1) Phil's Financial Tip of the Day:
Stressing over who to tip and how much to spend? Here are some guidelines to simplify the process.
With only 4 days to go until Christmas, I hope you set aside some money for tips. Here is a guide of who and how much to tip:
Holiday Tipping Guide-From Financially Fit
http://financiallyfit.yahoo.com/finance/video-holiday-tipping-guide-27641258
2) In the Markets today:
The euro fell on Wednesday as doubts set in over whether fresh lending by the European Central Bank would be used to buy struggling euro zone debt, while weak earnings from Oracle weighed on technology stocks and dragged Wall Street lower.
Oracle drags tech lower; euro off after ECB boost-From Reuters
The euro fell on Wednesday as doubts set in over whether fresh lending by the European Central Bank would be used to buy struggling euro zone debt, while weak earnings from Oracle weighed on technology stocks and dragged Wall Street lower.
Global shares drifted towards break-even for the day, holding on to strong gains from the previous session, though volumes were thin as the year-end holidays approach.
Italian and Spanish government bond yields rose, snapping an eight-session down trend, while prices of German Bunds edged up.
Initial optimism about ECB lending to euro zone banks gave way to concerns that the flood of liquidity only highlighted the scale of the pressure European banks are under.
The ECB lent 489 billion euros ($641.08 billion) to banks to ease the inter-bank credit crunch and tempt banks to buy higher-yielding Italian and Spanish debt, but optimism that the funding would ease Europe's two-year-old debt crisis quickly faded.
An Italian industry group said banks would not increase their exposure to sovereign debt even after the ECB offering because European Bank Authority rules discourage it.
"The key question remains what the banks will do with the newly acquired funds," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
"We suspect that to the extent banks buy sovereign bonds, they will purchase their own sovereign's bonds rather than their neighbor's."
Shares of Oracle Corp (ORCL.O), the world's No. 3 software maker, fell 13.1 percent after it missed Wall Street's forecasts for the first time in a decade.
Stock in its German peer SAP (SAPG.DE) fell 6.1 percent making it the worst performing blue chip in Europe.
"It is certainly a concern, Oracle is a bellwether in the sector but some of the other stocks in the group may be overreacting," said Brian Lazorishak, portfolio manager at Chase Investment Counsel in Charlottesville, Virginia.
In afternoon trading in New York, the Dow Jones industrial average .DJI fell 26.56 points, or 0.22 percent, to 12,077.02. The S&P 500 Index .INX dipped 1.53 points, or 0.12 percent, to 1,239.77. The Nasdaq Composite .IXIC lost 38.89 points, or 1.49 percent, to 2,564.84.
Global stocks as measured by MSCI were flat a day after posting their largest gains since November 30, while the European benchmark FTSEurofirst 300 .FTEU3 closed 0.47 percent lower. U.S. dollar-denominated Nikkei futures fell 0.4 percent.
Global equity markets and the euro have traded off European headlines for months as Europe's escalating sovereign debt crisis threatens to take down the region's economy.
EURO GIVES UP RALLY
The euro fell against the U.S. dollar after the larger-than-expected bank demand for ECB loans failed to convince investors the move would ease Europe's deep-seated debt problems.
The euro initially rose nearly 1 percent on the day to a one-week high near $1.32 before giving up gains to trade around $1.3040, down 0.3 percent.
"While the ECB had hoped that banks borrowing at low rates would buy sovereign debt, it appears they are using the perceived bullish opportunity to jettison risk," said Christopher Vecchio, currency analyst at DailyFX.com.
The benchmark 10-year U.S. Treasury note was down 4/32, yielding 1.9389 percent, up from 1.927 percent Tuesday.
Italian bond yields were 18 basis points higher at 6.817 percent, with Spanish yields 19 basis points higher at 5.313 percent, after both had fallen almost 100 basis points in the last week and a half.
Italian data showed the economy contracted by 0.2 percent in the third quarter compared with the previous three months while British consumer morale hit an almost three-year low in December.
U.S. crude futures rose 1.6 percent to $98.80 per barrel after government data showed inventories fell to their lowest level since the late 2008.
3) Top financial story of the day:
U.S. home sales grew in November, and the year's sales are on pace to be above last year's. But the real-estate group that provides the data significantly revised down sales for the past four years.
Home Resales Rise 4%, as Revisions Make Bust Look Worse-From The Wall Street Journal
The housing slump was deeper than initially estimated but new data indicate that the worst of the downturn may have passed.
The National Association of Realtors said Wednesday it over-estimated home sales by 14.3% between 2007 and 2010, meaning that 2.9 million fewer homes sold during those years than thought earlier.
The trade group, which tracks previously owned homes, said the over-counting was due to shifts in the housing market that weren't detected until this year.
But the report also provided fresh signs that housing is improving. Home sales in November rose 4% from October's levels to a seasonally adjusted annual rate of 4.42 million, the second-highest level of the year.
"We are not expecting to see a housing market that could be described as strong. But despite the downward revisions to sales, a modest recovery may be under way," said Paul Dales, an economist at Capital Economics. Prices could stop falling next year, he said, but it will take until 2014 for markets to show sustained gains.
The Realtors' report showed that housing inventory declined to 2.58 million in November, down 18.1% from one year ago to the lowest level since the spring of 2005.
Low inventory is normally a sign of health for housing markets because reduced competition can result in higher prices. But real-estate agents say markets are stalled now because sellers aren't willing to reduce prices further and are keeping their homes off the market rather than settling with buyers seeking deep discounts.
Buyers, meanwhile, remain frustrated by inventory that they say is unattractive or overpriced. A shortage of inventory has "caused buyers to go away," said Ron Leis, a real-estate agent in Sacramento, Calif. "It's our biggest issue right now. They lose interest because there just isn't anything to buy" that meets their requirements.
Andrena Crawford, a 68-year-old retired civil servant, has long wanted to sell her Kissimmee, Fla., property but won't accept the $100,000 or so she thinks it would fetch right now.
She and her husband bought the home, where they live during the winter, in 1994 for $106,000.
During the boom, the property's value rose as high as $200,000, Ms. Crawford says. She hopes to get $160,000 for it and recently met with a real-estate agent to gauge the market. "He's advised us that if we're not in a hurry to hang on a bit," said Ms. Crawford, who spends part of the year in her native Scotland. "As long as I can cover myself (with renters), I'm happy to let it run."
The drop in inventory could be temporary because millions of homes are expected to go into foreclosure. Analysts at Barclays Capital estimate that 3.4 million mortgages are in some stage of foreclosure or have gone more than three months without a payment. Banks have been slow to repossess these homes after foreclosure-processing abuses surfaced last year, but the inventory ultimately could rise as banks begin to take back and list more of those properties.
The Realtors group typically revises home-sales data every 10 years because its estimates are benchmarked to sales figures from the decennial census survey. But earlier this year the NAR began contemplating a significant downward revision after real-estate groups pointed out potential flaws in the group's tally.
The Realtors' group doesn't count the number of sales registered every month. Instead, it produces estimates based on a broad sample of data reported by local multiple-listing services to calculate monthly changes in sales. It then makes estimates about other sales that aren't included by those groups, such as "for sale by owner" transactions, and pegs the monthly changes to the total sales reported in the census survey. Economists, investors and the real-estate industry use the NAR estimates to gauge the health of the nation's housing market.
The trade group's model unintentionally began over-counting sales as the housing downturn accelerated in 2007. Consolidation among the multiple-listing services meant they were counting a greater share of sales than was accounted for in the NAR's methodology. Also, the share of "for sale by owner" sales declined from a 16% market share in 2000 to 9% in 2010.
4) Inspirational Quotes@Inspire_Us from Twitter
Adversity causes some men to break, and others to break records. -Unknown
Wednesday, December 21, 2011
Tuesday, December 20, 2011
Financial Headline News for Tuesday 12/20
1) Phil's Financial Tip of the Day:
Deal of the Day: Shipping deadlines have passed, and malls are crowded. What now?
With only 5 days until Christmas time is running out. Here are some last second gifts ideas for you procrastinators out there.
http://www.smartmoney.com/spend/deal-of-the-day/the-best-11th-hour-gifts-1324331906631/
2) In the Markets today:
Stocks surged Tuesday following encouraging signs out of Europe and a jump in apartment building in the U.S.
Stocks soar on Europe hopes, strong housing starts-From AP
The Dow Jones industrial average surged 337 points following encouraging signs out of Europe and a jump in apartment construction in the U.S. It was the best day for U.S. stocks this month.
The Spanish government pulled off a successful debt auction Tuesday and gauges of business and consumer confidence in Germany increased. Both helped ease worries about Europe's debt crisis.
The Dow gained 2.9 percent to close at 12,103. Caterpillar jumped 5 percent, the most in the Dow.
The S&P 500 index rose 36 points, or 3 percent, to 1,241. Only six stocks in the index fell.
The Nasdaq composite index rose 81, or 3.2 percent, to 2,604.
Seven stocks rose for every one that fell on the New York Stock Exchange. Trading volume was light at 3.8 billion.
3) Top financial story of the day:
U.S. home building hit its highest level in 19 months in November, with most of the increase coming from multifamily construction.
Rent Party! Apartments Drive Strong Housing Starts Data-From Contrary Indicator
The stock market rose sharply on Tuesday in part on the strength of a solid government report on new housing starts and permits. Housing starts in November checked in at an annual rate of 685,000, up 9.3 percent from October 2011, and up 24.3 percent from October 2010.
This would seem to be a strange time for a housing construction boom. As blogger Barry Ritholtz Tweeted: " Yeah, more inventory! Just what we need!" Indeed, a sharply higher amount of unsold homes would seem to fall near the bottom of the long list of things the U.S. economy needs. Existing home sales, while up this year, are way below their recent peaks. And so at the end of October, there were "3.33 million existing homes available for sale, which represents an 8.0-month supply at the current sales pace," according to the National Association of Realtors. That figure probably estimates the impending supply given the number of homes that are in foreclosure and likely to be puked onto the market by banks. Meanwhile, new home sales are running at a low pace — an annualized rate of 307,000 — which means it would take 6.3 months to clear the 162,000 new homes from the market. A four-month supply of new and existing homes would be much more healthy.
So why are housing starts rising? A look inside the data reveals the answer. Builders have learned their lesson. They aren't foolishly building amenity-rich McMansions and Tudors with four-car garages to sell to highly indebted aspirational consumers. Rather, they're building smaller, practical abodes that they plan to rent out. Indeed, recent housing data help flesh out a post-crisis cultural, societal and financial shift toward housing: less owning and more renting. Thanks to foreclosures, walking away and a general inability to get financing, the homeownership rate has fallen in the U.S. from 69 percent in the third quarter of 2006 to 66.3 percent in the third quarter of 2011. That translates into several million households that used to own homes that are now renting.
Builders have reacted to this shift. They're building fewer family homes and more multifamily buildings. Look at the data. Yes, in November, the headline housing starts number was up sharply from October 2011, and from November 2010. (See Table 3 in the above document) But single-family starts haven't done much: They were up only 2.3 percent from October 2011, and down 1.5 percent from November 2010. But the market for structures with five units or more is going gangbusters. In November 2011, starts in this sector came in at an annual rate of 230,000, up 32 percent from 174,000 in October 2011, and up an eye-popping 180 percent from November 2010. Through the first 11 months of the year, single family housing starts are off about 10 percent from the first 11 months of 2010. By contrast, starts of structures with five or more units were up 60 percent in the same time period, from 97,700 to 156,200. The sharp rise in apartment construction is more than compensating for the continuing decline in house construction. The data on permits (Table 1) tells a similar story.
Through first 11 months of 2011, permits for free-standing houses are off 7.7 percent from the first 11 months of 2010, while permits for 5+ unit structures are up 36.4 percent.
Rather than indicating optimism about the housing sales market, the data on housing starts and permits point to optimism about the apartment rental market. Builders, and the lenders who enable them, are looking ahead and concluding that it makes more sense to build multifamily units, which tend to be more efficient, smaller and less expensive than single-family homes. In addition, this type of housing offers developers far more flexibility. Depending on market conditions, they may decide to sell the units as condos, or rent them out. In recent years, as in the single-home market, the bias has shifted away from ownership. Check out the Census Bureau data that breaks down completed housing by purpose and design. (See Table Q6) In 2007, only 62 percent of the housing units in buildings with two or more units were built for rent; the percentage rose to 84 percent in 2009 and 87 percent in 2010. In the first three quarters of 2011, 90 percent of such units completed were built for rent.
4) Inspirational Quotes@Inspire_Us from Twitter
God doesn't require us to succeed; he only requires that you try. -Mother Teresa
Deal of the Day: Shipping deadlines have passed, and malls are crowded. What now?
With only 5 days until Christmas time is running out. Here are some last second gifts ideas for you procrastinators out there.
http://www.smartmoney.com/spend/deal-of-the-day/the-best-11th-hour-gifts-1324331906631/
2) In the Markets today:
Stocks surged Tuesday following encouraging signs out of Europe and a jump in apartment building in the U.S.
Stocks soar on Europe hopes, strong housing starts-From AP
The Dow Jones industrial average surged 337 points following encouraging signs out of Europe and a jump in apartment construction in the U.S. It was the best day for U.S. stocks this month.
The Spanish government pulled off a successful debt auction Tuesday and gauges of business and consumer confidence in Germany increased. Both helped ease worries about Europe's debt crisis.
The Dow gained 2.9 percent to close at 12,103. Caterpillar jumped 5 percent, the most in the Dow.
The S&P 500 index rose 36 points, or 3 percent, to 1,241. Only six stocks in the index fell.
The Nasdaq composite index rose 81, or 3.2 percent, to 2,604.
Seven stocks rose for every one that fell on the New York Stock Exchange. Trading volume was light at 3.8 billion.
3) Top financial story of the day:
U.S. home building hit its highest level in 19 months in November, with most of the increase coming from multifamily construction.
Rent Party! Apartments Drive Strong Housing Starts Data-From Contrary Indicator
The stock market rose sharply on Tuesday in part on the strength of a solid government report on new housing starts and permits. Housing starts in November checked in at an annual rate of 685,000, up 9.3 percent from October 2011, and up 24.3 percent from October 2010.
This would seem to be a strange time for a housing construction boom. As blogger Barry Ritholtz Tweeted: " Yeah, more inventory! Just what we need!" Indeed, a sharply higher amount of unsold homes would seem to fall near the bottom of the long list of things the U.S. economy needs. Existing home sales, while up this year, are way below their recent peaks. And so at the end of October, there were "3.33 million existing homes available for sale, which represents an 8.0-month supply at the current sales pace," according to the National Association of Realtors. That figure probably estimates the impending supply given the number of homes that are in foreclosure and likely to be puked onto the market by banks. Meanwhile, new home sales are running at a low pace — an annualized rate of 307,000 — which means it would take 6.3 months to clear the 162,000 new homes from the market. A four-month supply of new and existing homes would be much more healthy.
So why are housing starts rising? A look inside the data reveals the answer. Builders have learned their lesson. They aren't foolishly building amenity-rich McMansions and Tudors with four-car garages to sell to highly indebted aspirational consumers. Rather, they're building smaller, practical abodes that they plan to rent out. Indeed, recent housing data help flesh out a post-crisis cultural, societal and financial shift toward housing: less owning and more renting. Thanks to foreclosures, walking away and a general inability to get financing, the homeownership rate has fallen in the U.S. from 69 percent in the third quarter of 2006 to 66.3 percent in the third quarter of 2011. That translates into several million households that used to own homes that are now renting.
Builders have reacted to this shift. They're building fewer family homes and more multifamily buildings. Look at the data. Yes, in November, the headline housing starts number was up sharply from October 2011, and from November 2010. (See Table 3 in the above document) But single-family starts haven't done much: They were up only 2.3 percent from October 2011, and down 1.5 percent from November 2010. But the market for structures with five units or more is going gangbusters. In November 2011, starts in this sector came in at an annual rate of 230,000, up 32 percent from 174,000 in October 2011, and up an eye-popping 180 percent from November 2010. Through the first 11 months of the year, single family housing starts are off about 10 percent from the first 11 months of 2010. By contrast, starts of structures with five or more units were up 60 percent in the same time period, from 97,700 to 156,200. The sharp rise in apartment construction is more than compensating for the continuing decline in house construction. The data on permits (Table 1) tells a similar story.
Through first 11 months of 2011, permits for free-standing houses are off 7.7 percent from the first 11 months of 2010, while permits for 5+ unit structures are up 36.4 percent.
Rather than indicating optimism about the housing sales market, the data on housing starts and permits point to optimism about the apartment rental market. Builders, and the lenders who enable them, are looking ahead and concluding that it makes more sense to build multifamily units, which tend to be more efficient, smaller and less expensive than single-family homes. In addition, this type of housing offers developers far more flexibility. Depending on market conditions, they may decide to sell the units as condos, or rent them out. In recent years, as in the single-home market, the bias has shifted away from ownership. Check out the Census Bureau data that breaks down completed housing by purpose and design. (See Table Q6) In 2007, only 62 percent of the housing units in buildings with two or more units were built for rent; the percentage rose to 84 percent in 2009 and 87 percent in 2010. In the first three quarters of 2011, 90 percent of such units completed were built for rent.
4) Inspirational Quotes@Inspire_Us from Twitter
God doesn't require us to succeed; he only requires that you try. -Mother Teresa
Monday, December 19, 2011
Financial Headline News for Monday 12/19
1) Phil's Financial Tip of the Day:
A Consumer Reports poll shows the average person goes overboard by $811. To avoid it, map out a limit and avoid the remorse.
Good advice on how to avoid these last minute shopping mostakes to stay within budget.
http://abclocal.go.com/wabc/story?section=news/7_on_your_side&id=8467163
2) In the Markets today:
The Dow Jones Industrial Average declines more than 100 points to open the new week and took a late afternoon fall after European finance ministers failed to come up with the full amount of money pledged for a bailout fund.
US stocks drop; BofA and other big banks fall hard-From AP
The stock market took a late afternoon fall after European finance ministers failed to come up with the full amount of money pledged for a bailout fund.
Banks led the way down. Morgan Stanley dropped more than 5 percent and Bank of America Corp. sank 4 percent, the biggest fall in the Dow Jones Industrial average.
The Dow lost 100 points, or 0.8 percent to close at 11,766.
The S&P 500 index fell 14 points, or 1.2 percent, to 1,205. The Nasdaq composite index fell 32 points, or 1.3 percent, to 2,523.
Cautious comments from the head of the European Central Bank also helped push stocks lower.
Nearly four stocks fell for every one that rose on the New York Stock Exchange. Trading volume was very light at 3.5 billion.
3) Top financial story of the day:
Shares Often Derided as for 'Widows and Orphans' Are Outdoing Their Lower-Yielding Cousins
Dividend Stocks Become the Heroes-From The Wall Street Journal
A digital billboard greets commuters backed up in morning traffic along a bend in the Schuylkill Expressway snaking toward Philadelphia: "Earned Any Dividends Lately?"
Urging investors toward dividend-paying shares has been an easy sell. This year, the 100 stocks in the Standard & Poor's 500-stock index with the highest dividend yields are up an average of 3.7% before dividend payouts, according to Birinyi Associates. The 100 lowest-yielding stocks are down an average of 10%.
Dividend yield is calculated by dividing a company's annual per-share dividend by share price. In the third quarter, share-price returns on high-dividend payers exceeded those of lower-paying companies by 17 percentage points, AllianceBernstein calculates.
Investors hungry for stock-price gains have been barreling into dividend-paying shares, long regarded as "widow-and-orphan stocks" because of their steady but stodgy performance. Some analysts say such stocks are the most "crowded" trade around these days. Investors have been dazzled by dividend yields of more than 4% on many utilities, household-goods manufacturers and telecommunications companies. That is twice as much as recent paltry yields on 10-year Treasurys.
Dividend-stock fans say the unusually strong performance is likely to last as long as volatility driven by Europe's debt crisis and the global economic fits and starts continues to grip financial markets. Stocks that pay steady dividends tend to fall less than others when times are tough.
And there could be a new boost if companies with record-high mountains of cash on their balance sheet give in to prodding from shareholders to spread it around by increasing dividend payments.
Overall, companies are paying out a smaller chunk of profits in the form of dividends than they typically have in the past.
"Investors are demanding the money back in one form or another," says Jennifer Ellison, principal and portfolio manager at Bingham, Osborn & Scarborough in San Francisco, which manages $2.2 billion in investments. Buying stocks with healthy dividends is "not the holy grail that's going to solve all your problems, but it's one more way to mute that volatility," she says.
Skeptics contend that dividend-rich stocks aren't as safe as they look.
The recent run-up is unsustainable, these doubters say, especially if economic conditions improve, which could cause investors to switch to higher-growth companies that tend to pay lower or no dividends.
In contrast to classic dividend-stock investors who care more about quarterly dividend payments than stock price, many recent converts bought the shares for income and the possibility of price gains. If growth stocks spring back to life, the same momentum that pushed dividend-rich shares higher could reverse with just as much force.
"A crowded trade is always risky," says Vadim Zlotnikov, chief market strategist at AllianceBernstein.
Last week, he warned clients in a note that, while dividend stocks might keep outperforming the overall stock market, any signs of an economic upswing could quickly end the winning streak.
Mr. Zlotnikov says he was shocked by the angry response from dividend-stock lovers. "You have a lot of fund managers who are happy because they've seen a lot of new clients," he says. "Anyone who is even neutral will be viewed as being against a fairly clear, good investment theme."
In the first half of the 20th century, companies had to pay richer dividends on stocks than on their bonds in order to compensate investors for the higher risk of holding equity. Over time, high-dividend stocks have gotten less attention from investors than growth stocks, except for scurries during periods of economic stress.
High-dividend companies have typically seen their price-to-earnings ratios trade 20% or more lower than non-dividend-paying shares over the past three decades, according to AllianceBernstein. This year, though, valuations on dividend-hefty shares caught up with their no-dividend peers for the first time since the late 1970s.
McDonald's is a darling dividend stock of many investors. The fast-food chain's stock-price surge of 27% in the past year leads every other Dow Jones Industrial Average component.
McDonald's has a dividend yield of about 3%, outpacing the 2.625% coupon bond issued by the company in September, due in 2022. McDonald's has boosted its dividend by an average of 27% annually in the past five years, according to Haverford Trust Co.
"You have the best of both worlds: a company that has seen the stock price go up, and they've increased their dividend," says Hank Smith, chief investment officer at Haverford. The firm manages more than $6 billion in assets.
Ms. Ellison of Bingham, Osborn & Scarborough agrees with concerns that dividend stocks are "a defensive, quality play, and if we have big, big returns on stocks next year, no one will care." Still, if events in Europe and Washington keep hovering over the financial markets for years to come, as some investors expect, the recent surge might last, she says.
Such stocks could get an even longer-lasting lift as more baby boomers reach retirement age—and reduce their risk appetite. The first baby boomers turned 65 years old this year.
Haverford isn't changing direction in its portfolios of dividend-paying blue-chip stocks like McDonald's and Johnson & Johnson.
The firm spends a few thousand dollars a month on the "Earned Any Dividends Lately?" billboard.
We think our message about the importance of dividends is a timeless one," says Joe McLaughlin, Haverford's chairman and chief executive. "But obviously, it's also very timely right now."
Haverford is cooking up three new billboard slogans for 2012.
Mackay's Moral:
With good coaching, new hires can become superstars!
A Consumer Reports poll shows the average person goes overboard by $811. To avoid it, map out a limit and avoid the remorse.
Good advice on how to avoid these last minute shopping mostakes to stay within budget.
http://abclocal.go.com/wabc/story?section=news/7_on_your_side&id=8467163
2) In the Markets today:
The Dow Jones Industrial Average declines more than 100 points to open the new week and took a late afternoon fall after European finance ministers failed to come up with the full amount of money pledged for a bailout fund.
US stocks drop; BofA and other big banks fall hard-From AP
The stock market took a late afternoon fall after European finance ministers failed to come up with the full amount of money pledged for a bailout fund.
Banks led the way down. Morgan Stanley dropped more than 5 percent and Bank of America Corp. sank 4 percent, the biggest fall in the Dow Jones Industrial average.
The Dow lost 100 points, or 0.8 percent to close at 11,766.
The S&P 500 index fell 14 points, or 1.2 percent, to 1,205. The Nasdaq composite index fell 32 points, or 1.3 percent, to 2,523.
Cautious comments from the head of the European Central Bank also helped push stocks lower.
Nearly four stocks fell for every one that rose on the New York Stock Exchange. Trading volume was very light at 3.5 billion.
3) Top financial story of the day:
Shares Often Derided as for 'Widows and Orphans' Are Outdoing Their Lower-Yielding Cousins
Dividend Stocks Become the Heroes-From The Wall Street Journal
A digital billboard greets commuters backed up in morning traffic along a bend in the Schuylkill Expressway snaking toward Philadelphia: "Earned Any Dividends Lately?"
Urging investors toward dividend-paying shares has been an easy sell. This year, the 100 stocks in the Standard & Poor's 500-stock index with the highest dividend yields are up an average of 3.7% before dividend payouts, according to Birinyi Associates. The 100 lowest-yielding stocks are down an average of 10%.
Dividend yield is calculated by dividing a company's annual per-share dividend by share price. In the third quarter, share-price returns on high-dividend payers exceeded those of lower-paying companies by 17 percentage points, AllianceBernstein calculates.
Investors hungry for stock-price gains have been barreling into dividend-paying shares, long regarded as "widow-and-orphan stocks" because of their steady but stodgy performance. Some analysts say such stocks are the most "crowded" trade around these days. Investors have been dazzled by dividend yields of more than 4% on many utilities, household-goods manufacturers and telecommunications companies. That is twice as much as recent paltry yields on 10-year Treasurys.
Dividend-stock fans say the unusually strong performance is likely to last as long as volatility driven by Europe's debt crisis and the global economic fits and starts continues to grip financial markets. Stocks that pay steady dividends tend to fall less than others when times are tough.
And there could be a new boost if companies with record-high mountains of cash on their balance sheet give in to prodding from shareholders to spread it around by increasing dividend payments.
Overall, companies are paying out a smaller chunk of profits in the form of dividends than they typically have in the past.
"Investors are demanding the money back in one form or another," says Jennifer Ellison, principal and portfolio manager at Bingham, Osborn & Scarborough in San Francisco, which manages $2.2 billion in investments. Buying stocks with healthy dividends is "not the holy grail that's going to solve all your problems, but it's one more way to mute that volatility," she says.
Skeptics contend that dividend-rich stocks aren't as safe as they look.
The recent run-up is unsustainable, these doubters say, especially if economic conditions improve, which could cause investors to switch to higher-growth companies that tend to pay lower or no dividends.
In contrast to classic dividend-stock investors who care more about quarterly dividend payments than stock price, many recent converts bought the shares for income and the possibility of price gains. If growth stocks spring back to life, the same momentum that pushed dividend-rich shares higher could reverse with just as much force.
"A crowded trade is always risky," says Vadim Zlotnikov, chief market strategist at AllianceBernstein.
Last week, he warned clients in a note that, while dividend stocks might keep outperforming the overall stock market, any signs of an economic upswing could quickly end the winning streak.
Mr. Zlotnikov says he was shocked by the angry response from dividend-stock lovers. "You have a lot of fund managers who are happy because they've seen a lot of new clients," he says. "Anyone who is even neutral will be viewed as being against a fairly clear, good investment theme."
In the first half of the 20th century, companies had to pay richer dividends on stocks than on their bonds in order to compensate investors for the higher risk of holding equity. Over time, high-dividend stocks have gotten less attention from investors than growth stocks, except for scurries during periods of economic stress.
High-dividend companies have typically seen their price-to-earnings ratios trade 20% or more lower than non-dividend-paying shares over the past three decades, according to AllianceBernstein. This year, though, valuations on dividend-hefty shares caught up with their no-dividend peers for the first time since the late 1970s.
McDonald's is a darling dividend stock of many investors. The fast-food chain's stock-price surge of 27% in the past year leads every other Dow Jones Industrial Average component.
McDonald's has a dividend yield of about 3%, outpacing the 2.625% coupon bond issued by the company in September, due in 2022. McDonald's has boosted its dividend by an average of 27% annually in the past five years, according to Haverford Trust Co.
"You have the best of both worlds: a company that has seen the stock price go up, and they've increased their dividend," says Hank Smith, chief investment officer at Haverford. The firm manages more than $6 billion in assets.
Ms. Ellison of Bingham, Osborn & Scarborough agrees with concerns that dividend stocks are "a defensive, quality play, and if we have big, big returns on stocks next year, no one will care." Still, if events in Europe and Washington keep hovering over the financial markets for years to come, as some investors expect, the recent surge might last, she says.
Such stocks could get an even longer-lasting lift as more baby boomers reach retirement age—and reduce their risk appetite. The first baby boomers turned 65 years old this year.
Haverford isn't changing direction in its portfolios of dividend-paying blue-chip stocks like McDonald's and Johnson & Johnson.
The firm spends a few thousand dollars a month on the "Earned Any Dividends Lately?" billboard.
We think our message about the importance of dividends is a timeless one," says Joe McLaughlin, Haverford's chairman and chief executive. "But obviously, it's also very timely right now."
Haverford is cooking up three new billboard slogans for 2012.
Mackay's Moral:
With good coaching, new hires can become superstars!
Friday, December 16, 2011
Financial Headline News for Friday 12/16
1) Phil's Financial Tip of the Day:
Odysseas Papadimitriou is the CEO of Card Hub, an online marketplace for secured and unsecured credit cards, prepaid cards and gift cards.
I share this article only if you PROMISE to pay your credit card in full after Christmas. Please do not go into debt by paying the usary finance charges of the credit card companies in purchasing things you can't afford.
Best Credit Cards for Holiday Shopping-From Investopedia.com
Have you ever thought about how Santa pays for Christmas? I'm sure you didn't as a kid, but adulthood evokes financial realities, and while you could rely on a bit of North Pole magic, you could also take advantage of the many attractive offers that currently exist in the credit card space, which have the potential to save you hundreds of dollars.
A sliver of silver lining from the Great Recession is the effect it has had on the consumer recruitment efforts undertaken by credit card companies. More specifically, the body blows the financial downturn administered to the portfolios of major credit card companies in the form of high delinquency and default rates emphasized the importance of garnering a financially stable customer base. So, like NCAA rule breakers, credit card companies are offering gifts to recruits with high credit scores in return for opening new cards. Given that these gifts typically come in the form of lucrative initial rewards bonuses and/or lengthy 0% introductory rates, they can be quite helpful during the busy holiday shopping season.
The best of the bunch are the following:
Are These Cards Right for Everyone?
There are two types of people for whom the aforementioned cards are not a good fit. These cards are not a good fit for those with average or below-average credit, or those that will need the best possible credit score in the next six months because of an important loan application.The reasons for this are simple. You will not get approved for any of the cards mentioned above without excellent credit (typically a FICO score above 720) and your credit score may take a short-term hit when you open a new loan or line of credit.
For the latter reason, some consumers may be hesitant to open a new credit card just to save on holiday expenses, even if they don't have any looming credit decisions. If you fit this description, you want a credit card that will prove financially helpful not only during the holiday season, but also throughout the rest of the year and beyond.
The Capital One Venture Card is the "most rewarding card if you crave free airline flights," according to Money Magazine. It offers two miles for each dollar that you spend, which amounts to 2% cash back as long as you redeem miles for charges related to travel. It also provides a $100 initial rewards bonus for spending $1,000 in the first three months and, like all Capital One credit cards, does not assess foreign transaction fees, meaning it is a good tool for overseas travel.
The Bottom Line
Ultimately, whichever card you settle on, if any, I hope that your holidays are happy and free of financial concern.
2) In the Markets today:
U.S. stocks ended the week with a whimper, as continued jitters surrounding Europe's debt crisis weighed on investor sentiment.
Stocks close higher signs of improving U.S. economy-From USA Today
Stocks closed up Friday after shooting up at the open and then giving up most of the gains the rest of the trading session. Good news on the state of the U.S. economy and spending cuts by Italy lifted traders' hopes about Europe's progress toward taming its debt crisis. A flat reading on U.S. inflation helped send bond yields lower.
3) Top financial story of the day:
More ramifications from the financial collapse of 2008
Rattner: Taxpayers will lose $14B on auto bailouts-From The Detroit Free Press
Taxpayers will lose about $14 billion on the $82 billion investment to restructure General Motors, Chrysler and Ally Financial, former auto czar Steven Rattner said Thursday.
Rattner, who is now a cable television pundit and manager of New York Mayor Michael Bloomberg's personal fortune, said the auto bailout was unfair to certain groups of people.
4) Quote of the Day from Dave Ramsey.com:
It's really easy to complain. If you're not careful you end up complaining about your whole life. Concentrating on the good things is really good. Catch people doing good. — Lisa Williams
Odysseas Papadimitriou is the CEO of Card Hub, an online marketplace for secured and unsecured credit cards, prepaid cards and gift cards.
I share this article only if you PROMISE to pay your credit card in full after Christmas. Please do not go into debt by paying the usary finance charges of the credit card companies in purchasing things you can't afford.
Best Credit Cards for Holiday Shopping-From Investopedia.com
Have you ever thought about how Santa pays for Christmas? I'm sure you didn't as a kid, but adulthood evokes financial realities, and while you could rely on a bit of North Pole magic, you could also take advantage of the many attractive offers that currently exist in the credit card space, which have the potential to save you hundreds of dollars.
A sliver of silver lining from the Great Recession is the effect it has had on the consumer recruitment efforts undertaken by credit card companies. More specifically, the body blows the financial downturn administered to the portfolios of major credit card companies in the form of high delinquency and default rates emphasized the importance of garnering a financially stable customer base. So, like NCAA rule breakers, credit card companies are offering gifts to recruits with high credit scores in return for opening new cards. Given that these gifts typically come in the form of lucrative initial rewards bonuses and/or lengthy 0% introductory rates, they can be quite helpful during the busy holiday shopping season.
The best of the bunch are the following:
- Initial rewards bonus: The Chase Sapphire Preferred Credit Card offers 50,000 bonus points for spending $3,000 in the first three months after account opening, and does not charge an annual fee during the first year. The bonus points are worth either $625 in travel accommodations or $500 in the form of a check or statement credit.
- Zero percent on purchases: Roughly 29% of U.S. adults will need a few months to pay off holiday gift purchases this year, according to an American Express survey. A 0% credit card, like the Citi Dividend World MasterCard, would prove useful to members of this group, given its 15-month 0% purchase APR, $100 initial rewards bonus and 5% cash back on purchases made at numerous stores through the end of the year.
- Zero percent on transfers: Around 14 million U.S. consumers are still saddled with debt from the holidays last year, according to a Consumer Reports survey. Opening a 0% balance transfer credit card, like the Citi Platinum Select MasterCard, which does not charge interest on transferred debt for 21 months, could help you pay off debt faster and thereby make this year's holiday season easier to handle, both financially and mentally.
Are These Cards Right for Everyone?
There are two types of people for whom the aforementioned cards are not a good fit. These cards are not a good fit for those with average or below-average credit, or those that will need the best possible credit score in the next six months because of an important loan application.The reasons for this are simple. You will not get approved for any of the cards mentioned above without excellent credit (typically a FICO score above 720) and your credit score may take a short-term hit when you open a new loan or line of credit.
For the latter reason, some consumers may be hesitant to open a new credit card just to save on holiday expenses, even if they don't have any looming credit decisions. If you fit this description, you want a credit card that will prove financially helpful not only during the holiday season, but also throughout the rest of the year and beyond.
The Capital One Venture Card is the "most rewarding card if you crave free airline flights," according to Money Magazine. It offers two miles for each dollar that you spend, which amounts to 2% cash back as long as you redeem miles for charges related to travel. It also provides a $100 initial rewards bonus for spending $1,000 in the first three months and, like all Capital One credit cards, does not assess foreign transaction fees, meaning it is a good tool for overseas travel.
The Bottom Line
Ultimately, whichever card you settle on, if any, I hope that your holidays are happy and free of financial concern.
2) In the Markets today:
U.S. stocks ended the week with a whimper, as continued jitters surrounding Europe's debt crisis weighed on investor sentiment.
Stocks close higher signs of improving U.S. economy-From USA Today
Stocks closed up Friday after shooting up at the open and then giving up most of the gains the rest of the trading session. Good news on the state of the U.S. economy and spending cuts by Italy lifted traders' hopes about Europe's progress toward taming its debt crisis. A flat reading on U.S. inflation helped send bond yields lower.
Italy's lower house of parliament approved an austerity package in hopes of lowering the country's escalating borrowing costs.
The Dow Jones industrial average fell 2.42 points to 11,866.39 as of 4:00 p.m. Eastern time. The Standard & Poor's 500 index gained 3.91 points to 1,219.66. The Nasdaq composite index rose 14.32 points, or 0.6%, to 2,555.33.
The gains were broad and had been much stronger earlier in the trading day. All 10 industry groups in the S&P 500 index rose, led by industrial and materials companies. U.S. factories in some regions have seen shipments and orders rise this month, according to two surveys released Wednesday. Materials companies are benefiting from soaring commodity prices.
JPMorgan Chase (JPM) and Boeing (BA) led the Dow higher. Both were up 2.3% at one point and had given up most of those gains as the close approached.
Some analysts believe nervousness about Europe this fall and winter have pushed stock prices lower than their fair value. Investment adviser Uri Landesman, president of Platinum Partners, expects stocks to rise into next year because of the growing likelihood that economic news and European headlines will remain positive.
"The odds are, the news is going to be better than the market is discounting," Landesman said. He said the market is near the low end of its recent trading range, and a dose of positive news could set off a mini-rally. Any market moves next week could be sharp as trading volume thins out before the Christmas holiday, Landesman said.
The yield on the 10-year Treasury note plunged to 1.84% Friday from 1.91% Thursday after the government said consumer prices were unchanged in November, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn't diminish the buying power of the fixed return a bond provides over time.
This week's U.S. Treasury's auctions of government notes were blockbuster sales because of copious foreign buying. European banks are under pressure to shore up their balance sheets to meet new regulatory requirements. With European government bonds declining in value, the banks have no choice but to bulk up by buying what is currently viewed as the safest asset: U.S. Treasuries.
BlackBerry maker Research In Motion (RIMM) plunged 11% after it said late Thursday that new phones seen as critical to the company's future will be delayed until late next year. The company also is taking a big loss on unsold tablet computers and predicted that BlackBerry sales will fall sharply during the holiday sales season.
If stocks hold their gains, it will be only their second rise this week. Indexes gained Thursday after positive economic news brought relief to choppy markets. The Dow rose 45 points after separate reports showed sharply fewer layoffs and better business conditions for factories on the Eastern seaboard.
Italy's austerity measures are seen as a crucial step toward soothing fears about Europe. The nations' borrowing costs have risen in recent weeks to levels at which other nations, such as Greece and Portugal, were forced to take bailouts.
The cuts are aimed at persuading bond traders that Italy can emerge from the widening crisis without defaulting on its debts. The nation still sits on a $2.5 trillion powder keg of debt that could cause a global economic recession if it defaults.
Stocks were mixed in Europe, giving up earlier gains.
Among U.S. companies making big moves:
— Online game developer Zynga (ZNGA) ended the day down 50 cents at $9.50 after plunging nearly 7% during its first day of trading on the Nasdaq. Zynga's initial public offering was priced late Thursday at $10 per share, to raise $1 billion. That means the San Francisco company, which specializes in Facebook games, can boast the biggest Internet IPO since Google (GOOG) first offered shares in 2004.
— New York-area cable TV provider Cablevision Systems (CVC) plunged 8.5% and was down as much as 15% in morning trading, the most in the S&P 500, following the sudden departure of its chief operating officer, Tom Rutledge.
— Adobe Systems (ADBE) rose 6.6% and had traded nearly 7.5% higher earlier in the session, the most in the S&P 500, after the software maker reported earnings and revenues that were far better than what analysts had expected. Analyst Walter Pritchard at Citigroup said the quarter was a "blow-out when most expected weakness."
More ramifications from the financial collapse of 2008
Rattner: Taxpayers will lose $14B on auto bailouts-From The Detroit Free Press
Taxpayers will lose about $14 billion on the $82 billion investment to restructure General Motors, Chrysler and Ally Financial, former auto czar Steven Rattner said Thursday.
"It's unambiguous that it was a success," Rattner told the Detroit Economic Club, acknowledging his inherent bias because he led the effort.
He said at the time there were no private sources of capital to finance in a bankruptcy for either GM or Chrysler. Fast action was essential. And at least 500,000 jobs were at stake when suppliers, dealerships and other vendors were included, he said.
Whether the $14 billion loss is accurate will depend on when and at what price the U.S. Treasury sells the approximately 25% stake it still holds in GM. GM stock (GM) is trading around $20.30, well below the $33 at which the company went public in November 2010.
In addition, Rattner acknowledged in a recently published epilogue to his 2010 book, "Overhaul," that about $19.4 billion the government put into GM before the 2009 bankruptcy is "lost money."
Asked what he would have done differently, Rattner at first said, "amazingly little," but then after a brief reflection he added, "We put more cash into GM than we now, in hindsight, probably needed to."
Rattner, who is now a cable television pundit and manager of New York Mayor Michael Bloomberg's personal fortune, said the auto bailout was unfair to certain groups of people.
Salaried retirees from Delphi, GM's largest supplier, had their pension plan terminated with benefit cuts for some retirees of up to 70%, while the bankruptcies of GM and Delphi provided government money to bolster the pensions of UAW retirees.
"While the Delphi salaried retirees did get the short end of the stick, the GM salaried retirees took a fairly significant haircut on their medical benefits," Rattner said.
Chrysler and GM ended franchise agreements of hundreds of dealers, many of whom had received sterling evaluations for sales and customer service.
Rattner said dozens of industry leaders, consultants, economists and dealers told the Obama administration's Auto Task Force that having too many dealers was a competitive disadvantage for both Detroit automakers. But he said his team did not choose which dealers were terminated.
He also said the fact that the task force did not need congressional approval enabled it to act quickly.
Both GM's and Chrysler's bankruptcies were completed in about 40 days.
"I'm convinced if we had to go through Congress for any approval, at least one of these companies would have had to liquidate," Rattner said.
One questioner asked why the Obama administration has been ineffective in reviving the housing market or convincing lenders to do more to revise existing mortgages.
"We the government didn't extract a big enough price from the banks for what was spent to rescue them," Rattner said. "They got a lot of capital at really cheap prices and almost no one lost their job at the senior level."
4) Quote of the Day from Dave Ramsey.com:
It's really easy to complain. If you're not careful you end up complaining about your whole life. Concentrating on the good things is really good. Catch people doing good. — Lisa Williams
Thursday, December 15, 2011
Financial Headline News for Thursday 12/15
1) Phil's Financial Tip of the Day:
For those of you (including me) looking to buy a Kindle or Nook this Christmas season, beware of the increased prices of E-Books
E-Book Readers Face Sticker Shock-From The Wall Street Journal
Cheap new e-readers are expected to be one of the hottest gifts this holiday season. But new owners of Kindles and Nooks may be in for sticker shock on Christmas morning: The price gap between the print and e-versions of some top sellers has now narrowed to within a few dollars—and in some cases, e-books are more expensive than their printed equivalents.
When Amazon.com Inc. introduced its first Kindle e-reader back in November 2007, the $9.99 digital best seller was a key selling point. Today, the price of a Kindle has plummeted to under $100—from $399 back then. But e-book prices for some popular titles have soared.
Take Ken Follett's massive novel "Fall of Giants," for example, which costs $18.99 as an e-book. On Wednesday it was selling for $16.50 as a paperback on Amazon.
The digital price increases are the result of a decision by the six biggest publishers to set their own consumer e-book prices, a move that effectively bars retailers from discounting their e-books without permission. No such agreement exists for printed books—where retailers are free to set their own prices. So while a best-selling e-book price is often less than half of the hardcover price, heavy discounting of the print version closes the gap.
Industry executives say this new state of affairs may already be hurting e-book sales, which have skyrocketed over the past three years and are today 15% to 20% or more of major publishers' revenue.
"Some people who see $12.99 and $14.99 for e-books may find those prices a little expensive," says Scott Waxman, a literary agent and digital-books publisher.
For best-selling authors like James Patterson, "people may feel that if they aren't getting a bargain, at least they are getting convenience and portability," Mr. Waxman says. But he's less convinced people will shell out for lesser-known writers.
Mark Weaver, a New Yorker who owns an iPad 2 and used to have a Kindle, says he is "definitely buying fewer" e-books because of higher prices. "It's hard to justify the purchase of e-books that are priced at $10 to $15 when you can buy the real book on Amazon used for $2 or $3," he says.
Experts say higher prices could cause some digital consumers to turn to piracy sites. "We don't have data that directly correlates higher e-book prices to higher rates of piracy, but the piracy rate per title has grown exponentially over the last 12 months," says Matt Robinson, president of Attributor Inc., a leading antipiracy provider to the book industry.
To be sure, most e-books are still cheap. Yankee Group, a Boston-based research firm, says that the average price of a consumer digital book has fallen to $8.19 this year from $9.23 in 2009. Lagardère SCA's Hachette Book Group says that 83% of its digital titles are priced at $9.99 or below.
But for many of the country's most popular titles, consumers are paying more.
Laura Hillenbrand's nonfiction adventure tale "Unbroken" sells for $12.99 in digital form but $13.98 in hardcover on Amazon. Walter Isaacson's best-selling biography of Steve Jobs retails for $14.99 in e-book version, compared with the $17.49 hardcover available at Amazon and online at Wal-Mart Stores Inc.
It was Mr. Jobs himself who wanted to level the playing field for e-book pricing. Early last year, as Mr. Jobs, then CEO of Apple Inc., planned for the launch of the iPad, the company wanted to start an e-book store so that iPad owners didn't have to rely on Amazon's Kindle store to buy e-books.
But Apple didn't want to have to compete with Amazon's discounted prices. Under Mr. Jobs's direction, Apple persuaded five of the biggest publishers to abandon the wholesale model, by which retailers were free to discount the recommended retail price. Under the new pricing arrangement, publishers set the price of e-books.
In March, Random House Inc., a unit of Bertelsmann AG and the country's largest consumer book publisher, joined its five large rivals in adopting the no-discounting digital pricing model.
The Justice Department confirmed last week that it was investigating whether there was improper collusion between the publishers and Apple to prevent discounting. Publishers last week either disagreed with the allegations, said they were cooperating with regulators or declined to comment. Random House said it isn't part of the probe and otherwise declined to comment. Apple declined to comment at the time.
Ironically, though, publishers make less money with the arrangement. The six publishers which use this model today include Random House; Hachette; Macmillan, a unit of Germany's Verlagsgruppe Georg von Holtzbrinck GmbH; Simon & Schuster Inc., a unit of CBS Corp.; Pearson PLC's Penguin Group; and HarperCollins Publishers, a unit of News Corp., which also owns The Wall Street Journal.
Under the old book arrangement, major publishers charged the same wholesale price for e-books as they received for hardcovers. For a new novel priced at $25, for example, they received $12.50 for the e-book and $12.50 for the hardcover. When Amazon.com discounted the e-book at $9.99, Amazon took the loss.
But under the new pricing model, a $25 hardcover is often priced at $12.99 for the e-book. And because publishers receive 70% of the e-book retail price—while retailers retain 30%—that means publishers receive only $9.09. Publishers were willing to accept the lower profits because they felt the new arrangement preserved the value of books and encouraged other retailers to enter the e-book market.
Indeed, the new arrangement means guaranteed profits on best-selling titles for retailers like Barnes & Noble Inc., which today claims about 27% of the digital books market, as well as Amazon.
Even so, Amazon warns the arrangement has slowed the growth of the e-book market. Russell Grandinetti, Amazon's vice president of Kindle Content, says the growth rate in dollar terms for publishers using the traditional wholesale model that allows discounting is significantly higher than that of publishers that don't allow discounting.
Mike Shatzkin, chief executive of Idea Logical Co., a New York-based publishing consultancy, says that he expects e-books will account for 30% to 35% of all revenue for the country's largest publishers by the end of 2012. That growth may also reflect wider penetration of e-readers in the population.
James McQuivey, an analyst at Forrester Research, estimates that at least 20 million U.S. households will own a dedicated e-reader, like a Kindle or Nook, by year-end—compared with just over 10 million last year. Another 17 million tablets will be sold here this year, up from 7.6 million last year, the Yankee Group says.
Publishers believe that e-books are priced correctly and say consumers have shown that they are willing to pay $12.99 for a digital best seller.
"What that tells me is that there has been a change in the understanding of the value of a digital book, and that a digital book has advantages over a physical book in some cases," says Maja Thomas, a senior vice president of Hachette Digital. "It's instantaneous, it's portable, it's minimal in terms of storage, and it can be retrieved from all kinds of places and devices. It's also searchable, and it's easy to take notes and retrieve them."
Other publishing executives acknowledge price is an issue. John Makinson, chief executive of Penguin Group, says Penguin has seen some price resistance at the higher end, such as the $18.99 that it charges for the digital edition of Mr. Follett's "Fall of Giants."
"Some of the issue is that digital customers can't see how large the book actually is," he says.
Mr. Makinson agrees that lower prices result in higher unit sales. But he says the revenue generated by those increased sales doesn't make up for the lost revenue from sales at higher prices. Lower pricing also negatively affects income for authors dependent on royalty payments, he says.
Lorraine Shanley, a publishing industry consultant, says higher digital-book prices may lead some consumers to try self-published works. "If you really want a book, you'll pay the $12.99 or $14.99," she says. "But price is definitely an issue for consumers. At some point, they may say they're willing to try a generic $2.99 mystery that has five stars from readers."
2) In the Markets today:
Stocks gained after investors took heart from stronger U.S. economic data, snapping a three-day losing streak, but finished off session highs after another warning about Europe's sovereign-debt crisis.
Stocks Break Losing Streak-From The Wall Street Journal
Stocks gained after investors took heart from stronger U.S. economic data, snapping a three-day losing streak, but finished off session highs after another warning about Europe's sovereign-debt crisis.
The Dow Jones Industrial Average rose 45.33 points, or 0.4%, to 11868.81. The Standard & Poor's 500-stock index tacked on 3.94 points, or 0.3%, to 1215.76, and the Nasdaq Composite eked out a gain of 1.7 points, or 0.1%, to 2541.01. The defensive utilities, health-care and consumer-staples sectors posted the strongest gains as investors edged back into stocks after three days of losses.
The number of initial jobless claims filed in the U.S. last week was the lowest since May 2008, the Labor Department said, the latest indication of a strengthening jobs market. Also helping sentiment, a gauge of mid-Atlantic manufacturing activity jumped for December versus the prior month.
But the blue-chip Dow pared a triple-digit gain midsession after International Monetary Fund chief Christine Lagarde called the global economic outlook "quite gloomy" and urged international help in resolving Europe's sovereign-debt crisis.
"Europe can have a recession that doesn't drag the U.S. into it," said Howard Ward, portfolio manager at Gamco Growth fund. "It's important for people to understand that we will certainly be impacted in a negative way by the slowdown in Europe. But that doesn't mean that we're going to have a recession as well."
The euro gained slightly versus the dollar after dropping to its lowest point since January the previous session. European markets finished higher, with the Stoxx Europe 600 up 1%, boosted by better-than-expected euro-zone manufacturing data and a successful Spanish bond auction.
Asian exchanges fell, with China's Shanghai Composite shedding 2.1% to its lowest close since March 2009. Data showed China manufacturing activity contracted again in December, although at a slower rate than in November.
Gold futures lost 0.6% to $1,574.60 a troy ounce after plunging 4.6% Wednesday, while crude-oil futures lost $1.08 to settle at $93.87 a barrel, the lowest in more than a month.
Merck was the strongest stock in the blue-chip Dow, rising 2.3%, followed by Travelers, which gained 1.5%. Pfizer was also strong, rising 1.3%.
Novellus Systems was the biggest advancer in the S&P 500, rallying 16% after the company agreed to be acquired by fellow chip-equipment maker Lam Research in an all-stock deal that values Novellus at about $3.3 billion. Lam shares slipped 8.4%.
Fed Ex was the measure's second-strongest stock, climbing 8% after the package-delivery service reported fiscal second-quarter earnings that exceeded expectations and affirmed its full-year outlook.
Discover Financial Services was one of the S&P 500's biggest decliners, shedding 3%. The company's fiscal fourth-quarter profit jumped a better-than-expected 47%, but investors expressed concerns that credit improvements have run their course.
3) Top financial story of the day:
A drop in new unemployment filings to a three-and-a-half-year low offered the latest indication of an improving labor market, but a drop in U.S. industrial output last month highlighted vulnerability to shocks.
Jobless claims falling, Nov. wholesale prices in check-From AP
The outlook for the U.S. job market is looking brighter. Far fewer Americans are seeking unemployment benefits than just three months ago — a sign that layoffs are falling sharply. And inflation at the wholesale level in November rose modestly, a sign that inflation remains well in check.
4) Quote of the Day from Dave Ramsey.com:
Many of us spend half our time wishing for things we could have if we didn't spend half our time wishing. — Alexander Woollcott
For those of you (including me) looking to buy a Kindle or Nook this Christmas season, beware of the increased prices of E-Books
E-Book Readers Face Sticker Shock-From The Wall Street Journal
Cheap new e-readers are expected to be one of the hottest gifts this holiday season. But new owners of Kindles and Nooks may be in for sticker shock on Christmas morning: The price gap between the print and e-versions of some top sellers has now narrowed to within a few dollars—and in some cases, e-books are more expensive than their printed equivalents.
When Amazon.com Inc. introduced its first Kindle e-reader back in November 2007, the $9.99 digital best seller was a key selling point. Today, the price of a Kindle has plummeted to under $100—from $399 back then. But e-book prices for some popular titles have soared.
Take Ken Follett's massive novel "Fall of Giants," for example, which costs $18.99 as an e-book. On Wednesday it was selling for $16.50 as a paperback on Amazon.
The digital price increases are the result of a decision by the six biggest publishers to set their own consumer e-book prices, a move that effectively bars retailers from discounting their e-books without permission. No such agreement exists for printed books—where retailers are free to set their own prices. So while a best-selling e-book price is often less than half of the hardcover price, heavy discounting of the print version closes the gap.
Industry executives say this new state of affairs may already be hurting e-book sales, which have skyrocketed over the past three years and are today 15% to 20% or more of major publishers' revenue.
"Some people who see $12.99 and $14.99 for e-books may find those prices a little expensive," says Scott Waxman, a literary agent and digital-books publisher.
For best-selling authors like James Patterson, "people may feel that if they aren't getting a bargain, at least they are getting convenience and portability," Mr. Waxman says. But he's less convinced people will shell out for lesser-known writers.
Mark Weaver, a New Yorker who owns an iPad 2 and used to have a Kindle, says he is "definitely buying fewer" e-books because of higher prices. "It's hard to justify the purchase of e-books that are priced at $10 to $15 when you can buy the real book on Amazon used for $2 or $3," he says.
Experts say higher prices could cause some digital consumers to turn to piracy sites. "We don't have data that directly correlates higher e-book prices to higher rates of piracy, but the piracy rate per title has grown exponentially over the last 12 months," says Matt Robinson, president of Attributor Inc., a leading antipiracy provider to the book industry.
To be sure, most e-books are still cheap. Yankee Group, a Boston-based research firm, says that the average price of a consumer digital book has fallen to $8.19 this year from $9.23 in 2009. Lagardère SCA's Hachette Book Group says that 83% of its digital titles are priced at $9.99 or below.
But for many of the country's most popular titles, consumers are paying more.
Laura Hillenbrand's nonfiction adventure tale "Unbroken" sells for $12.99 in digital form but $13.98 in hardcover on Amazon. Walter Isaacson's best-selling biography of Steve Jobs retails for $14.99 in e-book version, compared with the $17.49 hardcover available at Amazon and online at Wal-Mart Stores Inc.
It was Mr. Jobs himself who wanted to level the playing field for e-book pricing. Early last year, as Mr. Jobs, then CEO of Apple Inc., planned for the launch of the iPad, the company wanted to start an e-book store so that iPad owners didn't have to rely on Amazon's Kindle store to buy e-books.
But Apple didn't want to have to compete with Amazon's discounted prices. Under Mr. Jobs's direction, Apple persuaded five of the biggest publishers to abandon the wholesale model, by which retailers were free to discount the recommended retail price. Under the new pricing arrangement, publishers set the price of e-books.
In March, Random House Inc., a unit of Bertelsmann AG and the country's largest consumer book publisher, joined its five large rivals in adopting the no-discounting digital pricing model.
The Justice Department confirmed last week that it was investigating whether there was improper collusion between the publishers and Apple to prevent discounting. Publishers last week either disagreed with the allegations, said they were cooperating with regulators or declined to comment. Random House said it isn't part of the probe and otherwise declined to comment. Apple declined to comment at the time.
Ironically, though, publishers make less money with the arrangement. The six publishers which use this model today include Random House; Hachette; Macmillan, a unit of Germany's Verlagsgruppe Georg von Holtzbrinck GmbH; Simon & Schuster Inc., a unit of CBS Corp.; Pearson PLC's Penguin Group; and HarperCollins Publishers, a unit of News Corp., which also owns The Wall Street Journal.
Under the old book arrangement, major publishers charged the same wholesale price for e-books as they received for hardcovers. For a new novel priced at $25, for example, they received $12.50 for the e-book and $12.50 for the hardcover. When Amazon.com discounted the e-book at $9.99, Amazon took the loss.
But under the new pricing model, a $25 hardcover is often priced at $12.99 for the e-book. And because publishers receive 70% of the e-book retail price—while retailers retain 30%—that means publishers receive only $9.09. Publishers were willing to accept the lower profits because they felt the new arrangement preserved the value of books and encouraged other retailers to enter the e-book market.
Indeed, the new arrangement means guaranteed profits on best-selling titles for retailers like Barnes & Noble Inc., which today claims about 27% of the digital books market, as well as Amazon.
Even so, Amazon warns the arrangement has slowed the growth of the e-book market. Russell Grandinetti, Amazon's vice president of Kindle Content, says the growth rate in dollar terms for publishers using the traditional wholesale model that allows discounting is significantly higher than that of publishers that don't allow discounting.
Mike Shatzkin, chief executive of Idea Logical Co., a New York-based publishing consultancy, says that he expects e-books will account for 30% to 35% of all revenue for the country's largest publishers by the end of 2012. That growth may also reflect wider penetration of e-readers in the population.
James McQuivey, an analyst at Forrester Research, estimates that at least 20 million U.S. households will own a dedicated e-reader, like a Kindle or Nook, by year-end—compared with just over 10 million last year. Another 17 million tablets will be sold here this year, up from 7.6 million last year, the Yankee Group says.
Publishers believe that e-books are priced correctly and say consumers have shown that they are willing to pay $12.99 for a digital best seller.
"What that tells me is that there has been a change in the understanding of the value of a digital book, and that a digital book has advantages over a physical book in some cases," says Maja Thomas, a senior vice president of Hachette Digital. "It's instantaneous, it's portable, it's minimal in terms of storage, and it can be retrieved from all kinds of places and devices. It's also searchable, and it's easy to take notes and retrieve them."
Other publishing executives acknowledge price is an issue. John Makinson, chief executive of Penguin Group, says Penguin has seen some price resistance at the higher end, such as the $18.99 that it charges for the digital edition of Mr. Follett's "Fall of Giants."
"Some of the issue is that digital customers can't see how large the book actually is," he says.
Mr. Makinson agrees that lower prices result in higher unit sales. But he says the revenue generated by those increased sales doesn't make up for the lost revenue from sales at higher prices. Lower pricing also negatively affects income for authors dependent on royalty payments, he says.
Lorraine Shanley, a publishing industry consultant, says higher digital-book prices may lead some consumers to try self-published works. "If you really want a book, you'll pay the $12.99 or $14.99," she says. "But price is definitely an issue for consumers. At some point, they may say they're willing to try a generic $2.99 mystery that has five stars from readers."
2) In the Markets today:
Stocks gained after investors took heart from stronger U.S. economic data, snapping a three-day losing streak, but finished off session highs after another warning about Europe's sovereign-debt crisis.
Stocks Break Losing Streak-From The Wall Street Journal
Stocks gained after investors took heart from stronger U.S. economic data, snapping a three-day losing streak, but finished off session highs after another warning about Europe's sovereign-debt crisis.
The Dow Jones Industrial Average rose 45.33 points, or 0.4%, to 11868.81. The Standard & Poor's 500-stock index tacked on 3.94 points, or 0.3%, to 1215.76, and the Nasdaq Composite eked out a gain of 1.7 points, or 0.1%, to 2541.01. The defensive utilities, health-care and consumer-staples sectors posted the strongest gains as investors edged back into stocks after three days of losses.
The number of initial jobless claims filed in the U.S. last week was the lowest since May 2008, the Labor Department said, the latest indication of a strengthening jobs market. Also helping sentiment, a gauge of mid-Atlantic manufacturing activity jumped for December versus the prior month.
But the blue-chip Dow pared a triple-digit gain midsession after International Monetary Fund chief Christine Lagarde called the global economic outlook "quite gloomy" and urged international help in resolving Europe's sovereign-debt crisis.
"Europe can have a recession that doesn't drag the U.S. into it," said Howard Ward, portfolio manager at Gamco Growth fund. "It's important for people to understand that we will certainly be impacted in a negative way by the slowdown in Europe. But that doesn't mean that we're going to have a recession as well."
The euro gained slightly versus the dollar after dropping to its lowest point since January the previous session. European markets finished higher, with the Stoxx Europe 600 up 1%, boosted by better-than-expected euro-zone manufacturing data and a successful Spanish bond auction.
Asian exchanges fell, with China's Shanghai Composite shedding 2.1% to its lowest close since March 2009. Data showed China manufacturing activity contracted again in December, although at a slower rate than in November.
Gold futures lost 0.6% to $1,574.60 a troy ounce after plunging 4.6% Wednesday, while crude-oil futures lost $1.08 to settle at $93.87 a barrel, the lowest in more than a month.
Merck was the strongest stock in the blue-chip Dow, rising 2.3%, followed by Travelers, which gained 1.5%. Pfizer was also strong, rising 1.3%.
Novellus Systems was the biggest advancer in the S&P 500, rallying 16% after the company agreed to be acquired by fellow chip-equipment maker Lam Research in an all-stock deal that values Novellus at about $3.3 billion. Lam shares slipped 8.4%.
Fed Ex was the measure's second-strongest stock, climbing 8% after the package-delivery service reported fiscal second-quarter earnings that exceeded expectations and affirmed its full-year outlook.
Discover Financial Services was one of the S&P 500's biggest decliners, shedding 3%. The company's fiscal fourth-quarter profit jumped a better-than-expected 47%, but investors expressed concerns that credit improvements have run their course.
3) Top financial story of the day:
A drop in new unemployment filings to a three-and-a-half-year low offered the latest indication of an improving labor market, but a drop in U.S. industrial output last month highlighted vulnerability to shocks.
Jobless claims falling, Nov. wholesale prices in check-From AP
The outlook for the U.S. job market is looking brighter. Far fewer Americans are seeking unemployment benefits than just three months ago — a sign that layoffs are falling sharply. And inflation at the wholesale level in November rose modestly, a sign that inflation remains well in check.
The number of people applying for benefits fell last week to 366,000, the fewest since May 2008. If the number stayed that low consistently, it would likely signal that hiring is strong enough to lower unemployment.
The unemployment rate is now 8.6%. The last time applications were this low, the rate was 5.4%.
The big question is whether fewer layoffs will translate into robust hiring. It hasn't happened yet, even though job growth has been rising consistently each month.
The four-week average of weekly unemployment applications, which smooths out fluctuations, dropped last week to 387,750. That's the lowest four-week since July 2008. The four-week average has declined in 10 of the past 12 weeks.
Applications for unemployment benefits are a measure of the pace of layoffs. Job cuts have fallen sharply since the recession, but so far employers are hiring at only a modest pace. When applications fall below 375,000 — consistently — that usually signals that hiring is strong enough to lower the unemployment rate.
The downward trend suggests that companies are cutting fewer workers as the economy picks up. It also comes as Congress is wrangling over whether to extend emergency unemployment benefits, which are set to expire at the end of this year.
Growth may top 3% at an annual rate in the final three months of this year, according to many economists. That would be up from 2% in the July-September quarter.
Other recent reports suggest the job market is improving a bit. In the past three months, net job gains have averaged 143,000 a month. That compares with an average of 84,000 in the previous three months.
In November, employers added 120,000 jobs, and the unemployment rate fell to 8.6% from 9%. That was the lowest unemployment rate in 2½ years. But about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they're no longer counted as unemployed.
But the economic outlook clearly remains mixed. U.S. factory output declined in November for the first time in seven months as auto production slowed. In another report out Thursday, the government said wholesale prices rose a modest 0.3% last month as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.
In the 12 months ending in November, wholesale prices have increased 5.7%, down from a 5.9% year-over-year pace in October, the Labor Department said. It's the smallest yearly increase since March.
The department's producer price index measures price changes before they reach consumers.
Excluding the volatile food and energy categories, the so-called "core" index rose 0.1%, after a flat reading the previous month. In the 12 months ending in November, the core index rose 2.9%, up from a yearly pace of 2.8% in October.
Most economists say they think inflation has peaked and will slowly decline next year. That's because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.
Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.
Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2% from a slight 0.9% in the first half of the year.
Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent.
Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.
The Fed declined to make any new moves at its latest meeting Tuesday. It reiterated its commitment to keep the benchmark short-term rate it controls at nearly zero through mid-2013. If there were signs that inflation was increasing to worrisome levels, the Fed would likely raise rates.
The central bank said last month that it expects consumer inflation to fall from about 2.8% this year to roughly 1.7% next year. That's in the Fed's preferred range of core inflation of about 1.7% to 2%. Economists at Wells Fargo expect it to drop to 1.8% by the end of next year.
A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.
4) Quote of the Day from Dave Ramsey.com:
Many of us spend half our time wishing for things we could have if we didn't spend half our time wishing. — Alexander Woollcott
Wednesday, December 14, 2011
Financial Headline News for Wednesday 12/14
1) Phil's Financial Tip of the Day:
There’s still time to cut your tax bill for 2011.
I found yet another helpful article for year end tax tips.
Year-end tax tips to maximize your money-From MarketWatch
http://www.marketwatch.com/story/year-end-tax-tips-to-maximize-your-money-2011-12-14?pagenumber=2
2) In the Markets today:
U.S. stocks fell, as a tumble in the euro currency and rising borrowing costs for Italy kept investor anxiety levels elevated. Leading the declines were energy stocks, as oil prices tumbled.
Stocks plunge on concerns euro deal isn't enough-From USA Today
US stocks closed sharply lower after two rating agencies criticized a European fiscal pact announced last week that aims to ease the region's debt crisis.
Fitch Ratings said the deal to bind Europe's budgets more closely will make little difference. The region will face "a significant economic downturn" as it wrestles with its sovereign debt crisis for another year or more, Fitch predicted.
3) Top financial story of the day:
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.
Existing home sales to be revised lower-From CNN Money
If you thought the U.S. housing market couldn't get much worse, think again.
Far fewer homes have been sold over the past five years than previously estimated, the National Association of Realtors said Tuesday.
NAR said it plans to downwardly revise sales of previously-owned homes going back to 2007 during the release of its next existing home sales report on Dec. 21.
NAR's existing home sales numbers, released monthly, are a closely followed gauge of the health of the housing market.
While NAR hasn't revealed exactly how big the revision to home sales will be, the agency's chief economist Lawrence Yun said the decrease will be "meaningful."
"For the real estate business, this means the housing market's downturn was deeper than what was initially thought," Yun said.
Yun said the database NAR uses to track existing home sales, the Multiple Listing Service (MLS), has led the real estate agency to over-count existing home sales for several reasons.
The MLS database only includes home sales listed by realtors, and excludes homes listed by owners, providing a very narrow view of the market. And because more people are using realtors to list their homes instead of selling them independently, realtor-listed sales numbers have become artificially inflated, said Yun.
NAR used in calculating its data have become outdated, since they were based on 2000 Census data.
The MLS has also been expanding its geographic coverage, so it may have appeared that there were more home sales simply because data from new areas were starting to show up. Also because of this geographic expansion, the system has been double-counting sales of some homes that can be considered part of multiple regions.
First-time homebuyers guide
"Colorado Springs has their own database, but because the Denver market is nearby they may also list that home in the Denver database, so when the home gets sold, both Denver and Colorado Springs will say sales rose -- so that's genuine double-counting," said Yun.
Yun said NAR realized this upward "shift" in data during its most recent re-benchmarking process this year. With the help of the government, economists and other real estate groups, NAR has now taken these factors into account and will issue revised numbers on Dec. 21 at 10 a.m.
"There are multifaceted reasons why things were drifting upward in our database," said Yun. "We have tried to adjust for all these factors so that we have a better understanding of total home sales in America."
Yun emphasized that the revisions will have no impact on consumers because median home price data will not be revised.
4) Quote of the Day from Dave Ramsey.com:
Nobody cleared a path for themselves by giving up. — Alacia Bessette
There’s still time to cut your tax bill for 2011.
I found yet another helpful article for year end tax tips.
Year-end tax tips to maximize your money-From MarketWatch
http://www.marketwatch.com/story/year-end-tax-tips-to-maximize-your-money-2011-12-14?pagenumber=2
2) In the Markets today:
U.S. stocks fell, as a tumble in the euro currency and rising borrowing costs for Italy kept investor anxiety levels elevated. Leading the declines were energy stocks, as oil prices tumbled.
Stocks plunge on concerns euro deal isn't enough-From USA Today
US stocks closed sharply lower after two rating agencies criticized a European fiscal pact announced last week that aims to ease the region's debt crisis.
Fitch Ratings said the deal to bind Europe's budgets more closely will make little difference. The region will face "a significant economic downturn" as it wrestles with its sovereign debt crisis for another year or more, Fitch predicted.
The Dow Jones industrial average dove as many as 243 points in afternoon trading before closing down 163. Intel Corp. dragged the Dow lower, falling 4 percent after the chipmaker said its fourth-quarter revenue will be lower than expected because of supply chain problems. Intel is considered a bellwether for the computer industry because its chips are used in a wide range of products.
The euro hit a 10-week low against the dollar, plunging nearly 2 cents. Yields on Italian bonds rose as investors fretted about that nation's debt burden. European stocks fell.
Moody's Investors Service said that it will review the credit ratings of all European Union nations in the first quarter of next year. The statement doused optimism among investors that had lifted stocks and other risky assets late last week.
The summit produced "few new measures" and Europe remains in a "critical and volatile stage," Moody's said in a published report. The pact, Moody's noted, does not address Europe's immediate problem: the crushing debt loads of some nations and their rising borrowing costs.
The agreement "kicks off a process that has a chance of solving the next crisis, not this one," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. "The problem is the changes they've agreed to go toward solving the root of current problems 12 months from now."
Stocks fell broadly, with declines across all 10 industry groups in the Standard & Poor's 500 index and 28 of the 30 stocks in the Dow.
The Dow closed down 162.87 points, or 1.3%, at 12,021.39. The S&P 500 lost 18.72, or 1.5%, to close at 1,236.47. The Nasdaq composite index dropped 34.59, or 1.3%, to close at 2,612.26.
About four stocks fell for every one that rose on the New York Stock Exchange. Volume was very light at 3.35 billion shares.
Financial stocks had some of the steepest declines. Investors fear that big banks might be damaged by the turmoil in Europe. Morgan Stanley fell 6.1%, Citigroup Inc. 5.4%. Bank of America Corp. and JPMorgan Chase & Co. posted the biggest and third-biggest losses in the Dow 30, falling 4.7% and 3.4%, respectively.
The warning from Moody's helped deflate optimism about last week's pact, which called for tougher fiscal discipline among European countries and a central authority with the ability to punish those that spend too much.
The yield on the 10-year Treasury note fell to 2.02% from 2.07% late Friday, indicating stronger demand for low-risk investments. Bond yields fall as demand for them increases.
Fears that Italy or Spain will default reduced demand for their government bonds, driving their yields higher and pushing their borrowing costs near the dangerous levels that forced Greece, Portugal and Ireland to take bailouts. The yield on the 10-year Italian bond rose to 6.53%. Greece and Portugal were forced to seek bailouts from their creditors when their bond yields approached 7%.
Stocks in Italy led European markets to a much lower close. Italy's main index closed down 3.8%. Germany's DAX lost 3.4% and Spain's fell 3.1%.
3) Top financial story of the day:
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.
Existing home sales to be revised lower-From CNN Money
If you thought the U.S. housing market couldn't get much worse, think again.
Far fewer homes have been sold over the past five years than previously estimated, the National Association of Realtors said Tuesday.
NAR said it plans to downwardly revise sales of previously-owned homes going back to 2007 during the release of its next existing home sales report on Dec. 21.
NAR's existing home sales numbers, released monthly, are a closely followed gauge of the health of the housing market.
While NAR hasn't revealed exactly how big the revision to home sales will be, the agency's chief economist Lawrence Yun said the decrease will be "meaningful."
"For the real estate business, this means the housing market's downturn was deeper than what was initially thought," Yun said.
Yun said the database NAR uses to track existing home sales, the Multiple Listing Service (MLS), has led the real estate agency to over-count existing home sales for several reasons.
The MLS database only includes home sales listed by realtors, and excludes homes listed by owners, providing a very narrow view of the market. And because more people are using realtors to list their homes instead of selling them independently, realtor-listed sales numbers have become artificially inflated, said Yun.
NAR used in calculating its data have become outdated, since they were based on 2000 Census data.
The MLS has also been expanding its geographic coverage, so it may have appeared that there were more home sales simply because data from new areas were starting to show up. Also because of this geographic expansion, the system has been double-counting sales of some homes that can be considered part of multiple regions.
First-time homebuyers guide
"Colorado Springs has their own database, but because the Denver market is nearby they may also list that home in the Denver database, so when the home gets sold, both Denver and Colorado Springs will say sales rose -- so that's genuine double-counting," said Yun.
Yun said NAR realized this upward "shift" in data during its most recent re-benchmarking process this year. With the help of the government, economists and other real estate groups, NAR has now taken these factors into account and will issue revised numbers on Dec. 21 at 10 a.m.
"There are multifaceted reasons why things were drifting upward in our database," said Yun. "We have tried to adjust for all these factors so that we have a better understanding of total home sales in America."
Yun emphasized that the revisions will have no impact on consumers because median home price data will not be revised.
4) Quote of the Day from Dave Ramsey.com:
Nobody cleared a path for themselves by giving up. — Alacia Bessette
Tuesday, December 13, 2011
Financial Headline News for Tuesday 12/13
1) Phil's Financial Tip of the Day:
Sandra Block covers personal finance for USA TODAY.
Despite running here there and everywhere to get your last minute Christmas gifts and also enjoying Holiday parties, it is still the time of year to study last second ways of getting a higher tax refund by taking advantages of tax tips. Remember it is only 18 more days until 12/31 so time is running out.
Your Money: Steps you take now can boost tax refund-From USA Today:
http://www.usatoday.com/money/perfi/columnist/block/story/2011-12-12/year-end-tax-planning/51846264/1
2) In the Markets today:
Stocks slipped in Tuesday afternoon trading as investors digested a statement from the Federal Reserve.
Wall Street closes lower on Fed disappointment-From Reuters
Stocks fell for a second straight day on Tuesday after the Federal Reserve gave no hints of new stimulus measures to offset the effects of the worsening European debt crisis.
Though the Fed did leave the door open to further easing next year, as it has done after recent meetings, it gave no indication it was any more inclined to provide new economic stimulus.
The Fed left monetary policy on hold and said financial market turbulence posed threats to economic growth. It also characterized the U.S. economy as expanding moderately despite an apparent slowing in global growth, though it added that unemployment remains elevated and housing activity depressed.
The Fed "gave the economy a very slight upgrade, but it sort of took the wind out of domestic equities, probably because some were hoping that they would hint at another -like program," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
Wall Street traded higher for much of the volatile session, but turned negative after the Fed's announcement. The losses accelerated going into the close and the S&P 500 briefly fell below its 50-day moving average. A close under that key level could signal more losses to come.
The Dow Jones industrial average (DJI:^DJI) slid 66.45 points, or 0.55 percent, to end at 11,954.94.
The Standard & Poor's 500 Index (SNP:^GSPC) dropped 10.74 points, or 0.87 percent, to 1,225.73.
The Nasdaq Composite Index (Nasdaq:^IXIC) lost 32.99 points, or 1.26 percent, to close at 2,579.27.
The disappointment with the Fed came at the tail-end of a trading session that was largely focused on Europe, especially after German Chancellor Angela Merkel rejected any suggestion of raising the limit on Europe's bailout fund.
Investors had been closely eyeing developments concerning the fund, the European Stability Mechanism (ESM), which will go into effect from the middle of next year and replace the current European Financial Stability Fund. The ESM will have an effective lending capacity of 500 billion euros.
"The developments in Europe don't address the region's short-term liquidity issues, so the next step is trying to figure that out," said Randy Frederick, director of trading and derivatives for Charles Schwab in Austin, Texas.
"That uncertainty is why our markets have been pressured lately. We're still all about Europe here."
Consumer-related stocks were the worst performers. Shares of Best Buy (NYSE:BBY) tumbled 15.5 percent to $23.73 after the electronics retailer reported a quarterly profit below expectations as bigger discounts squeezed margins. The S&P consumer discretionary sector (.GSPD) fell 2 percent.
U.S. government data showed U.S. retail sales rose less than expected in November as a drop in receipts for food and beverages weighed against stronger sales of motor vehicles, tempering expectations of a strong holiday shopping season.
U.S. crude oil futures prices rose more than 2 percent, advancing above $100 a barrel at the session high, with traders citing tension between the West and Iran as a possible trigger. The S&P energy index (SNP:^GSPE) had been up more than 2 percent at its session high, but was unable to maintain its gains and closed down 0.5 percent.
The only sector to close higher was utilities (.GSPU), considered a defensive play.
3) Top financial story of the day:
Fed officials left their policy options open for 2012 but took no actions and offered an assessment of the economy that was guardedly more upbeat.
Fed Takes No Action; Outlook a Bit Better-From The Wall Street Journal
Federal Reserve officials left their policy options open for 2012 but took no actions Tuesday and offered an assessment of the economy that was guardedly more upbeat, but still marked by "significant downside risks."
Nine out of 10 Fed officials voted to keep the central bank's easy-credit policies unchanged for the second meeting in a row in what was the last Federal Open Market Committee meeting of the year. It took place the day of Fed Chairman Ben Bernanke's 58th birthday.
Officials reiterated that short-term interest rates are likely to stay close to zero until mid-2013 at least. In their assessment of the economy, they said indicators pointed to some improvement in the U.S. jobs market.
Data since they last met at the start of November suggests the "economy has been expanding moderately, notwithstanding some apparent slowing in global growth," Fed officials said in a statement.
Still, the Fed is concerned the economy could be hit by higher taxes and continued government layoffs next year, as well as the repercussions from the debt crisis in Europe, which has close financial and trade ties with the U.S. With inflation expected to come down in 2012, some Fed officials have already started to argue in favor of additional steps to spur growth.
The Fed is looking at revamping its communication strategy, which could be a step toward easier monetary policy. Officials are considering whether to make their internal interest-rate forecasts public.
If they do that, and those forecasts suggest short-term interest rates will stay low for even longer than investors now believe, that could drive long-term rates down and be a boost to growth.
The post-meeting statement gave no indication of the state of that debate. That suggests the Fed has left it to be resolved next year. Minutes of the meeting, due out in three weeks, might reveal more.
As part of its internal debate about communications, Fed officials might soon need to address the conditional pledge they made in August to keep short-term rates near zero until at least mid-2013. The date is starting to look off. Prices in the futures markets suggest investors don't expect the first rate increase to occur until late 2013 or early 2014.
"The Fed likely thinks now that such a tightening move will not come at least until late 2014," said Roberto Perli, managing director at broker-dealer ISI and a former Fed staffer. Providing details of its interest-rate expectations could be a more systematic way of revealing the outlook for interest rate policy.
Another item on the agenda for next year could be another round of mortgage-backed securities purchases. Officials have suggested in recent weeks they are open to more purchases if the economy doesn't perform well next year, though the view isn't unanimous.
The roster of Fed officials voting on policy in 2012 could make it easier for Mr. Bernanke to navigate the unusual voting rules of official meetings toward a consensus. Fed governors vote at every meeting, as does the president of the Federal Reserve Bank of New York. Among the presidents of the 11 other regional Fed banks, four vote per meeting on a rotating basis.
Three out of the four officials who get a vote next year seem open to action: San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart and Cleveland Fed President Sandra Pianalto. Only one -- Jeffrey Lacker from Richmond -- is likely to be opposed.
They replace three officials who openly, and at times vociferously, disagreed with the Fed's efforts in August and September to spur economic growth: Richard Fisher of the Dallas Fed, Charlie Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis. Only one who rotates out of a vote -- Charles Evans from Chicago -- strongly supports more action by the Fed to boost growth.
Mr. Evans dissented for the second time in a row at Tuesday's FOMC meeting, arguing that additional monetary policy accommodation was warranted.
Mr. Bernanke probably already has enough support from the other five permanent members of the FOMC to launch a third round of asset purchases if he wants to. But more public support would make his job a bit easier and reduce the decibel level of internal dissent that has tended to surround Fed decisions in recent years.
Opposition to the Fed's second round of bond purchases launched in Nov. 2010, especially from inside the central bank, might have muted its potential benefits by leading investors to question the Fed's commitment to the program.
Mr. Bernanke moved ahead in August and September despite three FOMC dissents, the most opposition faced by a Fed chairman since 1992, showing his determination to act. Though Messrs. Fisher, Plosser and Kocherlakota will continue to take part in FOMC meetings and to air their views in public speeches, they won't have the dissent as a tool to register their disagreement in 2012.
4) Quote of the Day from Dave Ramsey.com:
Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young. — Henry Ford
Sandra Block covers personal finance for USA TODAY.
Despite running here there and everywhere to get your last minute Christmas gifts and also enjoying Holiday parties, it is still the time of year to study last second ways of getting a higher tax refund by taking advantages of tax tips. Remember it is only 18 more days until 12/31 so time is running out.
Your Money: Steps you take now can boost tax refund-From USA Today:
http://www.usatoday.com/money/perfi/columnist/block/story/2011-12-12/year-end-tax-planning/51846264/1
2) In the Markets today:
Stocks slipped in Tuesday afternoon trading as investors digested a statement from the Federal Reserve.
Wall Street closes lower on Fed disappointment-From Reuters
Stocks fell for a second straight day on Tuesday after the Federal Reserve gave no hints of new stimulus measures to offset the effects of the worsening European debt crisis.
Though the Fed did leave the door open to further easing next year, as it has done after recent meetings, it gave no indication it was any more inclined to provide new economic stimulus.
The Fed left monetary policy on hold and said financial market turbulence posed threats to economic growth. It also characterized the U.S. economy as expanding moderately despite an apparent slowing in global growth, though it added that unemployment remains elevated and housing activity depressed.
The Fed "gave the economy a very slight upgrade, but it sort of took the wind out of domestic equities, probably because some were hoping that they would hint at another -like program," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
Wall Street traded higher for much of the volatile session, but turned negative after the Fed's announcement. The losses accelerated going into the close and the S&P 500 briefly fell below its 50-day moving average. A close under that key level could signal more losses to come.
The Dow Jones industrial average (DJI:^DJI) slid 66.45 points, or 0.55 percent, to end at 11,954.94.
The Standard & Poor's 500 Index (SNP:^GSPC) dropped 10.74 points, or 0.87 percent, to 1,225.73.
The Nasdaq Composite Index (Nasdaq:^IXIC) lost 32.99 points, or 1.26 percent, to close at 2,579.27.
The disappointment with the Fed came at the tail-end of a trading session that was largely focused on Europe, especially after German Chancellor Angela Merkel rejected any suggestion of raising the limit on Europe's bailout fund.
Investors had been closely eyeing developments concerning the fund, the European Stability Mechanism (ESM), which will go into effect from the middle of next year and replace the current European Financial Stability Fund. The ESM will have an effective lending capacity of 500 billion euros.
"The developments in Europe don't address the region's short-term liquidity issues, so the next step is trying to figure that out," said Randy Frederick, director of trading and derivatives for Charles Schwab in Austin, Texas.
"That uncertainty is why our markets have been pressured lately. We're still all about Europe here."
Consumer-related stocks were the worst performers. Shares of Best Buy (NYSE:BBY) tumbled 15.5 percent to $23.73 after the electronics retailer reported a quarterly profit below expectations as bigger discounts squeezed margins. The S&P consumer discretionary sector (.GSPD) fell 2 percent.
U.S. government data showed U.S. retail sales rose less than expected in November as a drop in receipts for food and beverages weighed against stronger sales of motor vehicles, tempering expectations of a strong holiday shopping season.
U.S. crude oil futures prices rose more than 2 percent, advancing above $100 a barrel at the session high, with traders citing tension between the West and Iran as a possible trigger. The S&P energy index (SNP:^GSPE) had been up more than 2 percent at its session high, but was unable to maintain its gains and closed down 0.5 percent.
The only sector to close higher was utilities (.GSPU), considered a defensive play.
3) Top financial story of the day:
Fed officials left their policy options open for 2012 but took no actions and offered an assessment of the economy that was guardedly more upbeat.
Fed Takes No Action; Outlook a Bit Better-From The Wall Street Journal
Federal Reserve officials left their policy options open for 2012 but took no actions Tuesday and offered an assessment of the economy that was guardedly more upbeat, but still marked by "significant downside risks."
Nine out of 10 Fed officials voted to keep the central bank's easy-credit policies unchanged for the second meeting in a row in what was the last Federal Open Market Committee meeting of the year. It took place the day of Fed Chairman Ben Bernanke's 58th birthday.
Officials reiterated that short-term interest rates are likely to stay close to zero until mid-2013 at least. In their assessment of the economy, they said indicators pointed to some improvement in the U.S. jobs market.
Data since they last met at the start of November suggests the "economy has been expanding moderately, notwithstanding some apparent slowing in global growth," Fed officials said in a statement.
Still, the Fed is concerned the economy could be hit by higher taxes and continued government layoffs next year, as well as the repercussions from the debt crisis in Europe, which has close financial and trade ties with the U.S. With inflation expected to come down in 2012, some Fed officials have already started to argue in favor of additional steps to spur growth.
The Fed is looking at revamping its communication strategy, which could be a step toward easier monetary policy. Officials are considering whether to make their internal interest-rate forecasts public.
If they do that, and those forecasts suggest short-term interest rates will stay low for even longer than investors now believe, that could drive long-term rates down and be a boost to growth.
The post-meeting statement gave no indication of the state of that debate. That suggests the Fed has left it to be resolved next year. Minutes of the meeting, due out in three weeks, might reveal more.
As part of its internal debate about communications, Fed officials might soon need to address the conditional pledge they made in August to keep short-term rates near zero until at least mid-2013. The date is starting to look off. Prices in the futures markets suggest investors don't expect the first rate increase to occur until late 2013 or early 2014.
"The Fed likely thinks now that such a tightening move will not come at least until late 2014," said Roberto Perli, managing director at broker-dealer ISI and a former Fed staffer. Providing details of its interest-rate expectations could be a more systematic way of revealing the outlook for interest rate policy.
Another item on the agenda for next year could be another round of mortgage-backed securities purchases. Officials have suggested in recent weeks they are open to more purchases if the economy doesn't perform well next year, though the view isn't unanimous.
The roster of Fed officials voting on policy in 2012 could make it easier for Mr. Bernanke to navigate the unusual voting rules of official meetings toward a consensus. Fed governors vote at every meeting, as does the president of the Federal Reserve Bank of New York. Among the presidents of the 11 other regional Fed banks, four vote per meeting on a rotating basis.
Three out of the four officials who get a vote next year seem open to action: San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart and Cleveland Fed President Sandra Pianalto. Only one -- Jeffrey Lacker from Richmond -- is likely to be opposed.
They replace three officials who openly, and at times vociferously, disagreed with the Fed's efforts in August and September to spur economic growth: Richard Fisher of the Dallas Fed, Charlie Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis. Only one who rotates out of a vote -- Charles Evans from Chicago -- strongly supports more action by the Fed to boost growth.
Mr. Evans dissented for the second time in a row at Tuesday's FOMC meeting, arguing that additional monetary policy accommodation was warranted.
Mr. Bernanke probably already has enough support from the other five permanent members of the FOMC to launch a third round of asset purchases if he wants to. But more public support would make his job a bit easier and reduce the decibel level of internal dissent that has tended to surround Fed decisions in recent years.
Opposition to the Fed's second round of bond purchases launched in Nov. 2010, especially from inside the central bank, might have muted its potential benefits by leading investors to question the Fed's commitment to the program.
Mr. Bernanke moved ahead in August and September despite three FOMC dissents, the most opposition faced by a Fed chairman since 1992, showing his determination to act. Though Messrs. Fisher, Plosser and Kocherlakota will continue to take part in FOMC meetings and to air their views in public speeches, they won't have the dissent as a tool to register their disagreement in 2012.
4) Quote of the Day from Dave Ramsey.com:
Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young. — Henry Ford
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