U.S. trade gap falls. Smaller surplus for China.

The U.S. economy saw a small boost last month with the trade balance gap decreasing, the balance down 13% from the $44.6 gap in September. However this gap is expected to widen again over the next year or two. At the same time China's trade gap is also narrowing, as China has recently been pressured to narrow it's export surplus by taking in more foreign goods. Narrowing their surplus and allowing the yuan to balance more with the dollar will be main points of discussion at the U.S.-China Joint Commission on Commerce and Trade meets next week.

Risky Borrowers Find Credit Available Again, at a Price

While getting credit is still difficult for people, it's getting a little easier. However, it does come at a price. Instead of every person being "pre-approved" like a few years ago, the group of people getting credit cards is more carefully selected and the cards come with higher rates and annual fees. In addition to this, there are new categories of borrowers such as “strategic defaulters,” “first-time defaulters,” and “sloppy payers." Hopefully, even with these new restrictions, the greater spending ability will help the economy recover a little more.

Economic Stimulus (Jobs Bills)

This article is one that relates to the lectures in class as well as Professor McLouds 2008 Financial Crisis presentation a few weeks back. With the economy being what it was in 2008, Congress sought to revitalize the economy with an economic stimulus. Those who are unfamiliar with the term, an economic stimulus is an effort to try and pump money into a financially struggling economy with spending, tax cuts, or interest rate reductions. In all, this is to pave the way to grow the economy. Some economists consider cuts in the Interest by the Federal Reserve to be the most effective form of a stimulus. On the other hand, there are always opposing views on the best way to regain growth for an troublesome economy.
With the US economy still continuing to sink in 2008 even after the Fed cut interest rates to almost zero, something was still not working. This put a lot more pressure on congress to create a new stimulus plan.
Prior to President Obama entering office, he began working on a new plan to get the economy out of the slump it was in. In all, congress approved a 787 billion dollar bill that was called the American Recovery and Reinvestment Act- this stimulus was not liked at all by the Republicans.
As the unemployment rate began to rise over the 10% level, a new stimulus was needed for the economy. This would cause some more political controversy.

Salvation Army Struggles

This article touches upon the recent struggles of Salvation Army. Giant stores have limited Salvation Army's privileges over other non profit organizations. Normally, Salvation Army has the entire month of December and some of November to ring the bell outside the store. This year, Giant decided to allow other organizations to get in the spotlight. Salvation Army's numbers have depleted by more than half over the last year. This, on top of the diminishing unemployment benefits, is putting families in a difficult place. Families are struggling to get jobs and survive in this economy, and unfortunately, Salvation Army is being forced to turn people away.

Tax reform -- not just cuts -- needed

Tax reform is suddenly getting a lot more attention as a way to fix the ailing U.S. economy, as well as address the problems with government deficits. That's because even with the lower tax rates, your tax bill might rise due to closing loopholes and the removal of deductions and credits."The tax code is very inefficient," said Federal Reserve Chairman Ben Bernanke said in an interview with "60 Minutes" this week. "Both the personal tax code and the corporate tax code. By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest." There are as many different ways to simplify the tax code as there are IRS forms. But the basics are likely to revolve around eliminating the huge range of deductions and income that gets special treatment under current law, allowing for lower tax rates across the board.While lowering income and corporate tax rates sounds like a boon for workers and companies, experts say the loss of breaks and deductions will mean that some people will have higher tax bills, significantly higher in some cases. Those who don't take advantage of some of the advantages of the current system, such as those who don't itemize, are more likely to have their tax bills cut in the process. Still, the current political environment, with a divided Congress and the looming presidential election, doesn't lend itself to the kind of compromise needed to accomplish such radical reform, according to most experts.
Although tax reform is backed by promising leading officials, only time will tell as we push forward from the current recession.

Estimate That 2-Year Dividend Tax Extension Will Save Investors $74.5 Billion

The proposed two-year extension for qualified dividends to be taxed at 15% would add an additional US$ 74.5 billion into the hands of individual investors, and bring the ten year tax savings to US$ 348.4 billion (which is $348 not collected by the government). The savings are for dividends paid to individuals in taxable accounts.

In the short run I believe the two-year extension reduces the immediate pressure to pay one-time extra dividends or to move up January payments to December. Longer term, the 15% lower tax rate becomes more attractive to investors, who currently have few alternatives (even at the higher tax rate yields were competitive). Boards which would have been more hesitant to issue and increase fully taxed dividends, and might have pushed for more buybacks, will now have a higher comfort level of the net return to shareholders, and one less reason not to pay dividends. I will be releasing a full dividend report later in the month (editors, compliance and product people, oh my): S&P 500 Dividends: Out Of The Night That Covers Me

Also, if the if the total write-off of equipment purchases passes in Congress, Capital Expenditures for the S&P 500 should increase substantially (Q3 was up 14% but it appeared that the increase was mostly maintenance, not expansion). However, having ‘lived’ (but not always invested) through several of these, my question is where will the equipment come from, and where might it create jobs - in the U.S. or abroad?

Home Market's Misery May Be 'Buy' Sign

The first-time home buyer's credit has dried up, and home prices are down 29 percent from their 2006 peak. On Dec. 9 the latest release of the Federal Reserve's Flow of Funds data shows the value of homeowner equity in the third quarter of this year at $6.4 trillion—52 percent lower than four years ago.Hanging over the market is an ominous combination of a weak economic recovery, near 10 percent unemployment rate, an inventory of 8 million or so distressed properties, and uncertainty over the legality of foreclosures by major mortgage loan servicers. But does that mean it's a bad idea to buy a home? I don't believe so, based on some dispassionate analysis. For the long-term homeowner (or patient investor), a home appears to be one of the better investments around, with minimal downside risk. "Housing is priced to earn its historic real rate of return of 0.5 percent to 1 percent and interest rates are low," says Morris Davis, professor of real estate and urban land economics at the University of Wisconsin-Madison. "Now may be a once-in-a-lifetime time to buy."

NFL ticket prices on the rise

Average NFL single game ticket sales have increased 4.5% from the 2009-2010 season - an average ticket will cost you $76.47. The New York fan base is hurting the most, as the average ticket for the New York Jets and New York Giants increased 38.1% and 26.0% respectively. Much of the increase can be contributed to the new $1.6 billion stadium built in New Jersey for the Jets and Giants to play in. However, 15 NFL teams have either decreased their rates or kept them steady from the year prior while only 9 NFL teams are above the league average in ticket prices. Moreover, some teams are softening the blow by lowering parking or concession prices. In a down economy, teams must avoid blackouts (an NFL game is blacked out in the market team's state if the game is not sold out 72 hours before kick off) as they tend to push their fan base even further away.

Professional sports can have a significant impact on local economies and in our current economic state, winning teams can have a critical impact on recessing cities. Hear that owners? Draft well, spend well, and implement the right personal to create a winning formula that can help slow the bleeding of this Great Recession.

A&P, Grocery Store Owner, Files for Bankruptcy as Competition Rises

As another sign of the times, the operator of nearly 400 supermarkets and other stores has filed for bankruptcy. A&P, whose history dates back to its founding 101 years ago, cited competition and the increased consumer share of sales in megastores as the reason to end its billion-dollar business. As a company that primarily owns smaller retail stores and supermarkets, the demise of A&P is indicative of a greater trend for consumers that are mainly shopping in larger stores rather than "mom and pop" businesses. Consumers, including myself, seem to be satisfied with the decision to shop in stores that offer a variety of different goods and services instead of shopping in specialized stores.

You don't want to be unemployed in Vermont

The unemployment benefits that Americans our counting on may be cut due to concessions with the Bush Tax Cuts. But even if there are extension of unemployment, seven states may not recieve extended benefits. Vermont's residents will see cuts for 86 weeks to 60 weeks. The reason for these cuts is an unemplyment rate decrease to 6%. This is great for those lucky enough to find work but does not provide much consolation for those who are still looking.

Financial Crisis Causes Older Population to Put Off Retirement

1.6 million older Americans are putting off retirement by remaining in or rejoining the labor force as a result of the financial crisis. Those coming close to retirement age are experiencing stock holdings worth less than they were in 2006, fixed-income investments offering little income and low house prices. As a result, older people trying to get back into the labor force are, not surprisingly, having a hard time finding jobs and ultimately increasing the unemployment rate. As of August, the unemployment rate for people 55 and older is averaging 7.3%, which is the highest level of unemployment since 1948.

Home values tumble 1.7 trillion in 2010

It is estimated that American home values have dropped 1.7 trillion dollars this year. This is a 63 % increase since 2009. Also they have dropped 9 trillion in value since 2006. The home buyer tax credit helped the market in the first half of 2010, but then housing prices decreased. Eventually, many people believe that the housing market will come back naturally, but who knows how long that could take. Luckily, many sectors are gradually coming out of the recession, which in turn could be a good sign for the housing market. The temporary fixes that the government is trying to impose is simply not working. Hopefully, the government can find some solution to the housing market.

No Jobs? Young Graduates Make Their Own

With unemployment still high, and jobs extremely tough to come by for recent graduates, some urge new graduates to start their own businesses. "Only 24.4 percent of 2010 graduates who applied for a job had one waiting for them after graduation." With numbers like these, a new group has been formed to aid young graduates in forming a new business. The Young Entrepreneur Council is a group of 80 or more young business owners willing to give advice to others their own age in starting a new business.

Mortgage Lenders Clamp Down on Lax Standards

Mortgage lenders are tightening their standards even more restrictively as economists are concerned that the housing sector will experience another downward trend in sales. Homebuyer tax credits that helped increase sales earlier in the year have expired and home sales decreased over 25% from last year. Since the U.S. has relied on development from the housing market to help with economic growth in the past, tightening credit standards at the bottom of the business cycle will slow recovery. In a time where borrowers are needed to fuel the economy, constricting the standards will only add to the vicious cycle and make it hard for the housing sector to dig itself out of the deep hole they are already in.

A Grim Record: One In Seven Americans Is On Food Stamps

As of September of this year almost 13 million people will be living off of food stamps. This trend of citizens needing food stamps is not a new concept and has been occurring at these very high since the beginning of the decade. Unfortunately, this year the US has hit the all time high. The qualifications for food stamps, set by SNAP, haven’t changed much since the early 90’s. SNAP is seeing a lot of new families taking advantage of the government-sponsored program.
This is a true testament of what a dire situation the jobless are in. Hopefully within the next few years we will rise from this devastating economic status.

Ford invests a billion dollars into United States manufacturing plants

The president of US Ford America talks about the improvement of business climate in the United States, which has allowed a 600 million dallor investment into the Louisville Ford Escape manufacturing plant. With the investment into the plant there will also be a hiring over 1,600 employees. Ford's president believes that American is becoming a more competitive place to build vehicles. Do you think this is linked to the current recession?

Warren Buffet Explains Credit to Kids

Warren Buffet is featured on an online cartoon called "Secret Millionaires Club" in which he gives business tips and explains to kids how they can be financially responsible. In this episode, Mr. Buffet explains how using credit can lead to debt but saving and investing can lead to bigger long-term gains. So in addition to your nifty economics courses, consider watching "Secret Millionaires Club" because as Warren Buffet says: "The more you learn, the more you'll earn!"

Risky Borrowers Find Credit Available Again, at a Price

The credit market is looking up again as banks started dishing out credit cards after a 3 year slow down. This slow down had happened because of credit extended to risky borrowers which had resulted in a 189 billion dollars loss to the banking system. This loss was a significant part of the 2 trillion dollars that the banks have lost since the start of this crisis. However the banks have a different strategy for extending credit this time. Previously the banks seemed to pre approve anybody.The housing market collapse resulted in a lot of losses to the banks as people simply walked away from their homes when the value of the house dropped below the mortgage value. But this time, the banks have moved away from the traditional criteria of a credit check only. This time around they are categorizing people according to their habits. So for example a person who is registered on a job site online is considered a better risk than a person of equal credit score. The goal is to find people whose credit scores might be blemished but have the capacity and the willingness( checked by the new behavioral criteria) to pay their bills. The catch however, is a higher interest rate and annual fees. This approach shows that the banks want to grow again but they are moving more cautiously in a field which resulted in nearly bringing the whole industry down.

Well-Being Index Stuck at 2010 Low

The well-being index is based off of 6 different things, life evaluation, emotional health, physical health, healthy behavior, work environment, and basic access to things like food and shelter. The biggest "hit" comes from the healthy behavior component. t was said that “significantly fewer Americans exercised for at least 30 minutes three or more days per week in November (50.5%) than did in May (53.6%).” For people that earn less than $1,000 a month, their well being has decreased the most.

Obama to meet with CEOs in Blair House session

President Obama will meet with 20 CEOs this Wednesday to discuss on the best way to accelerate job creation. This meeting will take place in the Blair House and it will extend from morning to lunch. The White House Deputy Communications Director Jen Psaki said that "the biggest challenge we face moving forward is … in making sure we are preparing the next generation to compete globally". This meeting will focus on investment in clean energy technology, reducing the federal deficit and also on increasing exports.

CPI Up 0.2 Percent; Core Prices Unchanged – Lowest Annual Change Since Before WWII

In October, the Consumer Price Index rose 0.2 percent. This was the fifth consecutive monthly increase in the index. As was the case in most recent months, the index was pushed upward by energy prices, but which rose 2.6 percent in October. The core index, which excludes prices of energy and food products, was unchanged for the third straight month.

From a year prior, the CPI was 1.2 percent higher, just barely above its recent low of 1.1 percent in September. The core CPI was up by just 0.6 percent from a year prior. This was lowest year-over-year change in the index’s history going back to the 1950s. Despite rising energy prices as of late, there is a very low level of underlying inflation. This number further supports the Fed’s view that inflationary pressure is currently very mild if not outright deflationary.

3 Reasons to Buy Chipotle

This article discusses reasons why Chipotle is a good company to buy stock in. The reason that relates to class says that Chipotle and other restaurants are great companies to invest in as a recession passes. This is because higher employment causes heavier lunch traffic. Also great disposable income can lead to eating out more. When hard economic times hit many people turn to eating out less as a way to save money. They pack lunches to work and eat at home for dinner more often. However, as we come out of these hard economic times a reverse effect takes place. People begin eating out more then they did when faced with rough economic times.

Housing Starts Fall 11.7 Percent, Single Family Starts Down 1.1 Percent

Housing starts continued to fall in October, decreasing by 11.7 percent over the month. This brings the annualized sales pace to 519,000 units, the lowest level since April, 2009. Housing starts have been very volatile over the past few months; however, this has mostly been due to large swings in multi-family unit starts. In October, this category fell 43.5 percent. Single family starts fell by a much lesser 1.1 percent. Single family starts have essentially been flat for the past four months at an annualized pace of around 440,000. Still, this is a very slow pace and shows that building activity remains depressed.

“The excess inventory of existing homes continues to be a drag on housing starts. Until this inventory is absorbed, housing starts will stay at near historic low levels.” said Jim Chessen, ABA’s Chief Economist. Both single family and total housing starts have been in a range for this past year that is lower than any period since prior to WWII.

From a year prior, total starts were down 4.5 percent. Single family starts were down by a lesser 1.1 percent when compared to a year ago.

New building permits, which tend to lead future starts, rose by a modest 0.5 percent over the month. Single family permits rose 1.0 percent, which was the first increase since March. Meanwhile, multi-family unit permits continued to decline, falling 0.7 percent.

Gasoline Prices Rise to 2-Year High

Oil is a hard asset which is priced in U.S dollars around the world, and when the value of the dollar falls, global investors tend to shoot up the oil prices. One of the reasons for the weakening of the dollar has been the recent Fed’s Quantitative Easing, which led to the decrease in value of the dollar, and ultimately increase in oil price.

The Gasoline prices reached a two-year high last week with $2.98 per gallon; 35 cents more compared to last year, which could be traced to the weakening dollar and increase in imports by China. The Oil Price Information Service estimates that consumers will be spending $6.4 billion more in oil prices compared to last year, amount which could have been spend on holiday shopping.

Interestingly, the chief economist for the International Council of Shopping Centers, Michael P. Niemira, said that, “it doesn’t seem to matter much because we are getting accelerating economic activity, which is an offset”. But, he also predicts that the increase in oil prices will have a negative impact on the next year’s GDP as “when the bills come in after the Christmas shopping, there will be less disposable income in people’s pockets because of the increase in expenditures for oil, which they can’t avoid”.

Tax Reform --not just cuts -- Needed

Many people have started viewing tax reform as a way to fix the U.S. economy. A tremendous amount of attention has been drawn to this subject because even with the lower tax rates, tax bills might rise due to closing loopholes and the removal of deductions and credits. Ben Bernanke believes that the current tax code is not efficient and stated that, "By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest". There are a lot of people that believe tax reform is one of the largest factors in deficit reduction. This belief is justified by the thought that the best way to increase government revenue is to do so through a more efficient tax system.

Chinese inflation spikes on food costs

As China continues at a fantastic rate, some problems are beginning to trickle down and present themselves. One of those issues would be the high rates of inflation that has plagued the food market especially. Food prices have grown 11.7%. Yes, 11%! In order to stave off runaway inflation, China has committed to both raising its interest rates as soon as possible and to exercise a more "prudent" monetary policy starting in 2011.

Gift cards could get the cold shoulder this year

CNN.com- December 12,2010

This year, shoppers are going traditional. Instead of buying gift cards, they opt to buy an actual gift.

It costs them less. So instead of spending $100 on one single gift card, shoppers now can buy more than that with the same amount of money.

Retailers, after a dismal sale last year, also distribute bigger discount this year. They experienced a cheerful Black Friday this year generally, because sale shot up much better than last year. Still, consumers want to be more discrete in spending their money in the current economy, which only receives a few glances of recovery.

Yet, gift card sale slow-down does not worry much retailers.
""Only 10 to 15% of retail sales in January come out of gift card redemptions", according to the article. But it is a change for the better.

Oil demand to hit highest level ever

Due to rapid growth and development of certain nations over the past year. The worldwide demand for oil has increased to 88.3 million barrels per day. Yet, much to the relief of the American public especially, prices are not expected to spike as they did in 2007-2008, and consequently prices at the pump should remain relatively stable due to the increased production capacity of the world. China and India are largely responsible for the gross increase, as their oil consumption has increased by 11% and 10% respectively. Along the same lines, the figures on China's car consumption should indicate about a 32% increase in consumption over 2009.

Obama-Republican Deal Could Mean Tax Hike For One In Three Workers

The issue of tax cuts has become more political as time has passed. Citizens are arguing that the new deal reached between President Obama and the Republicans will only benefit those earning more than $20,000 (which is about 50million of the 150million population of the US). So technically, the poor citizens will be the one to suffer as these tax cuts will give them hardly any solace from the economic stress. Some claim that these tax cuts will benefit all citizens in a roundabout way as GDP growing by 1% will add about $2000 to the average American family. But everyone is aware of the unequal distribution of wealth. The higher-end people will get a much bigger tax cut than those who need it. At the end of this article is a table drawn out to illustrate the outcome of the extended tax cuts for the wealthiest in the next ten years.

Will rising mortgage rates spur home sales?

istorically low mortgage rates didn't encourage new home sales, but rising rates could finally push home-buying fence-sitters into the market.

Rates this week surged to a six-month high after President Barack Obama and congressional Republicans agreed to extend tax cuts for two years, including cuts for the wealthy. Though the deal is still being debated in Washington, financial markets interpreted the development as likely to accelerate the economic recovery but also swell the budget deficit. Though the yield on the benchmark 10-year bond has retreated some, it has still increased 21 basis points this week.

Because yields on Treasuries, especially the 10-year bond, largely influence mortgage rates, borrowing costs for mortgages have suddenly gone up. The average rate for a 30-year fix loan increased to 4.61% in the week ended Thursday from 4.46% the previous week, following a fourth week of increases, according to Freddie Mac(FMCC). The average 15-year rate rose to 3.96% from 3.81%. These rates are the highest they've been since June.

Euro will survive, said Merkel and Sarkozy

Germany and France told euro-area laggards to make their economies more competitive to help overcome the debt crisis, pledging to do whatever necessary to defend the currency at a European Union summit next week.

The euro traded at 1.3212, down 0.0027 cents, at 3:37 p.m. in Berlin. The single currency has fallen 7.8 percent this year.

The euro’s survival is “non-negotiable". “If the euro fails, Europe fails,” Merkel told reporters in the southwestern German town of Freiburg, calling for more economic “coherence” in the euro region. “We must find a way to overcome the gap in competitiveness,” she said. “It’s not a job for next Friday” at the EU summit “but for the future.”

They ruled out joint bonds and rejected any increase in the size of the 440 billion-euro ($583 billion) rescue fund set up in May. “Common bonds would make governments less responsible, when what we want to do is the opposite,” Sarkozy said. Both leaders also rejected any increase in the rescue fund set up to stem the contagion spreading from Greece.

“We will do what is necessary to defend the euro,” said Sarkozy.

China Pledges to Change Growth Model in 2011

China’s leaders pledged to accelerate a shift in the nation’s growth model in 2011 and also focus on stabilizing prices after an annual meeting in Beijing to set economic policy guidelines. The government is seeking to shift from dependence on investment in industry and exports to bolstering private consumption and service industries, a move that could also aid the world economy. The nation is tightening monetary policy to cool inflation that accelerated to 5.1 percent in November, the fastest pace in 28 months.
The government will seek to boost revenue and “resolutely” cut spending. Officials aim to balance “stable and relatively fast” growth with adjusting the economic structure and managing inflation expectations, the report said. The nation needs to strengthen consumption as part of speeding change in the growth model. The China central bank raised lenders’ reserve requirements on Dec. 10 as part of efforts to tame liquidity and cool prices. The government will “further prioritize overall price stability,” Xinhua reported.
In 2011, the main tasks will include strengthening macro-economic controls; ensuring the supply of agricultural goods; altering the growth model; improving basic public services; and continuing to “open up” and promote global cooperation, the report said.
U.S. lawmakers and officials say a stronger Chinese currency would help to reduce global trade imbalances, boost private consumption and contain inflation.

Mortgage rates up...house market in for more trouble

For the fourth week in a row mortgage rates have increased and many real estate professionals fear the fragile market will only hit more trouble. The rise in mortgage rates have already seen a lowered interest in homeowners refinancing and many fear that it will keep potential home buyers on the sidelines. With less buyers in the market many fear that it could ruin the stability in the residential real-estate market as the cost of overall cost of homeowner ships raises and it will force houses prices to lower to compensate.