Saturday, February 27, 2010
The Very Long View
The article is examining the long run of the economy compared to the short run. Strikingly, the recent year-end trough in this inflation-adjusted index, in 2008, was only fractionally higher than the peak in 1968. Investors had made no capital gains in real terms over 40 years. Although, they had enjoyed the benefits of a dividend income throughout this period. But this long drought was far from unique. When markets are booming, however, commentators tend to look back at the performance of stocks and extrapolate an even rosier future. The obvious parallel is with house prices. Analysts were convinced that American house prices might suffer regional busts but would not fall at the national level. The idea of housing as a one-way bet fuelled the boom in subprime lending and pushed prices up to a peak from which they could only fall. Robert Shiller of Yale University has pointed out that, in real terms, an index of American house prices rose from 100 in 1890 to 110 by the end of the 20th century. By the end of 2006, at the top of the housing boom, the index had reached 199. The key “saving age” is the cohort of 35-54 year-olds. As they prepare for retirement. This article shows that we may be in trouble now but hopefully in the very long run we will be out of this recession, and see better days.
Friday, February 26, 2010
East or famine
Goran read this article, its good stuff. Mentions everything from exchange rates to PPP. Talking about how different measures of GDP under/overstate the growth of Asian economies compared to the western economies. It also gives a good explanation for the reasoning in using PPP to measure GDP in Asian economies.
Wednesday, February 24, 2010
Wall Street bonuses jumped 17 percent last year
I find it somewhat difficult to judge the structure of these large financial institutions and their compensation methods because what people tend to forget is that the bonuses these top paying executives earn, as ludicrous and extravagant an amount as they are, are promised to them contractually and thus they are receiving what they are owed for having returned their company to profitability. I understand the social stigma and dissatisfaction associated with these compensations however the amount rose compared to 2008 because the economy was still in the middle of the recession during that time. I take this news to be more encouraging rather than upsetting because it shows that the large financial institutions are regaining stability and profitability. Unfortunately this is only a reminder to the public that financial institutions are designed to earn maximum profit, not to ensure the stability or protect the state of the economy as a whole.
Toyota's "Full Responsibility"
This article illustrates how Toyota plans to take full responsibility for the recall that was issued for Toyota's cars.
“We will work 24/7 at N.H.T.S.A. to make sure that Toyotas are safe to drive,” Mr. LaHood said. In addition, he said, the agency was adding 66 employees to the safety agency.
Tuesday, February 23, 2010
Olympic hockey tix trump the Super Bowl
In the spirit of the Olympic Winter Games, here is quite an interesting article discussing ticket prices for the many Olympic events. Almost all events have been sold out, but if one were looking for tickets your best bet is to look at "scalping" websites. However, be prepared to fork out some money because tickets to the hottest Olympic event this year, the men's hockey gold medal game, are averaging about $3,250. That is more than the ticket prices for this years Super Bowl, World Series and almost double the price for NHL's Stanley Cup. Some ticket prices are inflated as much as 2,603%, compared to their face value. If you are desperate to attend the games, don't fear, women's curling qualifiers are an easy $25.
Banking Compensation Around The World
This chart put together by Reuters' shows some large differences between the pay among CEO's of the worlds top banks. It is far from an even distribution, and the contrast between the Bank of China and JPMorgan is fairly large.
Toyota faces US criminal probe, Japan govt eyes impact
New U.S. documents showed on Monday how the company beat back U.S. safety regulators' efforts for a wider probe in 2007 and disclosure of a U.S. Securities and Exchange Commission request for documents. [ID:nN22203240] [ID:nN22198413]
It all comes as Toyota's top executive prepared for a hearing on Capitol Hill over unintended acceleration problems that have been linked to at least five U.S. deaths, with 29 other fatality reports being examined.
In a gesture it said was intended to reassure customers, Toyota said it would install brake-override systems on three more models of vehicles already on U.S. roads: the Tacoma truck going back to 2005 model year, the Venza crossover from 2009 and the Sequoia SUV.
Shares of Toyota fell 0.5 percent to 3,325 yen on Tuesday in Tokyo, matching the Nikkei 225's .N225 fall, suggesting little investor reaction to news of the criminal investigation and the plan for an additional brake override upgrade.
"Investors are not worried about such one-time costs. Instead they welcome Toyota's efforts to restore confidence in its products and its relations with the U.S. government regardless of the costs," said Yoshihiko Tabei, analyst at Kazaka Securities.
He said the earnings forecast Toyota gave on Feb. 4 for the year ending next month will likely be unaffected by the costs of the recalls and voluntary upgrades, while investors are more worried whether Toyota can revamp its brand and avoid a sales slump next business year.
A Japanese government official expressed concern about the effect Toyota's problems could have on Japan's exports.
"Strong growth in Asia-bound exports seems to be slowing, and we also have to consider Toyota's recalls, so we've given a cautious judgment on exports," Keisuke Tsumura, a parliamentary secretary on economic affairs, said as the government issued a report on the economy. [ID:nTOE61M003]
Toyota has recalled more than 8.5 million vehicles globally in recent months for problems including sticky accelerators, accelerators that can be pinned down by loose floor mats and a braking glitch affecting its hybrid models.
It is also investigating reports of steering problems in the Corolla, its second most popular U.S. model.
Toyota's extra installation of the brake-override systems extends the scope and cost of a recall that had already targeted five models including the top-selling Camry. Toyota said it would have the same safety technology on most new models sold in the United States by the end of 2010.
PRELUDE TO TESTIMONY
Akio Toyoda, who took the helm at the world No. 1 automaker last June, is scheduled to testify before the U.S. House Oversight and Government Reform Committee on Wednesday.
In a preview of the line he could take in his testimony, Toyoda said in a statement published in the Wall Street Journal that he was committed to making sure that Toyota learned from the crisis and changed its ways.
"It is clear to me that in recent years we didn't listen as carefully as we should -- or respond as quickly as we must -- to our customers' concerns," Toyoda said. "While we investigated malfunctions in good faith, we focused too narrowly on technical issues without taking full account of how our customers use our vehicles."
The extended apology from Toyoda, a grandson of the company's founder, came hours after Toyota said it had received a federal grand jury subpoena from the U.S. attorney's office in Manhattan on Feb. 8.
The automaker also said the SEC had asked for documents related to unintended acceleration of Toyota vehicles and the company's disclosure policies.
Toyota said it would cooperate with the investigations. (Reporting by Yumiko Nishitani; Editing by Hugh Lawson)
It all comes as Toyota's top executive prepared for a hearing on Capitol Hill over unintended acceleration problems that have been linked to at least five U.S. deaths, with 29 other fatality reports being examined.
In a gesture it said was intended to reassure customers, Toyota said it would install brake-override systems on three more models of vehicles already on U.S. roads: the Tacoma truck going back to 2005 model year, the Venza crossover from 2009 and the Sequoia SUV.
Shares of Toyota fell 0.5 percent to 3,325 yen on Tuesday in Tokyo, matching the Nikkei 225's .N225 fall, suggesting little investor reaction to news of the criminal investigation and the plan for an additional brake override upgrade.
"Investors are not worried about such one-time costs. Instead they welcome Toyota's efforts to restore confidence in its products and its relations with the U.S. government regardless of the costs," said Yoshihiko Tabei, analyst at Kazaka Securities.
He said the earnings forecast Toyota gave on Feb. 4 for the year ending next month will likely be unaffected by the costs of the recalls and voluntary upgrades, while investors are more worried whether Toyota can revamp its brand and avoid a sales slump next business year.
A Japanese government official expressed concern about the effect Toyota's problems could have on Japan's exports.
"Strong growth in Asia-bound exports seems to be slowing, and we also have to consider Toyota's recalls, so we've given a cautious judgment on exports," Keisuke Tsumura, a parliamentary secretary on economic affairs, said as the government issued a report on the economy. [ID:nTOE61M003]
Toyota has recalled more than 8.5 million vehicles globally in recent months for problems including sticky accelerators, accelerators that can be pinned down by loose floor mats and a braking glitch affecting its hybrid models.
It is also investigating reports of steering problems in the Corolla, its second most popular U.S. model.
Toyota's extra installation of the brake-override systems extends the scope and cost of a recall that had already targeted five models including the top-selling Camry. Toyota said it would have the same safety technology on most new models sold in the United States by the end of 2010.
PRELUDE TO TESTIMONY
Akio Toyoda, who took the helm at the world No. 1 automaker last June, is scheduled to testify before the U.S. House Oversight and Government Reform Committee on Wednesday.
In a preview of the line he could take in his testimony, Toyoda said in a statement published in the Wall Street Journal that he was committed to making sure that Toyota learned from the crisis and changed its ways.
"It is clear to me that in recent years we didn't listen as carefully as we should -- or respond as quickly as we must -- to our customers' concerns," Toyoda said. "While we investigated malfunctions in good faith, we focused too narrowly on technical issues without taking full account of how our customers use our vehicles."
The extended apology from Toyoda, a grandson of the company's founder, came hours after Toyota said it had received a federal grand jury subpoena from the U.S. attorney's office in Manhattan on Feb. 8.
The automaker also said the SEC had asked for documents related to unintended acceleration of Toyota vehicles and the company's disclosure policies.
Toyota said it would cooperate with the investigations. (Reporting by Yumiko Nishitani; Editing by Hugh Lawson)
Monday, February 22, 2010
States short $1 trillion to fund retiree benefits
By Tami Luhby
States and localities are now facing a $1 trillion deficit in public employees' retirement benefit funds. This comes out to an $8,800 deficit per household. This started when states failed to make annual contributions while also increasing benefits. This new finding doesn't even take into account the economic struggles we had in 2008; the average pension plan fell 25% in 2008. This comes at a bad time for the states, as they are dealing with a $180 billion budget gap for fiscal policy in 2011.
States and localities are now facing a $1 trillion deficit in public employees' retirement benefit funds. This comes out to an $8,800 deficit per household. This started when states failed to make annual contributions while also increasing benefits. This new finding doesn't even take into account the economic struggles we had in 2008; the average pension plan fell 25% in 2008. This comes at a bad time for the states, as they are dealing with a $180 billion budget gap for fiscal policy in 2011.
Bernanke Outlines Exit Strategy
FEBRUARY 10, 2010
Bernanke Outlines Exit Strategy
By LUCA DI LEO
Federal Reserve Chairman Ben Bernanke outlined the likely path the Fed would take to tighten credit once the economy has recovered enough. In another step toward unwinding its crisis-lending programs, he said Wednesday the Fed could soon begin raising its discount rate, charging more for emergency loans it makes directly to banks.
In testimony prepared for a House Financial Services Committee hearing that was called off because of a blizzard in Washington, Mr. Bernanke said that another interest rate might for a time replace the federal-funds rate as the main policy tool. That's the rate the Fed pays to banks on excess reserves they leave at the central bank.
Mr. Bernanke said that though the economy needed support from monetary policy, the Fed would "at some point" increase short-term rates and drain some of the money it had pumped into the economy during the recession. He gave no hint that such a move was imminent.
Fed Chairman Ben Bernanke outlines a plan to pull back policies that have been propping up the economy. Dow Jones Newswires' Neal Lipschutz and WSJ's Sudeep Reddy join Kelsey Hubbard in the News Hub with more.
As part of its plans to wind down emergency liquidity measures, the Fed may "before long" increase the difference between the discount rate and the federal-funds rate, a Fed-influenced rate at which banks lend to each other overnight, he said. The spread between the rates is a quarter percentage point; before the crisis, it was a full point.
Mr. Bernanke's speech was designed to outline the Fed's strategy for withdrawing its extraordinary support for the economy, which has brought the federal-funds rate near zero and led the Fed to buy more than $1 trillion worth of U.S. Treasury and mortgage-backed securities. He said the sequencing and tools the Fed would use to tighten policy would depend on how the economic recovery develops.
The Fed chairman said he didn't currently anticipate the Fed would sell any of its holdings of long-term U.S. Treasurys or mortgage-backed securities "in the near term," and probably not "until after policy tightening has gotten under way and the economy is clearly in a sustainable recovery." But over time, he said, "the Federal Reserve anticipates that its balance sheet will shrink toward more historically normal levels and that most or all of its security holdings will be Treasury securities."
A focus on the interest rate for excess reserves—now at 0.25%—would present markets with a new signal to follow when the Fed begins tightening credit. "It is possible that the Federal Reserve could for a time use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance," Mr. Bernanke said, adding no final decision had yet been made.
Raising the excess-reserves rate would give banks an incentive to park more funds at the Fed instead of lending them out to companies or households. In this way, the Fed would be able to restrain an economy that risks overheating and sparking inflation. Moving this rate would pull up other short-term rates, including the federal-funds rate, long the Fed's main tool for steering the economy.
While other major central banks, such as the European Central Bank, have been using interest on excess bank reserves for a while, it's a new tool for the Fed. Congress gave the central bank authority to use it in October 2008.
Mr. Bernanke says the Fed expects "it will eventually return to an operating framework with much lower reserve balances than at present and with the federal-funds rate as the operating target for policy."
Bernanke Outlines Exit Strategy
By LUCA DI LEO
Federal Reserve Chairman Ben Bernanke outlined the likely path the Fed would take to tighten credit once the economy has recovered enough. In another step toward unwinding its crisis-lending programs, he said Wednesday the Fed could soon begin raising its discount rate, charging more for emergency loans it makes directly to banks.
In testimony prepared for a House Financial Services Committee hearing that was called off because of a blizzard in Washington, Mr. Bernanke said that another interest rate might for a time replace the federal-funds rate as the main policy tool. That's the rate the Fed pays to banks on excess reserves they leave at the central bank.
Mr. Bernanke said that though the economy needed support from monetary policy, the Fed would "at some point" increase short-term rates and drain some of the money it had pumped into the economy during the recession. He gave no hint that such a move was imminent.
Fed Chairman Ben Bernanke outlines a plan to pull back policies that have been propping up the economy. Dow Jones Newswires' Neal Lipschutz and WSJ's Sudeep Reddy join Kelsey Hubbard in the News Hub with more.
As part of its plans to wind down emergency liquidity measures, the Fed may "before long" increase the difference between the discount rate and the federal-funds rate, a Fed-influenced rate at which banks lend to each other overnight, he said. The spread between the rates is a quarter percentage point; before the crisis, it was a full point.
Mr. Bernanke's speech was designed to outline the Fed's strategy for withdrawing its extraordinary support for the economy, which has brought the federal-funds rate near zero and led the Fed to buy more than $1 trillion worth of U.S. Treasury and mortgage-backed securities. He said the sequencing and tools the Fed would use to tighten policy would depend on how the economic recovery develops.
The Fed chairman said he didn't currently anticipate the Fed would sell any of its holdings of long-term U.S. Treasurys or mortgage-backed securities "in the near term," and probably not "until after policy tightening has gotten under way and the economy is clearly in a sustainable recovery." But over time, he said, "the Federal Reserve anticipates that its balance sheet will shrink toward more historically normal levels and that most or all of its security holdings will be Treasury securities."
A focus on the interest rate for excess reserves—now at 0.25%—would present markets with a new signal to follow when the Fed begins tightening credit. "It is possible that the Federal Reserve could for a time use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance," Mr. Bernanke said, adding no final decision had yet been made.
Raising the excess-reserves rate would give banks an incentive to park more funds at the Fed instead of lending them out to companies or households. In this way, the Fed would be able to restrain an economy that risks overheating and sparking inflation. Moving this rate would pull up other short-term rates, including the federal-funds rate, long the Fed's main tool for steering the economy.
While other major central banks, such as the European Central Bank, have been using interest on excess bank reserves for a while, it's a new tool for the Fed. Congress gave the central bank authority to use it in October 2008.
Mr. Bernanke says the Fed expects "it will eventually return to an operating framework with much lower reserve balances than at present and with the federal-funds rate as the operating target for policy."
One million could lose jobless benefits in March
The jobless could soon lose their unemployment insurance if Congress doesn't act fast. More than 1 million people could lose their jobless benefits and health insurance subsidy. The Senate will have one week to extend the deadlines to apply for federal unemployment benefits and the COBRA health insurance subsidy, where the current deadline for the jobless to sign up is Feb. 28. With no extension of the benefits, people who currently receive state jobless benefits won't be able to apply for additional federally pain unemployment insurance, and people whom are already receiving these checks could be cut off. While legislation was in place to extend the deadlines to May 31 in the form of $25 billion over 10 years, Senate Majority Leader Harry Reid has offered a trimmed job creation package that did not include the condition.
As unemployment benefits now run as long as 99 weeks, with an estimated 11.5 million people currently depending on jobless benefits, the average unemployment period lasts a record 30.2 weeks, the jobless will have to be more eager to re-enter the workforce to meet their needs. Many use their unemployment insurance to help pay for their roof over their heads. If a policy or action is taken in the Senate, hundreds of thousands of people will have an earlier than expected expiry date of their unemployment insurance. Hence, if unemployment insurance is not extended, will increase the opportunity cost of being unemployed and increase the urgency of finding work, thus increase "f" or the rate of job findings.
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