So what's going to happen next? It looks like lots of behind the scenes negotiations between the White House and Capitol Hill until Thursday. Then maybe a new bill gets put up for a vote. (We hear this from Congressional staffers, media, and the K Street crowd).
So what's going to happen to YOU next? That's the better question. Let's get ahead of the curve. The Wall Street Journal's Dennis Berman does just that for you. In fact, he's a must read today because he deftly explains why layoffs are just around the corner. He also does you one better because he takes a moment and explains for the non-MBA set what "commercial paper" is, how it works, and drum role please... why you care.
Meanwhile, the one other article you should read today is the Washington Post's business columnist Steven Pearlstein. You can actually hear anger and frustration in his words, but that's not the reason you should read this. Pearlstein argues, and we agree, that in the coming days the media lens will focus on the Federal Deposit Insurance Corp. (the FDIC) and the extent they will have to rescue failing banks.
Here's why you care: Both journalists are waving the a flag here to explain to you why and how Wall Street's and Washington's economic mechanisms are going to directly impact you. Pearlstein is clearly worried about the real possibility of slowed growth for a decade. Think about what that would mean for your retirement, your job, or if you're in college (or your kid is) the ability to get a job. Both Berman and Pearlstein leave you better informed than before you clicked on the article. They're today's must reads while the political back and forth continues in Washington.
And to really make the point about why you care, while all of this is going on home prices set another record... in dropping, again. CNN's got that story.
Tuesday, September 30, 2008
Monday, September 29, 2008
Will You be Economically Secure Next Month? Next Year? Looking Ahead, and Abroad for Answers
If you are looking for the best breakdown of the economic rescue legislation, MSNBC has meticulously gone through it section by section - and posted their breakdown the same way on the web. It has the most detail when compared to other media websites we've surveyed today and last night.
But, as always, our goal is to put you ahead of the curve. Use the above site for a resource, but we want to think about tomorrow, next week, and next month. That's why we think you need to read two articles today: The Wall Street Journal's look at how much U.S. debt China and the Middle East are carrying, and the ramifications... And, former Treasury Secretary Lawrence Summers' Op-Ed which is running simultaneously in the Washington Post and the Financial Times.
At first blush, you might ask - why do these need to be read together? The answer is that they are both about the cost of tomorrow, and what the future will look like.
Here's why you care: The Journal's piece gives an on-the-one-hand, on-the-other-hand analysis of what it means for China to hold $1 Trillion in U.S. debt, not to mention the role of Middle East countries buying stakes in American firms. On the-one-hand holding our debt means if the dollar goes down, they stand to lose too, so they NEED the U.S. to recover. On-the-other should they dump their stake, it will drive the dollar lower. You care because this has the potential for not just being an out of site out of mind impact for Main Street. Instead, this could have foreign policy consequences moving forward. Read the story, you'll be glad you did, and much more in the know.
And, while we are neither endorsing nor disapproving of Summers' argument that because the bailout will mean buying assets (instead of simply giving away money), the next President will actually be able to fund more of his projects - we think you should read it.
Here's why you care: During last week's first presidential debate, moderator Jim Lehrer was wonderfully dogged in trying to get both Senators John McCain and Barack Obama to acknowledge what of their campaign-promise-to-do list will simply not get funded given the current economic climate. Both said it would be tough. Neither gave terrific details. Mr. Lehrer tried, that was great. But now comes along former Secretary Summers arguing that the U.S. will be able to get back much of the $700 Billion, so spending on programs will not be as tough as one thinks. We think you just may hear that argument come Thursday during the vice presidential debate. Summers makes his case, and raises some good issues. But it still begs the question of what the future will look like. Agree/disagree, you should spend five minutes and give it a read.
We suspect you'll see questions on both come Thursday.
But, as always, our goal is to put you ahead of the curve. Use the above site for a resource, but we want to think about tomorrow, next week, and next month. That's why we think you need to read two articles today: The Wall Street Journal's look at how much U.S. debt China and the Middle East are carrying, and the ramifications... And, former Treasury Secretary Lawrence Summers' Op-Ed which is running simultaneously in the Washington Post and the Financial Times.
At first blush, you might ask - why do these need to be read together? The answer is that they are both about the cost of tomorrow, and what the future will look like.
Here's why you care: The Journal's piece gives an on-the-one-hand, on-the-other-hand analysis of what it means for China to hold $1 Trillion in U.S. debt, not to mention the role of Middle East countries buying stakes in American firms. On the-one-hand holding our debt means if the dollar goes down, they stand to lose too, so they NEED the U.S. to recover. On-the-other should they dump their stake, it will drive the dollar lower. You care because this has the potential for not just being an out of site out of mind impact for Main Street. Instead, this could have foreign policy consequences moving forward. Read the story, you'll be glad you did, and much more in the know.
And, while we are neither endorsing nor disapproving of Summers' argument that because the bailout will mean buying assets (instead of simply giving away money), the next President will actually be able to fund more of his projects - we think you should read it.
Here's why you care: During last week's first presidential debate, moderator Jim Lehrer was wonderfully dogged in trying to get both Senators John McCain and Barack Obama to acknowledge what of their campaign-promise-to-do list will simply not get funded given the current economic climate. Both said it would be tough. Neither gave terrific details. Mr. Lehrer tried, that was great. But now comes along former Secretary Summers arguing that the U.S. will be able to get back much of the $700 Billion, so spending on programs will not be as tough as one thinks. We think you just may hear that argument come Thursday during the vice presidential debate. Summers makes his case, and raises some good issues. But it still begs the question of what the future will look like. Agree/disagree, you should spend five minutes and give it a read.
We suspect you'll see questions on both come Thursday.
Friday, September 26, 2008
What Happens When a Bank Fails and Getting Ahead of Tonight's Debate
Normally we highlight just one article, but today we're making an exception because as the markets hang in limbo waiting on Congress' incubation period for the Bailout Bill to end, we've gotten a number of question regarding what happens to people's accounts when a bank fails. It just so happens that CNN has an excellent explainer on this, and you can read it here.
What we want to highlight in order to push the ball forward is regarding tonight's debate (which was set to be solely on foreign policy).
Here's why you care: The New York Times has an analysis of how questions about the markets will likely play tonight in the debate. It is important, because as we always point out - markets are like in elections in that they are a game of expectations. The New York Times' analysis has helped set that bar, and how the candidates react tonight could easily impact the markets come Monday. Everybody will be watching - that's the point. We think better to be ahead of the curve, and this story helps get you there. After all, it's only your money and your future right?
What we want to highlight in order to push the ball forward is regarding tonight's debate (which was set to be solely on foreign policy).
Here's why you care: The New York Times has an analysis of how questions about the markets will likely play tonight in the debate. It is important, because as we always point out - markets are like in elections in that they are a game of expectations. The New York Times' analysis has helped set that bar, and how the candidates react tonight could easily impact the markets come Monday. Everybody will be watching - that's the point. We think better to be ahead of the curve, and this story helps get you there. After all, it's only your money and your future right?
Thursday, September 25, 2008
Next Week's News Today (Markets and Presidential Debates Collide)
Next Week's News Today is back and we note that given the present market conditions and political fluidity due to the ongoing wrestling match over the Bailout Bill, we see two scenarios developing in news coverage next week....
SCENARIO 1: The Bailout Bill gets passed by the time that the markets open on Monday. The markets and coverage will focus on whether the U.S. breathes a sigh of relief or not. Under this scenario next week's economic reports will easily become news pegs for coverage. It is a worthy question to see how the markets react to personal spending numbers, auto/truck sale data, and unemployment numbers after passing a Bailout Bill. The rest of the coverage will continue to scrutinize the Bailout Bill itself, and shift into focusing on how assets are actually going to be bought and sold. We also suspect under this scenario - should the bill pass and the markets stabilize somewhat - that there will be more political finger pointing by the week's end, perhaps the Sunday papers and talk shows will see that. However, that is contingent on troubled waters receding a bit.
Particularly notable is Thursday's (October 2nd) planned vice presidential debate. Unlike the presidential debates that focus each meeting on one topic (foreign affairs, then domestic matters) all topics are fair game for the vice presidential debate. That means a few different factors will be at play as each VP candidate will have to juggle three balls - look presidential, attack his/her opponent's economic acumen, and not rattle the markets. Should the Bailout Bill pass and the markets seas calm it will allow the candidates to be more aggressive. If that's the case, journalists will rightly look to see how the markets react. The "X" factor, of course, being that tomorrow's presidential debate is now in limbo and under one suggestion it would be moved and replace Thursday's vice presidential debate. IF that were to happen the candidates and moderator would be hard pressed to stick to the planned single focus of foreign policy and national security.
SCENARIO 2: If the Bailout Bill has not passed by Monday the coverage will rightly be on the bill itself, whether the markets are withering under a lack of passage, and competing visions of the bill. Under this scenario if the markets continue to get worse there will be a "the clock is ticking" atmosphere. However, should the markets show patience then it will give more ammunition to the detractors of the bill who will make themselves increasing more available to journalists. The economic reports mentioned in Scenario 1 will still get reported but will not be the news drivers as media outlets will need all available hands to cover the different aspects of the bill and market reaction.
Thursday's debate will still require the vice presidential candidates to juggle three balls of looking presidential while attacking their opponents economic bonafides without actually rattling the economy. However, should the bill still be in limbo the candidates (whether presidential or vice presidential) will not be in a position to be as aggressive and risk looking like they might shake the markets. The political nightmare for any of the candidates is to say something that negatively impacts the markets the following day and wind up having that be the news story for the next media cycle.
As always, notable earnings and economic reports broken down day by day outlined below.:
MONDAY 9/29
Earnings: Circuit City; Walgreen
Economic Reports: Personal Income; Personal Spending
TUESDAY 9/30
Earnings: Pepsi Bottling Group
Economic Reports: Consumer Confidence
WEDNESDAY 10/1
Earnings: Micron Technology Inc.; Mosaic Co.
Economic Reports: Auto & Trucks Sales (for Sept.); Construction Spending (for Aug.); Crude Inventories
THURSDAY 10/2
Earnings: Constellation Brands; Marriott; Matrix Service Co.;
Economic Reports: Initial Claims (for unemployment); Factory Orders
Politics: Vice Presidential Debate - moderated by Gwen Ifill. Format: All topics fair game with 90 second answers and two minute follow-up discussions.
FRIDAY 10/3
Earnings: Cigna Corp.; Family Dollar Stores
Economic Reports: Hourly Earnings (for Sept.); Nonfarm payroll (for Sept.); Unemployment (for Sept.)
SCENARIO 1: The Bailout Bill gets passed by the time that the markets open on Monday. The markets and coverage will focus on whether the U.S. breathes a sigh of relief or not. Under this scenario next week's economic reports will easily become news pegs for coverage. It is a worthy question to see how the markets react to personal spending numbers, auto/truck sale data, and unemployment numbers after passing a Bailout Bill. The rest of the coverage will continue to scrutinize the Bailout Bill itself, and shift into focusing on how assets are actually going to be bought and sold. We also suspect under this scenario - should the bill pass and the markets stabilize somewhat - that there will be more political finger pointing by the week's end, perhaps the Sunday papers and talk shows will see that. However, that is contingent on troubled waters receding a bit.
Particularly notable is Thursday's (October 2nd) planned vice presidential debate. Unlike the presidential debates that focus each meeting on one topic (foreign affairs, then domestic matters) all topics are fair game for the vice presidential debate. That means a few different factors will be at play as each VP candidate will have to juggle three balls - look presidential, attack his/her opponent's economic acumen, and not rattle the markets. Should the Bailout Bill pass and the markets seas calm it will allow the candidates to be more aggressive. If that's the case, journalists will rightly look to see how the markets react. The "X" factor, of course, being that tomorrow's presidential debate is now in limbo and under one suggestion it would be moved and replace Thursday's vice presidential debate. IF that were to happen the candidates and moderator would be hard pressed to stick to the planned single focus of foreign policy and national security.
SCENARIO 2: If the Bailout Bill has not passed by Monday the coverage will rightly be on the bill itself, whether the markets are withering under a lack of passage, and competing visions of the bill. Under this scenario if the markets continue to get worse there will be a "the clock is ticking" atmosphere. However, should the markets show patience then it will give more ammunition to the detractors of the bill who will make themselves increasing more available to journalists. The economic reports mentioned in Scenario 1 will still get reported but will not be the news drivers as media outlets will need all available hands to cover the different aspects of the bill and market reaction.
Thursday's debate will still require the vice presidential candidates to juggle three balls of looking presidential while attacking their opponents economic bonafides without actually rattling the economy. However, should the bill still be in limbo the candidates (whether presidential or vice presidential) will not be in a position to be as aggressive and risk looking like they might shake the markets. The political nightmare for any of the candidates is to say something that negatively impacts the markets the following day and wind up having that be the news story for the next media cycle.
As always, notable earnings and economic reports broken down day by day outlined below.:
MONDAY 9/29
Earnings: Circuit City; Walgreen
Economic Reports: Personal Income; Personal Spending
TUESDAY 9/30
Earnings: Pepsi Bottling Group
Economic Reports: Consumer Confidence
WEDNESDAY 10/1
Earnings: Micron Technology Inc.; Mosaic Co.
Economic Reports: Auto & Trucks Sales (for Sept.); Construction Spending (for Aug.); Crude Inventories
THURSDAY 10/2
Earnings: Constellation Brands; Marriott; Matrix Service Co.;
Economic Reports: Initial Claims (for unemployment); Factory Orders
Politics: Vice Presidential Debate - moderated by Gwen Ifill. Format: All topics fair game with 90 second answers and two minute follow-up discussions.
FRIDAY 10/3
Earnings: Cigna Corp.; Family Dollar Stores
Economic Reports: Hourly Earnings (for Sept.); Nonfarm payroll (for Sept.); Unemployment (for Sept.)
Wednesday, September 24, 2008
Breaking Down the Different Big Bailout Arguments
The Big Bailout legislation before Congress is just that - Big. Likewise so too is the amount of journalism out there today. So, we've found what we think is the one article the best lays out both the government's plan, and alternative ideas. However, we'd like to note while the story does a great job of laying out different ideas it doesn't mention an important point. That point was asked of Treasury Secretary Henry Paulson at the end of yesterday's Senate Banking Committee hearing - do you still have the same urgency to get this done? Paulson's response? Paulson said, yes because in his view the markets had calmed a bit because they were told the legislation would get done.
Here's why you care: You need to understand the different arguments being put forth. But, as we always note, the market is like politics and often times is a game of expectations. The market was told there would be stability in quickly passed legislation. That clock is ticking. Take a few minutes and read the Washington Post piece today. There's a lot of wrangling going on behind the scenes, due to policy, and due to politics - this piece will give you a leg up on the policy.
Here's why you care: You need to understand the different arguments being put forth. But, as we always note, the market is like politics and often times is a game of expectations. The market was told there would be stability in quickly passed legislation. That clock is ticking. Take a few minutes and read the Washington Post piece today. There's a lot of wrangling going on behind the scenes, due to policy, and due to politics - this piece will give you a leg up on the policy.
Tuesday, September 23, 2008
Today's Debate and the Next Taxpayer Tab
Capitol Hill is ground zero today for the Mortgage Mess. Competing proposals will be on display as the Senate Banking Committee is currently taking testimony from Treasury Secretary Henry Paulson Jr., Federal Reserve Chairman Ben Bernanke, Chairman of the Securities and Exchange Commission Christopher Cox and Director of the Federal Housing Finance Agency James Lockhart. You can catch it a number of places online live if you are at work, like CNN.
The fight today will be over: 1) Whether executive pay for CEOs of companies being absorbed by the government should be limited, 2) whether home owners can go to court to have their loans adjusted, 3) the size of the government involvement.
Why You Care thinks you are busy, and now that you know those are the issues, we suggest reading something else - namely the next taxpayer tab. Namely, this New York Times article showing how retirees are vulnerable to the market slide as they slip into retirement.
Here's why you care: You care because as we've said, much of this relates to 401k's. And if you are retiring you don't want to see your nest egg shrink. You might say, we'll I'm not retiring, this story isn't for me. Why You Care says, wrong - this story is about you because if these retirees can't pay for their medical care and housing, guess who is going to pay? We think you care.
The fight today will be over: 1) Whether executive pay for CEOs of companies being absorbed by the government should be limited, 2) whether home owners can go to court to have their loans adjusted, 3) the size of the government involvement.
Why You Care thinks you are busy, and now that you know those are the issues, we suggest reading something else - namely the next taxpayer tab. Namely, this New York Times article showing how retirees are vulnerable to the market slide as they slip into retirement.
Here's why you care: You care because as we've said, much of this relates to 401k's. And if you are retiring you don't want to see your nest egg shrink. You might say, we'll I'm not retiring, this story isn't for me. Why You Care says, wrong - this story is about you because if these retirees can't pay for their medical care and housing, guess who is going to pay? We think you care.
Monday, September 22, 2008
Morphing Financials: Bank Holding Companies
You saw the headlines: Goldman Sachs and Morgan Stanley — the last of the Mohicans in terms of large independent banks - are morphing into "bank holding companies". So what's that mean? It means: 1) They will leverage less - i.e. they will be more risk adverse in their investments; 2) They will have tighter oversight/regulations - but have access to the Fed lending window like other banks; and 3) They'll be in a position to purchase a regular brick and mortar bank like where you currently have your checking account, and after that... They'll look exactly like other banks.
Here's why you care: You care because you/we/us want need stability in the financial world. Ultimately being a "bank holding company" allows these banks to have a revenue stream from normal banking activity. And given the number of financial institutions on the skids, having a greater number of healthier players helps you - the consumer. On the flip side, the question is out as to what is lost in diversity in the financial sector. Independence does have its advantages.
Why You Care notes that we did not publish Next Week's News Today last week because of the dearth of scheduled events for this week, and frankly things were moving to fast to accurately predict what was/is going to happen. We hope to be back on track this week.
Here's why you care: You care because you/we/us want need stability in the financial world. Ultimately being a "bank holding company" allows these banks to have a revenue stream from normal banking activity. And given the number of financial institutions on the skids, having a greater number of healthier players helps you - the consumer. On the flip side, the question is out as to what is lost in diversity in the financial sector. Independence does have its advantages.
Why You Care notes that we did not publish Next Week's News Today last week because of the dearth of scheduled events for this week, and frankly things were moving to fast to accurately predict what was/is going to happen. We hope to be back on track this week.
Wednesday, September 17, 2008
Can Tax Payer Afford the Wall Street Bar Tab?
Most of today's coverage will be trying to define what AIG's take over means for the economy, while trying to spot the next failure.
Why You Care suggests focusing on the thoughtful reporting by the LA Times today as it tries to add up the cost of the recent actions by the government to either backstop institutions or out right take them over.
Here's why you care: At the end of the day either the government's actions will be right in that better to pay now than even more later - or - it will be the wrong call because the market will anticipate the government acting from here on out. The LA Times piece explores this important question.
What Why You Care would love to see is a follow up piece adding not only the price tag for the government's recent market action, but Afghanistan, Iraq and the entitlement programs that are going to face an incredible test with the baby-boomers retiring in droves. Not an easy task, and that's just for the journalist to write it.
Why You Care suggests focusing on the thoughtful reporting by the LA Times today as it tries to add up the cost of the recent actions by the government to either backstop institutions or out right take them over.
Here's why you care: At the end of the day either the government's actions will be right in that better to pay now than even more later - or - it will be the wrong call because the market will anticipate the government acting from here on out. The LA Times piece explores this important question.
What Why You Care would love to see is a follow up piece adding not only the price tag for the government's recent market action, but Afghanistan, Iraq and the entitlement programs that are going to face an incredible test with the baby-boomers retiring in droves. Not an easy task, and that's just for the journalist to write it.
Monday, September 15, 2008
Cutting Through Wall Street's Fear and Loathing for What You Should be Reading
The tsunami of financial coverage this morning is both awesome and overwhelming. What to do with so much reporting? Well, we know you know four things: 1) the economy is still in a terrible spot; 2) Lehman Brothers will go into bankruptcy; 3) Merrill Lynch will get sold to Bank of America; 4) the 800 pound insurance gorilla - A.I.G. needs cash.
That raises the question - what's gonna happen next?
That's why amidst all the stories about angst, fear, loathing, etc. the New York Times' "Banks Fear Next Move by Shorts" is really the one story you need to read today. To help, Why You Care notes we've posted on this topic before explaining: "Regular short sales involve a seller borrowing from a broker the stock he plans to sell - then buying it later at a lesser price, thus making a profit from the difference. Sell high, buy low says a short seller".
Here's why you care: If Wall Street hedge funds decide to make money buy shorting stocks (betting that the financial stocks will continue to go lower before going up), that's simply another way of saying Wall Street doesn't see the bottom of the market yet. If that's the case, then it makes it a whole lot harder for the government to help out. That doesn't bode well for your 401K or home price.
Reading the NY Times article we linked to will help you understand the pressure and context of how the market is working, and at times working angst itself as it seeks stability.
That raises the question - what's gonna happen next?
That's why amidst all the stories about angst, fear, loathing, etc. the New York Times' "Banks Fear Next Move by Shorts" is really the one story you need to read today. To help, Why You Care notes we've posted on this topic before explaining: "Regular short sales involve a seller borrowing from a broker the stock he plans to sell - then buying it later at a lesser price, thus making a profit from the difference. Sell high, buy low says a short seller".
Here's why you care: If Wall Street hedge funds decide to make money buy shorting stocks (betting that the financial stocks will continue to go lower before going up), that's simply another way of saying Wall Street doesn't see the bottom of the market yet. If that's the case, then it makes it a whole lot harder for the government to help out. That doesn't bode well for your 401K or home price.
Reading the NY Times article we linked to will help you understand the pressure and context of how the market is working, and at times working angst itself as it seeks stability.
Friday, September 12, 2008
"Happy Housing Story" Amidst Another Record Foreclosure Report
The news today is another record high for foreclosures, Wall Street in the throes of bank angst, and YET... This week we all learned that Warren Buffett managed to do okay lending money to subprime borrowers. Huh, you say?
Here's why you care: Take a quick moment and read the Buffett story and understand that the key phrase in the story is that the company "keeps all loans on its own books rather than offloading them to others by means of securitization". So what's that mean?
Securitization is when the bank that issued the mortgage sells it to another institution, thus not having to worry about it anymore. That other institution then dumps a bunch of mortgages into one pot to increase the payout by numbers, and then sells it as an investment to other individuals, banks, etc.
Securitization is GREAT if you are bank looking to dump a mortgage and get cash back (thus enabling you to lend more). Securitization is TOUGHER if you are a borrower trying to renegotiate your terms because that means you aren't talking to the bank that issued you the mortgage in the first place.
Here's why you care: Take a quick moment and read the Buffett story and understand that the key phrase in the story is that the company "keeps all loans on its own books rather than offloading them to others by means of securitization". So what's that mean?
Securitization is when the bank that issued the mortgage sells it to another institution, thus not having to worry about it anymore. That other institution then dumps a bunch of mortgages into one pot to increase the payout by numbers, and then sells it as an investment to other individuals, banks, etc.
Securitization is GREAT if you are bank looking to dump a mortgage and get cash back (thus enabling you to lend more). Securitization is TOUGHER if you are a borrower trying to renegotiate your terms because that means you aren't talking to the bank that issued you the mortgage in the first place.
Thursday, September 11, 2008
Next Week's News Today: Bank Angst Story Continues
If it is Thursday, then it must be time for Why You Care's futures calendar.
Two important earnings reports are due next week: Goldman Sachs and Morgan Stanley. Why You Care always notes that these reports are a game of expectations, and thus you've seen a few stories already out this week. However, there's another key factor... Lehman Brothers. What's going on with Lehman Brothers this week and next will inevitably frame how journalists will cover Goldman and Morgan Stanley.
Here's why you care: Companies will be successful in framing the story by saying it isn't simply about a game of expectations, but that we're in a better spot than Lehman Brothers. You care because Lehman's woes will create exceptionally high interest from journalists for close scrutiny of the reports and challenging of the spin. Result for next week: Likely excellent pieces looking at the financial health of not only Goldman and Morgan Stanley, but where the financial sector stands going into the Fall. That's a win for the investor/reader.
All the days are noted below for the reports including housing numbers on Wednesday and unemployment on Thursday. Taken together this is fertile ground to ask candidates financial questions on the campaign trail.
MONDAY 9/15
Earnings: Titan Machinery Inc.
Economic Reports: Industrial Production
TUESDAY 9/16
Earnings: Best Buy, Kroger Co., Goldman Sachs
Economic Reports: Consumer Price Index
WEDNESDAY 9/17
Earnings: General Mills, Morgan Stanley, Orleans Homebuilders
Economic Reports: Building Permits, Housing Starts
THURSDAY 9/18
Earnings: FedEx, Palm Inc., Pier 1 Imports Inc.
Economic Reports: Initial (unemployment) Claims
FRIDAY 9/19
TBD as of now.
Two important earnings reports are due next week: Goldman Sachs and Morgan Stanley. Why You Care always notes that these reports are a game of expectations, and thus you've seen a few stories already out this week. However, there's another key factor... Lehman Brothers. What's going on with Lehman Brothers this week and next will inevitably frame how journalists will cover Goldman and Morgan Stanley.
Here's why you care: Companies will be successful in framing the story by saying it isn't simply about a game of expectations, but that we're in a better spot than Lehman Brothers. You care because Lehman's woes will create exceptionally high interest from journalists for close scrutiny of the reports and challenging of the spin. Result for next week: Likely excellent pieces looking at the financial health of not only Goldman and Morgan Stanley, but where the financial sector stands going into the Fall. That's a win for the investor/reader.
All the days are noted below for the reports including housing numbers on Wednesday and unemployment on Thursday. Taken together this is fertile ground to ask candidates financial questions on the campaign trail.
MONDAY 9/15
Earnings: Titan Machinery Inc.
Economic Reports: Industrial Production
TUESDAY 9/16
Earnings: Best Buy, Kroger Co., Goldman Sachs
Economic Reports: Consumer Price Index
WEDNESDAY 9/17
Earnings: General Mills, Morgan Stanley, Orleans Homebuilders
Economic Reports: Building Permits, Housing Starts
THURSDAY 9/18
Earnings: FedEx, Palm Inc., Pier 1 Imports Inc.
Economic Reports: Initial (unemployment) Claims
FRIDAY 9/19
TBD as of now.
Wednesday, September 10, 2008
Capitol Hill: The Intersection of Land, Money and Power
The intersection of money, land and power often is not on Wall Street but on Capitol Hill. That is why the Citizens for Responsibility and Ethics in Washington (CREW) fourth annual list of ethics investigations in the halls of Congress just out today is worth a moment of your time. Although CREW's list isn't just about real estate matters, we were surprised to see how many actually were at a quick glance: Rep. Gary Miller, Rep. Charles Rangel, Rep. Laura Richardson and Sen. Ted Stevens.
Here's why you care: The circumstances surrounding the members mentioned above illustrate the degree to which real estate touches all our lives and creates opportunities and risks. Understanding the degree to which business deals involving land are going on around you is helpful to not only decipher the business pages, but also the legislation coming out of Congress. Take a moment and look at each of the deals above, it is food for thought.
Here's why you care: The circumstances surrounding the members mentioned above illustrate the degree to which real estate touches all our lives and creates opportunities and risks. Understanding the degree to which business deals involving land are going on around you is helpful to not only decipher the business pages, but also the legislation coming out of Congress. Take a moment and look at each of the deals above, it is food for thought.
Tuesday, September 9, 2008
Now Taking Applications for the Next Rescue
The New York Times has the must read ahead of the curve piece today, "Who Else Can Pile On for a Federal Rescue?" that examines the debate that is likely to end up in the halls of Congress and hopefully on the campaign trail. BUT, the debate isn't exactly what you think. If you thought it was about whether some other financial entity should get a rescue you would be only partially correct... It is really about the "moral hazard" argument which essentially means if you help one company in distress then others will continue their own ill advised behavior assuming they'll get help too. The question becomes does helping a company in one industry make companies in OTHER industries assume they'll get bailed out too? How far does the "moral hazard" argument spread?
Here's why you care: The debate asks what standard should be set. Should it be too big to fail? If that's the case then what about automakers, airlines, pharmaceutical companies? Airlines and car makers can claim an economic impact due to massive job loss, and drug companies could claim the loss of important research and so on... Or should it be focused on financial related industries that can claim if they drown they'll take everyone with us? Those are important questions. But someone is going to pay, and that person is you.
Here's why you care: The debate asks what standard should be set. Should it be too big to fail? If that's the case then what about automakers, airlines, pharmaceutical companies? Airlines and car makers can claim an economic impact due to massive job loss, and drug companies could claim the loss of important research and so on... Or should it be focused on financial related industries that can claim if they drown they'll take everyone with us? Those are important questions. But someone is going to pay, and that person is you.
Monday, September 8, 2008
Why the Smart Money and Journalists Are Still Worried About the Banks
We trust by now you've seen the Freddie Mac and Fannie Mae news... So we're determined to stay true to form and only focus on the one story today that will put you ahead of the curve. That's why we think you need to read a story buried inside the Wall Street Journal today: "No End Yet to the Capital Punishment". The headline is, of course, a play on words and speaks to struggle some private banks are having with a lack of funds.
Here's why you care: We've repeatedly pointed to articles about banks on the government watch list for failure, most recently HERE and HERE. The Wall Street Journal is right to keep their eye on the ball, and so should you.
We thought we were done and then we saw this article on CNNMoney.com pointing out that many of these struggling banks actually hold Freddie and Fannie stock. In other words, banks already hanging on by their fingernails may have just gotten another left jab at their fiscal health. If you take less than five minutes and read the CNNMoney.com article and Wall Street Journal article like companion pieces - you'll understand this on an entirely different level.
Here's why you care: We've repeatedly pointed to articles about banks on the government watch list for failure, most recently HERE and HERE. The Wall Street Journal is right to keep their eye on the ball, and so should you.
We thought we were done and then we saw this article on CNNMoney.com pointing out that many of these struggling banks actually hold Freddie and Fannie stock. In other words, banks already hanging on by their fingernails may have just gotten another left jab at their fiscal health. If you take less than five minutes and read the CNNMoney.com article and Wall Street Journal article like companion pieces - you'll understand this on an entirely different level.
Friday, September 5, 2008
Next Week's News Today: Campaign Trail Charts Course Through Home Sales and Unemployment Reports
We're a day late with our installment of Next Week's News Today due to the holiday this week. However, Why You Care would like to note that last week's forecast for this week was on target, especially given the sour job news today. So what's up next week? Well...
Here's why you care about next week: Both campaigns will be focusing on Pennsylvania, Michigan, Ohio, and Pennsylvania, and Pennsylvania... Did we mention Pennsylvania? That will be in the context of news on pending home sales (Tuesday as noted below, followed by a homebuilder's earnings due on Thursday) and more unemployment claims (Thursday as noted below). Where Sen. John McCain certainly touched on the economy in his acceptance speech last night, he did not roll up the sleeves and get into the specifics as we thought he would. However, PA, OH, and MI are all states where housing prices and jobs are paramount on the campaign trail. The economic news will likely create some frank questions from voters and journalists. We're hoping more specifics emerge, until then we can at least help you anticipate the headlines for next week.
MONDAY 9/8
Earnings: Pep Boys
Economic Reports: Consumer Credit
TUESDAY 9/9
Earnings: Piedmont Natural Gas Inc.
Economic Reports: Pending Home Sales; Wholesale Inventories
WEDNESDAY 9/10
Earnings: U.S. Global Investors
Economic Reports: Crude Inventories
THURSDAY 9/11
Earnings: Campbell Soup; Orleans Homebuilders Inc.
Economic Reports: Export/Import Prices; Initial Unemployment Claims;
FRIDAY 9/12
TBD as of now.
Here's why you care about next week: Both campaigns will be focusing on Pennsylvania, Michigan, Ohio, and Pennsylvania, and Pennsylvania... Did we mention Pennsylvania? That will be in the context of news on pending home sales (Tuesday as noted below, followed by a homebuilder's earnings due on Thursday) and more unemployment claims (Thursday as noted below). Where Sen. John McCain certainly touched on the economy in his acceptance speech last night, he did not roll up the sleeves and get into the specifics as we thought he would. However, PA, OH, and MI are all states where housing prices and jobs are paramount on the campaign trail. The economic news will likely create some frank questions from voters and journalists. We're hoping more specifics emerge, until then we can at least help you anticipate the headlines for next week.
MONDAY 9/8
Earnings: Pep Boys
Economic Reports: Consumer Credit
TUESDAY 9/9
Earnings: Piedmont Natural Gas Inc.
Economic Reports: Pending Home Sales; Wholesale Inventories
WEDNESDAY 9/10
Earnings: U.S. Global Investors
Economic Reports: Crude Inventories
THURSDAY 9/11
Earnings: Campbell Soup; Orleans Homebuilders Inc.
Economic Reports: Export/Import Prices; Initial Unemployment Claims;
FRIDAY 9/12
TBD as of now.
Thursday, September 4, 2008
Convict Abramoff Reminds Us How Washington Can Fail
Convict/Prisoner/Former Star Lobbyist Jack Abramoff gets a break from his jail cell today so that he may have a hearing regarding tax evasion. The best part is his letter to the judge saying he's not Osama Bin Laden as he lobbies for a reduced sentence. The Wall Street Journal, Washington Post, and New York Times all have great little posts - just pick one.
Here's why you care: The Republican convention, like the Democratic convention, has a mantra about changing Washington because of corruption... Well, Abramoff is the poster boy. He's the reminder of what can go wrong, and seems to every decade. This may not get many headlines today, but it is worth a quick read as a reminder of the moments when Washington fails.
Here's why you care: The Republican convention, like the Democratic convention, has a mantra about changing Washington because of corruption... Well, Abramoff is the poster boy. He's the reminder of what can go wrong, and seems to every decade. This may not get many headlines today, but it is worth a quick read as a reminder of the moments when Washington fails.
Wednesday, September 3, 2008
Job Cuts at Highest Levels in Six Years
Job losses continue, but it is worth reading this CNNMoney.com article because while job cuts for the past few months are at the highest level in six years, there may yet be some leveling off. It is easy to dismiss job loss numbers if you think your job is safe. That's a mistake.
Here's why you care: A reasonable person sees the job cuts headline and asks, is my job safe? We suggest taking one more step and ask, how do these job losses fit into the overall economic picture and impact the price of my house, the growth of my business, and my ability to finance education/retirement/car etc.?
Now that you've asked yourself that, consider the messages coming out of Minneapolis this week. Sen. John McCain's speech Thursday will undoubtedly focus on war and the economy. Why You Care is looking forward to his details just like we were with the speeches from Denver. We suspect you are too.
Here's why you care: A reasonable person sees the job cuts headline and asks, is my job safe? We suggest taking one more step and ask, how do these job losses fit into the overall economic picture and impact the price of my house, the growth of my business, and my ability to finance education/retirement/car etc.?
Now that you've asked yourself that, consider the messages coming out of Minneapolis this week. Sen. John McCain's speech Thursday will undoubtedly focus on war and the economy. Why You Care is looking forward to his details just like we were with the speeches from Denver. We suspect you are too.
Tuesday, September 2, 2008
Does Greenspan Still Impact Your Bottom Line?
Charlie Rose recently had a smart show on the economy with Fortune Magazine's Allan Sloan and New York Times' Gretchen Morgenson. Amidst waxing as to the length and depth of our collective financial rollercoaster (more down than up) was an observation that Why You Care has not heard in the media before but has heard in private conversations: The difference between the Bernanke Fed and the Greenspan Fed is that Greenspan had the benefit of the United States being seen as the 800 pound gorilla. In other words, when the Fed talked people listened and believed.
But, through no fault of Ben Bernanke, the world has changed. September 11th happened, the world is more fractionalized, American influence abroad is not quite like it once was - and that's speaking strictly from a political analysis - not an economic one.
Enter the credit crisis, can a country with waning influence still get the job done when the job requires sheer strength of influence? Seems like influence is self-perpetuating. If you convince others it is real, well, then it is real. If not, well, you get the picture.
Here's why you care: Allan Sloan's Washington Post column regarding the chattiness of Alan Greenspan is important. It is not just whether his outspokenness is overshadowing the Bernanke Fed. It seems to us the question is does this make the Bernanke Fed's ability to be the 800 pound gorilla all that much harder? And if you don't think making it harder impacts your personal bottom line, then see this CNNMoney.com story about how many retirees might just have 25% less than they counted on.
But, through no fault of Ben Bernanke, the world has changed. September 11th happened, the world is more fractionalized, American influence abroad is not quite like it once was - and that's speaking strictly from a political analysis - not an economic one.
Enter the credit crisis, can a country with waning influence still get the job done when the job requires sheer strength of influence? Seems like influence is self-perpetuating. If you convince others it is real, well, then it is real. If not, well, you get the picture.
Here's why you care: Allan Sloan's Washington Post column regarding the chattiness of Alan Greenspan is important. It is not just whether his outspokenness is overshadowing the Bernanke Fed. It seems to us the question is does this make the Bernanke Fed's ability to be the 800 pound gorilla all that much harder? And if you don't think making it harder impacts your personal bottom line, then see this CNNMoney.com story about how many retirees might just have 25% less than they counted on.
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