The rally was further supported by the G-20 Summit, where leaders of the global powerhouses neared an agreement on the global recession through tightening rules on financial markets, cracking down on tax havens and channeling more cash to the International Monetary Fund. In fact, the G-20 leaders have decided to pump $1.1 trillion in international aid into the global markets to cushion the global recession’s blow, state Tony Czuczka and Edwin Chen for Bloomberg.
The effects of the recession have been further supported by the rise in consumer loan delinquencies. Mounting job losses have forced the delinquency rates across multiple types of closed-end consumer loans to jump to 3.2%, states the Stephen Bernanrd of the Associated Press. What’s shocking is that these delinquency rates do not take into consideration credit cards, which, for some, is a way of life. If one includes credit card delinquencies, this percentage will absolutely increase.
Many believe that the reason consumer loan delinquencies continue to rise is the increase in jobless claims, and there doesn’t seem to be any relief in this department. New claims for unemployment benefits jumped to a 26-year high and jobless claims increased to a whopping 669,000, last week, the highest jump since 1982, states the Labor Department. Although these numbers are devastating, they seem to have no immediate effect on the markets and their rally.
Crude oil seems to have jumped on the wagon and is riding the wave of the global market rally. A combination of surging markets in Asia and Europe and hopes of an economic recovery in the United States sent black gold north of $5 a barrel in intraday trading. PowerShares DB Oil (DBO), was up 6.8% in intraday trading and 0.1% year to date.
It seems that no amount of bad news can throw the markets off of their high horse. Supplier of herbicides and genetically engineered seeds, Monsanto (MON), increased revenues by 8.3%, but saw a drop in profits by 3.3%. These numbers still beat analysts’ expectations, sending shares of the seed maker’s stock in the green during morning trading, states The Wall Street Journal.
- Market Vectors Agribusiness ETF (MOO): up 3.2% in intraday trading and 4.5% year-to-date; MON is 8.4%
The Dow Jones Industrial Average soared 3.6% sending it north of 8,000 midday, the S&P 500 jumped 3.2% and the Nasdaq gained 3.8% in morning trading.Kevin Grewal contributed to this article. Source: www.etftrends.com
Inflation is an inevitability; we wrote about this back earlier this month in our article "INFLATION WILL MAKE UYM A 10 BAGGER BY THE END OF 2009!" Glenn Beck of "Fox News" has a great chart presentation that describes where the value of our money is headed. With a devalued dollar hard assets will be the place to be. We here at ETF Daily news see no better ETF fund to benefit from this scenario than UYM. Check out the video below, we appreciate your take on what the devaluation means to your portfolio.
By Kevin G. Hall | McClatchy Newspapers WASHINGTON — The little-known Financial Accounting Standards Board is poised to deliver Thursday a change in accounting rules that proponents say will save the banking system — and opponents warn could bring even more ruin to the U.S. economy. The FASB board is expected to relax the rules on how banks value assets that investors no longer are willing to purchase. Current rules require banks to list the value of assets on their books at their current market price — a practice called "mark-to-market." The assets, however, at the center of the global financial meltdown — securities backed by bad mortgages — have no market. Investors simply won't touch them. That's forced banks to lower the reported value of their assets, and quarter after quarter since mid-2007, they've had to write off more and more losses. That forces them to hoard their capital, rather than lend it, to offset their losses. That's how the housing crisis begat the banking crisis, which begat the U.S. economic crisis, which begat the global financial meltdown. Banks say the mark-to-market accounting rule has worsened the financial crisis by making institutions appear weaker than they really are. The pools of mortgages, they say, should be valued not on what they're worth today, but what they are expected to be worth at maturity. "Why should all assets be treated as if they're really for sale?" asked Bert Ely, a banking expert who gained wide recognition during the savings and loan crisis of the late 1980s. During the S&L crisis, government regulators initially eased federal accounting rules for troubled S&Ls, which hid their negative worth and allowed them to make even worse decisions that led to their collapse and an expensive federal rescue. Could it happen again? "That concern does come up with this situation," Ely said. "At what point in time do we move from improved accounting to manipulation?" Although Ely thinks there are risks in the accounting shift, he acknowledges that mark-to-market has amplified both the mortgage finance and banking crises. Enter FASB. The Norwalk, Conn., private-sector entity adopts common standards that are accepted by regulators such as the Securities and Exchange Commission. FASB moved with breakneck speed to consider the rule change after its chairman, Robert Herz, was roughed up by lawmakers on March 12 and warned that Congress could impose new rules if he wasn't willing to do so. Democrats, led by Massachusetts Rep. Barney Frank, the chairman of the House Financial Services Committee, insisted on the change. FASB is expected to relax mark-to-market rules, sometimes called fair-value accounting, to recognize the maturity value of the mortgage securities often referred to as toxic assets. Supporters think this will provide a tremendous boost to banks and ease the economic crisis. "I think change in mark-to-market (rules) would make a big difference. If there's a bottom spotted on the economy, then the banking thing goes away. As soon as Wall Street sees a bottom, then you can make accurate forecasts. When you can do that, the banking crisis ends," said James Paulsen, chief investment strategist for Wells Capital Management, a subsidiary of Wells Fargo. "That's equivalent to a huge toxic asset (being lifted) because you bring private investors back in." Other supporters, such as investment analyst Ed Yardeni, call the change long overdue. "I fully agree with investors who insist that mark-to-market is necessary for honest accounting. However, it makes no sense to require financial firms to raise capital just because the values of their assets have been temporarily depressed by a financial crisis," Yardeni wrote this week in a research note. The rule change could allow banks to use one accounting standard for what it reports to the SEC, whose mandate is investor protection, and a more relaxed standard for reporting to banking regulators. That would ease the demand on banks to raise more capital in a distressed environment. Critics think the change would allow banks to cook their books by hiding their truly bad assets behind longer maturity dates. "The biggest problem with mark-to-market isn't mark-to-market, it's what part of the balance sheet is mark-to-market and what part is not," said Franklin Raines, the former chief executive of mortgage-finance giant Fannie Mae. If FASB relaxes the rule for distressed bank assets, he said, "You have got a distortion in the balance sheet that nobody can understand." The changes would allow banks to revise their first quarter 2009 reports to reflect a hold-to-maturity value on assets that no investor will buy now. Some advocates have proposed allowing this change to apply retroactively to the dismal last quarter of 2008, and perhaps even further back. The change has been debated from the very start of the financial crisis in mid-2007, so action now raises eyebrows. "It's an awkward time to do it," said David Wyss, chief economist for the credit rating agency Standard & Poor's in New York. He said it gives the appearance of sweeping problems under the rug. The action could add more uncertainty, warned Gary Stern, the president of the Federal Reserve Bank of Minneapolis. "I think it would raise as many problems as it answers," he told McClatchy. Once the rule change is made, bank balance sheets could appear healthier, but Raines and other financial experts doubt the banks would be perceived that way. "It's kind of hard to fool people at this stage, where everyone is so focused on what the facts are," Raines said. "I think there are a lot of problems with mark-to-market, but I don't think you are going to change people's views of these banks by moving around the accounting, especially if you are moving away from market prices. I think the average person might be fooled by it, but I don't think smart investors will be fooled by it." The rule change may also affect the Obama administration's ambitious program to have the government, alongside private investors, buy back as much as $1 trillion of toxic assets polluting bank balance sheets. "Banks have already taken large markdowns, and may now be able to mark up the values of their assets," analyst Yardeni wrote in a March 25 research note. "In other words, their toxic assets won't be so toxic. Their distressed assets won't be so distressed. They won't be under the gun to raise capital, or beg for more of it from the government." Source: http://www.mcclatchydc.com
New research from the National Association of Realtors offers hope that the housing market may be stabilizing. The number of existing homes for sale put under contract rose 2.1 percent in February after hitting a historic low the previous month. But despite the national boost, the West is lagging. Pending home sales in the West dropped 13.5 percent, while the Midwest, Northeast and South all posted strong gains. The NAR report also showed that housing affordability hit a record high in February. The group’s Housing Affordability Index jumped 0.9 percentage points to 173.5 in February, up 36.3 percentage points from a year ago. To determine affordability, the index incorporates the relationship between home prices, mortgage interest rates and family income. A family earning the national median income of $59,700 could afford a $285,600 home in February, presuming no more than 25 percent of gross income is devoted to mortgage principal and interest, NAR said. The national median price for existing single-family homes is $164,600. Source: Phoenix Business Journal
March ETF Performance ReportMarch 31, 2009 at 1:40 pm by Tom Lydon www.etftrends.com March was one of the best months in years for the major indexes and exchange traded funds (ETFs). The Dow Jones Industrial Average rose 7.7% for March, but lost 12.2% this quarter. While no one is declaring the problems in the economy fixed, some strategists say that there’s at least a change in perception. Earnings season is now beginning, and many are nervous about what the reports will bring. The S&P 500 rose 8.5% for the month and fell 10.4% for the quarter. The Nasdaq gained 10.9% in March, but lost 1.4% in the quarter. The strongest sector for the month was solar energy, which rose 29%. For the quarter, gasoline was a standout, gaining 33.5%. For a complete look at the month of March, as well as the first quarter of 2009, click through to see our March ETF Performance Report.
5 bear rallies in 1930sDuring the early 1930s, the Dow Jones industrial average staged five bear market rallies of 20 percent or greater before hitting an ultimate bottom in 1932. The most famous was a 48 percent gain in 1930. Tom McManus, chief investment officer with Wachovia Securities, says the market will give up at least half of its March gains. "We are in a bottoming process, where the market is winnowing out the winners from the losers," he says. "March 9 was probably a bottom for the quality stocks. It's probably not a bottom for the lower-quality stocks." He says there's a 40 percent chance the overall market could fall below its March 9 low.
Durables are volatileMcManus doesn't put much faith in the signs of stabilization that some analysts see, such as better-than-expected reports on durable goods, home sales and retail sales. Durable goods is so volatile, he says, "I would never use it as a signal the trend has changed." Some analysts cheered when the government reported that retail sales in February were down only 0.1 percent (economists were expecting a 0.5 percent drop) and revised January's surprise increase upward to 1.8 percent from its original estimate of 1 percent. When you look at the drop in retail sales over the previous three to four months, "the size of the improvement is microscopic," he says. "It's like saying your kid took a test and got 1 right out of 20. The next time he got 2 right out of 20. You could say, 'Wow, he did twice as well.' But it was still horrible." McManus says the S&P 500 might "bounce around 700-900 for another six months." It closed Friday at 816. Its low on March 9 was 677. He says the economy will start to recover at the end of 2009 or early next year. He warns that investors should not try to pick the exact bottom. Instead, they should put money into the market gradually over the next six months. Five years from now, that will look like a very smart investment.
Patience can pay off"The valuations are very attractive. Someone who is patient can make money. Focus on improving the quality of your portfolio," he says. That means dumping stocks that have gone down the most and putting money into high-quality companies that have been hurt less. Rob Arnott, chairman of Research Affiliates, is gloomier on the economy. "I don't see how the economy can turn around while we are engaged in this massive de-leveraging," he says. "Resources are being siphoned to pay down debt, both household and corporate debt. This process is going to take time, a lot of time. It's dangerous to assume the economy can suddenly pick up when the de-leveraging process is only just now gaining full steam."
Growth seen in 2010Arnott says the economy won't start growing until 2010 and employment won't pick up until 2011. "I think unemployment will crest above 10 percent, perhaps significantly above. This will be ugly," he says. For now, Arnott says investors should put money into corporate bonds, not stocks, on the theory that the stock market can't really recover until the credit markets do. He says that corporate bonds did not show the same improvement in March that stocks did. Until they do, "I don't think this is a real bull market," he says.
Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at firstname.lastname@example.org.
This article appeared on page D - 1 of the San Francisco Chronicle
By Burton Frierson Reuters New York: The U.S. economy may have pulled out of its tailspin, but it is still losing altitude. Global stock markets have turned euphoric over the idea that the worst may be over for the world's largest economy, with Wall Street rallying more than 20 percent from lows reached earlier in March. Fueling this newfound optimism, unexpectedly robust economic reports last week showed signs of recovery in the beleaguered U.S. manufacturing and housing sectors. However, economists warn that it is too soon to say the United States is recovering from what will probably become the longest and deepest decline since the Great Depression. "I think it's reasonable to say that we perhaps are pulling out of the tailspin, that we're moving out of the period of free fall," said Nigel Gault, director of U.S. economic research at IHS Global Insight in Lexington, Massachusetts. "That's not the same thing as recovery being just around the corner." The president of the Federal Reserve Bank of Atlanta, Dennis Lockhart, echoed this sentiment Thursday, saying one month of improved data did not constitute an economic recovery. "Most of the data that we follow appears to signal a continuing recession, at least a few more months," Mr. Lockhart said. Indeed, data confirmed the U.S. economy shrank in the fourth quarter at its fastest pace since 1982, with a chain reaction of job losses and plummeting demand for imported goods from around the globe. Leaders from the Group of 20 industrialized and emerging economies meet this week in London to try to come to grips with the global economic crisis. The most painful vestige of the U.S. recession, the sharp rise in unemployment, will not begin to improve until long after the rest of the economy stabilizes. The scale of job destruction should be evident when the U.S. government releases monthly employment data Friday. The nonfarm payrolls report, usually the biggest event on the U.S. economic calendar, is expected to show 654,000 jobs were lost in March, according to the median in a Reuters poll of economists. Economists have already increased their forecasts for job losses. The only silver lining is that the projected total would be little worse than the 651,000 jobs lost in February. The U.S. unemployment rate is expected to have jumped to 8.5 percent in March. This would be the highest level since 1983, when the economy was still shaking off the debilitating effects of stagflation, with its low economic growth and sharp price rises. Gault, at IHS Global Insight, expects 750,000 job losses for March — which would be the worst month since 1949. He said the unemployment rate would continue rising this year before peaking at more than 10 percent in the first half of next year, perhaps well after the economy starts to grow. "The next employment report is probably going to be the worst one yet," Gault said of the March payrolls report. "Unemployment is the very last thing that turns." Other U.S. economic indicators during the week are unlikely to depart much from the gloom of the jobs report. The United States will not be able to look abroad for much help, at least for now. A report to be released Monday on Japanese industrial output is expected to show a 10 percent decline. Meanwhile, Japan has slipped to the brink of deflation. Euro zone consumer and industrial sentiment readings Monday are expected to remain negative. Similarly, manufacturing and service sector gauges to be released Wednesday and Friday are likely to remain weak. The European Central Bank's meeting Thursday may only highlight the difficulties facing the euro zone economy. Economists expect an interest rate cut but also a discussion of less common methods of easing monetary conditions. Ultimately, though, analysts figure the global economy is still trailing the United States on its slog through the quagmire, so new measures may be of little immediate help. "The rest of the world is falling into the same hole we did, but later," said Brian Fabbri, managing director of economic research at BNP Paribas. Source: www.iht.com
The Dollar's Tipping PointA defining move by the Fed last week to buy billions in treasuries and Freddie and Fannie mortgage backed securities will change the world as we know it. In my November 25, 2008 article entitled 'Deflation Dragon Disaster', I asked:
Will the unprecedented inflow of cash that is being injected into the system be enough to still the Deflation Dragon? At what point will the unyielding upward trend in the dollar be stopped in its tracks by the avalanche of FIAT sisters and brothers joining daily?With the Fed buying 300 billion in treasuries, I believe that day of reckoning has come. Martin Weiss of Money and Markets adds up the tally of government funds committed so far as close to 13 trillion. He also reports a total of 57.3 trillion in credit default swaps. This inevitably will push the dollar down. I explained the perils of this stealth tax in my December 30, 2007 article:
I hear many smart financial people say ‘but Americans buy everything in dollars so it won’t really affect us much’. ‘It is great for increasing our exports’ they add. Yes, it does at first, but products aren’t sold on price alone but design, promotion, etc. To them I say “Foreign countries and Americans sell commodities at the international price on the Chicago Market. Cocoa beans, chocolate, oil, plastics and soy beans are all paid in US dollars at the international prices.”I continued on to say:
The thought that you will not even hear whispered is that an unhinging of the reserve currency could happen and that would cause financial panic, plummeting stock markets, oil priced in the us dollar would rise way over $100 a barrel and the gold price, which has been shouting inflation, would quickly jump over $1000 an ounce as investors seek protection in safe havens. The government’s reserves would be gone in a few days if it had to support a dollar dive. Conversely, if we keep our dollar strong, foreign capital from the developing world will buy the US dollar and help finance the huge liabilities of social security, Medicare and interest on the national debt.I also explained in my August 12, 2007 article:
If fear of US instability creates more selling of the dollar, interest rates will have to eventually rise considerably to lure the world back to buying the greenback.Foreign government saber rattling by Russia and China has finally brought attention to the viability of the US dollar as the world’s reserve currency. Is a planned New World Order complete with a New World Currency backed by gold and silver all a part of the puppet show unfolding before our eyes? What would the consequences be if the world Mainstream news media has finally tackled this concept with questions this week to Bernanke, Geithner and President Obama asking if they were for a new world currency. Obviously they all said no. We know this issue will be well represented at the G20 meeting in London on April 2, 2009. If currency devaluation does come due to:
- A massive spending and bailout.
- A fear based rush out of the dollar.
- A planned devaluation of all G20 currencies.