Jobs Drought (Update)

twocents@thestreet.com (Peter Morici) — Thu, 10 May 2012 13:35 GMT

This story was updated 9:30 a.m. May 10, 2012 to add newly released trade data.

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- The Commerce Department Thursday reported the deficit on international trade in goods and services was $51.8 billion in March. This was up from $45.4 billion in February thanks to weakening conditions in Europe, and chronic deficits with China and in petroleum. ...