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Day of Seesaw Talks Produces No Accord on Fiscal Crisis
By JONATHAN WEISMAN
WASHINGTON — Senate leaders on Sunday failed to produce a fiscal deal with just hours to go before large tax increases and spending cuts were to begin taking effect on New Year’s Day, despite a round of volatile negotiations over the weekend and an attempt by Vice President Joseph R. Biden Jr. to intervene.
In seesaw negotiations, the two sides got closer on the central issue of how to define the wealthy taxpayers who would be required to pay more once the Bush-era tax cuts expire.
But that progress was overshadowed by gamesmanship. After Republicans demanded that any deal must include a new way of calculating inflation that would mean smaller increases in payments to beneficiaries of programs like Social Security, Democrats halted the negotiations for much of the day.
The Republican leader in the Senate, Mitch McConnell, made an emergency call to Mr. Biden in hopes of restarting negotiations, and the White House sent the president’s chief legislative negotiator to the Capitol to meet with Senate Democrats. Soon after, Republicans withdrew their demand and discussions resumed, but little progress was made.
Lawmakers will be back on Monday. Senator Harry Reid of Nevada, the majority leader, said the Senate would return at 11 a.m. Monday and then left the Capitol just after 6 p.m. “Talk to Joe Biden and McConnell,” Mr. Reid told reporters when asked if negotiations were continuing.
In the balance are more than a half-trillion dollars in tax increases on virtually every working American and across-the-board cuts that are scheduled to begin Tuesday. Taken together, they threaten to push the economy back into recession.
“It looks awful,” said Senator Richard J. Durbin of Illinois, the second-ranking Democrat. “I’m sure the American people are saying, with so much at stake why are they waiting so late to get this done?”
Senator Lindsey Graham, Republican of South Carolina, who had said early Sunday that he thought a deal was within reach, said later on his Twitter feed, “I think we’re going over the cliff.”
Weeks of negotiations between President Obama and Speaker John A. Boehner inched toward a deal to avert the so-called fiscal cliff, while locking in trillions of dollars in deficit reduction over 10 years and starting an effort to overhaul the tax code and entitlement programs like Medicare. But earlier this month, Mr. Boehner walked away from those talks.
Instead he tried to reach a much more modest deal to avoid a fiscal crisis by extending the expiring tax cuts for incomes under $1 million. When Mr. Boehner’s own Republican members revolted, he ceded negotiations to the Senate. But compromise has proved equally elusive in that chamber.
Absent a last-minute deal, Mr. Reid is expected to move on Monday to bring to a vote a stopgap measure pushed by Mr. Obama, which would retain lower tax rates for incomes below $250,000 and extend unemployment benefits. But it was not clear that would even get a vote. The objection of a single senator on Monday would run out the clock on the 112th Congress before a final tally could be taken.
Mr. Obama appeared on the NBC program “Meet the Press” on Sunday and implored Congress to act. “We have been talking to the Republicans ever since the election was over,” Mr. Obama said in the interview. “They have had trouble saying yes to a number of repeated offers.”
He added, “Now the pressure’s on Congress to produce.”
MORE - http://www.nytimes.com/2012/12/31/us/politics/obama-accuses-republicans-of-blocking-tax-deal.html?_r=0&pagewanted=print
Asia stocks mostly down on lack of U.S. cliff deal
By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) — Asian stocks sat mostly lower Monday amid concerns about the U.S. fiscal cliff, but with Chinese shares gaining ground after manufacturing data showed that sector extending its recovery.
Volume was reportedly light as many markets were shut for holiday or on a shortened trading day.
With U.S. lawmakers yet to make a deal to avert the host of austerity measures known as the “fiscal cliff” due to begin taking effect Tuesday, Australia’s S&P/ASX 200 (ASX:AU:XJO) fell 0.5%, Singapore’s Straits Times Index (SIN:SG:STI) dropped 0.9%, and New Zealand’s NZX 50 lost 0.4%.
Bourses in Japan, South Korea, Thailand and Taiwan were all closed for holiday, though Japanese Nikkei Stock Average futures were down 0.7% in Singapore trade.
In China, Hong Kong’s Hang Seng Index (HSI:HK:HSI) opened lower but later clawed back up to the flat-line after the upbeat Chinese manufacturing data from HSBC, while the Shanghai Composite Index (SHA:CN:000001) also bucked the downtrend to rise 0.8%, extending its recent gains.
<mish>Ho Hum - Fiscal Cliff Deal Stalls - Republicans Offer More and More Concessions; Poison Pill Nonsense
Republicans have offered more concessions including an agreement to hike taxes on those making as little as $400,000 (up from the $250,000 sought by Obama). They also backed down on a proposal to slow the growth of Social Security benefits.
They may as well throw out the white flag at this point. While I do not know if they reach a compromise today, it appears Senate Republicans are willing to do more than they should.
The fact remains this is a pathetic effort by both parties to rein in unsustainable budgets.
Please consider Fiscal deal stalls as clock ticks to deadline
Efforts to prevent the economy from tumbling over a "fiscal cliff" stalled on Sunday as Democrats and Republicans remained at loggerheads over a deal that would prevent taxes for all Americans from rising on New Year's Day.
One hour before they had hoped to present a plan, Democratic and Republican Senate leaders said they were still unable to reach a compromise that would stop the automatic tax hikes and spending cuts that could push the U.S. economy back into recession.
"There are still serious differences between the two sides," said Senate Democratic leader Harry Reid.
Progress still appeared possible after the two sides narrowed their differences on tax increases and Republicans indicated they would withdraw a contentious proposal to slow the growth of Social Security retirement benefits.
The two sides were close to agreeing to raise taxes on households earning around $400,000 or $500,000 a year - higher than Obama's preferred threshold of $250,000 - several senators told reporters.
Republicans aim to pair any tax increase with government spending cuts to benefit programs that are projected to grow ever more expensive as the population ages in coming decades.
But their proposal to slow the growth of Social Security benefits by changing the way they are measured against inflation met fierce resistance from Democrats. Obama included the proposal, known as "chained CPI," in an earlier proposal, but many of his fellow Democrats remain opposed.
'POISON PILL'
"We consider it a poison pill - they know we can't accept it. It is a big step back from where we were on Friday," a Senate Democratic aide said.
Poison Pill Nonsense
The real poison pill is allowing Social Security and Medicare costs to escalate unabated. Does anyone in either party want to admit the truth?
Apparently not, but that is hardly news to anyone with an eighth-grade education in math.
As the bargaining continues, it will be up to the House to reject whatever nonsense the Senate comes up with, because if not in December, the Senate will come up with something in January at the current rate of Republican concessions.
Every compromise to date leaves the US worse off than if the fiscal cliff happens. Thus, the best hope still remains that all compromises fail.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2012/12/ho-hum-fiscal-cliff-deal-stalls.html#iUGVpaxGsE3OdTtl.99
Futures are up a little from the nasty ass LOW they posted on Friday, overall down from Friday close. Going to be an interesting day on Moday with all the bozos in Washington.
HAPPY NEW YEAR!
Washington pushes United States to edge of "fiscal cliff"
By David Lawder and Richard Cowan
WASHINGTON (Reuters) - Lawmakers pushed the country to the edge of the "fiscal cliff" on Sunday as they struggled to reach a last-minute deal that could protect the world's largest economy from a politically induced recession.
Democratic and Republican leaders in the Senate had hoped to clear the way for swift action that would avert sweeping tax increases and spending cuts due to kick in on Tuesday.
But with the two sides still at loggerheads in talks, Senate Democratic leader Harry Reid postponed any possible votes and the Senate adjourned until Monday, leaving mere hours to pass any deal that may emerge through both chambers of a bitterly divided Congress.
"There are still significant differences between the two sides," Reid said on the Senate floor.
Behind closed doors, the parties kept seeking a way to bridge deep divides over taxes and spending. But even if a deal emerges in the coming hours, under Senate rules any one of the 100 senators could prevent the chamber from acting quickly.
Prospects are also uncertain in the House of Representatives, where dozens of conservative Republicans could oppose any deal that includes a tax increase on the nation's wealthiest households.
As the hours ticked away, it appeared increasingly likely that Washington's failure to act would deliver a $600 billion hammer blow to the fragile U.S. economic recovery.
"Something has gone terribly wrong when the biggest threat to the American economy is the American Congress," said Democratic Senator Joe Manchin of West Virginia.
Americans could see a bigger bite taken out of their paychecks starting on Tuesday as payroll and income tax cuts expire, while 2 million unemployed Americans could see their jobless benefits run out. Government contractors might be forced to lay off employees as $109 billion in automatic spending cuts kick in, and businesses could lose tax breaks for everything from wind power to research and development.
The uncertainty has weighed on financial markets and forced businesses to slow hiring and investment. Market participants braced for more turbulence on Monday.
"I believe investors will show their displeasure tomorrow by selling stocks if there is no deal," said Mohannad Aama, managing director at Beam Capital Management in New York.
Though corporate chieftains have lobbied lawmakers to show flexibility, Congress also faces pressure from an array of interest groups urging them not to compromise core principles.
Conservative groups have warned Republicans that a vote to increase any taxes could be held against them, while liberal and labor groups have pressed Democrats to resist any benefit cuts to popular retirement and health programs.
Lawmakers may find it easier to act once the country goes over the "fiscal cliff" on January 1, as any new legislation can then be portrayed as a tax cut rather than a tax increase.
POINTS OF DISAGREEMENT
Republicans floated a proposal on Sunday to slow the growth of Social Security retirement benefits by changing the way they are measured against inflation, but they backed away after Democrats said they would not consider it.
Still, there were disagreements over all the major aspects of the negotiation.
Buoyed by his re-election in November, Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income for the less affluent has stalled.
Many conservative Republicans in the House of Representatives oppose a tax hike on anyone, no matter how wealthy.
Obama has proposed raising income taxes on households that earn more than $250,000, but Republicans pushed to set the threshold between $400,000 and $500,000. Republicans also were resisting a Democratic proposal to raise inheritance taxes on the wealthiest estates.
MORE - http://www.reuters.com/article/2012/12/31/us-usa-fiscal-idUSBRE8A80WV20121231?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29
Odds are good when you see a pattern repeat multiple times, nice chart!
Hey! My mom said I look good in Buster Brown pants and combat boots!
That chart is telling me that we see a repeat of 2008-2009. Looks like we hit our 'high', but it is a lower high. Let's face it, what has brought that market up so hard from 2009? It sure as heck is NOT the economy, as unemployment is still crappy, the housing market is still not that robust, corporate earnings are not as hot as they used to be, and Europe is a huge mess.
What do we have coming up in 2013? Well, to start there is the Fiscal Cliff mess that MAY get some sort of finality come January, but whatever form it takes it is guaranteed to have tax increases. (I am SURE that the cap gains tax will go up) After that is the Debt Ceiling, and we know how great that went last time! You also wilkl have the first year of Obamacare, and nobody knows how bad that is going to mess things up, but we DO know that it is keeping companies from actually hiring anyone full-time. And Europe will eventually come back into the fold again as nothing but a mess.
The market is up on nothing but pure fed manipulation with all the damn QE and money printing.
Sorry to sound so bearish.
Loaded for bear with a LOT of FAZ calls. (A LOT!)
Wow, those poor guys are SO old news! Ever since the Hurricane, Debt Ceiling, and Fiscal Cliff, Europe has become nothing but background noise; the annoying kind that you wish would just stop. Remember just a few months ago, any idiotic utterance like that would have ramped the market up a few points. Now, it is just like dust in the wind.....
Hey Stuff. One more day today of burning the midnight oil to finish up those interviews. Fell asleep last night and checked the market, SPY at about $141. Wake up this morning, and WOW! Talk about an after hours drop. Fingers crossed that it keeps up on Monday, so those FAZ calls can pop real nice, I got a BOATLOAD of those suckers.
Kaching! Way to go with those Spy puts. My FAZ had a little bounce yesterday. If all goes like it did after hours on Monday, I will really be rolling in profit on that sucker.
Hey Larry. You will get it back. Last month was cruddy for me in the market, but kicking butt lately with those FAZ and TZA plays. Just need MHK to come down a few more dollars, and I will have a Trifecta of wonderful profit.
Out here, it is COLD. They got snow up in Bagram, here in Kandahar it is just windy and chilly. The walk to the chow hall gets my fingers numb.....and I got SHRINKAGE!
Good work Larry! I got back to my room late yesterday, saw my TZA Calls were up 50%, so I sold those suckers, and bought another boat load of FAZ Calls. (18$ Calls, to go along with my $17 Calls.)
Of course, the damn market popped back up when I woke up, but I still think the financial sector is at a top, and takes a hit, so I will buy more Calls today. Currently at .26, I got em at .31.
Wow, that is a BIG gap there! Good luck, it made a nice move yesterday on a crappy market day.
*sigh* That was the kind of move I was looking for when I bought Puts on that thing last month. Of course, NOW it drops quick.
CPB hammer is a beauty, but that gap at 32.75 would have me hold onto the Puts the way this market is going. of course, I do not have Puts on this sucker, but I do still have my and FAZ calls, as well as my MHK Puts still alive. I sold my TZA Puts for a nice 50% profit, and then took those profits and bought a bunch more FAZ. The Russell has been staying strong lately, but financials I still think drop like GBs pants if no deal is reached. I now have $17 and $18 FAZ calls.
Have been working LONG days out here, we are doing interviews with soldiers back home for a job when we get back, so I have been here in the office until LATE to deal with the time difference back home. I have just enough time to hit my room, do a few trades, and then pass out. Did NOT see such a big bounce coming last night, so the new FAZ I bought has dipped a bit, thinking of buying another batch today, on the thought that the bozos in Washington do NOT come up with a deal.
Happy New Year EZ. Pretty sad state of affairs when some commie country is now ready to downgrade us. Damn, when I was a kid, I had to eat all my food, because all those poor Chinese kids were starving.
<ritholtz>What Is The Purpose of QE?
Posted By James Bianco On December 25, 2012 @ 5:00 pm In Federal Reserve | 6 Comments
As detailed earlier in the month, the Federal Reserve announced more stimulus, otherwise known as QE4, at its recent meeting.
Lots of the discussion thus far has focused on whether or not QE will happen and not on the purpose of QE.
What we discuss below is a good example of economists discussing the probability of QE rather than why QE is necessary or what it will accomplish.
So, what is QE supposed to do? Bernanke told us in his speech over the summer in Jackson Hole [1]:
“After nearly four years of experience with large-scale asset purchases, a substantial body of empirical work on their effects has emerged. Generally, this research finds that the Federal Reserve’s large-scale purchases have significantly lowered long-term Treasury yields. For example, studies have found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The $600 billion in Treasury purchases under the second LSAP program has been credited with lowering 10-year yields by an additional 15 to 45 basis points.12 Three studies considering the cumulative influence of all the Federal Reserve’s asset purchases, including those made under the MEP, found total effects between 80 and 120 basis points on the 10-year Treasury yield.13 These effects are economically meaningful.
LSAPs also appear to have boosted stock prices, presumably both by lowering discount rates and by improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities purchases. This effect is potentially important because stock values affect both consumption and investment decisions.
While there is substantial evidence that the Federal Reserve’s asset purchases have lowered longer-term yields and eased broader financial conditions, obtaining precise estimates of the effects of these operations on the broader economy is inherently difficult, as the counterfactual–how the economy would have performed in the absence of the Federal Reserve’s actions–cannot be directly observed. If we are willing to take as a working assumption that the effects of easier financial conditions on the economy are similar to those observed historically, then econometric models can be used to estimate the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two rounds of LSAPs may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs [2], relative to what otherwise would have occurred.15 [3]
This is not the first time the Federal Reserve has laid out this argument. In a November 4, 2010 Washington Post op-ed, [4] the day after QE2 was approved, Ben Bernanke defended their actions with the following passage:
Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
And in January 2011 Bernanke said [5]:
Federal Reserve Board Chairman Ben Bernanke said Thursday that a controversial $600 billion bond buying plan has contributed to a stronger stock market. “Our policies have contributed to a stronger stock market just as they did in March 2009 when we did the first iteration of this program,” Bernanke said at a Federal Deposit Insurance Corp. forum on small businesses. “A stronger economy helps small businesses more than larger businesses. Interest rates are higher but that’s mostly because the news is better. It has responded to a stronger economy and better expectations.”
To sum it all up:
• The Federal Reserve buys Treasury bonds in order to push down interest rates, making them an unattractive investment (last shown here [6], page 6) .
• Investors respond by moving out the risk curve and buying assets like corporate bonds and stocks, pushing them higher. The Federal Reserve believes this happens via the portfolio balance theory [7].
• But according to the Federal Reserve, moving out the risk curve does not include buying agricultural or crude oil futures, so do not blame them for higher food or gasoline prices.
• Higher asset prices create a wealth effect, which increases spending and confidence and improves the economy. The Federal Reserve believes this has helped create 2 million jobs.
We agree with half of what is written above.
• QE does produce lower interest rates, or at least the belief that rates are too low [8]. This then pushes investors out the risk curve which is why stocks have such an immediate and positive reaction whenever QE is speculated.
• The Federal Reserve is playing politics in regards to the effect of QE on commodity prices. There is no reason to believe the risk curve ends at low-rated stocks. How much QE affects food and gasoline prices can be debated, but to argue there is no effect at all, and will never be an effect under any scenario, merely because the Federal Reserve does not want to answer for these higher prices, is just wrong.
• The argument that higher asset prices produce a wealth effect is only partially correct. Two conditions must be met for a wealth effect to ensue. Net worth must reach a new high and it must be perceived to be permanent. This is why housing produced such a powerful wealth effect before 2006. Home prices always went up and their gains were perceived to be permanent. Currently we have a retracement of losses and a widespread distrust of financial markets. These conditions will not produce any wealth effect and we believe they have not.
QE is great for Wall Street as it produces more volatility (brokers like this), higher stocks prices (fund managers like this) and draws lots of attention (analysts like this). It is not good for Main Street because it does not create wealth. QE’s effects are not perceived to be permanent, so it does not lead to higher GDP or job growth.
What Will The Federal Reserve Do?
In Septmber we noted that the median expectation in a survey of primary dealers calls for $500 billion of additional purchases heavily tilted toward mortgage-backed securities. If the purpose of QE is to push stock prices higher, then the Federal Reserve has to deliver at least $500 billion in purchases. Otherwise it will disappoint risk markets.
Right now, if we have to guess, we believe the Federal Reserve will announce purchases of less than $500 billion. In January the Federal Reserve adopted an inflation target of 2.0%. As we detailed in a conference call last month, inflation expectations are running well above this target. One measure of inflation expectations, the 10-year TIPS inflation breakeven rate, is shown below. Further, in April [9], when Bernanke was asked if he would adopt a suggestion from Paul Krugman to expand the target to 3%, he flatly rejected the idea.
The hawks will argue expected inflation is too high to add more stimulus, an argument which will carry some weight. The compromise will be a program of less than $500 billion in purchases which will disappoint the markets.
US ECONOMICS for Wednesday:
Wednesday, December 26
US Economics (Time Zone: EDT)
09:00 S&P/Case-Shiller 20 City – consensus 0.40%, prior 0.39%
09:00 S&P/CS 20 Composite YoY – consensus 4.00%, prior 3.00%
09:00 S&P/CS Home Price Index – consensus 145.92, prior 146.22
10:00 Richmond Fed – consensus 7, prior 9
11:00 Fed buying $1.5b-$2.25b notes in 25 to 30-year range
11:30 Treasury selling 4-week bills
US retailers report weakest holiday sales since 2008
Published December 25, 2012
Associated Press
WASHINGTON – U.S. holiday retail sales this year were the weakest since 2008, when the nation was in a deep recession. In 2012, the shopping season was disrupted by bad weather and consumers' rising uncertainty about the economy.
A report that tracks spending on popular holiday goods, the MasterCard Advisors SpendingPulse, said Tuesday that sales in the two months before Christmas increased 0.7 percent, compared with last year. Many analysts had expected holiday sales to grow 3 to 4 percent.
In 2008, sales declined by between 2 percent and 4 percent as the financial crisis that crested that fall dragged the economy into recession. Last year, by contrast, retail sales in November and December rose between 4 percent and 5 percent, according to ShopperTrak, a separate market research firm. A 4 percent increase is considered a healthy season.
Shoppers were buffeted this year by a string of events that made them less likely to spend: Superstorm Sandy and other bad weather, the distraction of the presidential election and grief about the massacre of schoolchildren in Newtown, Connecticut. The numbers also show how Washington's current budget impasse is trickling down to Main Street and unsettling consumers. If Americans remain reluctant to spend, analysts say, economic growth could falter next year.
In the end, even steep last-minute discounts weren't enough to get people into stores, said Marshal Cohen, chief research analyst at the market research firm NPD Inc.
"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Cohen said, referring to the traditional retail rush the day after the Thanksgiving holiday in late November. "We had one reason after another for consumers to say, `I'm going to stick to my list and not go beyond it."'
Holiday sales are a crucial indicator of the economy's strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales don't materialize, stores are forced to offer steeper discounts. That's a boon for shoppers, but it cuts into stores' profits.
Last-minute shoppers like Kris Betzold, of Carmel, Indiana, embraced discounts that were available before Christmas.
"We went out yesterday, and I noticed that the sales were even better now than they were at Thanksgiving," said Betzold while shopping Monday at an upscale mall in Indianapolis. Betzold, who said the sluggish economy prompted her and her husband to be more frugal this year, noted that she saved about $25 on a Kindle Fire she found at Best Buy.
Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers but for manufacturers, wholesalers and companies at every other point along the supply chain.
The SpendingPulse data include sales by retailers in key holiday spending categories such as electronics, clothing, jewelry, luxury goods, furniture and other home goods between Oct. 28 and Dec. 24. They include sales across all payment methods, including cards, cash and checks.
MORE - http://www.foxnews.com/us/2012/12/25/us-holiday-retail-sales-growth-weakest-since-2008/
Obama to Leave Hawaiian Vacation Early to Work on Fiscal Deal
By JEREMY W. PETERS
KAILUA, Hawaii — President Obama is planning to cut his Christmas vacation short and return to Washington to make a last-ditch push for a compromise on a tax and spending dispute that remains stubbornly unresolved.
The White House said Tuesday that the president would leave Wednesday night. His family, however, will stay behind in Hawaii.
MORE - http://www.nytimes.com/2012/12/22/us/politics/next-move-is-obamas-after-boehners-tax-plan-fails.html
U.S. Holiday Sales Advanced a Marginal 0.7%, SpendingPulse Says
By Cotten Timberlake - Dec 26, 2012
U.S. holiday sales growth slowed by more than half this year after gridlock in Washington soured consumers’ moods and Hurricane Sandy disrupted shopping, MasterCard Advisors SpendingPulse said.
Retail sales grew by 0.7 percent from Oct. 28 through Dec. 24, the Purchase, New York, research firm said yesterday, without providing a dollar figure in the billions. Sales grew at a 2 percent pace in the same period a year ago. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.
Americans became skittish as Washington approached the end of the year without an agreement to forestall higher taxes and automatic spending cuts -- the so-called fiscal cliff. Hurricane Sandy interrupted shopping in stores and online after it slammed into the East Coast in late October. Last month, retailers from Macy’s Inc. (M) to Target Corp. (TGT) posted same-store sales that trailed analysts’ estimates.
“You are looking at modest to marginal growth from a year ago,” Michael McNamara, a SpendingPulse vice president, said in a telephone interview yesterday. “Weather events and the fiscal debate both anchored the season in terms of growth. The media coverage, which did a good job of explaining the negative consequences of the fiscal cliff, created this negative trend in consumer confidence and spending.”
Consumer confidence fell in December to a five-month low, according to a Dec. 21 report. The Thomson Reuters/University of Michigan consumer sentiment index slid to 72.9, the weakest since July, from 82.7 in November.
Disruptive Weather
Sales in the Mid-Atlantic and Northeast regions, which account for 24 percent of national consumer spending, contracted 3.9 percent and 1.4 percent, respectively, McNamara said. Upper Midwest spending also was hampered by disruptive weather, he said. By contrast, sales in the South and West ranged from about 2 percent to about 4 percent, he said.
Luxury sales “struggled,” pulled down by the New York region, which generates 20 percent of that category’s U.S. sales and was hit hard by the hurricane, McNamara said.
Apparel and consumer electronics sales performed in line with the national average, he said.
The only bright spot was home-related merchandise, which benefited from the housing rebound, he said.
The hurricane also spurred that category, Robin Lewis, a New York-based retail consultant, said in a telephone interview yesterday.
School Shootings
“Sandy reached into people’s holiday pocketbooks to pull money out that we spend on gifts to spend on ruined appliances, household repairs,” Lewis said.
Another restraining factor: the Dec. 14 shooting of 20 children at a Connecticut school, he said.
MORE - http://www.bloomberg.com/news/print/2012-12-25/u-s-holiday-sales-advanced-a-marginal-0-7-spendingpulse-says.html
Gold Declines on U.S. Economic Recovery, Budget-Deal Optimism
By Glenys Sim - Dec 26, 2012
Gold dropped for the first time in four days as optimism that the U.S. economy is recovering and lawmakers will reach a budget deal damped demand for the metal as a protection of wealth. Platinum and palladium advanced.
Spot gold fell as much as 0.4 percent to $1,651.62 an ounce and was at $1,654.85 at 1:14 p.m. in Singapore. It lost 2.3 percent last week, the most since the period to June 22, after data showed that consumer spending, durable-goods orders and industrial output increased in November. A separate report showed the largest economy grew at a 3.1 percent annual rate last quarter, exceeding all projections in a Bloomberg survey.
The U.S. may be a “bright spot” for the global economy in 2013, according to Huang Guobo, who oversees management of the $3.3 trillion foreign-exchange reserves in China, the largest foreign lender to the U.S. government. President Barack Obama and House Speaker John Boehner have not yet been able to reach a deal to avert more than $600 billion in automatic spending cuts and tax increases from Jan. 1, known as the fiscal cliff.
“The U.S. economy has been recovering and the market is optimistic on resolution of the fiscal cliff,” Janet Kong, an analyst at China International Capital Corp., the nation’s largest investment bank, wrote in a note.
Gold for February delivery slipped 0.2 percent to $1,655.60 an ounce on the Comex in New York. Holdings in gold-backed ETPs reached a record 2,632.516 metric tons on Dec. 20, and have expanded 12 percent this year, data compiled by Bloomberg show.
Spot gold is 5.8 percent higher this year, set for a 12th annual gain, as investors sought the metal to hedge against weakening currencies and the threat of inflation after central banks around the world boosted stimulus to prop up economies.
Spot platinum rose as much as 0.9 percent to $1,549 an ounce, before trading at $1,548.50. The best performing precious metal in 2012 has risen 11 percent. Palladium rose 0.2 percent to $687 an ounce, 4.9 percent higher this year. Cash silver fell 0.2 percent to $29.8975 an ounce, up 7.4 percent this year.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net
U.S. may expand mortgage refinance program: WSJ
Tue, Dec 25 2012
(Reuters) - The U.S. government is considering expanding its mortgage refinancing program to include borrowers whose mortgages are not backed by Fannie Mae FNMA.O and Freddie Mac (FMCC.OB: Quote, Profile, Research, Stock Buzz), the Wall Street Journal reported, citing people familiar with the discussions. (link.reuters.com/mej84t)
The refinancing program now being considered also seeks to include "underwater" borrowers who owe more than their homes are worth, the Journal said.
The proposal would also transfer potentially riskier loans held by private investors to the government-sponsored mortgage entities Fannie Mae and Freddie Mac, the paper said.
Such a move would require congressional authorization to temporarily change the charters of Fannie Mae and Freddie Mac, according to the Journal.
About 22 percent of all homes with a mortgage, or around 10.8 million homes, down from 12.1 million last year, were worth less than the outstanding balance at the end of June, the Journal said, citing data from CoreLogic.
Under the proposal, Fannie and Freddie would be allowed to charge higher rates to borrowers in order to compensate for the risk of guaranteeing refinanced loans that are underwater and more likely to result in default.
Officials at the U.S. Treasury could not be reached for comment by Reuters outside of regular U.S. business hours.
Combined with Fannie Mae and Freddie Mac, which buy loans and repackage them as securities for investors, Washington's footprint in the market has grown to account for nearly nine of every 10 mortgages.
(Reporting by Sakthi Prasad in Bangalore; Editing by Matt Driskill)
I called my mom on Christmas morning. She said she got home from work on Christmas Eve, and the box I sent from Afghanistan was on the doorstep. (I got her a nice Afghan scarf, a fake Coach bag, and a bunch of audio books) She cried and told me it was the BEST Christmas present ever, because it came on Christmas Eve from so far away.
(I also got her a nice pair of winter boots from Amazon while we were chatting.)
Hope everyone had a MERRY CHRISTMAS. New Years coming up, party at EZ's this year.
You are spot on about that! I was thinking about that as well, but then I saw how the market has NOT reacted to the QE like it once did, so am hoping that the tax fears outweigh the future QE coming down the pipe. Always a crap shoot.
Hope you are having a good Christmas with family DA, and gave one of your chickens a pardon for the holidays.
Thanks Merciful Bunny. I hope you are having great times with family, and enjoying lots of good egg nog.
Off to be a good officer and do chow detail tonight, will miss the open and most fo the trading day, be back tomorrow! MERRY CHRISTMAS ALL!
Does the slowing momentum in US stocks predict lower prices ahead? Some historical evidence: http://stks.co/iHqt
Subdued mood on the last holiday shopping weekend
MAE ANDERSON, AP Retail Writers, By MAE ANDERSON and ANNE D'INNOCENZIO, AP Retail Writers | December 23, 2012 | Updated: December 24, 2012 4:17am
ATLANTA (AP) — Christmas shoppers thronged malls and pounced on discounts but apparently spent less this year, their spirits dampened by concerns about the economy and the aftermath of shootings and storms.
Talk about more than just the usual job worries to cloud the mood: Confidence among U.S. consumers dipped to its lowest point in December since July amid rising economic worries, according to a monthly index released Friday.
Marshal Cohen, chief research analyst at NPD Inc., a market research firm with a network of analysts at shopping centers nationwide, estimates customer traffic over the weekend was in line with the same time a year ago, but that shoppers seem to be spending less.
"There was this absence of joy for the holiday," Cohen said. "There was no Christmas spirit. There have been just too many distractions."
Shoppers are increasingly worried about the "fiscal cliff" deadline — the possibility that a stalemate between Congress and the White House over the U.S. budget could trigger a series of tax increases and spending cuts starting Jan. 1
The recent Newtown, Conn., school shooting also dampened shoppers' spirits atop the fall's retail woes after Superstorm Sandy's passage up the East Coast.
The Northeast and Mid-Atlantic, which account for 24 percent of retail sales nationwide, were tripped up by Sandy when the enormous storm clobbered the region in late October, disrupting businesses and households for weeks.
All that spelled glum news for retailers, which can make up to 40 percent of annual sales during November and December. They were counting on the last weekend before Christmas to make up for lost dollars earlier in the season.
The Saturday before Christmas was expected to be the second biggest sales day behind the Friday after Thanksgiving.
After a strong Black Friday weekend, the four-day weekend that starts on Thanksgiving, when sales rose 2.7 percent, the lull that usually follows has been even more pronounced. Sales fell 4.3 percent for the week ended Dec. 15, according to the latest figures from ShopperTrak, which counts foot traffic and its own proprietary sales numbers from 40,000 retail outlets across the country. On Wednesday, ShopperTrak cut its forecast for holiday spending down to 2.5 percent growth to $257.7 billion, from prior expectations of a 3.3 percent rise.
Online, sales rose just 8.4 percent to $48 billion from Oct. 28 through Saturday, according to a measure by MasterCard Advisors' SpendingPulse. That is below the online sales growth of between 15 to 17 percent seen in the prior 18-month period, according to the data service, which tracks all spending across all forms of payment, including cash.
MORE - http://www.chron.com/news/us/article/Subdued-mood-on-the-last-holiday-shopping-weekend-4142060.php
Stocks to Watch: Regions, Google, RIM http://t.co/EinSa3Tn $RF $GOOG $RIMM $HLF
Why Would Nokia Want to Build a Windows-Based Tablet? http://t.co/zzTdesCs $NOK $MSFT
Americans Miss $200 Billion Abandoning Stocks
By Whitney Kisling - Dec 24, 2012
Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis.
Assets in equity mutual, exchange-traded and closed-end funds increased about 85 percent to $5.6 trillion since the bull market began in March 2009, trailing the Standard & Poor’s 500 Index’s 94 percent advance, according to data compiled by Bloomberg and Morningstar Inc. The proportion of retirement funds in stocks fell about 0.5 percentage point, compared with an average rise of 8.2 percentage points in rallies since 1990.
The retreat shows that even the biggest gain since 1998 failed to heal investor confidence after the financial collapse that wiped out $11 trillion in U.S. equity value was followed by record price swings in equities, a market breakdown that briefly erased $862 billion in share value and the slowest recovery from a recession since World War II. Individuals are withdrawing money as political leaders struggle to avert budget cuts that threaten to throw the economy into a new slump.
“Our biggest liability in the stock market has been the total destruction to confidence,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion, said in a telephone interview. “There’s just so much evidence of this recovery broadening.”
Weekly Gain
The S&P 500 climbed 1.2 percent to 1,430.15 last week, extending the 2012 gain to 14 percent, led by financial stocks and consumer companies. The benchmark index from American equity has risen from a low of 676.53 on March 9, 2009, though it is still 8.6 percent below its record high on Oct. 9, 2007. Futures on the gauge dropped 0.6 percent to 1,417.9 as of 8:37 a.m. in London today.
Now, much of the damage to investors is self-inflicted as U.S. growth improves and companies whose earnings are most tied to economic expansion reap the biggest rewards. Of the 500 companies in the benchmark index, 481 are higher now than they were in March 2009 or when they entered the gauge.
Expedia Inc. (EXPE), the Bellevue, Washington-based online travel agency, rallied 577 percent, leading consumer discretionary companies to the biggest advance from 2009 through the third quarter. Capital One Financial Corp. rose 39 percent this year as the Mclean, Virginia-based lender posted profit that beat projections by 19 percent last quarter.
PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, more than doubled this year after the Bloomfield Hills, Michigan-based company had its biggest annual earnings increase in 2012 and the housing market rebounded.
Stock Allocation
Individuals are selling into the rally, cutting the proportion of assets in stocks to 72 percent from 72.5 percent in 2009, according to 401(k) and IRA mutual fund data from the Washington-based Investment Company Institute compiled by Bloomberg. The data is for all equities, bonds and hybrid funds, and excludes money markets. Investors are lowering the proportion of stocks they own in retirement funds during a bull market for the first time in 20 years.
The percentage of households owning stock mutual funds has also fallen, dropping every year since 2008 to 46.4 percent in 2011, the second-lowest since 1997, according to the latest ICI annual mutual fund survey.
The technology bubble in the 1990s saw equity mutual funds expand twice as much as the S&P 500. Stocks’ representation in 401(k) and individual retirement account funds rose to about 90 percent in 2000 from 77 percent in 1992.
Fed Policy
Money has gone to the relative safety of fixed-income investments. Managers who specialize in corporate bonds and Treasuries have received nearly $1 trillion in fresh cash since March 2009, ICI data show. Federal Reserve Chairman Ben S. Bernanke’s zero percent interest-rate policy and the lowest inflation in almost 50 years have helped spur a 29 percent rally in debt securities since Obama’s first term began, according to the Bank of America Merrill Lynch’s U.S. Corporate and Government Index through the third quarter.
MORE - http://www.bloomberg.com/news/2012-12-24/americans-miss-200-billion-abandoning-stocks.html
Lawmakers Say Time Short to Reach Deal on Fiscal Cliff
By Jeff Kearns - Dec 24, 2012
Lawmakers said they were losing confidence that Congress and President Barack Obama can reach a deal within a week to avoid more than $600 billion in tax increases and spending cuts that could cause a U.S. recession.
“For the first time I feel it’s more likely that we will go off the cliff,” Senator Joseph Lieberman, a retiring Connecticut independent, said yesterday on CNN’s “State of the Union” program of the so-called fiscal cliff.
In the aftermath of House Speaker John Boehner’s failure to garner support from his caucus for “Plan B,” which would have extended tax cuts on incomes below $1 million, Lieberman said Senate leaders now must take charge of resolving the budget stalemate.
Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell “have the ability to put this together again and pass something” and “they can do some things that will avoid the worst consequences,” Lieberman said.
Lawmakers plan to return to Washington Dec. 27 to continue negotiating. Tax cuts signed into law by President George W. Bush and extended by Obama are scheduled to expire Jan. 1. In addition, automatic spending reductions to domestic and defense programs are scheduled to start next month.
Interim Bill
Before leaving to spend the Christmas holiday on vacation with his family in Hawaii, Obama on Dec. 21 urged leaders of both parties to put together an interim bill to keep taxes from rising on middle-income Americans as they work on a more comprehensive package.
Failing to reach a budget deal would push the U.S. into recession for the first half of 2013, according to the nonpartisan Congressional Budget Office.
U.S. stocks retreated Dec. 21 after House Republicans canceled the vote on higher taxes for top earners. The Standard & Poor’s 500 Index slumped 0.9 percent to 1,430.15 for its biggest drop since Nov. 14. The decline pared the week’s gain for the benchmark gauge for American equities to 1.2 percent.
Senator Kent Conrad, a North Dakota Democrat who is chairman of the Senate Budget Committee, said on “Fox News Sunday” that it’s still possible to reach an agreement before the deadline. Obama and Boehner “were so close and then Speaker Boehner went off on Plan B. I never understood why, it had no prospect of succeeding.”
No Change
Republican Representative Mick Mulvaney of South Carolina said that the rejection of Boehner’s plan doesn’t change the probability that the fiscal provisions will be triggered because the Obama administration won’t compromise.
MORE - http://www.bloomberg.com/news/2012-12-23/lawmakers-say-time-short-to-reach-deal-on-fiscal-cliff.html