Stock Market News & Stocks to Watch from StraightStocks » Obama administration

Yes the future deficits are worrisome

James Hamilton — Wed, 25 Nov 2009 14:58:07 +0000

Paul Krugman ([1], [2], [3]) has been arguing vigorously that U.S. budget deficits are no cause for concern. I see things differently.

One of the arguments that Krugman makes is that, although the U.S. debt-to-GDP ratio is expected to double over a short period, the higher level would still be substantially below those currently observed in Italy and Japan, and only modestly above that of Belgium. Paul suggests that if these countries can run up debts of this magnitude without serious repercussions, so can the United States.

Source: Paul Krugman.

But European politics may not import all that well to this side of the Atlantic. Receipts of the U.S. federal government have never exceeded 21% of U.S. GDP, even at the height of World War II. A permanent move to taxation levels significantly above that would require a major shift in the political landscape, for which I see no consensus of support. To me that implies that any spending trajectory inconsistent with the long-established U.S. norm may be headed for a political brick wall.

Federal receipts and outlays as a percentage of GDP, 1970-2008 and 2009 estimates. Data source: OMB.

One of the ways I have suggested for personalizing this issue stems from the observation that $1 trillion is approximately the total personal income tax receipts collected by the U. S. federal government in 2006. So, to calculate what another trillion in deficits means for me personally, I take the amount I paid in federal income taxes that year and double it; $10 trillion in new debt will require 10 years at that higher rate to pay off. It's going to be a real problem for any politician who tries to service the growing debt burden by raising taxes. That's why I see troubles ahead for managing the federal cash flow.

But Paul feels I'm using an inappropriate metric:

Jim gets scary numbers about the debt burden by assuming that we'll have to pay off the debt in 10 years. But why would we have to do that? Again, the lesson of the 1950s-- or, if you like, the lesson of Belgium and Italy, which brought their debt-GDP ratios down from early 90s levels-- is that you need to stabilize debt, not pay it off; economic growth will do the rest.

Normally, you'd think that putting off repaying a debt does not make it any smaller. The federal government can (with my wallet) pay the trillion today, or it can wait 10 years to pay one trillion plus 10 years' interest, or wait 20 years to pay one trillion plus 20 years' interest. The present value of the service cost on one trillion dollars in debt is exactly one trillion dollars today, no matter how long you put off paying. My comments on how much a trillion really is are perfectly appropriate for discussion of any repayment timetable.

Perhaps Paul is suggesting that there may be a potential free lunch available from postponing payment in this case, arising from the fact that the economy's growth rate has historically exceeded the government's cost of borrowing. If I put off paying another year, with interest the amount I owe grows 2% in real terms, but my income grows 3%, so things get easier the longer I put it off.

Let me go on the record as favoring the consumption of truly free lunches. If everything the government buys really is free, then by all means, let's have them buy more, and more, and more, and rather than double my taxes, let's cut taxes all the way to zero. Unfortunately, I expect that Paul would agree with me that in fact there is a limit to just how much we can count on supersizing this particular happy meal. At least I know that he entertained such concerns, as Scrivener and Verdon note, when in March of 2003, Paul contemplated the implications of the debt-to-GDP ratio that was then reaching 40%:

we're looking at a fiscal crisis that will drive interest rates sky-high.... But what's really scary... is the looming threat to the federal government's solvency.

What I presume was producing Paul's concerns in 2003, and is giving rise to my concerns today as well, is the fact that the low cost of government borrowing relative to the economic growth rate-- which could produce the apparent free-lunch calculus-- is predicated on the historical political equilibrium, which Paul worried might not be continued after 2003, and I certainly worry might not be continued after 2009. Specifically, I would suggest that the low borrowing cost that the U.S. government traditionally faced was very much attributable to the responsible management of the debt. Once that responsibility becomes called into question, the U.S. will cease to enjoy that privilege. This kind of problem gets messier, not neater, the longer you put it off. And that's why you might not want to assume that an apparent free snack can be scaled up to an unlimited feast.

Which brings me to Paul's third argument:

Right now, however, the bond market seems notably unworried by deficits. Long-term interest rates are low; inflation expectations are contained (too well contained, actually, since higher expected inflation would be helpful). No problem, right?

Alas, I'm getting the sense that the Obama administration is intimidated all the same. We've got the president telling Fox News that he's worried about a double-dip recession if he doesn't reduce the deficit soon-- as opposed to the concern I and other have that he'll have a double dip if he doesn't provide more support. (And why is Obama talking to Fox News, btw?) And the buzz is that admin economic officials are telling him that the bond market needs to be appeased, even though rates are low.

This is truly amazing. It's one thing to be intimidated by bond market vigilantes. It's another to be intimidated by the fear that bond market vigilantes might show up one of these days, even though you're currently able to sell long-term bonds at an interest rate of less than 3.5%.

Paul is absolutely right that, at the moment, we're observing an amazing willingness of investors and foreign central banks to lend to the U.S. Treasury. On Monday the Treasury successfully auctioned $44 billion in 2-year notes paying the lowest yield on record, and last week the nominal yields on some bills on the secondary market actually turned negative-- people paying for the privilege of being able to lend to the government. So if the government were to borrow another dollar today, invest in anything with a positive rate of return, and repay the sum in two years, it would indeed be a great deal.

Those remarkably low yields at the moment in my mind are a result of a flight to safety. Many people are afraid to hold anything other than treasuries until there's some more clarity to the economic and financial landscape. It's not so much a market vote in favor of the U.S. Treasury as it is a market vote against everything else.

But the question before us is, what will the situation be another two years down the road, when the government will need to go back to bond markets to roll over the debt it issued on Monday along with new debt to cover the several trillion added to the federal debt between now and then? Krugman's position is that we should trust the term structure of interest rates to give us the answer. If markets anticipate an explosion of short-term interest rates a few years down the road, why is anyone today buying the longer term debt at such low yields?

If you thought that there is some chance that treasury yields will only rise slightly over the next few years, but also some risk of solvency problems and a panic flight from the dollar, what you might want to do is to take a long position in treasuries hedged with a long position in commodities. I agree with Paul that the long-term treasury yields are hard to reconcile with a market worried about the solvency risk. But I would add that the run-ups we've seen in commodity prices are hard to reconcile with a market sold on the deflation scare. What I see is investors buying both bonds and commodities, suggesting that people are spreading their money across a variety of strategies to be in position for several alternative scenarios from here.

Is it possible that some time within the next five years, the U.S. Treasury will run an auction in which there are not enough bids to roll over the debt? My answer is yes.

For other thoughtful perspectives, see Brad DeLong, Carlo Cottarelli, Dean Baker, Tyler Cowen, and Free Exchange.

Prieur’s readings (November 24, 2009)

Prieur du Plessis — Tue, 24 Nov 2009 10:02:04 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Zacks Analyst Blog Highlights: PNC Financial Services, Bank of America, Bank of New York Mellon Corp, MasterCard and JPMorgan Chase – Press Releases

Zacks Market Commentaries — Wed, 18 Nov 2009 13:10:27 +0000

For Immediate Release

Chicago, IL – November 18, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: PNC Financial Services (PNC), Bank of America (BAC), Bank of New York Mellon Corp (BK), MasterCard (MA) and JPMorgan Chase (JPM).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

BofA Continues CEO Hunt

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.

We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.

The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.

Earlier this month, Robert Kelly of the Bank of New York Mellon Corp (BK) was offered the role of CEO by the bank. Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the CEO job offer, as did MasterCard (MA) President Ajay Banga. Others may include Moffett and Charlie Scharf, who runs JPMorgan Chase’s (JPM) retail operations, among others.

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Should “Big Tobacco” run the government?

Andrew Snyder — Wed, 18 Nov 2009 09:55:49 +0000

pBaltimore #8212; (a href="http://www.todaysfinancialnews.com" target="_blank"TFN/a): If politicians would get their heads out of their re-election campaigns, they would not have to make hasty, thoughtless decisions that cost you and I money./p pIn the days following Obama’s inauguration, Washington quickly passed a wide set of tax reforms. Part of the legislation included a $400 tax break for the country’s working class and increased healthcare funding for the country’s poor, unhealthy children thanks to increased taxes on the tobacco industry./p pIt is no surprise neither measure has worked out as planned./p pAccording to reports today, more than 15 million of us will have to pay back the $400 we saved in taxes over the last few months due to an error on Washington’s end./p pI hope Uncle Sam#8230;/p

BofA Continues CEO Hunt – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 16:01:35 +0000

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.

We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.

The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.

Earlier this month, Robert Kelly of the Bank of New York Mellon Corp (BK) was offered the role of CEO by the bank. Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the CEO job offer, as did MasterCard (MA) President Ajay Banga. Others may include Moffett; Charlie Scharf, who runs JPMorgan Chase's (JPM) retail operations; Robert Kaplan, a former Goldman Sachs (GS) top gun; former US Bancorp CEO Jerry Grundhofer; American Express (AX) President Alfred Kelly; and two former BofA executives, Al de Molina, who runs GMAC, and James Hance. Offers were reportedly made to those banking chieftains, among others.

The bank's credit problems are the key to relieving the pressure of government involvement. Once the bank's loan book stabilizes, it can start to pay back the money it borrowed from the U.S. government, which came with some serious strings attached including Feinberg's control of compensation for top executives.

Read the full analyst report on "PNC"
Read the full analyst report on "BAC"
Read the full analyst report on "MA"
Read the full analyst report on "JPM"
Read the full analyst report on "GS"
Read the full analyst report on "AX"
Read the full analyst report on "BK"
Zacks Investment Research

Prieur’s readings (November 17, 2009)

Prieur du Plessis — Tue, 17 Nov 2009 08:50:30 +0000

Leo Motors, Inc. (OTC:LEOM) “One of the Best Electric Vehicle Investment in the Market” Research Report by Princeton Research

Dr. Stock Pick — Wed, 11 Nov 2009 23:37:49 +0000

November, 2009 Volume1, Issue 1 One of the Best Electric Vehicle Investment in the Market Leo Motors, Inc. (OTC:LEOM) is the only company in the world that develops, manufactures and markets premium Electric Vehicle Power Systems that include electric engines, digital controllers, and 12th generation Lithium Polymer Battery Power Packs. LEO proved that it can make sustainable Electric [...]

Cereplast, Inc. (CERP.OB) Projects Bio-Plastics to Capture 30% of U.S. Market, Topping $10B by 2020

QualityStocks — Wed, 11 Nov 2009 16:31:22 +0000

Cereplast, Inc., a pioneer in the manufacture of plastics which derive largely from resins based on plant starches, released news announcing projections for its market sector. Expecting a ten-fold sales increase in the U.S. bio-plastics market by 2020, the Company cited the $1B sales figures from 2007 and estimates which show that, within ten years, [...]

Gov’t Program Boosts Freddie Mac – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 14:00:30 +0000

Freddie Mac’s (FRE) third quarter net loss (available to common shareholders) came in at $1.94 per share, compared to a net loss of 11 cents in the prior quarter and $19.44 in the prior-year quarter.

Results for the quarter exclude the preferred dividend of $1.3 million paid to the U.S. Department of the Treasury on the senior preferred stock. Though the results improved significantly over the prior-year quarter, the company expects its provision for credit losses to remain high during the fourth quarter of 2009.

The company is mainly focused on initiatives that support the Making Home Affordable Program (MHA Program) announced by the Obama Administration in February 2009. As a leading player, Freddie Mac continued to support the housing market during the third quarter of 2009, enabling more than 78,000 struggling borrowers to accept offers to modify their loans under the Home Affordable Modification program and approximately 69,000 borrowers to lower their payments under the Freddie Mac Relief Refinance Mortgage.

Net loss (excluding preference dividend) for Freddie Mac for the quarter was $6.3 billion, compared to a net loss of $25.3 billion in the prior-year quarter. During the reported quarter, provision for credit losses increased 32.9% year-over-year to $7.6 billion due to continued credit deterioration in the company’s single-family credit guarantee portfolio.

Net loss was partly offset by net interest income for the quarter, which increased 4.7% sequentially to $4.5 billion. The increase was primarily driven by lower short-term and long-term funding costs.

Management and guarantee income for Freddie Mac for the quarter increased 12.7% sequentially to $800 million. The sequential increase reflects higher amortization income related to certain pre-2003 deferred fees due to the decrease in forecasted interest rates, which resulted in an increase in projected prepayments.

Other non-interest loss for the quarter came in at $1.9 billion, compared to net interest income of $2.5 billion in the prior quarter. Other non-interest loss for the quarter included net mark-to-market gains of $42 million, compared to net mark-to-market gains of $5.2 billion in the prior quarter.

Credit quality significantly worsened during the quarter. Total single-family delinquency rate, excluding Structured Transactions increased 55 bps sequentially to 3.33%. At the same time, Single-family net charge-offs increased to $2.2 billion from $1.9 billion in the prior-quarter. Single-family non-performing assets increased to $91.6 billion at Sep 30, 2009 from $76.9 billion at Jun 30, 2009.

Net worth at Sep 30, 2009 was positive at $10.4 billion. This reflects an $8.5 billion gain in accumulated other compressive income (AOCI), primarily driven by improved values on the company's available-for-sale securities.

Freddie Mac has been among the hardest hit financial firms by the housing slump, credit crisis and ongoing recession. We do foresee the current expansion of the Home Affordable Refinance Program (HARP) to bring down losses from foreclosures in the upcoming quarters. The deterioration in the overall market condition continues to negatively impact Freddie Mac’s financial results. As a result, the company expects to request additional funds from the Treasury.

However, we expect the government conservatorship to continue for a long time and thus see no value in the company for common shareholders.
Read the full analyst report on "FRE"
Zacks Investment Research

Prieur’s readings (November 7, 2009)

Prieur du Plessis — Sat, 07 Nov 2009 08:10:26 +0000

Is it time to panic?

Andrew Snyder — Fri, 06 Nov 2009 16:08:12 +0000

pBaltimore-(a href="http://todaysfinancialnews.com" target="_blank"TFN/a):Time to panic? If you are part of the Obama administration the answer is yes. If you are an American investor, hold off on the freaking out for at least another month or so./p pWith the nation’s unemployment rate officially in double-digit territory and the under-employed rate ready to the 20% mark, the politicians that promised bliss in the days ahead are eating their words today./p pAnd that means Wall Street is eating its recent gains./p pFor nearly a month, the Dow has hovered around the 10,000 mark. After hundreds of billions of dollars were withdrawn earlier this year, it was relatively easy to put that money back to work and send the equities market higher./p pBut now that the economic data is showing#8230;/p

Prieur’s readings (November 6, 2009)

Prieur du Plessis — Fri, 06 Nov 2009 08:57:14 +0000

Prieur’s readings (November 5, 2009)

Prieur du Plessis — Thu, 05 Nov 2009 09:50:16 +0000

Goldman Mulls Fannie Tax Credits – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 22:51:55 +0000

Goldman Sachs Group Inc. (GS) is contemplating buying tax credits from Fannie Mae (FNM). However, it may be reasonable to assume that the U.S. Treasury may not approve of the deal.

Goldman hopes to receive approval this week for $1 billion worth of tax credits. Tax credits are incentives designed to bring more investment to low-income housing developments. This would help the company reduce its tax bill as well as bring some much-needed financial relief to Fannie Mae.

While financial details of the proposed transaction are not disclosed, Goldman could arrange other investors for the deal as well.

The Obama Administration, however, is opposed to the deal, as it will reduce Goldman's tax bill at a time when Wall Street is already facing intense public scrutiny.

Fannie Mae, a government-controlled mortgage financier, could get financial relief if Goldman bought the tax credits. As the housing market collapsed and mortgage defaults skyrocketed, the company faced billions of dollars in losses and was unable to remain afloat without major government support.

The Treasury Department had purchased $45.9 billion of preferred stock in Fannie Mae last year to support the troubled firm, giving taxpayers a substantial stake. The company continues to need funding from the government and its operations are closely monitored by its regulator.

Goldman reported third quarter 2009 (ended Sept. 25, 2009) earnings of $5.25 per share -- significantly ahead of the Zacks Consensus Estimate of $4.13.

Results reflected strong performance in the trading operations, which offset the decrease in investment banking division. The company also reported a drop in expenses on a sequential basis.

Goldman’s well-diversified business model coupled with a more favorable operating environment led to this strong growth. We think Goldman’s sturdy capital and liquidity will lead to increased profitability from newer opportunities once the economy recovers.

We continue to have an Outperform recommendation on the stock.
Read the full analyst report on "GS"
Read the full analyst report on "FNM"
Zacks Investment Research

Prieur’s readings (October 30, 2009)

Prieur du Plessis — Fri, 30 Oct 2009 08:57:52 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. • Richard Ennis (CFA Institute): The uncorrelated return myth, November/December 2009. • Peter Clarke (Financial Times): How to avoid a repeat of the Great Crash, October 28, 2009. The chain of events leading [...]

Southern Barely Beats – Analyst Blog

Zacks Market Commentaries — Thu, 29 Oct 2009 15:30:49 +0000

Electric utility firm Southern Co. (SO) reported modestly better-than-expected third quarter results, driven by lower expenses and increased monthly service charges. Earnings per share came in at 99 cents, edging past the Zacks Consensus Estimate by a penny.

In the year-ago period, Southern earned $1.01 per share. The year-over-year negative comparison can be attributed to decrease in electricity usage and sales and flat customer growth. Revenues for the quarter were $4.7 billion, a decrease of nearly 14% from the corresponding period last year.

Another Challenging Quarter

It was another difficult quarter for Southern, as it continued to be adversely affected by significantly cooler than average weather and a weak economy. This resulted in a decrease in electricity sales across all categories. Total electricity sales during the third quarter were down 6.1% from the same period last year.

Total retail sales declined by 5.1%, reflecting soft demand. Industrial sales suffered the most, reflected in a 9.6% year-over-year fall. With almost 30% of the company’s total retail sales coming from industrial customers, a sluggish economy severely affects the fortunes of Southern, as compared to other utilities that are less dependent on the industrial component. Residential and commercial sales performed relatively better, declining 2.6% and 3.6%, respectively.

Effective Expense Management

Given the weak electricity sales environment, Southern has taken certain strategic actions to improve the company’s performance and competitiveness in a cost-effective manner. As part of this initiative, the company managed to reduce operations and maintenance expenses by nearly 10% year-over-year, the third successive quarterly fall. Southern’s total operating expense for the period was $3.3 billion, approximately 19% lower than the prior-year level.

Smart Grid Award

In a separate development, Southern announced the receipt of a $165 million award in stimulus funds as part of Obama administration's plan to invest $3.4 billion to encourage transition to a smarter energy grid. The so-called smart grids are designed to improve communications and handling of the electrical infrastructure at the same time providing meters to allow conservation of power.

Outlook

Management indicated that there were signs of stabilization and the beginning of recovery in some of its regions. The company cited an 11% sequential increase in industrial sales to support this.

We subscribe to management’s view regarding an improving outlook, however, at the same time believe that the company will have to persist with its cost cutting initiatives to offset the weak revenue trends. We think that the challenging economic environment will continue to hamper Southern’s results during the next few quarters, as industrial sales still remain weak.

As such, we do not anticipate a significant turnaround in the near future and maintain our Neutral rating on the company.

Read the full analyst report on "SO"
Zacks Investment Research

The Rise of the Rest

Trading School — Thu, 29 Oct 2009 10:46:12 +0000

One great thing about my position here as Director of Marketing is my extensive contact list. I say that because I have access to thousands of excellent traders, investors, and economists at my finger tips! So when things around the world catch my attention, I can quickly find someone who can give me the skinny [...]

GWS Technologies (GWSC.OB) and Renewables Industry to Benefit from Stimulus Spending on ‘Smart Grid’

QualityStocks — Wed, 28 Oct 2009 14:07:14 +0000

GWS Technologies is an alternative energy company that has been gaining much acclaim of late. Founded in 2005 in Scottsdale, Arizona, GWS became a fully-reporting company by March of 2007 and has had continued success since that time period. A recent announcement directed at stimulus spending will enhance GWS for years to come. Yesterday, [...]

Prieur’s readings (October 28, 2009)

Prieur du Plessis — Wed, 28 Oct 2009 07:39:49 +0000

With Friends Like These…

Robert Amsterdam — Mon, 26 Oct 2009 16:29:00 +0000

I just published a quick rant on Huffington Post after watching Joe Scarborough complain and moan about how the U.S. is going it alone on Afghanistan during his morning MSNBC show. It's no wonder so many countries are getting into...

The Warning

Prieur du Plessis — Sat, 24 Oct 2009 07:29:57 +0000

In the midst of the 1990s bull market, one lone regulator warned about the dangers of derivatives - and overnight became the enemy of some of the most powerful people in Washington ... In "The Warning", veteran Frontline producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. This is a must-view production.

Wise Words from Across the Pond – Analyst Blog

Dirk Van Dijk — Wed, 21 Oct 2009 14:41:50 +0000

Meryn King, the British counterpart to U.S. Fed Chair Ben Bernanke, had this to say in a speech yesterday:

“The United Kingdom faces two fundamental long-run challenges. First, to rebalance the economy, with more resources allocated to business investment and net exports and fewer to consumption.

"That is consistent with the need – now widely accepted – to eliminate the large structural fiscal deficit and to raise the national saving rate. It is part of a need for a wider rebalancing of domestic demand in the world economy away from those countries that borrowed and ran current account deficits towards those that lent and ran surpluses."

Everything he has to say about the UK is true in spades for the US. The US. is more dependent on consumption than is the UK and perpetually runs trade (current account) deficits. We need for the US to be consuming less and investing more in productive capacity, and then exporting more than we import.

It is the current account deficit, not the budget deficit, that leads us to be deeply indebted to the Chinese and OPEC. In any sort of rational world, it would be the large, developed, mature economies that would be exporting capital to emerging markets, not the other way around.

"Second, both the structure and regulation of banking in the UK need reform. Banks increased both the size and leverage of their balance sheets to levels that threatened stability of the system as a whole. They remain extraordinarily dependent on the public sector for support. That was necessary in the immediate crisis, but is not sustainable in the medium term."

Any bank that is "too big to fail" should not be allowed to operate as a casino. Yes, risk-taking activity is vital to the growth and vibrancy of the economy, but it should not be undertaken by banks that are backstopped by the taxpayer.

The reforms that the Obama Administration have put forth are a good first step, but only a first step. Unfortunately, as most of the nation has been focused on the Health Care battle, the lobbyists for the banks have already swooped in and begun to undermine the reforms. Yes, we might get something call financial regulatory reform, but it will not be anywhere near strong enough to prevent a recurrence of last year's events.

Requiring higher capital standards for the Tier One financial institutions, those that are "too big to fail," might do the trick, but to offset the much lower cost of capital that comes with that implicit federal guarantee of their debt, the capital requirements will have to be very high -- higher than will be politically sustainable.

A far better solution would be to declare that a bank that is "too big to fail" is "too big to exist." We need to bring back something that looks like Glass-Stiegel, the law that stabilized the banking system and prevented any real problems like these for almost half a century.

“Why were banks willing to take risks that proved so damaging both to themselves and the rest of the economy? One of the key reasons – mentioned by market participants in conversations before the crisis hit – is that the incentives to manage risk and to increase leverage were distorted by the implicit support or guarantee provided by government to creditors of banks that were seen as 'too important to fail.'

"Such banks could raise funding more cheaply and expand faster than other institutions. They had less incentive than others to guard against tail risk. Banks and their creditors knew that if they were sufficiently important to the economy or the rest of the financial system, and things went wrong, the government would always stand behind them. And they were right."

We are setting up the biggest case of moral hazard ever. If a pay-off from a bet is structured so that if things go right, you make a fortune, and if things go wrong you just break even, people will start to take crazy risks. That cannot be allowed to happen again with taxpayers being the ones who cover the bets if things go the wrong way.

Just a year after the world stood on the brink of disaster, the Street is back to handing out record bonuses. At Goldman Sachs (GS) alone, a firm with 25,000 employees world wide, the bonus pool is reportedly $23 billion.

That is equivalent to 0.16% of GDP…for the bonus pool of one firm! A firm that has benefited greatly from Federal largess over the last year.

Yes, Goldman has had a very profitable year, mostly due to their prop desk. In other words, they have done well by their risk-taking with the capital of the firm. That is all well and good, but it is not an activity that should be backstopped by the government.

Unfortunately, in the heat of the crisis, and because there was, in many cases nowhere else to turn, we moved in exactly the wrong direction, with the "too big to fail" banks becoming substantially larger -- J.P. Morgan (JPM) gobbled up Bear Stearns and WaMu, Wells Fargo (WFC) ate Wachovia, and Bank of America (BAC) swallowed Merrill Lynch.
Read the full analyst report on "GS"
Read the full analyst report on "JPM"
Read the full analyst report on "WFC"
Read the full analyst report on "BAC"
Zacks Investment Research

Zacks Industry Outlook Highlights: Allscripts-Misys Healthcare Solutions, Inc., Omnicell Inc. and Merge Healthcare Incorporated – Press Releases

Zacks Market Commentaries — Fri, 16 Oct 2009 12:00:11 +0000

For Immediate Release

Chicago, IL – October 16, 2009 – Zacks.com announces the latest Industry Outlook. Today, Zacks Equity Research discusses the Medical Devices sector, including Allscripts-Misys Healthcare Solutions, Inc. (MDRX), Omnicell Inc. (OMCL) and Merge Healthcare Incorporated (MRGE).

Here is the latest on the Medical Devices sector:

In the medical devices space, we recommend that investors focus on companies providing life-sustaining products. These companies provide a strong recurring stream of revenues as patients are unable to forego these products. Furthermore, investors should allocate funds to companies with high-earnings-quality profiles.

Large companies with a wide portfolio of products are also better poised for good returns. These companies are capable of withstanding the current economic recession.

Another area which is interestingly poised for growth these days is Healthcare IT. The landscape has changed since the Obama Administration passed a health care stimulus package to encourage hospitals and physicians practices to modernize their health record keeping. Names in this area include Allscripts-Misys Healthcare Solutions, Inc. ( MDRX ), Omnicell Inc. (OMCL) and Merge Healthcare Incorporated (MRGE). However, none of these companies have the above-mentioned attributes that differentiate them from the others. As such, we have a Neutral rating on these stocks.

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Zacks Investment Research

Medical Devices – Industry Outlook

Zacks Market Commentaries — Thu, 15 Oct 2009 20:20:36 +0000

The global medical devices industry is fairly large and is valued at roughly $223 billion, with the U.S. accounting for approximately 41%. The industry is divided into different categories such as Cardiology, Oncology, Neuro, Orthopedic, Aesthetic Devices and Healthcare IT.

In the medical devices space, we recommend that investors focus on companies providing life-sustaining products. These companies provide a strong recurring stream of revenues as patients are unable to forego these products. Furthermore, investors should allocate funds to companies with high-earnings-quality profiles.

Large companies with a wide portfolio of products are also better poised for good returns. These companies are capable of withstanding the current economic recession.

Another area which is interestingly poised for growth these days is Healthcare IT. The landscape has changed since the Obama Administration passed a health care stimulus package to encourage hospitals and physicians practices to modernize their health record keeping. Names in this area include Allscripts-Misys Healthcare Solutions, Inc. (MDRX), Omnicell Inc. (OMCL) and Merge Healthcare Incorporated (MRGE). However, none of these companies have the above-mentioned attributes that differentiate them from the others. As such, we have a Neutral rating on these stocks.

We advise investors to avoid companies that have grown historically through acquisitions. These companies may find it difficult to fund acquisitions in future. Also, they face increasing challenges in delivering operational synergies from these acquisitions, which are considered to be the prime reason for failures of Mergers & Acquisitions. Additionally, the financial statements of these companies have a large number of one-time items that affect the quality of earnings.

OPPORTUNITIES

In our portfolio, we see growth potential in companies dealing with cardiovascular devices and surgical equipment, blood related products, and associated consumables. Names currently on our Outperform list include Medtronic, Inc. (MDT), Baxter International Inc. (BAX), Haemonetics Corporation (HAE) and Intuitive Surgical, Inc. (ISRG). These are all producers of life-sustaining products and are less affected by the current economic turbulence. Among these names, Medtronic has a diversified presence in Cardiovascular, Neuro, Spinal, Diabetes, ENT, etc.

Our industry outlook would be incomplete if we did not discuss names like Boston Scientific Corporation (BSX), St. Jude Medical Inc. (STJ) and Becton, Dickinson and Company (BDX). These are all leaders in their respective fields of Cardiology, Neuro and disposable products. These names are potential winners in the long run. However, we downgraded these stocks to Neutral based on their prior quarter results. We will closely monitor them in the next quarter results. They are strong candidates for upgrades.

WEAKNESSES

We notice weaknesses in the orthopedic market due to the current economic turbulence that has resulted in patients deferring their elective procedures. Names on this list include Conmed Corporation (CNMD). However, with the economic recovery underway, a few names in this market have already been upgraded to Neutral. These include Symmetry Medical, Inc. (SMA), Wright Medical Group, Inc. (WMGI) and Hanger Orthopedic Group Inc. (HGR).

[Industry Outlook as of October 14, 2009]
Zacks Investment Research

RA’s Daily Russian News Blast – October 14, 2009

Robert Amsterdam — Wed, 14 Oct 2009 08:25:08 +0000

TODAY: Did Clinton get what she wanted?; media reports possible silence for sanctions deal; START treaty progress. Georgia accused of abetting al-Qaida; Putin 'satisfied' with job. German official castigates Medvedev for investigation into Stalin-researching historian; the man of steel's grandson...

How Russia Learned to Love the (Iranian) Bomb

Robert Amsterdam — Mon, 12 Oct 2009 20:28:17 +0000

Out of the many, many interesting quotes we got from Vice President Joe Biden during his famously candid Wall Street Journal interview (which sounded like it was done in a cocktail lounge), was the following appraisal of the United States...

Stock Market News for October 12, 2009 – Market News

Zacks Market Commentaries — Mon, 12 Oct 2009 13:57:05 +0000

U.S. stocks ended modestly higher Friday, wounding up a week of solid gains as investors braced for the third-quarter financial results. Sentiments also got a boost after Federal Reserve Chairman Ben Bernanke indicated that the central bank will be ready to tighten monetary policy once the economy improves. Bernanke’s tightening comments helped the dollar regain some lost ground. Bond prices fell sharply.

After a two-week selloff, fueled in part by concerns that the seven-month old rally had gotten ahead of any economic recovery, stocks got a boost last week following better-than-estimated economic numbers and Alcoa’s (NYSE:AA) surprise quarterly profit. That helped investors set aside worries and extend the rally. Meanwhile, White House economic adviser Lawrence Summers reiterated the Obama administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner.

This morning’s stock futures show markets are headed for a higher opening as the busy week of earnings commences. Ahead of the market's open, Dow Jones industrial average futures are up 59 points, or 0.6%, to 9,866. Standard & Poor's 500 index futures gained 7.30 points, or 0.7%, to 1,075.40, while Nasdaq 100 index futures rose 11 points, or 0.6%, to 1,736.50.

On Friday, the Dow Jones industrial average rose 78 points, or 0.8%, to 9,864.94 -- its highest closing level in a year. The S&P 500 index gained 6 points, or 0.6%, to 1,071.49 and the Nasdaq climbed 15 points, or 0.7%, to 2,139.28. On the New York Stock Exchange, advancing issues beat those that declined in price by a three-to-two margin. For the week, the DJIA rose 4% and the S&P 500 index gained 4.5% - their best performance since July. The Nasdaq advanced 4.5% during the week.

Last week's rally saw all but one of the S&P500 industry sector recording gains. Only telecommunications shares failed to advance, and fell 5.9%, following AT&T's (NYSE:T) announcement that it plans to allow internet-based phone calls on phones including Apple's (NASDAQ:AAPL) iPhones. The gains last week were led by basic materials (+8.4%), oil and gas (+7.6%), financials (+6.3%), industrials (+5.0%), tech (+4.9%), consumer services (+4.5%), consumer goods as well as utilities (+2.9%), and health care (+2.7%). Financials rose after a Goldman Sachs (NYSE:GS) report recommended large-cap banks. Gains in industrial shares were helped by last week’s fall in dollar and Caterpillar's (NYSE:CAT) announcement that it plans to hike prices globally in 2010. Retail shares rose after firms reported better-than-expected comparable monthly sales numbers.

This week sees the release of the first big batch of third-quarter earnings. Companies reporting their numbers include Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Nokia (NYSE:NOK), Google (NASDAQ:GOOG), IBM (NYSE:IBM), Bank of America (NYSE:BAC), and General Electric (NYSE:GE).

Zacks Investment Research

Lockheed Lands Army Contract – Analyst Blog

Zacks Market Commentaries — Fri, 09 Oct 2009 22:12:31 +0000

Lockheed Martin Corporation (LMT) yesterday bagged a $133 million contract from the U.S. Army to provide eight threat detection systems. The company will supply the systems over the next 11 months. The U.S. Army is already using nine such systems. Lockheed’s detection systems are equipped with multi-mission sensors to provide intelligence, surveillance, reconnaissance and communications to support coalition forces.

In recent times, Lockheed Martin Corporation has witnessed the cancellation of quite a few prominent programs such as the TSAT Mission Operations System (TMOS) contract, F-22 Raptor program and the VH-71 Presidential Helicopter (VH-71) program. Lockheed Martin’s high-cost platform programs were the prime targets of the Obama administration for budget cuts. The addition of $133 million would boost the beleaguered backlog of the company, which shrunk to $79.2 billion after the first half of the fiscal 2009 from $80.9 billion at year-end fiscal 2008.

Lockheed Martin remains a key player within the military space and continues to benefit from strong defense spending. The company’s customer base includes the U.S. Government, foreign governments and other commercial buyers. The company’s traditional defense focus appears strong, with increasing interest from domestic and international customers. In addition, management intends to explore strong business opportunities beyond the traditional defense market, specifically in the areas of civil, governmental and commercial space businesses.

Going forward, we believe Lockheed Martin has significant upside potential based on strong defense outlays throughout 2009–10, above-industry average return-on-invested-capital, and expanding product lines. However, these are offset by risks related to key projects execution, fate of high cost platform programs, lower top-line results in the Aeronautics segment, higher pension liability, and lower delivery of F-16s in recent times. We maintain our market Neutral recommendation on the shares.
Read the full analyst report on "LMT"
Zacks Investment Research

The Eternal Depression

The Daily Reckoning — Thu, 08 Oct 2009 15:16:36 +0000

Yesterday was another exciting day on Wall Street. The Dow rose 131 points…and gold shot up $25 to a new record, $1043. Investors must be pondering the future. What will the future look like? No one knows. But investors thought they saw things they liked. For one thing, there was the Federal Reserve governor from New York, who [...]

The Eternal Depression

Bill Bonner — Thu, 08 Oct 2009 11:19:53 +0000

pYesterday was another exciting day on Wall Street. The Dow rose 131 points…and gold shot up $25 to a new record, $1043./p pstrongInvestors must be pondering the future./strong/p pWhat will the future look like? No one knows. But investors thought they saw things they liked./p pFor one thing, there was the Federal Reserve governor from New York, who told the world that there was no risk of a rate hike anytime soon. Bill Dudley knows which way the wind is blowing. He said the Fed would hold money policy loose “indefinitely.”/p pstrongIndefinitely is otherwise known as “as long as it takes.”/strong/p pBut as long as it takes for what? Ah…as long as it takes until the economy appears strong again./p pHow long will that be? Ah…maybe#8230;/p

Guest Contribution: The Wisconsin Foreclosure and Unemployment Relief Plan (WI-FUR)

Menzie Chinn — Tue, 06 Oct 2009 05:00:00 +0000

By Morris A. Davis

Today, we're fortunate to have Morris A. Davis, Assistant Professor of Real Estate and Urban Land Economics at University of Wisconsin School of Business, as a guest contributor.

Research by economists inside the Federal Reserve system have shown that two events typically lead homeowners to default on their mortgage (see here). First, the value of the house must be less than the value of the mortgage ("under water"). This is necessary but not sufficient (see here). Second, homeowners must experience a significant disruption and loss of income. The available data suggest there might be a big increase in foreclosures in the immediate future. Zillow estimates that 22 percent of the 50 million homeowners with mortgages are currently under water; unemployment rates are high and are expected to remain high for the next two years.

Why does unemployment lead to a foreclosure when a house is under water? Consider the case of Wisconsin. In Wisconsin, UI benefits are capped at $1,452 per month. According to the 2007 American Community Survey, the average mortgage payment including all mortgages and taxes in Wisconsin is approximately $1,200. If the unemployed make their mortgage payment, they have roughly $63 per week available for food, transportation, and other necessities. After spending down their assets, the unemployed have no choice but default. They cannot sell their house, because they would have to write the bank a check at closing. They cannot make their mortgage payment, because they would have no money left for food.

The Obama Administration's "HAMP" proposal to reduce foreclosures calls for modifying mortgage payments. Mortgage modifications are designed to help borrowers refinance from a "bad" subprime mortgage to a more conventional mortgage. The reason that many legislators and journalists think mortgage modifications are the solution to the foreclosure problem is that the delinquency rate on subprime mortgages is much higher than the delinquency rate on prime mortgages, 12 percent compared to under 3 percent in 2009:Q2.

Although the HAMP plan will help some borrowers, it likely will not help avoid the majority of people facing foreclosure. There are two related reasons for this. First, shown in the table below, in 2009:Q2, 52% of seriously delinquent homeowners have prime mortgages -- so a "bad" mortgage is not the underlying problem. Second, because of the way the HAMP rules are written, the unemployed are essentially ineligible to have their mortgage refinanced. And, the research is quite clear that unemployment is a trigger to foreclosure.

There are two proposals out there that will prevent foreclosures for unemployed homeowners. One plan is from a team of researchers at the Boston Fed (Chris Foote, Jeff Fuhrer, Paul Willen) and Federal Reserve Board (Eileen Mauskopf), the so-called "Boston Fed" plan. The second is from my colleagues Stephen Malpezzi, François Ortalo-Magn&eacute and I here at the Department of Real Estate at the Wisconsin School of Business. We call this the WI-FUR plan. Both plans address the foreclosure problem by providing the temporarily unemployed with temporary assistance. Both plans attempt to mitigate the "moral hazard" problem by specifying that the amount of temporary assistance is independent of the original mortgage amount.

For each unemployed person, the Boston Fed plan (here for details) computes the percentage disruption in income due to unemployment (i.e. the gap between the wage while last employed and the UI benefit), and then pays that percentage of the mortgage directly to the mortgage servicer. This payment could be either a loan or a grant. The loss in income must be demonstrable and significant, at least 25 percent.

The WI-FUR plan (here for details) specifies that all unemployed receiving UI benefits also receive a housing voucher that can be used to pay the mortgage. The housing voucher would be computed such that, on average in each state, homeowners pay 30% of their UI benefits on their mortgage -- the voucher would cover the balance. In Wisconsin, for example, we advocate for an average voucher of about $764. This would make up for the shortfall in a $1,200 mortgage payment if households pay 30% of their UI benefit ($436 = 0.30 × $1,452) towards their mortgage.

You could ask: Why prevent foreclosures? We've known or suspected for some time that foreclosures are costly in terms of time and process (see here); that foreclosures may have "spillover" effects on values of neighboring property (see here); and that foreclosures may affect the well-being of children (see here). But why prevent them now?

People that know me know that I was completely opposed to foreclosure relief in 2007 and 2008. At that time, my view was that homeowners that were being foreclosed on put little down on their property, so they had option value from homeownership with no risk. Further, during the foreclosure process, they lived in the house for free -- no mortgage payment and no taxes. The economic and political environment has changed quite a bit since 2008, and my opinion has changed. Now, I can give two reasons for why, in late 2009, we should implement either the Boston Fed or WI-FUR plan.

First, my opinion is that we experienced two very large (and likely connected) aggregate shocks. I mention this because I want to emphasize that it is possible the foreclosures we’re observing now are not necessarily the result of ex-ante bad or risky decisions by lenders or borrowers, but of decisions that look bad ex-post due to bad luck. The first shock is that house prices have fallen by 30 percent nationwide since the peak in mid-2006. I describe this as a shock because traders appeared to think a big decline in house prices was a possible but low probability event. For example, the "Meltdown" scenario in a Lehman Brothers outlook as of August 2005, assumed to occur with only a 5 percent probability, called for a cumulative decline in house prices of about 15 percent over 3 years: See here. The second shock was the massive recession we just experienced. I describe this as a shock because many economists had become convinced the volatility of major macro aggregates had been cut in half due to the "Great Moderation" -- see here for a recent paper. In a world with a great moderation, the severe recession we just experienced is a very unlikely event. When put together, the large decline in house prices (shock 1) and large increase in unemployment (shock 2) have resulted in an unprecedented surge in foreclosures.

Second, as a society we've committed to spend money to reduce foreclosures. So let’s spend it effectively. The Obama Administration has been authorized to spend $75 billion dollars to try to prevent foreclosures. The Treasury now is spending the money by paying servicers to modify mortgages. This plan might help some people, but it will not address the majority of future foreclosures from unemployed people with prime-rate mortgages. If we want to prevent foreclosures of this group of people, either the Boston Fed plan or the WI-FUR plan will get the job done.

This post written by Morris Davis.

Three Government Reports Point to Fiscal Doomsday

Martin D. Weiss, Ph.D. — Tue, 06 Oct 2009 00:39:26 +0000

When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action. Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty. But when they have full ...

How Russia Sees Iran’s Nuke Threat

Robert Amsterdam — Sat, 03 Oct 2009 16:33:16 +0000

Fred Hiatt of the Washington Post has a new column which digs up a number of quotes from American officials over the years which illustrate how often they have been willing to assume a certain level of rational thinking going...

Four Companies Set to Profit from a Federal Cash Injection

Contrarian Profits — Wed, 30 Sep 2009 20:37:51 +0000

pWhat do strongCisco Systems/strong (Nasdaq: a href="http://www.google.com/finance?q=CSCO" target="_blank"CSCO/a), strongIBM/strong (NYSE: a href="http://www.google.com/finance?q=IBM" target="_blank"IBM/a), strongAT#38;T/strong (NYSE: a href="http://www.google.com/finance?q=T" target="_blank"T/a) and strongIntel/strong (Nasdaq: a href="http://www.google.com/finance?q=INTC" target="_blank"INTC/a) all have in common?/p pThe obvious answer is that they’re four of the most successful technology companies on the planet./p pBut they’re also heavily involved in the modernization plans for America’s “Smart Grid” – a topic I introduced in a previous column./p pMake no mistake, with a decade-long project as monumental as modernizing the country’s “Smart Grid,” the devil is truly in the details. And the Commerce Department released the finer details of the initiative last week./p pUntil now, one of the big problems with the “Smart Grid” was the lack of set standards. Without them, each power company would be free to do as it pleases, resulting in a hodge-podge of#8230;/p

America’s Smart Grid: Four Companies Set to Profit from a Federal Cash Injection

Investment U — Wed, 30 Sep 2009 14:11:12 +0000

America’s Smart Grid: Four Companies Set to Profit from a Federal Cash Injection by David Fessler, Advisory Panelist What do Cisco Systems (Nasdaq: CSCO), IBM (NYSE: IBM), AT&T (NYSE: T) and Intel (Nasdaq: INTC) all have in common? The obvious answer is that they’re four of the most successful technology companies on the planet. But they’re also heavily [...]

Maxwell Tech Focus Shifting – Analyst Blog

Zacks Market Commentaries — Tue, 29 Sep 2009 15:05:55 +0000

Maxwell Technologies Inc.'s (MXWL) steadily rising revenue and improving cost structure is in-line with our expectation of break-even in the final quarter of fiscal 2009. Maxwell Technologies develops, manufactures and markets energy storage and power delivery products for transportation, industrial telecommunications and other applications and microelectronic products for space and satellite applications.

However, its future performance will improve mainly through strong ultracapacitor sales growth. The company generates a significant portion of its revenue from ultracapacitors (43% in the first half of fiscal 2009). In the recently concluded second quarter of fiscal 2009, ultracapacitor sales grew 58% year over year, compared to 34% growth overall. Maxwell's cost structure will also improve due to its gradual shift of production to China .

We are bullish on Maxwell’s ultracapacitor-driven growth story, as demand is expected to rise since key end-markets appear likely to benefit from the government stimulus programs as well as more stringent automotive emissions legislation. The European Union has taken the lead in enacting legislation requiring carbon dioxide emission reduction targets and leveling penalties for vehicles whose emissions exceed the mandated limit.

In the U.S. the Obama Administration is focused on increasing federal investments in greener transportation technologies, and the Chinese government is funding development and production of hybrid and electric public transit vehicles.

Maxwell’s geographically diversified ultracapacitor sales will benefit immensely through steady demand from heavy transportation, wind, braking recuperation and automotive programs.

In the near-term, however, the rate of penetration of ultracapacitor technology into broader markets, higher cost structure for ultracapacitor production and earnings dilutive issuances present downside potential. We maintain a market Neutral recommendation on the shares.
Read the full analyst report on "MXWL"
Zacks Investment Research

Gander Mountain: Going Private, Sending a Message

Andrew Snyder — Mon, 28 Sep 2009 22:10:37 +0000

pI hope the federal government is paying attention. As regulations and costs increase, more companies, like Gander Mountain (NASDAQ:strong/strongstronga href="http://www.google.com/finance?q=gmtn" target="_blank"GMTN/a/strong) are going private. It is not good news for the nation’s vital financial sector. /p pCould this be a sign of things to come? Earlier today, strongGander Mountain (NASDAQ:a href="http://www.google.com/finance?q=gmtn" target="_blank"GMTN/a) /strongannounced its two largest shareholders have made a deal to take the company private./p pIn an economic environment where regulations are increasing by the minute and costs are rising even faster, middle-weight companies are quickly realizing it is better business to buy their shares from the secondary market and go private./p pSure, the move is costing Gander Mountain a pretty penny – a premium of about 35% of Friday’s closing price – but the handful#8230;/p

September 28th CEOcast Weekly Newsletter

QualityStocks — Mon, 28 Sep 2009 21:05:11 +0000

Companies featured in this edition of the newsletter: ACTC, CHIP, CUR, CVM, ENZ, IMUC, IWEB, SRCO, SVUL, XSNX Markets finally snapped their winning streak last week, as weakness in housing markets and durable goods orders led to broad-based declines in all of the major indices. All told, the Dow surrendered 155 points on the week [...]

WFC Revamps Overdraft Policy – Analyst Blog

Zacks Market Commentaries — Mon, 28 Sep 2009 15:23:05 +0000

On Wednesday, Wells Fargo (WFC) became the latest large financial institution to announce a reshuffle in its policy towards overdraft fees.

The bank will eliminate overdraft fees for Wells and Wachovia customers when they overdraw their accounts by $5 or less. Wells will not charge customers more than four overdraft fees per day. In addition, customers will be able to opt out of overdraft coverage. Henceforth, customers can specify that they don't want their transactions authorized into overdraft if funds aren't available to cover the transaction.

Wells Fargo is following the footsteps of other large banks, Bank of America Corporation (BAC) and JP Morgan Chase & Co. (JPM). While JP Morgan has decided to automatically remove all its customers from the overdraft service, and allow customers who want that protection to opt in; BofA and Wells Fargo will leave it to customers to opt out of the overdraft facility.

The nation’s largest banks have been under tremendous political pressure to restrain costly fees and practices. The overdraft shift also comes as leading Democrats are poised to launch a plan on Thursday to hasten the implementation of a law forcing credit card companies to limit fees and charges and give longer notice of interest rate increases.

Carolyn Maloney, chairman of the Joint Economic Committee, and Barney Frank, chairman of the House financial Services Committee, are introducing new legislation so that the rules would come into place on December 1 instead of February next year. Both politicians are concerned that some credit companies appear to be taking advantage of the period before the law comes into force to push up charges.

US banks have already collected a record $38.5 billion in fees for customer overdrafts year-to-date, with the bulk of the revenue coming from the most financially stretched consumers. The median bank overdraft fee has this year risen from $25 to $26 being the first time it has gone up in a recession for more than 40 years.

The Federal Reserve is working on rules on overdraft fees, and rules on customer charges could be a priority of the Obama Administration’s proposed Consumer Protection Agency if approved by Congress.
Read the full analyst report on "WFC"
Read the full analyst report on "BAC"
Read the full analyst report on "JPM"
Zacks Investment Research

Constellation Energy Group Inc. Has Long-Term Potential, But Short-Term Problems

Contrarian Profits — Mon, 28 Sep 2009 15:05:15 +0000

pAs the second-largest provider of electricity to the United States,strong Constellation Energy Group Inc./strong (NYSE: a href="http://www.google.com/finance?q=NYSE%3ACEG" target="_blank"CEG/a) has a tremendous upside. At least, it would if the economy were growing strongly. /p pUnfortunately, that’s not the case. And that means Constellation will have to clear a number of hurdles if it’s going to fulfill its long-term promise.br / Last year, the company bet big on higher energy prices and paid the price dearly when the economy collapsed./p pConstellation’s very high level of debt, with large bond maturities in 2009 and 2012 at that time meant they were flirting with financial disaster. That forced the company into a deal with stronga href="http://www.google.com/finance?q=EPA%3AEDF" target="_blank"Électricité de France SA /a /strong(EDF),strong /strongin which the European energy giant agreed to inject $4.5 billion into Constellation in exchange#8230;/p

Russia Will Disappoint on Iran

Robert Amsterdam — Fri, 25 Sep 2009 21:19:18 +0000

I think that Rob Coalson at RFE/RL makes some good points here. The missile shield was a non-functional fiasco, but the diplomatic missteps which have so severely damaged relations with Eastern Europe are certainly not worth the expected help the...

How the Government is Setting Us Up for a Second Subprime Crisis

Shah Gilani — Wed, 23 Sep 2009 14:43:27 +0000

pIs the government creating another subprime-mortgage bubble?/p pThe first time around, the three-headed federal serpent – the Bush administration, the Treasury Department and the U.S. Federal Reserve – used Fannie Mae (NYSE: a href="http://www.google.com/finance?q=fnm"FNM/a) and Freddie Mac (NYSE: a href="http://www.google.com/finance?q=fre"FRE/a) to “legitimize” trillions of dollars worth of toxic financial waste known as subprime mortgages./p pThe result was the worst financial crisis since the Great Depression – a mess that was global in nature./p pAnd we’re now headed for a repeat performance./p pSome of the players may have changed since the first a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis"subprime-mortgage crisis/a, but the game apparently remains the same. With banks currently unwilling to lend, the new federal triumvirate of the Obama administration, the Treasury and the Fed are trying to inflate the moribund U.S.#8230;/p

Prieur’s readings (September 23, 2009)

Prieur du Plessis — Wed, 23 Sep 2009 08:43:04 +0000

This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Snapshot Observations on the Global Economic Crisis

Robert Amsterdam — Tue, 22 Sep 2009 18:59:51 +0000

CNN Money is running an interesting feature by David Goldman entitled "10 countries, 10 solutions" which details the particularities of the global economic crisis facing 10 key countries. In typical old-media fashion, the layout makes no sense from a user-friendliness...

More US dollar woes ahead

Prieur du Plessis — Thu, 17 Sep 2009 09:40:05 +0000

“The Fed and the Obama administration seem to be pursuing policies that are dollar-negative, and they give no hint of letting up,” said John Mauldin (Thoughts from the Frontline). I share this view and alluded to this in July (see “US dollar about to pop“) when I pointed out that the devaluation of the greenback [...]

GD Wins Air Force Contract – Analyst Blog

Zacks Market Commentaries — Wed, 16 Sep 2009 21:27:50 +0000

General Dynamics Corporation (GD) bagged a $50 million contract from the U.S. Air Force to perform specialized research and use advanced state-of-the-art material technologies or applications in several programs within the survivability portfolio of the Pentagon. The company has significant exposure in survivability programs.

General Dynamics has earlier worked on M1A2 SEP, Abrams Integrated Management (AIM) and Tank Urban Survivability Kit (TUSK) programs. These programs focused on improving the electronics, command-and-control capabilities and armor enhancements for higher crew survivability. General Dynamics finished the first half of fiscal 2009 with a total order backlog of $67.6 billion, a 22.2% rise over the year-ago period. Subsequent to that, the companies haven’t won any significant major contract.

General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. The company operates through four segments: Information Systems & Technology (IS&T), Combat Systems, Marine Systems, and Aerospace.

We view General Dynamics as a well-run company that is likely to continue to deliver on expectations driven by strong revenue growth, margin expansion and cash flow generation. Strong defense outlays should further improve the company’s outlook for shareholders while an increasing funded backlog and an improving balance sheet signal additional positive factors for the company.

However, these are offset by apprehensions over defense spending under the Obama Administration, a bleak scenario for the Gulfstream, risks related to key projects execution and order cancellation of the FCS program. Thus we maintain our market Neutral recommendation on the shares.
Read the full analyst report on "GD"
Zacks Investment Research

Still Squaring the NATO-Russia Circle

Robert Amsterdam — Wed, 16 Sep 2009 18:47:23 +0000

There are a number of media outlets reporting on the most recent NATO-Russia foxtrot, NATO Secretary General Anders Fogh Rasmussen's call for an "open-minded and unprecedented dialogue" with Russia. Personally, I'd first rather just go straight to the source: Listening...

What China Could Do to the Price of Gold

Bill Bonner — Wed, 16 Sep 2009 11:07:03 +0000

pem“I’m Brazilian. I have gold. And I’ve just arrived from Rio richer than anyone#8230;”/em Thus sang one of the characters in an operetta by Jacques Offenbach. But that was in the mid-19 th century. But hey#8230; what goes around#8230; /p pGuess what happened last year? According to a study from Boston Consulting Group, the only area of the world that got richer last year was Latin America#8230; led by Brazil!/p pThe rest of the world got poorer. By 11%, according to BCG. Down in the rum and sun zone, on the other hand, they got 3% richer./p pSo maybe our investments in South and Central America will turn out all right after all./p pMeanwhile, back in the developed world#8230; what’s going on? There are two#8230;/p

President Obama Issues Stern Warning to Wall Street and its “Reckless Behavior”

QualityStocks — Mon, 14 Sep 2009 19:33:01 +0000

We face the fourth quarter with hopes of reform and rebuilding paired with an obvious and earned distrust for the government, Wall Street and the mortgage and banking systems. Between bankruptcies, bailouts and layoffs, some feel that we hit the bottom of the worst economic storm since the Great Depression, and that the next step [...]

No Fear

Bill Bonner — Mon, 14 Sep 2009 18:33:05 +0000

pstrongThis week marks the one-year anniversary of the Lehman bankruptcy./strong The media struggles to say something meaningful about it. Here at the a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a we will not even attempt meaningfulness. We’ll be satisfied with a few snide remarks. /p pWhat is most remarkable about the world a year after Lehman fell is that so little seems to have changed. Even the papers have noticed./p p“A year after Lehman, little change on Wall Street,” says the headline on today’s International Herald Tribune. “Backed by huge U.S. government guarantees, the biggest banks have re-structured only around the edges. Employment [on Wall Street] has fallen just 8% since last September.”/p p“Obama to push banking overhaul,” says another headline at the Telegraph. Yes, the pols will try to convince#8230;/p

Prieur’s readings (September 14, 2009)

Prieur du Plessis — Mon, 14 Sep 2009 07:08:30 +0000

This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting. Please also add the links to any other worthwhile articles you would like to share to the comments section.

The Two Reasons it’s Time to Short U.S. Stocks

Contrarian Profits — Wed, 09 Sep 2009 17:30:54 +0000

pThe stock market is up 51% from its March 9 lows. The leading economic indicators have turned sharply positive, a href="http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1"showing gains for each of the last four months/a. Manufacturing is on the rebound. And banks are promising to pay record bonuses, as their earnings have rebounded./p pWith this recent rush of upbeat economic news, it’s no wonder commentators are trumpeting the rebound of the U.S. economy./p pBut I think it’s time to short U.S. stocks./p pShocked?/p pDon’t be./p pWhat most experts see as a strengthening U.S. rebound, I see as an increasingly dangerous “false dawn” – for these two key reasons:/p ul type="disc" liAn overly expansive monetary policy that’s almost certain to spawn inflation./li liAnd a record-level budget deficit that will cause interest rates to spike, crimping economic growth./li /ul h3A#8230;/h3

The Two Reasons it’s Time to Short U.S. Stocks

Martin Hutchinson — Wed, 09 Sep 2009 15:11:43 +0000

$172,000 Payday First subscribers to Martin Hutchinson’s new advisory service were able to collect $13,301 in guaranteed cash in record time. Now, Martin’s using the same “guaranteed payment” strategy to help new subscribers collect $172,000. He explains how here. The stock market is up 51% from its March [...]

Oil Sands Pipeline Approval from Canada into the U.S.

Stuart T. Smith — Tue, 08 Sep 2009 13:44:20 +0000

Sep. 8, 2009 (Business Wire) — Cobra Oil & Gas Company (OTCBB: CGCA) (hereafter “Cobra”) is pleased to notify an approval by the Obama administration for a pipeline to carry oil-sands fuel from Canada into the U.S., sending a positive economic signal in a difficult economic period. The pipeline will amass 1000 miles and is [...]

Lockheed Wins Air Force Contract – Analyst Blog

Zacks Market Commentaries — Fri, 04 Sep 2009 21:40:14 +0000

Lockheed Martin Corporation (LMT) bagged a $421.1 million contract from the U.S. Air Force for upgrading the Air Force’s command and control center, Weapon System Integrator. The company will provide systems engineering, integration, modernization, maintenance, management and contingency support.

In recent times, Lockheed Martin has witnessed the cancellation of quite a few prominent programs such as the TSAT Mission Operations System (TMOS) contract, F-22 Raptor program and the VH-71 Presidential Helicopter (VH-71) program. Lockheed’s high-cost platform programs were the prime targets of the Obama Administration for budget cuts.

The addition of $421.1 million would boost the beleaguered backlog of the company, which reduced to $79.2 billion after the first half of the fiscal 2009 from $80.9 billion after year-end fiscal 2008.

Lockheed Martin remains a key player within the military space and continues to benefit from strong defense spending. The company’s customer base includes the U.S. government, foreign governments and other commercial buyers.

The company’s traditional defense focus appears strong, with increasing interest from domestic and international customers. In addition, management intends to explore strong business opportunities beyond the traditional defense market, specifically in the areas of civil, governmental and commercial space businesses.

Going forward, we believe Lockheed Martin has significant upside potential based on strong defense outlays throughout 2009–10, above-industry average return-on-invested-capital, and expanding product lines. However, these are offset by risks related to key projects execution, fate of high cost platform programs, lower top-line results in the Aeronautics segment, higher pension liability, and lower delivery of F-16s in recent times.

We maintain our market Neutral recommendation on the shares.
Read the full analyst report on "LMT"
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Do You Suffer From This Common Investing Mistake?

Contrarian Profits — Thu, 03 Sep 2009 16:26:34 +0000

pWe received a letter snooty letter recently accusing us of confirmation bias. Maybe we are only capable of seeing the bearish side of the story?/p pAccording to good old Wikipedia, confirmation bias is “an irrational tendency to search for, interpret or remember information in a way that confirms one#8217;s preconceptions or working hypotheses.” Put simply, it means you look for information that agrees with your own perspective./p pIn our case, we guess that means ignoring idiots like Paul Krugman, who tells us that we can spend our way out of a depression and the do-gooders in the Obama administration, who tell us that everything will be okay and that we’re about to witness a miraculous V-shape recovery. (Just like when President Hoover#8230;/p

The U.S. Housing Market’s False Dawn

Martin Hutchinson — Tue, 01 Sep 2009 18:10:43 +0000

Why Did These Companies Cream the S&P 500? Is the U.S. housing market truly at a turning point, as investors seem to increasingly believe? Or is this actually a false dawn, meaning that there are problems and pain ahead for those who turned bullish too soon? New home sales jumped almost 10% in July, while the Case-Shiller [...]

More Baby Steps For A German Economic Recovery

Contrarian Profits — Tue, 01 Sep 2009 16:00:46 +0000

pGerman unemployment falls! RBA disappoints the markets#8230; China to buy Canadian company#8230; ISM to print positive? And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Terrific Tuesday to you! And Welcome to September! Well#8230; Here#8217;s a thought to get our engines started this morning#8230; a href="http://www.contrarianprofits.com/articles/author/bill-bonner/" class="alinks_links"Bill Bonner/a of the a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a ( www.dailyreckoning.com )had this to add to my ranting about our National Debt going to over $20 Trillion in the next 10 years, due to deficit spending#8230;/p p#8220;The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years – and that number is based on a recovery! Imagine what will happen if the economy doesn’t recover?#8221;/p pNow, that#8217;s a nice comforting thought to start our day right? NOT! WAKE UP! Morning has broken, and#8230;/p

South African interest rates could be too high

Prieur du Plessis — Tue, 01 Sep 2009 09:22:13 +0000

By Cees Bruggemans, Chief Economist FNB Let us for a change take somebody at his word. Larry Summers, for instance. Economic advisor to US President Obama, Larry has been sending signals that could well shape also us in rather fundamental ways in coming years. It could mean the Rand might be forced stronger [...]

A New Model for the World Economy

Bill Bonner — Mon, 31 Aug 2009 19:33:19 +0000

pActually, we haven’t gotten to Bedford Springs yet. We’re still sitting in the airport lounge in Paris. strongSummer is over./strong It’s back to work…12 hours a day…just like we’ve worked for the past 39 years./p pWhen we were in college we had no money. In the summer we had to work two jobs to try to save enough cash to continue. One summer, we worked in a boatyard in Annapolis early in the morning…then, we did an evening shift painting television towers. Painting the towers was such dangerous work our poor mother begged us to quit. But the money was good – $5.25 an hour – so we had to keep at it. More about that in a minute…/p pWe’ve only got a#8230;/p

RA’s Daily Russian News Blast – August 31, 2009

Robert Amsterdam — Mon, 31 Aug 2009 07:41:49 +0000

TODAY: NATO head upbeat on relations with Russia; Medvedev looks to imams for help with Caucasus Islamic insurgents; suggests a TV channel. Russia on the defensive regarding WW2; 70th anniversary of its start to prove a diplomatic minefield? St...

$9 trillion– what, me worry?

James Hamilton — Fri, 28 Aug 2009 13:58:02 +0000

Paul Krugman may not be that concerned by the Obama administration's new projection that the unified federal budget deficits will sum to $9 trillion dollars over the next 10 years. But I am.

Here's the argument Paul Krugman gave for why $9 trillion maybe isn't as huge a sum as it sounds:

even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s.

Political Math (hat tip: Russ Roberts) takes a closer look at Paul's first comparison:

implicit in his observation is the concept that since we did fine after WWII, we'll do fine now. But the years after WWII saw drastic reductions in the inflation-adjusted debt driven by drastic reductions in spending. Mr. Krugman points to no similar possibility in the post-Obama world.... Back in 1945, at the height of the spending that saw our national debt rise so dramatically, entitlement spending and interest on the national debt made up a meager 5% of our total budget.

Source: Political Math.

And whereas in 1945 Americans could reasonably look ahead to a huge decrease in military expenditures, in 2009 when I look ahead what I see is a looming increase in federal medical expenditures.

I also believe it is relevant to compare these deficits not just with GDP but also with current federal tax revenues. $1 trillion is approximately the total personal income tax receipts of the federal government in 2006. My preferred metric for what each additional trillion dollars would require from me personally is to take what I paid in federal income taxes in 2006 and double that amount. To pay off $9 trillion, I'd have to do that for 9 years.

Unfortunately, $9 trillion may not be the whole iceberg. Diane Lim Rogers highlights the Concord Coalition estimate that current policy would imply a cumulative $14.4 trillion deficit over the next ten years.

You also can't ignore the off-balance sheet federal liabilities, such as the $5 trillion in debt and loan guarantees from Fannie and Freddie. A quarter trillion dollars worth of those loans we've guaranteed are currently nonperforming. That's just Fannie and Freddie-- doesn't include FHA, FDIC, Federal Reserve,...

If the government tries to double taxes on people like me, it's in real political trouble. If it doesn't try to double taxes on people like me, it's in real solvency trouble.

It looks like we may have a problem here.

General Dynamics Bags Army Order – Analyst Blog

Zacks Market Commentaries — Thu, 27 Aug 2009 17:15:38 +0000

General Dynamics (GD) recently said that its unit, General Dynamics Armament and Technical Products, has received a $100 million contract from the US Army TACOM-Rock Island Ill division. The contract for supplying M2 flex machine guns is of indefinite delivery-indefinite quantity (IDIQ) nature and is scheduled to be completed by April 2012.

The M2 flex machine gun is a belt-fed, recoil-operated, air-cooled, right-hand/left-hand feed compatible, crew-served arm and is suited for both offensive and defensive operations. The guns will be manufactured at the company’s Saco, Maine facility and its technology center in Burlington, Vermont will administer program management.

General Dynamics is likely to continue meeting investor expectations backed by strong revenue growth, margin expansion and cash flow generation. The recent acquisitions of Jet Aviation and Axle Tech, increased Navy spending and resumption of the Pander program for the Czech Republic will provide near-term upside potential despite apprehensions about defense spending under the Obama Administration, steady ramp down of BOWMAN program and the bleak Gulfstream scenario.

Shares of General Dynamics closed at $58.73 on Wednesday, trading at 9.2X trailing 12-month EPS. We maintain our Outperform recommendation on the stock.

Read the full analyst report on "GD"
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Healthcare Truths

Investment U — Wed, 26 Aug 2009 21:18:54 +0000

Healthcare Truths Ryan Cole, The Investment U Research Team If there’s one subject that has a hysterical debate surrounding it, it’s healthcare. The right is accusing the left of euthanizing little old ladies. The left is accusing the right of coldly killing the poor. And somehow poor Stephen Hawking would be dead if left to [...]

Maxwell: Future is Ultracapacitors – Analyst Blog

Zacks Market Commentaries — Wed, 26 Aug 2009 19:23:40 +0000

Maxwell Technologies Inc.'s (MXWL) steadily rising revenue and improving cost structure is in-line with our expectation of break-even in the final quarter of fiscal 2009. Maxwell Technologies develops, manufactures and markets energy storage and power delivery products for transportation, industrial telecommunications and other applications and microelectronic products for space and satellite applications.

However, its future performance will improve mainly through strong ultracapacitor sales growth. The company generates a significant portion of its revenue from ultracapacitors (43% in the first half of fiscal 2009). In the recently concluded second quarter of fiscal 2009, ultracapacitor sales grew 58% year over year, compared to 34% growth overall. Maxwell's cost structure will also improve due to its gradual shift of production to China.

We are bullish on Maxwell’s ultracapacitor-driven growth story, as demand is expected to rise since key end-markets appear likely to benefit from the government stimulus programs as well as more stringent automotive emissions legislation. The European Union has taken the lead in enacting legislation requiring carbon dioxide emission reduction targets and leveling penalties for vehicles whose emissions exceed the mandated limit.

In the U.S. the Obama Administration is focused on increasing federal investments in greener transportation technologies, and the Chinese government is funding development and production of hybrid and electric public transit vehicles.

Maxwell’s geographically diversified ultracapacitor sales will benefit immensely through steady demand from heavy transportation, wind, braking recuperation and automotive programs.

In the near-term, however, the rate of penetration of ultracapacitor technology into broader markets, higher cost structure for ultracapacitor production and earnings dilutive issuances present downside potential. We maintain a market Neutral recommendation on the shares.
Read the full analyst report on "MXWL"
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United Technologies Trim F-35 – Analyst Blog

Zacks Market Commentaries — Wed, 26 Aug 2009 16:00:57 +0000

United Technologies Corp.'s (UTX) Pratt & Whitney unit recently announced that it was investing substantially to lower costs for the F-35 engine in the longer term. Of late, the company has been working extensively with the government in this respect.

The measures undertaken by the company include engineering changes, which might require government investment in some cases, extensive efforts to cut supplier costs and improve the production process of engines.

The estimated price for Pratt engine was slated to rise to $8.3 million per engine from $6.7 million, the biggest increase since 2001.

While the company’s efforts could result in prices dropping below the third lot of low-rate production engines, it would not be as low as the price after production of 250 engines.

Pratt & Whitney is trying to improve the quality of certain engine parts but the overall acceptance level is currently around 97%. Certain parts like the fan blades and turbines are particularly difficult to manufacture and result in a lower acceptance rate of around 70% to 80%.

United Technologies is closely following the ongoing argument between the Obama administration and the Congress over the funding of an alternate F-35 engine being developed by General Electric Co. (GE) and Britain’s Rolls-Royce Group Plc.

United Technologies was incorporated in Delaware in 1934. The company provides high-tech products and services to the building systems and aerospace industries worldwide.

We currently have a Neutral recommendation on United Technologies.

Read the full analyst report on "UTX"
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Employment Outlook Still Shaky

Michael E. Brisky — Wed, 26 Aug 2009 15:10:00 +0000

Employment numbers, while their decline has moderated, still haven't recovered. This will likely take some time and will weigh heavily on the economy no matter how much other span class="blsp-spelling-corrected" id="SPELLING_ERROR_0"indicators/span improve. Not many people seem to be covering this today, but the White House did release some interesting data yesterday (a href="http://www.bloomberg.com/apps/news?pid=20601087amp;sid=aNaqecavD9ek"span class="blsp-spelling-error" id="SPELLING_ERROR_1"bloomberg/span/a):br /br /blockquoteU.S. a href="http://www.bloomberg.com/apps/quote?ticker=USURTOT%3AIND" t_delay="50" t_width="110" t_bgcolor="#ddedd9" t_fontface="Verdana,sans-serif" t_fontcolor="#000000" t_static="true" t_above="true"unemployment/a will surge to 10 percent this year and the budget a href="http://www.bloomberg.com/apps/quote?ticker=FDEBTY%3AIND" t_delay="50" t_width="110" t_bgcolor="#ddedd9" t_fontface="Verdana,sans-serif" t_fontcolor="#000000" t_static="true" t_above="true"deficit/a will be $1.5 trillion next year, both higher than previous Obama administration forecastsbr /because of a recession that was deeper and longer than expected, White House budget chief a href="http://search.bloomberg.com/search?q=Peter+Orszagamp;site=wnewsamp;client=wnewsamp;proxystylesheet=wnewsamp;output=xml_no_dtdamp;ie=UTF-8amp;oe=UTF-8amp;filter=pamp;getfields=wnnisamp;sort=date:D:S:d1" t_delay="50" t_width="110" t_bgcolor="#ddedd9" t_fontface="Verdana,sans-serif" t_fontcolor="#000000" t_static="true" t_above="true"Peter span class="blsp-spelling-error" id="SPELLING_ERROR_2"Orszag/span/a said.br /br /The Office of Management and Budget forecasts a weaker economic recovery than it saw in May as the gross domestic product shrinks 2.8 percent this year before expanding 2 percent next year, according to the administration’s mid-year economic review issued today.br /br /The Congressional Budget Office, in a separate assessment, forecast the economy will grow 2.8 percent next year. Both see the GDP expanding 3.8 percent in 2011.br /br /“While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.”br //blockquotebr /br /Also, a little span class="blsp-spelling-corrected" id="SPELLING_ERROR_3"tidbit/span from the Fed's Fisher today (a href="http://www.reuters.com/article/newsOne/idUSTRE57P38Z20090826"span class="blsp-spelling-error" id="SPELLING_ERROR_4"reuters/span/a):br /br /blockquoteDallas Federal Reserve President Richard Fisher said on Wednesday the U.S. economy is poised for a slow, sluggish recovery as it emerges from a painful recession.br /br /"We're beginning to see indicators that we're coming out of this," he said in an interview with the Dallas Morning News."I think it will be a while before businesses rehire or increase pay," he said. Consumers are also likely to be cautious before starting to spend again, said Fisher, who is not a voter on the Fed's interest rate setting panel.br /br /"They're all going to be very, very conservative on that front until they feel comfortable that we have a global economy that is proceeding," he said. "I think that will take some time." Fisher said he believes the worst declines may be over for residential investment, inventories, exports, and possibly consumption.br //blockquotediv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/819581243324579563-7528990533140026835?l=briskycapital.blogspot.com'//div

Another Sad Day For The Economy: Bernanke Re-Nominated By Obama

Steve Warshaw — Wed, 26 Aug 2009 04:31:04 +0000

A big piece of not so surprising news was released today; president Obama has decided to nominate Ben Bernanke for a second term as fed chairman. This is a sad day indeed, as Mr. Bernanke’s financial shenanigans have caused many economic analysts and market pundits much consternation. Frankly, Mr. Bernanke has as been outright dishonest about his financial policy. He has continuously revoked Freedom of Information Act (FOIA) requests by several news organizations claiming that the Federal Reserve is above the law, and that the FOIA doesn’t apply to him ...

Two Companies Taking Advantage of the Growing Deficit

Andrew Snyder — Tue, 25 Aug 2009 20:43:48 +0000

pWashington is spending this country towards its demise. These two companies will hep you put your hard-earned tax dollars back in your pockets. /p pWhat does the government have up its sleeves this time? While the president is on vacation (playing golf with shady business connections), the White House put out a report detailing how the economy is much worse off than it originally anticipated./p pOf course, Wall Street shrugs it off, virtually saying, “Washington was wrong? What else is new?”/p pMost intriguing, or alarming, is the White House’s latest deficit predictions. Instead of the $7 trillion estimate predicted in May, our executive branch is now expecting a gap of $9 trillion./p pIt turns out the notion of higher taxes really does decrease revenues./p pWith#8230;/p

Seniors Beware: Deflation Hits Social Security

Contrarian Profits — Tue, 25 Aug 2009 19:38:32 +0000

pHere’s an interesting credit crisis byproduct: The 50 million current Social Security recipients probably won’t see any extra SS income until 2012. In fact, millions on the government dime might see their monthly checks shrink./p pIt all boils down to COLA — the government’s cost-of-living adjustment. Since consumer prices are — in theory, at least — deflating, the Social Security administration announced this weekend that they do not plan on a COLA for the next two years. Should that forecast come true, it’ll be the first time that’s happened since at least 1975, when automatic increases were first implemented./p p style="text-align: center;"/p pThat will probably equate to a net monthly loss for millions of beneficiaries. Medicare prescription drug premiums are on track to bump up#8230;/p

First Solar (Nasdaq: FSLR): Stock of the Day

Investment U — Tue, 25 Aug 2009 19:01:24 +0000

First Solar (Nasdaq: FSLR): Stock of the Day by David Fessler, Advisory Panelist Competition – as I used to say to my sales force – has a way of keeping competitors honest. The real beneficiary of a healthy business duel, however, is the customer. Particularly when the competition gets down to price. Nowhere is that more [...]

The Calm Before the Financial Storm

Bill Bonner — Tue, 25 Aug 2009 18:54:47 +0000

Is the rally over? Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks. The Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday…to close at $954. And the dollar is killing us softly…sinking to $1.43 [...]

Are American Homes Affordable? – Analyst Blog

Zacks Market Commentaries — Tue, 25 Aug 2009 17:10:58 +0000

In order to address the key problems of the current financial crisis and restore the economy, the Obama Administration introduced the Home Affordable Modification Program (HAMP) earlier this year. The program has pledged $75 billion to retain the homes of 3 to 4 million Americans by preventing avoidable foreclosures.

According to the program, mortgage servicers who have received federal aid from the Troubled Asset Relief Program (TARP) need to modify the loan terms to help the housing loan borrowers avoid foreclosures.

As part of their role, the servicers requires to lower monthly payments for borrowers at risk of default by lengthening repayment terms, lowering interest rates and forbearing outstanding principal, along with other methods. Also, servicers can receive a $1,000 fee for each modification completed under the program.

According to the National Mortgage News, Bank of America Corporation (BAC) is the biggest U.S. mortgage servicer, followed by Wells Fargo (WFC), JP Morgan Chase & Co. (JPM) and CitiMortgage, Inc., a part of Citigroup Inc. (C).

The Treasury has published its first monthly service report early in August disclosing the progress of HAMP. According to that report, J.P. Morgan Chase is one of the better performers, with a participation rate of 20% of its eligible loan modifications since the implementation of the program in March. CitiMortgage’s participation rate was 15%.

However, neither Bank of America nor Wells Fargo & Co. has performed well in modifying loans for struggling homeowners as their participation rates were 4% and 6%, respectively. However, Saxon Mortgage Services, a subsidiary of Morgan Stanley (MS), has put 25% of its delinquent loans into modifications.

Nevertheless, foreclosures and delinquencies are still on the rise and the Treasury is increasing its pressure on the mortgage companies to accelerate their tempo in modifying loan terms for the eligible borrowers.
Read the full analyst report on "JPM"
Read the full analyst report on "BAC"
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Obama Backs Big Ben – Analyst Blog

Dirk Van Dijk — Tue, 25 Aug 2009 16:05:16 +0000

President Obama has decided to reappoint Fed Chairman Ben Bernanke to a second term. On balance, I think this is the right move. In many ways, his reappointment makes more sense than his original appointment.

The worst marks against Bernanke’s record come from when he was serving on the Fed board under Alan Greenspan, did nothing to stop the bubble forming and was almost willfully blind in seeing it coming. While as Chairman, he was a little slow off the mark in addressing the crisis, once engaged he took the needed steps to pull the world back from the brink of the abyss.

The role of Fed Chairman has two major components. First and foremost, he (along with the board of Governors) is responsible for monetary policy. This is the raising and lowering of the Fed Funds rate and regulating the overall money supply.

On that front, I think he has done an excellent job under the most trying of circumstances. He faced a raging wildfire of deleveraging in the financial system after the demise of Lehman Brothers and the near collapse of several other major financial institutions, including American International Group (AIG), Fannie Mae (FNM), Freddie Mac (FRE), Merrill Lynch -- now part of Bank of America (BAC) and Citigroup (C).

He responded by quickly lowering the Fed Funds rate to almost zero, and then going a few steps further by engaging in quantitative easing, or buying mortgage-backed securities and long-term T-notes. These actions dramatically increased the size of the Fed balance sheet and with it the size of the monetary base. He responded with a slew of innovative alphabet soup programs, such as the TALF program, to stabilize the system.

At the core of the problem is that deleveraging dramatically slows the velocity of money, or the rate at which it moves from one hand to another. Banks want to hold onto as much cash as possible and do not want to lend it out.

Since nominal GDP can be defined as the supply of money times the rate at which it turns over, if the money supply is not increased, then GDP will fall precipitously. This comes from the basic monetarists equation of M*V = P*Q, where M is the money supply, V is the velocity, P is the price level (inflation) and Q is the quantity produced (real output).

Once engaged, Bernanke saw the scope of the problem and unleashed a fire hose of liquidity on the problem. While the economy is clearly not in good shape, I shudder to think about the condition we would be in had he not taken these actions. Most people fail to appreciate just how close we came to financial Armageddon last fall. It was the economic equivalent of the Cuban Missile Crisis.

Sopping up all that liquidity is going to be extremely tricky, and the timing is going to have to be just right. If it is removed too soon, then the economy will slip right back into its downward trajectory.

The actions of the Fed prevented a second Great Depression, but that does not mean the threat has totally disappeared, just that the medicine is working. Stopping the medicine too soon would cause a relapse.

The best example of this in history was in the 1930’s. Few people realize that the greatest growth in GDP and industrial production in U.S. peacetime history was from 1933 through 1936. Unfortunately, worried about the potential for inflation and unprecedented budget deficits, both Monetary and Fiscal policy turned concretionary in 1937, resulting in a very nasty recession, a relapse that took WWII to cure.

On the other hand, if velocity starts to pick up and all that monetary base is still out there, then the movement on the other side of the equation will be as much or more from the P, inflation, as it is from the Q, a pick up in real economic activity. If Bernanke does not act quickly enough, inflation could easily return to mid-1970’s levels or worse.

Bernanke is betting that right now real activity is depressed enough that when V starts to pick up, the bulk of the adjustment will be in real output, or Q. With capacity utilization at near record lows, there is a very good justification for this view.

Certainly recent inflation reports have been not been on the too-hot side. Heck, we just saw the biggest year-over-year drop in producer prices on record! Changing horses in midstream is not a good idea, and until this river of liquidity is removed, we will not get to the other side.

The other major role of the Fed Chairman is to be one of the most important bank regulators. Here I would give him much weaker marks. The banks acted outrageously leading up to the crisis. They used taxpayer-backed deposits and effectively went to Las Vegas with them. Their casino of choice was highly leveraged bets on exotic forms of mortgage-backed securities.

Another favorite table game were derivatives, most notably Credit Default Swaps (CDS) which were essentially life insurance contracts on companies. When they were winning the bets, they paid out bonuses that were beyond lavish. They did not set aside sufficient reserves for when the bets turned bad.

The Fed, along with the Treasury, simply threw money at the banks with very few strings attached. The taxpayer got very little in return. This was one of the greatest transfers of wealth -- welfare, if you will -- in human history. It did not go to the poor or the sick; it went to the wealthy and the powerful. In the process, it set up a moral hazard problem of epic proportions.

Bankers now know that they can make huge bets, and if they lose, the taxpayer will cover them. If they win, they get to keep it all. This will encourage banks and other financial institutions to be even more irresponsible in the future.

An overhaul of the financial regulatory structure would help, and the recent proposals by the Obama Administration are a decent first step in that regard. Unfortunately, the proposals are more likely to be watered down in Congress than strengthened. This is exactly the sort of issue where lobbyists hold the most sway -- dry and complicated issues where a very powerful group has a huge interest in the outcome.

The net result is that down the road -- not next year or the year after, but maybe in a decade -- we will face another massive crisis in the financial system. And where the actions of the last administration with regard to the banks were beyond scandalous, the actions of the current administration towards the banks have been a huge disappointment. "Change we can believe in" has, at best, become change around the edges.

In his second term, Bernanke will have to become a much tougher regulator. Part of the regulatory reform would put even more power in the hands of the Fed as a systemic risk regulator. I agree that such a regulator is needed, and the Fed is one of the two obvious candidates for the job (the other being the FDIC).

The opposition the Fed has shown in giving up part of its regulatory power -- the consumer protection part -- is extremely disappointing, and smacks of more interest in bureaucratic turf than the interests of the American people or the economy. The Fed has done a lousy job in protecting the consumer from predatory practices at the banks, and a separate agency is desperately needed.

The experience of Alan Greenspan should warn us loudly about the lionization of a Fed Chairman. For most of his tenure, Greenspan was lionized as the “Maestro." Now it is clear that he truly was a failure whose actions led to the near total collapse of the entire world economy.

Thus, I have no desire to lift Ben Bernanke up to Mount Olympus. Still, given his excellent handling of monetary policy during the most difficult of times, Bernanke deserves to finish the job he started, and Obama is making the right move in reappointing him.
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Ben’s Back, And So is Real Estate

Investment U — Tue, 25 Aug 2009 14:22:38 +0000

Ben’s Back, And So is Real Estate by The Investment U Research Team When someone recently told us that the Obama administration would replace Federal Reserve Chief Ben Bernanke we almost all but laughed. Our logic was simple, politics aside; if Obama had replaced Bernanke it would have sent a signal to the markets that we [...]

Home Sales Will Struggle to Rebound Without Tax Credit Extension

Contrarian Profits — Mon, 24 Aug 2009 23:27:27 +0000

pA rise in existing home sales last month shows things are getting better in the U.S. housing market, but the still-dire unemployment situation and the looming possibility of a a href="http://www.moneymorning.com/category/jobless-recovery/" target="_blank"jobless recovery/a may halt the rally by the end of the year. That makes the extension of an $8,000 tax credit for first-time homebuyers imperative./p pa href="http://www.realtor.org/files/research/2c6627a8ebdeb5359da50bb99ea0c172/release.htm" target="_blank"Existing home sales rose 7.2% to a 5.24 million annual rate/a in July, the most since August 2007 and the fourth straight month the figure increased, the National Association of Realtors (NAR) said Friday. Year-over-year sales grew 5%, the increase since September 2007, just before the markets came crashing down the following month./p p“The housing market has decisively turned for the better,” said NAR chief economist Lawrence Yun. “A combination#8230;/p

In the Race for a U.S. Economic Rebound, Growing Debt and Budget Deficits Remain the Biggest Possible Roadblock

Contrarian Profits — Mon, 24 Aug 2009 22:33:22 +0000

pEven as investors get more and more bullish about the outlook for the U.S. economy, the economy’s underlying foundation continues to erode./p pIn a report to be released this week, the Obama administration will boost its 10-year projection for the federal budget deficit to about $9 trillion – an increase of roughly $2 trillion, or 29%, from its prior projection, strongemFox News/em/strong reported over the weekend, citing a source from the a href="http://www.whitehouse.gov/omb/" target="_blank"Office of Management and Budget/a (OMB)./p pThe new cumulative deficit projection – for 2010-2019 – replaces the a href="http://www.foxnews.com/politics/2009/08/21/official-obama-increase-year-deficit-trillion/?test=latestnews#38;test=health" target="_blank"administration’s previous estimate of $7.108 trillion./a Changes in budget projections – whether they result in a surplus or a deficit – are often refined as economic conditions change. This new projection was necessary because the recession has#8230;/p

The Future Will Come

Bill Bonner — Mon, 24 Aug 2009 18:39:50 +0000

pIs the rally over? Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks. /p pThe Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday#8230; to close at $954. And the dollar is killing us softly#8230; sinking to $1.43 per euro on Friday./p pStocks and oil are at their highest levels so far this year. With such profits at hand people figure they don’t need the dollar. Investors run to the safety of the greenback when financial storms approach. But now#8230; they think it will be clear sailing./p p“Worlds bankers suggest rebound may be under way,” says a headline at the New#8230;/p

Zacks Analyst Blog Highlights: Bristol-Myers Squibb, Amgen, Genzyme, Aetna and United Health – Press Releases

Zacks Market Commentaries — Mon, 24 Aug 2009 13:30:33 +0000

For Immediate Release

Chicago, IL – August 24, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bristol-Myers Squibb (BMY), Amgen (AMGN), Genzyme (GENZ), Aetna (AET) and United Health (UNH).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Friday’s Analyst Blog:

Healthcare Reform - Potential Winners

Regardless of what you think about the drug companies, they are not going anywhere. The pharmaceutical lobby has made certain that it has a seat at the table and it seems probable that any new laws will benefit them. Even though some concessions will be made, the Obama Administration has quietly signaled a willingness not to pursue the most beneficial cost-saving strategies.

Potential winners not only include large drug companies like Bristol-Myers Squibb (BMY), but also biotechs such as Amgen (AMGN) and Genzyme (GENZ).

Despite talk about a public option, the insurance companies are not going quietly into the night. Not only do these companies have a large number of lobbyists, they are also major employers. This makes dismantling the current system very unrealistic and extremely expensive.

Even if the insurers are forced to make big concessions, they could potentially gain millions in new members. Plus, any reduction in medical costs should ultimately help their bottom lines.

Potential winners include Aetna (AET) and United Health (UNH).

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

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In Defense Of Securitization: Why The Model Is Sound, And Will Further Spread Through Developing Economies

Jason G. Wulterkens — Sun, 23 Aug 2009 02:31:45 +0000

The following appeared in the August edition of Business Diary Botswana. Right now I find myself fascinated by the role that securitization and a mature credit derivatives market will ultimately play in frontier economies; as J.P. Morgan once penned, “credit derivatives allow even the most illiquid credit exposures to be transferred to the most [...]

Bernanke Speaks at Jackson Hole – Analyst Blog

Dirk Van Dijk — Fri, 21 Aug 2009 18:24:41 +0000

In a long speech to the annual Kansas City Fed gathering at Jackson Hole, Wyoming, Fed Chief Ben Bernanke gave a history lesson about the recent financial crisis. It is worth reading in its entirety since it reminds us of just how close we came to absolute catastrophe.

He recounts the demise of Lehman Brothers and the decisions to bail out Fannie Mae ([/url]), Freddie Mac ([url=http://www.zacks.com/stock/quote/fre]FRE) and American International Group (AIG), as well as the shotgun marriages of Bank of America (BAC) with Merrill Lynch and J.P. Morgan (JPM) with Washington Mutual.

The full speech can be read here: http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm.

While most of the speech focused on the recent past, he gave the following assessment of the current situation:

“Overall, the policy actions implemented in recent months have helped stabilize a number of key financial markets, both in the United States and abroad. Short-term funding markets are functioning more normally, corporate bond issuance has been strong, and activity in some previously moribund securitization markets has picked up.

"Stock prices have partially recovered, and U.S. mortgage rates have declined markedly since last fall. Critically, fears of financial collapse have receded substantially. After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.

"Notwithstanding this noteworthy progress, critical challenges remain: Strains persist in many financial markets across the globe, financial institutions face significant additional losses, and many businesses and households continue to experience considerable difficulty gaining access to credit.

"Because of these and other factors, the economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels."

I have to agree with his basic assessment that the economy is stabilizing, but that the recovery will be exceptionally anemic. As a central banker, he is obligated to speak in soft tones and not say anything that has the potential to alarm markets. If he were back teaching at Princeton, he would probably use stronger language.

Historically, sharp downturns are followed by sharp and strong recoveries. That is not likely to happen this time around. Still, we have seen some encouraging signs, most recently the pick-up in existing home sales and the tentative rebound in industrial production.

These signals probably mean that the NBER will eventually say that the recession ended around now. They will not get around to doing so until perhaps the first quarter of next year, just as they did not tell us the recession started in December of 2007 until November of 2008, when any fool could tell we were in a recession.

Bernanke only touched lightly on what was likely going forward and did not really address how the programs of the last year will be unwound -- the timing of which will be extremely difficult. If the Fed acts too quickly, we could easily be back where we were last fall. If it waits too long, inflation expectations will rise, and given the huge amount of excess reserves the Fed has injected into the system, inflation could rapidly get out of control.

Some insight into this timing would have been nice in this speech, but I didn’t find it. Still it was a useful history lesson. Here is his conclusion:

“Since we last met here, the world has been through the most severe financial crisis since the Great Depression. The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge.

"As severe as the economic impact has been, however, the outcome could have been decidedly worse. Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal and financial policies around the world have been aggressive and complementary.

"Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk. We cannot know for sure what the economic effects of these events would have been, but what we know about the effects of financial crises suggests that the resulting global downturn could have been extraordinarily deep and protracted.

"Although we have avoided the worst, difficult challenges still lie ahead. We must work together to build on the gains already made to secure a sustained economic recovery, as well as to build a new financial regulatory framework that will reflect the lessons of this crisis and prevent a recurrence of the events of the past two years. I hope and expect that, when we meet here a year from now, we will be able to claim substantial progress toward both those objectives."

The effort the build an new regulatory framework is going to be critical, and is something that the public has to be aware of. Since it is a highly complex and difficult subject, it is just the sort of thing where lobbyists can have the greatest influence.

Already the effort to create a new agency focused on consumer protection from abusive financial products seems to be floundering under intense opposition from the banking lobby. The country did an enormous favor to the banking industry last year, but in the final analysis it was in the public interest to do so (as a general proposition of stepping in, the actual implementation was FAR too nice to the banks).

It would be nice if those efforts led to changes that would prevent a reoccurrence of this disaster. So far, there is little evidence of that happening.

The regulatory overhaul as proposed by the Obama Administration would be a good first step, but needs to be strengthened as it moves through Congress. However, it seems more likely that as the bank lobby sets its teeth in, it will be substantially weakened instead.

Thus, we will face another crisis like the one we had last year, maybe not this year or next, but 10 or 20 years down the line. Let us hope that Bernanke is right and a year from now we will see substantial progress towards these objectives, but I fear that we will not.
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Healthcare Reform – Potential Winners – Analyst Blog

Charles Rotblut — Fri, 21 Aug 2009 15:43:18 +0000

The ongoing debate about health care has become more focused on ideological lines than on what realistically can and should be done. Though not surprising, it is unfortunate.

It would be wonderful if the conversation shifted to what changes can realistically be made and what changes should be made to prevent a worsening crisis. Here are some ideas, along with potential investment plays.

Big Pharma Is Not Going Away

Regardless of what you think about the drug companies, they are not going anywhere. The pharmaceutical lobby has made certain that it has a seat at the table and it seems probable that any new laws will benefit them. Even though some concessions will be made, the Obama Administration has quietly signaled a willingness not to pursue the most beneficial cost-saving strategies.

Furthermore, the White House is playing ball when it comes to patent expiration, a huge victory for drug and biotech companies. Incidentally, this is partially why I have Healthcare SPDR (XLV) in Zacks ETF Trader.

Potential winners not only include large drug companies like Bristol-Myers Squibb (BMY), but also biotechs such as Amgen (AMGN) and Genzyme (GENZ).

Insurance Companies Will Survive

Despite talk about a public option, the insurance companies are not going quietly into the night. Not only do these companies have a large number of lobbyists, they are also major employers. This makes dismantling the current system very unrealistic and extremely expensive.

Even if the insurers are forced to make big concessions, they could potentially gain millions in new members. Plus, any reduction in medical costs should ultimately help their bottom lines.

Potential winners include Aetna (AET) and United Health (UNH).

Medical Records and Billing Need to Be Changed

The Obama Administration wants to digitalize electronic medical records. Though having a high initial cost, the benefits are enormous.

Any reform should also directly address medical billing practices. The current system is a network of severely bloated bureaucracies. As a result, doctors have to employ additional staff just to contend with the insurance companies.

Similarly, patients have no idea of assessing what procedures will actually cost them. Not to mention that billing errors are common, partially because of the large number of codes and partially because an insurance's decision as to whether or not cover a procedure is dependant on how well the attending physician explains the reason for the treatment.

Potential winners include Microsoft (MSFT) and Google (GOOG). It also seems logical that other tech conglomerates, such as Hewlett-Packard (HPQ) and IBM (IBM) would be quick to jump into this very large market.

Costs Need to Be Contained

The current health care system is not sustainable. If nothing is done, spending on health care will quickly jump to 25% of GDP. Tort reform is not the answer either, since according to the nonpartisan CBO, malpractice costs account for a very small percentage of overall spending.

A free market system of high deductibles and price conscious consumers is not a viable solution either. As stated above, costs are not transparent. Consumers lack adequate information to quantitatively assess the quality of care.

Finally, there is the problem that many Americans with health care currently are not seeking adequate treatment. We see this in the large number of people with treatable but undiagnosed medical conditions such as diabetes and thyroid disease. If consumers put off regular examinations and treatments in an effort to preserve their health savings account, the potential costs could skyrocket even more in the future.

Any reform needs to reduce the spending on health care as a proportion of GDP. According to the CBO, the legislation considered by congressional Democrats prior to the summer break failed to provide adequate savings, a big problem. If we fail to cut costs, the federal deficit will be balloon and interest rates will soar.

So what is the solution? One idea is a hybrid system that breaks the relationship of getting insurance through one's employer. The Healthy Americans Act does just that. It is a bipartisan bill that has certified by the CBO as paying for itself, and it provides universal coverage. I'm not saying it's the best piece of legislation, but it is a good place to reframe the debate about what should be done.

Potential winners include the U.S. economy.

Americans Need to Make Changes

Finally, any true cost savings will require sacrifices on the part of you and me. Bluntly put, we need to exercise more, eat more vegetables and less meat, drink less soda and floss every single day. Changes to the tax code could easily help push Americans in the right direction. A sin tax on soda and snacks would be a good start.

The government could also help by making weight loss programs tax deductible to anyone whose BMI exceeds a specified level (the deduction is only currently available to those are medically required to lose weight). Additionally, gym memberships and gym equipment should also be tax deductible. Would there be some abuse? Sure, but the overall benefits would still be substantial.

Potential winners would include Weight Watchers (WTW), Lifetime Fitness (LTM) and Nike (NKE).
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Rationing? I Have to Disagree – Analyst Blog

Dirk Van Dijk — Fri, 21 Aug 2009 14:17:10 +0000

In yesterday’s Wall Street Journal, Martin Feldstein, Ronald Reagan’s top economist and a Harvard professor, claims the current health care proposals are all about rationing. I have to disagree. Excerpts from his article are below, along with my critique.

"Although administration officials are eager to deny it, rationing health care is central to President Barack Obama's health plan. The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive.

"The White House Council of Economic Advisers issued a report in June explaining the Obama Administration's goal of reducing projected health spending by 30% over the next two decades. That reduction would be achieved by eliminating 'high cost, low-value treatments' by 'implementing a set of performance measures that all providers would adopt' and by 'directly targeting individual providers . . . (and other) high-end outliers.'"

First and foremost, it is important to recognize that the current system already relies on rationing. It uses rationing by price. If you can’t afford the treatment, or are one of the over 47 million uninsured, tough.

However, insurance companies like Aetna (AET) and United Health (UNH) will also routinely decide that a treatment is not covered because it is too costly. For many conditions, there are several potential treatment alternatives.

The major health care reform proposals (there are currently 4 on the table, and one more is still being worked on) plan on looking at which methods work best, and eliminating costly treatment options that don’t work very well (but which might be highly lucrative to the doctor and/or hospital) in favor of lower cost, more effective options. If that be rationing, sign me up. Sounds like simple “best practices" to me.

"The president has emphasized the importance of limiting services to 'health care that works.' To identify such care, he provided more than $1 billion in the fiscal stimulus package to jump-start Comparative Effectiveness Research (CER) and to finance a federal CER advisory council to implement that idea.

"That could morph over time into a cost-control mechanism of the sort proposed by former Sen. Tom Daschle, Mr. Obama's original choice for White House health czar. Comparative effectiveness could become the vehicle for deciding whether each method of treatment provides enough of an improvement in health care to justify its cost."

Could, could, could -- but Marty, you provide absolutely no evidence as to the probability of that occurring. If the CER finds, for example, that radiation therapy is more effective than surgery for the treatment of a certain type of cancer, and that radiation therapy is also 30% less expensive, it seems downright stupid to keep having doctors do a lot of that type of surgery. The surgeons might make less money, but that is not anything like the specter that has been floated of the government denying care to old folks.

"In the British national health service, a government agency approves only those expensive treatments that add at least one Quality Adjusted Life Year (QALY) per £30,000 (about $49,685) of additional health-care spending. If a treatment costs more per QALY, the health service will not pay for it.

"The existence of such a program in the United States would not only deny lifesaving care, but would also cast a pall over medical researchers who would fear that government experts might reject their discoveries as 'too expensive.'"

There is nothing in any of the proposals that would prevent people from paying extra to get these marginal treatments, either by paying out of pocket or through supplemental insurance. It would not deny lifesaving care, it would simply decline to pay for every procedure, regardless of how expensive or how ineffective.

It might also focus researchers to look for treatments that bring down costs and are more effective. Those procedures would get a much bigger market share and would be very lucrative.

"One reason the Obama Administration is prepared to use rationing to limit health care is to rein in the government's exploding health-care budget. Government now pays for nearly half of all health care in the U.S. , primarily through the Medicare and Medicaid programs.

"The White House predicts that the aging of the population and the current trend in health-care spending per beneficiary would cause government outlays for Medicare and Medicaid to rise to 15% of GDP by 2040 from 6% now. Paying those bills without raising taxes would require cutting other existing social spending programs and shelving the administration's plans for new government transfers and spending programs."

Note that government spending is about 20% of GDP now, so it is not just existing social spending programs that would have to be cut, but just about everything. That includes the military. Going on the current trajectory on health care spending has the potential to seriously harm national security.

"The rising cost of medical treatments would not be such a large burden on future budgets if the government reduced its share in the financing of health services. Raising the existing Medicare and Medicaid deductibles and coinsurance would slow the growth of these programs without resorting to rationing. Physicians and their patients would continue to decide which tests and other services they believe are worth the cost.

"There is, of course, no reason why limiting outlays on Medicare and Medicaid requires cutting health services for the rest of the population. The idea that they must be cut in parallel is just an example of misplaced medical egalitarianism."

“Misplaced medical egalitarianism" -- we are talking life and death here! Every year, 18,000 Americans die prematurely because they lack access to proper medical care. That is more than 6x as many who died when the Twin Towers came down.

Raising the deductibles and coinsurance for Medicaid? Just who does the good Harvard professor think is on Medicaid? Here is a news flash for ya, Marty -- it's poor people. This would result in rationing of the very worst sort, not you get treatment A instead of treatment B because A is more cost effective, but you get no treatment at all and just suffer or die.

If Grandma can’t afford the higher deductable and copayment then what happens? Does the plug get pulled? Does he seriously think that runaway medical cost inflation outside of Medicare and Medicaid is not a problem for the economy, even though costs in those two programs have already been rising slower than overall medical costs?

"But budget considerations aside, health-economics experts agree that private health spending is too high because our tax rules lead to the wrong kind of insurance. Under existing law, employer payments for health insurance are deductible by the employer but are not included in the taxable income of the employee.

"While an extra $100 paid to someone who earns $45,000 a year will provide only about $60 of after-tax spendable cash, the employer could instead use that $100 to pay $100 of health-insurance premiums for that same individual. It is therefore not surprising that employers and employees have opted for very generous health insurance with very low copayment rates.

"Since a typical 20% copayment rate means that an extra dollar of health services costs the patient only 20 cents at the time of care, patients and their doctors opt for excessive tests and other inappropriately expensive forms of care. The evidence on health-care demand implies that the current tax rules raise private health-care spending by as much as 35%.

"The best solution to this problem of private overconsumption of health services would be to eliminate the tax rule that is causing the excessive insurance and the resulting rise in health spending. Alternatively, Congress could strengthen the incentives in the existing law for health savings accounts with high insurance copayments. Either way, the result would be more cost-conscious behavior that would lower health-care spending."

The result would be to push people out of group employer-sponsored plans and into the individual health insurance market. That market is FAR more abusive than the employer group market. That is where people get rejected for pre-existing conditions. That is where people get their health care coverage cancelled on the flimsiest of excuses as soon as they file a serious claim and actually need the insurance.

While I agree that the self-employed and those who are working for small businesses that don’t offer health benefits deserve a break, absent something reasonable to replace it, it would be reckless to dismantle the employer sponsored system. Now if you want to argue for scrapping the system and replacing it with a single-payer Medicare for All system, that would make a lot of sense.

Our current system is not something that anyone designed, but an outgrowth of wage controls during WWII, and is not what anyone starting from scratch would design. It is the system we have in place, and without a replacement it would be dangerous to get rid of it.

"But unlike reductions in care achieved by government rationing, individuals with different preferences about health and about risk could buy the care that best suits their preferences. While we all want better health, the different choices that people make about such things as smoking, weight and exercise show that there are substantial differences in the priority that different people attach to health.

"Although there has been some talk in Congress about limiting the current health-insurance exclusion, the Administration has not supported the idea. The unions are particularly vehement in their opposition to any reduction in the tax subsidy for health insurance, since they regard their ability to negotiate comprehensive health insurance for their members as a major part of their raison d'être."

Funny, the AFL-CIO has long argued for a single-payer system, one that would completely eliminate that major part of their raison d’etre. It is not just about your preferences for spending more or less on health care. Demand is the combination of desire for something plus the ability to pay for it. If you are poor, your desire to live and not to suffer counts for nothing in the world that Dr. Feldstein inhabits.

"If changing the tax rule that leads to excessive health insurance is not going to happen, the relevant political choice is between government rationing and continued high levels of health-care spending. Rationing is bad policy. It forces individuals with different preferences to accept the same care.

"It also imposes an arbitrary cap on the future growth of spending instead of letting it evolve in response to changes in technology, tastes and income. In my judgment, rationing would be much worse than excessive care.

"Those who worry about too much health care cite the Congressional Budget Office's prediction that health-care spending could rise to 30% of GDP in 2035 from 16% now. But during that 25-year period, GDP will rise to about $24 trillion from $14 trillion, implying that the GDP not spent on health will rise to $17 billion in 2035 from $12 billion now. So even if nothing else comes along to slow the growth of health spending during the next 25 years, there would still be a nearly 50% rise in income to spend on other things.

"Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules. But if that is not going to happen, let's not destroy the high quality of the best of American health care by government rationing and misplaced egalitarianism."

For starters there is a typo in the article, it is to $17 trillion, not billion. Leaving that aside, using his numbers, if we could just keep spending at 16% of GDP (keep in mind the next highest level of spending in the OECD is Switzerland at 11% of GDP, and everyone knows what a hellhole Swiss hospitals are), we are talking about a difference of $3.36 Trillion a year by 2035. That is a lot of money in my book.

Dr. Feldstein must have an awfully small circle of economists he knows (doubtful) to make that statement. There are few questions in economics that are universally agreed upon, and that is certainly not one of them. Taxing “platinum plans" might be a useful way to raise some of the revenues needed to help cover the uninsured, but to think just changing the tax code would solve the problem by itself is just plain silly.

The high quality of the best of American health care means little if it is only available to a tiny fraction of the population. If a few people ride around in Mercedes and Bentleys and most people have to walk does that mean you have a great transportation system? The claim that America has the best health care system in the world is not one that Dr. Feldstein should be making.

On every major public health indicator tracked by the World Health organization the U.S. is way down the list, and overall we rank neck and neck with Cuba, and far below places like France, Canada or the U.K. Sometimes when you pay the most, you get the best, other times it just means you are getting ripped off. The latter is clearly the case with the U.S. health care system.
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A Partly Sunny Outlook for the Solar Industry

Investment U — Thu, 20 Aug 2009 21:53:42 +0000

A Partly Sunny Outlook for the Solar Industry Tony Daltorio, The Investment U Research Team The forecast for the solar power industry is rather cloudy. On the one hand, we have governments globally trying to give the industry the impetus it needs, through subsidies and incentives, to fulfill its potential and become a mainstream energy source. On [...]

A Small Victory for the Budget Deficit

Contrarian Profits — Thu, 20 Aug 2009 21:35:27 +0000

pHere’s a small victory, worthy of breaking out some Andre Brut: The U.S. government budget deficit is more likely to ring in at $1.58 trillion this year, not the $1.84 trillion the Obama administration reported in May./p pAccording to some purposefully leaked budget projections due out next week, roughly $250 billion that was set aside in the 2009 budget for bank bailouts will not be used by October, the end of the fiscal year./p p style="text-align: center;"a class="flickr-image alignnone" title="US Budget Projections" href="http://www.agorafinancial.com/5min/"/a/p pOf course, we’ll end up with an annual budget deficit of 11.2% of GDP, the highest since 1945 and an all-time high in dollar terms. But hey (they must be thinking), now we’ll have a little extra for that $1 trillion health care reform!/p pBack in our grammar school,#8230;/p

Stocks Push the Currencies Higher…

Contrarian Profits — Thu, 20 Aug 2009 19:34:35 +0000

pStocks push the currencies higher#8230;Norway pulls out of recession#8230;Jackson Hole boondoggle#8230;Oil helps rally commodity currencies#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; We had more rain here last night, but the storms have cooled things off and it is starting to feel a bit like fall around here. Chuck flies off to San Francisco today to speak at the Money Show, so I will be bringing you the Pfennig for the next few days. The dollar has rallied just a bit overnight, clawing back some of the losses which occurred mid morning yesterday./p pAnd what, you might asked, caused the dollar to rally yesterday? You can re-read a bit of yesterday#8217;s Pfennig for the answer: #8220;The data cupboard has been emptied out and is#8230;/p

Superlattice Power, Inc. (SLAT.OB): A “Green” Power Company Currently Under the Radar

QualityStocks — Thu, 20 Aug 2009 17:03:25 +0000

Superlattice Power Inc. is a development stage technology company that is focusing its resources and efforts on the development and marketing of batteries for electric-powered vehicles and products. The company is developing the next generation lithium-powered batteries which will have a wide range of applications. Superlattice Power has made considerable progress in advancing its next generation [...]

Lockheed Links to Smart Grid – Analyst Blog

Zacks Market Commentaries — Thu, 20 Aug 2009 16:40:19 +0000

Lockheed Martin (LMT) recently joined forces with privately owned Black & Veatch to garner a better slice of utilities modernizing in response to the US Department of Energy’s (DOE) Smart Grid Investment Grant Program.

This $4.5 billion program is part of the DOE's Electricity Delivery and Energy Reliability Recovery Plan to support modernization of the electrical grid. The Lockheed – Black & Veatch partnership is well placed to cater to other DOE funding applications, such as loan guarantees for employing innovative energy efficiency, renewable energy and advanced transmission and distribution.

Together, the companies complement each other in assisting utilities plan projects and in requesting federal grants from the DOE. Lockheed Martin will provide its expertise in information management, business process reengineering, cyber security expertise, modeling and simulation and demand-response tools. Black & Veatch, a premier US contractor, will chip in with design and construction of telecommunications as well as transmission and distribution infrastructure.

Lockheed Martin is strategically spreading its wings outside the traditional defense-focused arena. The company recently saw a number of its high-value platform programs coming under the axe of the Obama administration, with the F-22 program being most noteworthy. Considering these, we maintain our Neutral recommendation on LMT.

Read the full analyst report on "LMT"
Zacks Investment Research

Stock Market News for August 20, 2009 – Market News

Zacks Market Commentaries — Thu, 20 Aug 2009 14:03:28 +0000

A sharp rebound in Chinese shares helped erase yesterday’s slump and sent Asian stocks sharply higher Thursday, a day after Shanghai’s big fall ignited fears of a Chinese stock collapse and triggered a selling spree around the world. Asian markets also drew comfort from an overnight recovery on Wall Street after a surprise drop in U.S. crude stockpiles lifted hopes for an economic recovery and sent investors back on the buying table.

Shanghai's main index jumped 126 points, or 4.5%, to 2,911.58, while Japan's Nikkei 225 stock average climbed 179.41 points, or 1.8%, to 10,383.41. Hong Kong's Hang Seng rose 374.63, or 2%, to 20,336.36. South Korea’s Kospi advanced 2% to 1,576.39.

Stock futures pointed to a higher open on Wall Street Thursday. Dow Jones industrial average futures rose 24, or 0.3%, to 9,300. Standard & Poor's 500 index futures edged up 3.70, or 0.4%, to 1,000.80, while Nasdaq 100 index futures rose 3.50, or 0.2%, to 1,602.25.

On Wednesday, the unexpected drop in crude inventories helped U.S. stocks wipe off early losses and finish the day with gains of less than 1% as investors looking for reassuring sings picked up oil and other commodity stocks. Rumors that the Obama Administration was considering a second stimulus package also helped sentiments on the Street yesterday. However, the rumors were later dismissed, with White House spokesman Gibbs noting, "There is no imminent economic announcement."

The 30-stock Dow Jones industrial average added 61 points, or 0.7%, to close at 9,279.16. The NASDAQ added 13.32 points, or 0.7% for a close at 1,969.24, and the S&P500 ended 6 points higher at 996, up 0.7%. Volume remained light with only 988 million shares trading on the NYSE and advancing shares ahead of decliners by a 3-to-2 margin.

On the earnings front, the picture was mixed as Hewlett-Packard (NYSE:HPQ), Deere (NYSE:DE) and PetSmart (NASDAQ:PETM) reported earnings that beat expectations, but outlook from these companies disappointed. Some retailers, though, were optimistic, with BJ's Wholesale (NYSE:BJ) and Limited (NYSE:LTD) offering improved yearly outlook.

Among S&P500 industry sectors, oil and gas shares advanced 1.9% and were the leading gainers. DJIA components Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) moved higher, up 1.8% and 2.3%, respectively. Commodity-related issues were not far behind, with basic material shares up 0.9%, following the broad-based gain in commodities. Freeport-McMoRan (NYSE:FCX) shares surged 2.7%. However, Alcoa (NYSE:AA) led the decliners on the DJIA after Goldman Sachs (NYSE:GS) downgraded the stock, citing Alcoa's (NYSE:AA) recent appreciation and advised rolling positions into Freeport-McMoRan (NYSE:FCX), which is on its Conviction Buy List.

Health care issues advanced 1.3%, as Merck's (NYSE:MRK) 2.5% advance led DJIA component gains. A New Jersey court upheld the firm's patent for asthma drug Singulair, and ruled against Teva Pharmaceuticals (NASDAQ:TEVA).

Despite the day's reported increase in weekly mortgage applications, financial shares failed to gain in the market advance, and eased 0.03%. News of last week's rise in mortgage applications on increased refinancing requests did not have an impact on financial shares. Bank of America (NYSE:BAC) shares dropped 0.9% and JP Morgan (NYSE:JPM) eased 0.7%.

Retailers scheduled to report include: Barnes and Noble (NYSE:BKS), GameStop (NYSE:GME), HJ Heinz (NYSE:HNZ), Hormel Foods (NYSE:HRL), Ross Stores (NASDAQ:ROST), Sears Holdings (NASDAQ:SHLD), and Gap (NYSE:GPS).

Zacks Investment Research

The Impact of the Genome

Contrarian Profits — Tue, 18 Aug 2009 19:32:54 +0000

pCurrently, medicine is, to a large degree, a “one size fits all” proposition. Doctors watch for adverse effects and check personal and family histories. Medical technologies, however, are designed for the general population, not individuals. That’s going to change./p pMoreover, strongthere will be huge profit opportunities, in many enabling technologies, for those who invest accordingly./strong And today I’m going to tell you about a company that will hand you your best chance to make a transformational fortune./p pWe know that many current treatments work on some people, yet not others. Some drugs are safe for many people, but have dangerous side effects for others. This is because all of us have individual differences in our genetic code based on heredity and environment. Even#8230;/p

Housing Recovery Will Be Slow as Foreclosures Continue to Weigh on Housing Prices

Money Morning — Thu, 13 Aug 2009 22:39:00 +0000

Inflation-Proof Savings Account Could Pay 100% “Interest” this Year Euro Pacific Capital President Peter G. Schiff has identified a savings account that could yield 100% interest between now and the end of the year. It’s much safer than a regular account, and fully insured by Lloyd’s of London. Since every dollar of your savings is [...]

Record Budget Insanity

Contrarian Profits — Thu, 13 Aug 2009 19:30:51 +0000

pIt’s official: Our government ran a record $180.7 billion over budget in July, the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported Monday. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief./p pA few more scary details:/p ul liThe budget deficit is still on track to exceed $1.8 trillion by October, the end of the fiscal year. That would be four times last year’s record budget/li liJuly spending rose to over $332.2 billion, an all-time high/li liGovernment revenues fell 5.6% from last June, to $151 billion/li liThose revenues have been lower than#8230;/li/ul

Budget Insanity, FOMC Down-Low, Oil Sands Investing and More!

Contrarian Profits — Thu, 13 Aug 2009 16:00:10 +0000

pGovernment budget hits all-time insanity… record monthly, year-to-date deficits#8230; “Cash for clunkers” helps GM, but not economy… July retail sales stage surprise fall#8230; Fed plans exit strategy, ends bond buys… why the FOMC is still not helping you#8230; Byron King’s crude reality: How Canada could be the next Saudi Arabia#8230;/p p It’s official: strongOur government ran a record $180.7 billion over budget in July,/strong the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported a href="http://www.agorafinancial.com/5min/the-debt-ceiling-dividend-plays-a-currency-sea-change-and-more/"Monday/a. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief./p pA few more scary details:/p ul liThe budget deficit is still on track to#8230;/li/ul

Prieur’s readings (August 11, 2009)

Prieur du Plessis — Tue, 11 Aug 2009 08:31:10 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other thought-provoking articles you would like to share to the comments section.

Imaginary Wars

Robert Amsterdam — Sun, 09 Aug 2009 16:15:37 +0000

Venezuela's inimitable Hugo Chavez has been having quite the busy summer. In between renewed crackdowns on the media, utterly totalitarian measures to usurp power from the democratically elected opposition, along with new evidence pointing to his support of FARC and...

The New Credit Crunch Victims

Contrarian Profits — Wed, 05 Aug 2009 22:35:37 +0000

pNow that the subprime, low-income crowd has taken their lashings, there’s a new Great Recession victim — the faux rich./p pJumbo mortgages — home loans exceeding $417,000 — now have the fastest rising default rates of any mortgage class. According to recent data from First American CoreLogic, 7.4% of these larger-than-life mortgages are currently in some form of default, nearly three times the rate at the start of 2008./p pAs you can see, when stocks tanked in late 2008, the market for super-sized mortgage loans followed suit:/p p style="text-align: center;"a class="flickr-image alignnone" title="Jumbo Prime Mortgage Defaults" href="http://www.agorafinancial.com/5min/"/abr / em(Heh, we love the “exclude option ARMs” note… no need to worry about them!)/em/p pIs there any reason for this trend to improve? The Obama administration has done plenty to help out their beloved middle-class homeowner… like#8230;/p

Cash for Liquor Anyone?

Bill Bonner — Wed, 05 Aug 2009 19:30:16 +0000

pThe future cometh#8230;Cash for bankers! Cash for Detroit’s clunkers! From one scam to the next#8230;But first, let us turn to the latest market update. /p pThe Dow rose again yesterday – up 33 points, to close at 9,320. We set 10,000+ as our objective for this bounce. We’ll stick with it for a while longer./p pMake no mistake though. No one knows how long this rally will last – certainly no one here at the a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a vacation headquarters. It will continue until it runs out of gas. That could be tomorrow. It could be months from now./p pIt will run out of gas sooner or later, and probably this fall. A real, durable bull market would require an economic boom – a genuine#8230;/p

Don’t Believe What You Hear About a Housing Recovery

Christian Hill — Wed, 05 Aug 2009 17:32:53 +0000

p style="text-align: left;"If you look at recent headlines such as CNNMoney.com’s “Another Sign of a Housing Thaw” you may be inclined to believe that the housing market has finally found a bottom. Various reports cite increases in sales, slight increases in sales prices, and reduced inventory. These are the three factors needed for any housing recovery to begin. Throw in the first-time homebuyer tax credit, and we may have a winning formula./p pBut there are some overlooked problems with this belief. The first is that while monthly sales of existing homes have improved, on a seasonally-adjusted basis, we are still worse off than we were last year in all regions but the west. Here’s some data from the National Association of Realtors:/p p style="text-align: center;"/p pThe next#8230;/p

Mining Stocks: The Surprising Cash-for-Clunker Winners

Andrew Snyder — Tue, 04 Aug 2009 23:25:12 +0000

pThe Obama Administration is desperate for another couple of billion dollars added to the Cash-for-Clunkers coffer. Miners like North American Palladium (AMEX:stronga href="http://www.google.com/finance?q=pal" target="_blank"PAL/a/strong) want the money even more./p pIf you fire enough bullets, eventually one of them is bound to hit the bull’s eye. After spending a trillion dollars on an array of stimulus packages, the Obama administration is scrambling to “enhance” a billion-dollar program that actually hit its mark./p pBy now, we have all heard of the popularity of Washington’s Cash-for-Clunkers initiative. Drive, push or tow any old gas hog into a local dealer and Uncle Sam will give you a check for $3,500 or even $4,500 if you buy a new car./p pIn the short-term, the plan appears to be nothing but#8230;/p

DeVry, Inc. (NYSE: DV): Stock of the Day

Investment U — Tue, 04 Aug 2009 15:22:33 +0000

DeVry, Inc. (NYSE: DV): Stock of the Day Judith Martin, The Investment U Research Team Last month’s figures from the U.S. Bureau of Labor peg unemployment at 9.7% across the country, but some of us are sweating it more than others. The good news is that all demographics can increase their chances of employment (and [...]

Stock Market News & Stocks to Watch from StraightStocks » Obama administration

Yes the future deficits are worrisome

Source: Paul Krugman.

Federal receipts and outlays as a percentage of GDP, 1970-2008 and 2009 estimates. Data source: OMB.

Prieur’s readings (November 24, 2009)

Zacks Analyst Blog Highlights: PNC Financial Services, Bank of America, Bank of New York Mellon Corp, MasterCard and JPMorgan Chase – Press Releases

Should “Big Tobacco” run the government?

BofA Continues CEO Hunt – Analyst Blog

Prieur’s readings (November 17, 2009)

Leo Motors, Inc. (OTC:LEOM) “One of the Best Electric Vehicle Investment in the Market” Research Report by Princeton Research

Cereplast, Inc. (CERP.OB) Projects Bio-Plastics to Capture 30% of U.S. Market, Topping $10B by 2020

Gov’t Program Boosts Freddie Mac – Analyst Blog

Prieur’s readings (November 7, 2009)

Is it time to panic?

Prieur’s readings (November 6, 2009)

Prieur’s readings (November 5, 2009)

Goldman Mulls Fannie Tax Credits – Analyst Blog

Prieur’s readings (October 30, 2009)

Southern Barely Beats – Analyst Blog

The Rise of the Rest

GWS Technologies (GWSC.OB) and Renewables Industry to Benefit from Stimulus Spending on ‘Smart Grid’

Prieur’s readings (October 28, 2009)

With Friends Like These…

The Warning

Wise Words from Across the Pond – Analyst Blog

Zacks Industry Outlook Highlights: Allscripts-Misys Healthcare Solutions, Inc., Omnicell Inc. and Merge Healthcare Incorporated – Press Releases

Medical Devices – Industry Outlook

RA’s Daily Russian News Blast – October 14, 2009

How Russia Learned to Love the (Iranian) Bomb

Stock Market News for October 12, 2009 – Market News

Lockheed Lands Army Contract – Analyst Blog

The Eternal Depression

The Eternal Depression

Guest Contribution: The Wisconsin Foreclosure and Unemployment Relief Plan (WI-FUR)

Three Government Reports Point to Fiscal Doomsday

How Russia Sees Iran’s Nuke Threat

Four Companies Set to Profit from a Federal Cash Injection

America’s Smart Grid: Four Companies Set to Profit from a Federal Cash Injection

Maxwell Tech Focus Shifting – Analyst Blog

Gander Mountain: Going Private, Sending a Message

September 28th CEOcast Weekly Newsletter

WFC Revamps Overdraft Policy – Analyst Blog

Constellation Energy Group Inc. Has Long-Term Potential, But Short-Term Problems

Russia Will Disappoint on Iran

How the Government is Setting Us Up for a Second Subprime Crisis

Prieur’s readings (September 23, 2009)

Snapshot Observations on the Global Economic Crisis

More US dollar woes ahead

GD Wins Air Force Contract – Analyst Blog

Still Squaring the NATO-Russia Circle

What China Could Do to the Price of Gold

President Obama Issues Stern Warning to Wall Street and its “Reckless Behavior”

No Fear

Prieur’s readings (September 14, 2009)

The Two Reasons it’s Time to Short U.S. Stocks

The Two Reasons it’s Time to Short U.S. Stocks

Oil Sands Pipeline Approval from Canada into the U.S.

Lockheed Wins Air Force Contract – Analyst Blog

Do You Suffer From This Common Investing Mistake?

The U.S. Housing Market’s False Dawn

More Baby Steps For A German Economic Recovery

South African interest rates could be too high

A New Model for the World Economy

RA’s Daily Russian News Blast – August 31, 2009

$9 trillion– what, me worry?

Source: Political Math.

General Dynamics Bags Army Order – Analyst Blog

Healthcare Truths

Maxwell: Future is Ultracapacitors – Analyst Blog

United Technologies Trim F-35 – Analyst Blog

Employment Outlook Still Shaky

Another Sad Day For The Economy: Bernanke Re-Nominated By Obama

Two Companies Taking Advantage of the Growing Deficit

Seniors Beware: Deflation Hits Social Security

First Solar (Nasdaq: FSLR): Stock of the Day

The Calm Before the Financial Storm

Are American Homes Affordable? – Analyst Blog

Obama Backs Big Ben – Analyst Blog

Ben’s Back, And So is Real Estate

Home Sales Will Struggle to Rebound Without Tax Credit Extension