From Real Time Economics Blog at Wall Street Journal online:
$41 Billion: The total amount of money on gift cards that went, or is likely to go, unspent from 2005 to 2011.
Gift cards are becoming an increasingly popular holiday present, but... what happens to money that goes unspent?
The vast majority of money put on gift cards gets redeemed, but ... since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in.
The lion’s share of money lost on gift cards from 2005-2009 came from fees and expiration dates. All that changed with the Credit Card Accountability Responsibility and Disclosure Act. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.
But what happens when the purchases go under the face value and then sit in the junk drawer in perpetuity, or when grandma, who can barely check her AOL email, gets an Amazon.com card that she’ll never redeem?
The SEC allows companies to take unused gift-card money as income once they can reasonably say the card won’t be redeemed, but there’s no set time limit....
But some states don’t allow companies to keep unused gift-card cash. They demand that companies give the money to the state after a certain period of time to add to unclaimed-funds accounts.
States claim this is a way to reunite consumers with their unspent money, but practically it’s a way for cash-strapped governments to give themselves more liquid funds. Money the state holds as unclaimed funds can be used for general purposes until someone claims it.
For example, in 2008 ... New York state collected $9.6 million in unredeemed gift cards and returned around $2,150 to the rightful owners.
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Link: http://blogs.wsj.com/economics/2011/12/24/number-of-the-week-billions-in-gift-cards-go-unspent
Tuesday, December 27, 2011
Sunday, December 25, 2011
How to make a fortune after 50
From Reuters online:
At an age when others might ready for pre-retirement, some folks pass age 50 determined to start a new life in the business world - and succeed beyond their rosiest business plan projections...
Reuters spoke with four entrepreneurs who have created successful businesses after 50. And take note: Three of the four leaders featured here are women, having shattered the twin glass ceilings of gender and age...
Carol Gardner, 66
HER STORY: While nursing a broken femur and a broken heart (she'd just divorced her husband of 27 years), Gardner got an English Bulldog named Zelda, who became the mascot of a humorous greeting card land gift line, Zelda Wisdom. A former advertising creative director, Gardner started the business at age 52 around 1997, and almost by accident: Cash-strapped, she entered a Christmas card contest held by a pet store to win free dog food for a year, and won.
TODAY: Gardner started her company with 24 greeting cards in the middle of her living room. Within six months, she sold more than one million cards. Today she produces more than 200 licensed Zelda products, from calendars to children's books. Sales are conservatively estimated at $50 million annually.
TOP TIPS: Listen to your customers...
Franny Martin, 65
HER STORY: A former marketing professional who worked with Domino's Pizza, Martin left the corporate world just shy of turning 56 to pursue her passion - baking cookies.
TODAY: Martin's Cookies on Call, based in Douglas, Michigan, ships 40 cookie varieties all over the world and should surpass $700,000 in sales for 2011. She provides work for more than a dozen part-time and full-time employees. She started the company in 2002.
TOP TIPS: Get a great business team and ask for sage advice. "Make sure that you have the best accountant, the best lawyer and the best web designer," Martin says...
Jill Boehler, 59
HER STORY: A self-described "do gooder," Boehler spent her career as a speech pathologist until she got the inspiration to make "portable shawls" (wrinkle-free wraps that come with a tiny carrying bag) after she shivered through a meal at a restaurant because the air conditioning was too high. Soon she was making cold calls at fashion stores; she was 54 when she started in 2006.
TODAY: The founder of Chilly Jilly sold more than $500,000 in products in 2010 and is constantly unrolling new products, from gloves to the Duelette bracelet and hair tie. Boehler works with 20 private contractors across the country.
TOP TIPS: Toughen up...
STARTING AFTER AGE 50: "It's the perfect time to do it. My kids were gone and I could start working at 3 o'clock and work until 1 in the morning. My husband was into it, and I don't have to wait for kids at the bus stop, change diapers, or take them to activities."
Wally Blume, 73
HIS STORY: The one-time dairy marketer struck out on his own in 1996 to form Denali Flavors, a company that specializes in making ice cream ingredients and flavors for independent dairies. He was 57.
TODAY: With Denali sales at between $80 and $100 million, Blume credits much of his success to Moose Tracks - the flavor he helped develop and popularize as his company took root. "You have a flavor that is almost as strong as vanilla, and the national brands will never be able to get it. As soon as we developed it, it just took off."
TOP TIPS: Know your industry.... He also stresses training and hiring people you can trust to mind the store. "I have such good people working for me that I'm hardly involved with ice cream. They just run it and they do a better job than I can."
-----------
Link: http://www.reuters.com/article/2011/12/23/us-usa-retirement-after-idUSTRE7BM0TO20111223
At an age when others might ready for pre-retirement, some folks pass age 50 determined to start a new life in the business world - and succeed beyond their rosiest business plan projections...
Reuters spoke with four entrepreneurs who have created successful businesses after 50. And take note: Three of the four leaders featured here are women, having shattered the twin glass ceilings of gender and age...
Carol Gardner, 66
HER STORY: While nursing a broken femur and a broken heart (she'd just divorced her husband of 27 years), Gardner got an English Bulldog named Zelda, who became the mascot of a humorous greeting card land gift line, Zelda Wisdom. A former advertising creative director, Gardner started the business at age 52 around 1997, and almost by accident: Cash-strapped, she entered a Christmas card contest held by a pet store to win free dog food for a year, and won.
TODAY: Gardner started her company with 24 greeting cards in the middle of her living room. Within six months, she sold more than one million cards. Today she produces more than 200 licensed Zelda products, from calendars to children's books. Sales are conservatively estimated at $50 million annually.
TOP TIPS: Listen to your customers...
Franny Martin, 65
HER STORY: A former marketing professional who worked with Domino's Pizza, Martin left the corporate world just shy of turning 56 to pursue her passion - baking cookies.
TODAY: Martin's Cookies on Call, based in Douglas, Michigan, ships 40 cookie varieties all over the world and should surpass $700,000 in sales for 2011. She provides work for more than a dozen part-time and full-time employees. She started the company in 2002.
TOP TIPS: Get a great business team and ask for sage advice. "Make sure that you have the best accountant, the best lawyer and the best web designer," Martin says...
Jill Boehler, 59
HER STORY: A self-described "do gooder," Boehler spent her career as a speech pathologist until she got the inspiration to make "portable shawls" (wrinkle-free wraps that come with a tiny carrying bag) after she shivered through a meal at a restaurant because the air conditioning was too high. Soon she was making cold calls at fashion stores; she was 54 when she started in 2006.
TODAY: The founder of Chilly Jilly sold more than $500,000 in products in 2010 and is constantly unrolling new products, from gloves to the Duelette bracelet and hair tie. Boehler works with 20 private contractors across the country.
TOP TIPS: Toughen up...
STARTING AFTER AGE 50: "It's the perfect time to do it. My kids were gone and I could start working at 3 o'clock and work until 1 in the morning. My husband was into it, and I don't have to wait for kids at the bus stop, change diapers, or take them to activities."
Wally Blume, 73
HIS STORY: The one-time dairy marketer struck out on his own in 1996 to form Denali Flavors, a company that specializes in making ice cream ingredients and flavors for independent dairies. He was 57.
TODAY: With Denali sales at between $80 and $100 million, Blume credits much of his success to Moose Tracks - the flavor he helped develop and popularize as his company took root. "You have a flavor that is almost as strong as vanilla, and the national brands will never be able to get it. As soon as we developed it, it just took off."
TOP TIPS: Know your industry.... He also stresses training and hiring people you can trust to mind the store. "I have such good people working for me that I'm hardly involved with ice cream. They just run it and they do a better job than I can."
-----------
Link: http://www.reuters.com/article/2011/12/23/us-usa-retirement-after-idUSTRE7BM0TO20111223
Friday, December 23, 2011
No Child Left Behind Meltdown
From Walter Russell Mead's blog at The American Interest online:
President Bush’s No Child Left Behind act was widely hailed as a bipartisan cure for the problems of American education. That no longer rings true; the law has been in force for some time and plenty of children are being left behind every day at schools from all over the land.
The law’s goals include tracking student performance, increasing teacher accountability and improving standards for education — all generally commendable goals, but the law has mostly failed to achieve them....
But if gaming the system was the primary way many schools dealt with the law, others went straight to cheating. Superintendents, principals and teachers routinely committed deliberate and willful fraud to get scores that would bring money to their schools in violation of the clear provisions of the law....
The fact that NCLB triggered a national fraud epidemic leads to two conclusions:
The first is that the law was pointing to some real problems. Schools are failing all over the country; teachers and principals are receiving salaries but aren’t succeeding at their jobs.
The second is that the problem is bigger than the schools, much bigger. Bad schools aren’t simply a bad teacher or a bad principal problem. Children from homes where books and reading are important often come to the first grade or even kindergarten with reading skills. From other homes they come knowing very little they haven’t learned from TV.
The school is the place where society’s expectations meet reality: a large chunk of the American population doesn’t have what it takes to function successfully in the contemporary world, and no school system, however lavishly funded and minutely supervised can fix a problem whose roots lie outside the school....
NCLB at best is a diagnostic tool; its standards help us identify who is failing, but its provisions cannot make them succeed.
The Via Meadia guess is that there is no such thing as a national solution for the problems of our schools. Money is not the problem. With the right kids and parents, a school straight out of Little House on the Prairie would get better results than the most expensive and elaborate program that all the educational foundations, peer-reviewed experts and congressional bill writers in this country can devise.
With the wrong kids from the wrong homes, not all the consultants at the Ford Foundation or all the billions in the Gates Foundation can make schools work.
We need to be a little bit more honest with ourselves. Schools didn’t cause America’s biggest social problems, and schools can’t cure them. A public school doesn’t take in sow’s ears and put out silk purses; a school inevitably reflects the strong and weak points of the society and culture around it.
A neighborhood of weak families will rarely have strong schools. School reform is important and we have a long way to go, but until America finds ways to address its broken homes, we will not be able to fix our broken schools....
------------------------------
Link: http://blogs.the-american-interest.com/wrm/2011/12/22/no-child-left-behind-meltdown/
"A neighborhood of weak families will rarely have strong schools. School reform is important and we have a long way to go, but until America finds ways to address its broken homes, we will not be able to fix our broken schools."
President Bush’s No Child Left Behind act was widely hailed as a bipartisan cure for the problems of American education. That no longer rings true; the law has been in force for some time and plenty of children are being left behind every day at schools from all over the land.
The law’s goals include tracking student performance, increasing teacher accountability and improving standards for education — all generally commendable goals, but the law has mostly failed to achieve them....
But if gaming the system was the primary way many schools dealt with the law, others went straight to cheating. Superintendents, principals and teachers routinely committed deliberate and willful fraud to get scores that would bring money to their schools in violation of the clear provisions of the law....
The fact that NCLB triggered a national fraud epidemic leads to two conclusions:
The first is that the law was pointing to some real problems. Schools are failing all over the country; teachers and principals are receiving salaries but aren’t succeeding at their jobs.
The second is that the problem is bigger than the schools, much bigger. Bad schools aren’t simply a bad teacher or a bad principal problem. Children from homes where books and reading are important often come to the first grade or even kindergarten with reading skills. From other homes they come knowing very little they haven’t learned from TV.
The school is the place where society’s expectations meet reality: a large chunk of the American population doesn’t have what it takes to function successfully in the contemporary world, and no school system, however lavishly funded and minutely supervised can fix a problem whose roots lie outside the school....
NCLB at best is a diagnostic tool; its standards help us identify who is failing, but its provisions cannot make them succeed.
The Via Meadia guess is that there is no such thing as a national solution for the problems of our schools. Money is not the problem. With the right kids and parents, a school straight out of Little House on the Prairie would get better results than the most expensive and elaborate program that all the educational foundations, peer-reviewed experts and congressional bill writers in this country can devise.
With the wrong kids from the wrong homes, not all the consultants at the Ford Foundation or all the billions in the Gates Foundation can make schools work.
We need to be a little bit more honest with ourselves. Schools didn’t cause America’s biggest social problems, and schools can’t cure them. A public school doesn’t take in sow’s ears and put out silk purses; a school inevitably reflects the strong and weak points of the society and culture around it.
A neighborhood of weak families will rarely have strong schools. School reform is important and we have a long way to go, but until America finds ways to address its broken homes, we will not be able to fix our broken schools....
------------------------------
Link: http://blogs.the-american-interest.com/wrm/2011/12/22/no-child-left-behind-meltdown/
Thursday, December 22, 2011
Foreclosures Rise, Delinquencies Stable
From the Wall Street Journal online:
Newly initiated foreclosures jumped in the third quarter of the year and are expected to remain at a high level for the “foreseeable future,” a U.S. bank regulator said Wednesday.
The number of new foreclosures increased by 21.1% during the third quarter, the Office of the Comptroller of the Currency said in a report.
The rise follows an end to voluntary freezes on foreclosures started in late 2010 by mortgage servicers, the OCC said. There were 347,726 newly initiated foreclosures during the July to September period. Nearly 1.33 million foreclosures were in process at the end of the quarter; 172,785 homes were seized....
About 88% of borrowers measured in the bank regulator’s report were making their payments on time, down only slightly from the second quarter. About 9% had either missed at least two mortgage payments or were in foreclosure, and another 3% had missed just one mortgage payment....
--------------------
Link: http://blogs.wsj.com/developments/2011/12/21/foreclosures-rise-delinquencies-stable/
Newly initiated foreclosures jumped in the third quarter of the year and are expected to remain at a high level for the “foreseeable future,” a U.S. bank regulator said Wednesday.
The number of new foreclosures increased by 21.1% during the third quarter, the Office of the Comptroller of the Currency said in a report.
The rise follows an end to voluntary freezes on foreclosures started in late 2010 by mortgage servicers, the OCC said. There were 347,726 newly initiated foreclosures during the July to September period. Nearly 1.33 million foreclosures were in process at the end of the quarter; 172,785 homes were seized....
About 88% of borrowers measured in the bank regulator’s report were making their payments on time, down only slightly from the second quarter. About 9% had either missed at least two mortgage payments or were in foreclosure, and another 3% had missed just one mortgage payment....
--------------------
Link: http://blogs.wsj.com/developments/2011/12/21/foreclosures-rise-delinquencies-stable/
Economic Growth Revised Lower for 3rd Quarter
From the Wall Street Journal online:
The U.S. economy expanded less than thought during the third quarter as consumer spending fell short of an earlier estimate, though signs point to stronger growth in the final months of the year.
Separately, new claims for unemployment benefits unexpectedly fell last week, reaching the lowest level since April 2008 and providing another sign of improvement for the weak labor market.
Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 1.8% in the July to September period.... lower than the previous reading of 2.0%....
For the economy as a whole, the final three months of the year look stronger. Consumer spending has looked solid during the key holiday shopping season and exports have been surprisingly resilient. Many economists have been forecasting fourth-quarter growth greater than 3.0%.
However, the unemployment rate remains historically high at 8.6% and there are many clouds on the economic horizon, including the chance of higher taxes at home and the fallout from Europe's ongoing debt crisis....
The Federal Reserve is considering additional steps to help the economy, though some officials at the central bank worry that further monetary stimulus could spur inflation....
-----------------------
Link: http://online.wsj.com/public/page/news-economy.html
The U.S. economy expanded less than thought during the third quarter as consumer spending fell short of an earlier estimate, though signs point to stronger growth in the final months of the year.
Separately, new claims for unemployment benefits unexpectedly fell last week, reaching the lowest level since April 2008 and providing another sign of improvement for the weak labor market.
Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 1.8% in the July to September period.... lower than the previous reading of 2.0%....
For the economy as a whole, the final three months of the year look stronger. Consumer spending has looked solid during the key holiday shopping season and exports have been surprisingly resilient. Many economists have been forecasting fourth-quarter growth greater than 3.0%.
However, the unemployment rate remains historically high at 8.6% and there are many clouds on the economic horizon, including the chance of higher taxes at home and the fallout from Europe's ongoing debt crisis....
The Federal Reserve is considering additional steps to help the economy, though some officials at the central bank worry that further monetary stimulus could spur inflation....
-----------------------
Link: http://online.wsj.com/public/page/news-economy.html
"Signs Point to Economy’s Rise, but Experts See a False Dawn"
From the NY Times online:
As the fourth quarter draws to a close, a spate of unexpectedly good economic data suggests that it will have some of the fastest and strongest economic growth since the recovery started in 2009, causing a surge in the stock market and cheering economists, investors and policy makers.
...But the good news also comes with a significant caveat. Many forecasters say the recent uptick probably does not represent the long-awaited start to a strong, sustainable recovery. Much of the current strength is caused by temporary factors. And economists expect growth to slow in the first half of 2012 to an annual pace of about 1.5 to 2 percent.
...There are two reasons for the renewed pessimism. First, economists say that temporary trends increased growth in the fourth quarter and may not continue into next year. Second, the economy faces significant headwinds in 2012: some from Europe’s long-lingering sovereign debt crisis, and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one.
Even the Federal Reserve is predicting that the unemployment rate will remain around 8.6 percent by the time voters go to the polls in November....
-----------------------
Link: http://www.nytimes.com/2011/12/22/business/signs-point-to-economys-rise-but-experts-see-a-false-dawn.html
As the fourth quarter draws to a close, a spate of unexpectedly good economic data suggests that it will have some of the fastest and strongest economic growth since the recovery started in 2009, causing a surge in the stock market and cheering economists, investors and policy makers.
...But the good news also comes with a significant caveat. Many forecasters say the recent uptick probably does not represent the long-awaited start to a strong, sustainable recovery. Much of the current strength is caused by temporary factors. And economists expect growth to slow in the first half of 2012 to an annual pace of about 1.5 to 2 percent.
...There are two reasons for the renewed pessimism. First, economists say that temporary trends increased growth in the fourth quarter and may not continue into next year. Second, the economy faces significant headwinds in 2012: some from Europe’s long-lingering sovereign debt crisis, and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one.
Even the Federal Reserve is predicting that the unemployment rate will remain around 8.6 percent by the time voters go to the polls in November....
-----------------------
Link: http://www.nytimes.com/2011/12/22/business/signs-point-to-economys-rise-but-experts-see-a-false-dawn.html
Monday, December 19, 2011
Most stock funds post losses this year
From USA Today online:
The average diversified U.S. stock mutual fund has fallen 5.9% this year, vs. a 1.4% loss for the Standard & Poor's 500-stock index, says Lipper, which tracks the funds... 92% are showing a loss ....
One reason the average fund has lagged so badly: expenses. The average fund charges about 1.3% a year to pay for salaries, offices and other costs, according to Morningstar. Stock indexes have no expenses....
Investors have yanked out $133 billion more than they have put in to stock funds this year, according to the Investment Company Institute, the funds' trade group....
Few investors put all their money in stock funds, however, so the year hasn't been a total wash. The average bond fund that invests in U.S. Treasury securities has soared 14.7% this year, as investors flocked to government securities for safety.
Funds that invest in Treasury Inflation Protected Securities, or TIPS, have surged 11% even though the consumer price index, the government's main gauge of inflation, has risen only 3.4% the 12 months ended November.
-----------------
Link: http://www.usatoday.com/money/perfi/funds/story/2011-12-16/mutual-fund-performance/52056356/1
The average diversified U.S. stock mutual fund has fallen 5.9% this year, vs. a 1.4% loss for the Standard & Poor's 500-stock index, says Lipper, which tracks the funds... 92% are showing a loss ....
One reason the average fund has lagged so badly: expenses. The average fund charges about 1.3% a year to pay for salaries, offices and other costs, according to Morningstar. Stock indexes have no expenses....
Investors have yanked out $133 billion more than they have put in to stock funds this year, according to the Investment Company Institute, the funds' trade group....
Few investors put all their money in stock funds, however, so the year hasn't been a total wash. The average bond fund that invests in U.S. Treasury securities has soared 14.7% this year, as investors flocked to government securities for safety.
Funds that invest in Treasury Inflation Protected Securities, or TIPS, have surged 11% even though the consumer price index, the government's main gauge of inflation, has risen only 3.4% the 12 months ended November.
-----------------
Link: http://www.usatoday.com/money/perfi/funds/story/2011-12-16/mutual-fund-performance/52056356/1
Thursday, December 15, 2011
Initial jobless claims fall to lowest level since 2008
From CNN:
Fewer Americans filed for their first week of unemployment benefits last week. So few in fact, that initial jobless claims were at their lowest level since May 2008.
About 366,000 people filed initial jobless claims in the week ended Dec. 10, the Labor Department said Thursday. That was a decrease of 19,000 from the prior week, and far better than the bigger influx of claims that economists were expecting....
That said, the United States job market is still far from robust. About 8.8. million jobs were lost in the financial crisis, and as of November, still less than a third of those have been added back. Plus, the population has also grown during that time.
Still, 3.6 million people filled for their second week of unemployment benefits or more, in the week ended Dec. 3, the most recent data available.
---------
Link: http://money.cnn.com/2011/12/15/news/economy/unemployment_benefits/index.htm
Fewer Americans filed for their first week of unemployment benefits last week. So few in fact, that initial jobless claims were at their lowest level since May 2008.
About 366,000 people filed initial jobless claims in the week ended Dec. 10, the Labor Department said Thursday. That was a decrease of 19,000 from the prior week, and far better than the bigger influx of claims that economists were expecting....
That said, the United States job market is still far from robust. About 8.8. million jobs were lost in the financial crisis, and as of November, still less than a third of those have been added back. Plus, the population has also grown during that time.
Still, 3.6 million people filled for their second week of unemployment benefits or more, in the week ended Dec. 3, the most recent data available.
---------
Link: http://money.cnn.com/2011/12/15/news/economy/unemployment_benefits/index.htm
New Foreclosure Wave is Coming
From CNBC:
Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the "robo-signing" processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac.
As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again....
While overall inventories of homes for sale have been dropping somewhat steadily over the past year, these new distressed properties will put increasing downward pressure on home prices nationally.... Both government and the private sector know that until the backlog of distressed properties is cleared, the housing market will have little chance of regaining a solid footing.
--------------
Link: http://www.cnbc.com/id/45682960
Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the "robo-signing" processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac.
As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again....
While overall inventories of homes for sale have been dropping somewhat steadily over the past year, these new distressed properties will put increasing downward pressure on home prices nationally.... Both government and the private sector know that until the backlog of distressed properties is cleared, the housing market will have little chance of regaining a solid footing.
--------------
Link: http://www.cnbc.com/id/45682960
Roubini: Fragile and Unbalanced in 2012
Commentary from Nouriel Roubini:
The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies...
At this point, a eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn....
Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition. But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, “Fasten your seat belts, it’s going to be a bumpy year!”
--------
Link: http://www.project-syndicate.org/commentary/roubini45/English
The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies...
At this point, a eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn....
Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition. But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, “Fasten your seat belts, it’s going to be a bumpy year!”
--------
Link: http://www.project-syndicate.org/commentary/roubini45/English
Tuesday, December 13, 2011
Now they tell us: Realtors say they Overcounted Home Sales for Five Years
From CNBC online:
Data on sales of previously owned U.S. homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.
The National Association of Realtors said a benchmarking exercise had revealed that some properties were listed more than once, and in some instances, new home sales were also captured.
"All the sales and inventory data that have been reported since January 2007 are being downwardly revised. Sales were weaker than people thought," NAR spokesman Walter Malony told Reuters.
"We're capturing some new home data that should have been filtered out and we also discovered that some properties were being listed in more than one list."
....The depressed housing market is one of the key obstacles to strong economic growth and an oversupply of unsold homes on the market continues to stifle the sector.
-------------------
Link: http://www.cnbc.com/id/45659547
Data on sales of previously owned U.S. homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.
The National Association of Realtors said a benchmarking exercise had revealed that some properties were listed more than once, and in some instances, new home sales were also captured.
"All the sales and inventory data that have been reported since January 2007 are being downwardly revised. Sales were weaker than people thought," NAR spokesman Walter Malony told Reuters.
"We're capturing some new home data that should have been filtered out and we also discovered that some properties were being listed in more than one list."
....The depressed housing market is one of the key obstacles to strong economic growth and an oversupply of unsold homes on the market continues to stifle the sector.
-------------------
Link: http://www.cnbc.com/id/45659547
More: Corzine knew of $175M loan
From the Washington Post online:
A financial-exchange executive said that Jon Corzine [former co-Chairman of Goldman Sachs, U.S. Senator, New Jersey Governor] might have known that MF Global customers’ money was transferred earlier than Corzine has admitted.
CME Group Inc. Executive Chairman Terrence Duffy told a Senate panel that Corzine knew before Oct. 30 about a transfer of $175 million in the form of a loan to a European affiliate of MF Global.
Corzine, a former senator, has testified that he didn’t know any customer money was missing until Oct. 30, the day before MF Global became the eighth-largest bankruptcy in U.S. history....
Under a 2002 anti-corporate-fraud law that Corzine co-wrote as a U.S. senator, the CEO and chief financial officer of public companies must personally certify the accuracy of their company’s financial statements. It can be a violation of the law for executives to sign a false statement.
The three executives say that they didn’t become aware of the shortfall until hours before the firm filed for bankruptcy protection on Oct. 31....
The Senate panel is one of three committees to have issued subpoenas to compel Corzine’s testimony on the issue. It marked the first time a former senator has been subpoenaed by his former peers in more than 100 years, according to the Senate historian’s office....
---------------
Link: http://www.washingtonpost.com/business/corzine-and-2-other-top-mf-global-executives-deny-role-in-missing-12b-of-clients-money/2011/12/13/.html
A financial-exchange executive said that Jon Corzine [former co-Chairman of Goldman Sachs, U.S. Senator, New Jersey Governor] might have known that MF Global customers’ money was transferred earlier than Corzine has admitted.
CME Group Inc. Executive Chairman Terrence Duffy told a Senate panel that Corzine knew before Oct. 30 about a transfer of $175 million in the form of a loan to a European affiliate of MF Global.
Corzine, a former senator, has testified that he didn’t know any customer money was missing until Oct. 30, the day before MF Global became the eighth-largest bankruptcy in U.S. history....
Under a 2002 anti-corporate-fraud law that Corzine co-wrote as a U.S. senator, the CEO and chief financial officer of public companies must personally certify the accuracy of their company’s financial statements. It can be a violation of the law for executives to sign a false statement.
The three executives say that they didn’t become aware of the shortfall until hours before the firm filed for bankruptcy protection on Oct. 31....
The Senate panel is one of three committees to have issued subpoenas to compel Corzine’s testimony on the issue. It marked the first time a former senator has been subpoenaed by his former peers in more than 100 years, according to the Senate historian’s office....
---------------
Link: http://www.washingtonpost.com/business/corzine-and-2-other-top-mf-global-executives-deny-role-in-missing-12b-of-clients-money/2011/12/13/.html
Sunday, December 11, 2011
The Fattest or the Fittest?
From Gretchen Morgenson on the New York Times website:
Institutions most likely to receive assistance from the federal government if they become troubled — behemoths like Citigroup, Bank of America or Wells Fargo — have grown only larger in recent years.
... the army arguing for change is far outgunned by the battalions of bankers and lobbyists working to maintain the status quo. But some combatants seeking reform believe they are making headway.
Richard W. Fisher, the president of the Federal Reserve Bank of Dallas ... described, quite colorfully, the problems of these unwieldy institutions and the regulatory ethic “that coddles survival of the fattest rather than promoting survival of the fittest.”
...Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation ... “I know that many members of this subcommittee heard the same arguments that I heard during the crisis — that bailouts were necessary or the ‘entire system’ would come down,” she said. “But we never really had good, detailed information about the derivatives counterparties, bond holders and others who were ultimately benefiting from the bailouts and why they needed protecting.”
Such details are still kept under wraps. Ms. Bair urged the Fed and the F.D.I.C. to write rules requiring banks to report on their interrelationships. That way, distress at one institution can be recognized before it causes crippling losses at another.
In her testimony, Ms. Bair also urged regulators to write rules requiring executives and boards to be “personally accountable for monitoring and compliance” of the institutions they oversee.
...“What in the world are they being paid for?”
At the moment, they are being paid for taking risks that generate lush bonuses when things go well but that require taxpayer bailouts when the tide turns. Main Street understands that this is wrong and that allowing it to continue is dangerous. It’s past time that Washington did something about it.
--------------------
Link: http://www.nytimes.com/2011/12/11/business/a-fed-banker-wants-to-break-up-some-banks.html
Institutions most likely to receive assistance from the federal government if they become troubled — behemoths like Citigroup, Bank of America or Wells Fargo — have grown only larger in recent years.
... the army arguing for change is far outgunned by the battalions of bankers and lobbyists working to maintain the status quo. But some combatants seeking reform believe they are making headway.
Richard W. Fisher, the president of the Federal Reserve Bank of Dallas ... described, quite colorfully, the problems of these unwieldy institutions and the regulatory ethic “that coddles survival of the fattest rather than promoting survival of the fittest.”
...Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation ... “I know that many members of this subcommittee heard the same arguments that I heard during the crisis — that bailouts were necessary or the ‘entire system’ would come down,” she said. “But we never really had good, detailed information about the derivatives counterparties, bond holders and others who were ultimately benefiting from the bailouts and why they needed protecting.”
Such details are still kept under wraps. Ms. Bair urged the Fed and the F.D.I.C. to write rules requiring banks to report on their interrelationships. That way, distress at one institution can be recognized before it causes crippling losses at another.
In her testimony, Ms. Bair also urged regulators to write rules requiring executives and boards to be “personally accountable for monitoring and compliance” of the institutions they oversee.
...“What in the world are they being paid for?”
At the moment, they are being paid for taking risks that generate lush bonuses when things go well but that require taxpayer bailouts when the tide turns. Main Street understands that this is wrong and that allowing it to continue is dangerous. It’s past time that Washington did something about it.
--------------------
Link: http://www.nytimes.com/2011/12/11/business/a-fed-banker-wants-to-break-up-some-banks.html
Saturday, December 10, 2011
Corzine offers Testimony of the Week
From the Washington Post website:
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine said, according to the testimony....
Jon S. Corzine, the former U.S. senator and governor who presided over the collapse of the commodities brokerage MF Global, told lawmakers Thursday that he never intended to authorize a transfer of customer funds to the firm’s accounts and that if he did “it was a misunderstanding.”
...Corzine served as chairman and chief executive of Goldman Sachs but, according to published accounts, was forced out.
He used the personal fortune he built at Goldman to fuel his ascent to the U.S. Senate, where he served on the Banking Committee. He later won the New Jersey governorship. In 2007, he was badly injured in a car crash.
He ran for reelection as governor of New Jersey in 2009 but was defeated by Republican Chris Christie...
At MF Global, Corzine was returning to his Wall Street roots. The job could have served as a step toward a political comeback. As recently as last spring, he hosted a fundraiser for President Obama.
Now, Corzine’s disastrous tenure at MF Global has left him in a harsh spotlight. The House Agriculture Committee isn’t the only congressional panel eager to question Corzine.
The Senate Agriculture Committee on Tuesday voted unanimously to subpoena him for a Dec. 13 hearing, and the House Financial Services Subcommittee on Oversight and Investigations voted 15-0 Wednesday to subpoena him for a Dec. 15 hearing.
------------------------
Link: http://www.washingtonpost.com/business/economy/jon-corzine-to-tell-house-panel-he-doesnt-know-where-customers-money-went/2011/12/07/
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine said, according to the testimony....
Jon S. Corzine, the former U.S. senator and governor who presided over the collapse of the commodities brokerage MF Global, told lawmakers Thursday that he never intended to authorize a transfer of customer funds to the firm’s accounts and that if he did “it was a misunderstanding.”
...Corzine served as chairman and chief executive of Goldman Sachs but, according to published accounts, was forced out.
He used the personal fortune he built at Goldman to fuel his ascent to the U.S. Senate, where he served on the Banking Committee. He later won the New Jersey governorship. In 2007, he was badly injured in a car crash.
He ran for reelection as governor of New Jersey in 2009 but was defeated by Republican Chris Christie...
At MF Global, Corzine was returning to his Wall Street roots. The job could have served as a step toward a political comeback. As recently as last spring, he hosted a fundraiser for President Obama.
Now, Corzine’s disastrous tenure at MF Global has left him in a harsh spotlight. The House Agriculture Committee isn’t the only congressional panel eager to question Corzine.
The Senate Agriculture Committee on Tuesday voted unanimously to subpoena him for a Dec. 13 hearing, and the House Financial Services Subcommittee on Oversight and Investigations voted 15-0 Wednesday to subpoena him for a Dec. 15 hearing.
------------------------
Link: http://www.washingtonpost.com/business/economy/jon-corzine-to-tell-house-panel-he-doesnt-know-where-customers-money-went/2011/12/07/
Sunday, December 4, 2011
More Cronyism: Secret Fed Loans; Hundreds of Billions in Hidden Bailout Money; Big Banks Benefit with Profits of $13 Billion from Special Deals
From Bloomberg.com:
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse...
----------------
Link: http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse...
----------------
Link: http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
"Economy Creates 120,000 Jobs, Unemployment Rate Drops to 8.6%"... yet something is not right
From CNBC.com:
Job creation remained weak in the U.S. during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6 percent, a government report showed Friday.
The rate fell from the previous month's 9.0 percent, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64 percent, from 64.2 percent in October, representing 315,000 fewer job-seekers....
The drop in participation rate is significant in that had the labor force remained steady, the jobless rate would have dropped to 8.8 percent, according to Citigroup calculations. If the labor force had followed trend growth, unemployment would be at 8.9 percent.
"Overall, the continued modest employment gains reflect an economy that plods along at an uninspiring pace," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in a statement. "These modest job gains are still not enough to propel economic growth to a sustainable 2 percent-plus growth path."
The measure some refer to as the "real" unemployment rate, which counts discouraged workers, also took a fall to 15.6 percent from 16.2 percent, its lowest level since March 2009.
-------------
Link: http://www.cnbc.com/id/45521793
Job creation remained weak in the U.S. during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6 percent, a government report showed Friday.
The rate fell from the previous month's 9.0 percent, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64 percent, from 64.2 percent in October, representing 315,000 fewer job-seekers....
The drop in participation rate is significant in that had the labor force remained steady, the jobless rate would have dropped to 8.8 percent, according to Citigroup calculations. If the labor force had followed trend growth, unemployment would be at 8.9 percent.
"Overall, the continued modest employment gains reflect an economy that plods along at an uninspiring pace," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in a statement. "These modest job gains are still not enough to propel economic growth to a sustainable 2 percent-plus growth path."
The measure some refer to as the "real" unemployment rate, which counts discouraged workers, also took a fall to 15.6 percent from 16.2 percent, its lowest level since March 2009.
-------------
Link: http://www.cnbc.com/id/45521793
Our Deeply Daunting Jobs Hole
From the New Republic online:
As the Bureau of Labor Statistics announced a fall in the unemployment rate from 9.0 to 8.6 percent, it noted that a contraction of the labor force accounted for more than half the reduction in the number of unemployed....
Three points are worthy of note.
First: Despite the growth of the working-age population over the past four years, the labor force (roughly, the sum of those employed plus job-seekers) has not expanded. For various reasons, more and more Americans have been dropping out of the labor force. If Americans of working age were participating in the labor force at the same rate as they were at the onset of the recession, the labor force would be nearly 5 million people larger, and unemployment would be significantly worse in both absolute and percentage terms.
Second: Despite the modest economic recovery since the recession ended in mid-2009, total employment remains more than 5.5 million below the level of 2007 and about 1.6 million below where it was when President Obama took office.
Third: To regain full employment (5 percent, which happens to be the same as the level when the recession began) with the pre-recessionary labor force participation rate, we would need 150.7 million jobs—10.1 million more than we have today. That’s a reasonable measure of the hole we’re still in, two and a half years since the official end of the recession.
The American people are unlikely to cheer up about the economy until we get appreciably closer to the top of the hole.
Bill Galston is a senior fellow at the Brookings Institution and a contributing editor for The New Republic.
-------------
Link: http://www.tnr.com/article/the-vital-center/98073/unemployment-contraction-labor-force-recovery
As the Bureau of Labor Statistics announced a fall in the unemployment rate from 9.0 to 8.6 percent, it noted that a contraction of the labor force accounted for more than half the reduction in the number of unemployed....
Three points are worthy of note.
First: Despite the growth of the working-age population over the past four years, the labor force (roughly, the sum of those employed plus job-seekers) has not expanded. For various reasons, more and more Americans have been dropping out of the labor force. If Americans of working age were participating in the labor force at the same rate as they were at the onset of the recession, the labor force would be nearly 5 million people larger, and unemployment would be significantly worse in both absolute and percentage terms.
Second: Despite the modest economic recovery since the recession ended in mid-2009, total employment remains more than 5.5 million below the level of 2007 and about 1.6 million below where it was when President Obama took office.
Third: To regain full employment (5 percent, which happens to be the same as the level when the recession began) with the pre-recessionary labor force participation rate, we would need 150.7 million jobs—10.1 million more than we have today. That’s a reasonable measure of the hole we’re still in, two and a half years since the official end of the recession.
The American people are unlikely to cheer up about the economy until we get appreciably closer to the top of the hole.
Bill Galston is a senior fellow at the Brookings Institution and a contributing editor for The New Republic.
-------------
Link: http://www.tnr.com/article/the-vital-center/98073/unemployment-contraction-labor-force-recovery
For Jobless, Little Hope of Restoring Better Days
From the New York Times online:
People across the working spectrum suffered job losses in recent years: bricklayers and bookkeepers as well as workers in manufacturing and marketing.
But only a select few workers have fully regained their footing during the slow recovery....
According to (a) study... by the John J. Heldrich Center for Workforce Development at Rutgers, just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.
The vast majority say they have diminished lifestyles, and about 15 percent say the reduction in their incomes has been drastic and will probably be permanent. ...
More than two years after the recovery officially began, American employers have reinstated less than a quarter of the jobs lost during the downturn, according to Labor Department figures. Of the 13.1 million people still searching for work, more than 42 percent have been unemployed for six months or longer. About 8.9 million more are working part time because they cannot find full-time work.
While health care and some energy-related jobs have boomed throughout in recent years, the other winners have mostly been in skilled professions like computer systems design, management consulting and accounting, where employers have added back as many or more jobs than were cut during the downturn....
Some are trying for slots even if they do not meet basic qualifications. PricewaterhouseCoopers received more than 250,000 applications through its Web site over the last year, but it has hired only 1 percent from that pool, said Holly Paul, its United States recruiting leader. She said a house painter with no qualifications beyond high school had applied for 10 different openings that required college degrees and accounting certification.
“It’s definitely an eye-opener for me because it gives you an idea of what unfortunately is happening in the economy,” said Ms. Paul.
-----------
Link: http://www.nytimes.com/2011/12/02/business/for-jobless-little-hope-of-full-recovery-study-says.html
People across the working spectrum suffered job losses in recent years: bricklayers and bookkeepers as well as workers in manufacturing and marketing.
But only a select few workers have fully regained their footing during the slow recovery....
According to (a) study... by the John J. Heldrich Center for Workforce Development at Rutgers, just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.
The vast majority say they have diminished lifestyles, and about 15 percent say the reduction in their incomes has been drastic and will probably be permanent. ...
More than two years after the recovery officially began, American employers have reinstated less than a quarter of the jobs lost during the downturn, according to Labor Department figures. Of the 13.1 million people still searching for work, more than 42 percent have been unemployed for six months or longer. About 8.9 million more are working part time because they cannot find full-time work.
While health care and some energy-related jobs have boomed throughout in recent years, the other winners have mostly been in skilled professions like computer systems design, management consulting and accounting, where employers have added back as many or more jobs than were cut during the downturn....
Some are trying for slots even if they do not meet basic qualifications. PricewaterhouseCoopers received more than 250,000 applications through its Web site over the last year, but it has hired only 1 percent from that pool, said Holly Paul, its United States recruiting leader. She said a house painter with no qualifications beyond high school had applied for 10 different openings that required college degrees and accounting certification.
“It’s definitely an eye-opener for me because it gives you an idea of what unfortunately is happening in the economy,” said Ms. Paul.
-----------
Link: http://www.nytimes.com/2011/12/02/business/for-jobless-little-hope-of-full-recovery-study-says.html
A Trusted Market Predictor Falters
From the New York Times online:
ONE of the most reliable guides to investing in the American stock market — to buy during the third year of a presidential term — is in danger of failing for the first time since the Great Depression.
...The last negative return during the third year of a presidential term was in 1939, when the loss was a barely noticeable 0.1 percent. That loss came as storm clouds gathered in Europe with the beginning of World War II. It is hard to think of any year since the war when Europe’s problems have loomed as large to investors as they have this year.
As can be seen from the accompanying charts, an investor who put money into American stocks at the beginning of each third year, and then got out of the market for the next three years, would have done far better than one who chose any other year of the presidential cycle to invest in.
...A $100 investment in 1947, allowed to grow only in third years, would be worth more than $2,000 now. Similar investments in the first, second or fourth years would have grown to less than $400.
It has long been suspected that the fact that third years were the best was far from a coincidence, as presidents sought to stimulate the economy and corporate profits heading into a year when they would seek re-election or, if they were completing a second term, try to keep the White House in the hands of the same party.
This year, the economic outlook has been anything but clear, with encouraging signs of growth early in the year replaced by fears of a double-dip recession in the summer as the European credit crisis intensified. Since August, the market has gyrated wildly as European prospects have seemed to change almost daily....
------------
Link: http://www.nytimes.com/2011/12/03/business/as-a-market-predictor-a-trusty-guide-falters.html
ONE of the most reliable guides to investing in the American stock market — to buy during the third year of a presidential term — is in danger of failing for the first time since the Great Depression.
...The last negative return during the third year of a presidential term was in 1939, when the loss was a barely noticeable 0.1 percent. That loss came as storm clouds gathered in Europe with the beginning of World War II. It is hard to think of any year since the war when Europe’s problems have loomed as large to investors as they have this year.
As can be seen from the accompanying charts, an investor who put money into American stocks at the beginning of each third year, and then got out of the market for the next three years, would have done far better than one who chose any other year of the presidential cycle to invest in.
...A $100 investment in 1947, allowed to grow only in third years, would be worth more than $2,000 now. Similar investments in the first, second or fourth years would have grown to less than $400.
It has long been suspected that the fact that third years were the best was far from a coincidence, as presidents sought to stimulate the economy and corporate profits heading into a year when they would seek re-election or, if they were completing a second term, try to keep the White House in the hands of the same party.
This year, the economic outlook has been anything but clear, with encouraging signs of growth early in the year replaced by fears of a double-dip recession in the summer as the European credit crisis intensified. Since August, the market has gyrated wildly as European prospects have seemed to change almost daily....
------------
Link: http://www.nytimes.com/2011/12/03/business/as-a-market-predictor-a-trusty-guide-falters.html
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