Joseph Lazzaro
New York - http://
Joseph Lazzaro is a veteran financial editor with more than 10 years in financial news and financial publishing. Lazzaro served as Managing Editor of New York-based financial news web site WallStreetItalia.com / WallStreetEurope.com for four years. Lazzaro, who holds an ABD/Ph.D. in American Government and International Economics from the University of Connecticut, also served as a News Editor for the Pulitzer Prize-winning Hartford [Connecticut] Courant, prior to graduate school. He is based in New York.
Posted Nov 21st 2008 5:46PM by Joseph Lazzaro
Filed under: Forecasts, Politics, Recession, Financial Crisis
One of the ironies of public officialdom is that those elected officials who deal with budgets and tax policy rarely fully grasp the economic sea changes when they occur in the nation.
Whether it's due to habit, tunnel vision, groupthink, arrogance, ignorance, surrounding yourself with sycophantic staff, or some combination, congressional lawmakers are often the last to notice economic shifts that occur cyclically.
January 2009: A new era begins?
One of the key economic questions for investors and other stake holders is whether President-elect Barack Obama follows through with his campaign promise to be an eclectic, someone who tries a center-left policy here, deploys a center-right policy there because it works, and who does not implement typical party -- or partisan -- responses to problems; i.e., solutions from traditional sources of power in his party.
But an even more-telling economic question concerns what the Republicans will do. In November 2008, the Republican Party suddenly found out that it was very white, male, old, Protestant, and by-and-large economically and fiscally conservative. The aforementioned guarantees in the years ahead that they'll hold at least 20 or 25 Senate seats in a chamber of 100, and if they're not careful, about the same percentage of House seats. Meanwhile, the nation's electorate is increasingly nonwhite, female, younger, non-Protestant, and by-and-large economically and fiscally moderate, and in some cases, liberal/progressive.
Continue reading Does Obama symbolize the start of a new economic era?
Posted Nov 21st 2008 4:35PM by Joseph Lazzaro
Filed under: Citigroup Inc. (C), Politics, Recession, Financial Crisis
With credit markets remaining under stress, and with uncertainty growing regarding the status of megabank
Citigroup (NYSE:
C), the U.S. Congress may have to take more action to maintain financial system stability and prevent the U.S. economy from spiraling into a deeper recession, so says economist David H. Wang.
"The U.S. Congress may have to approve a 'TARP 2,'" Wang told BloggingStocks Friday. "Whether Congress does it as part of a fiscal stimulus package, or separately, it is clear we will need more money to purchase toxic assets, improve bank capitalization and allocate funds for home mortgage refinance programs, and other financial stabilization measures. At this stage of the crisis, the $700 billion TARP is not going to be enough, in my interpretation."
Bank sector stress remainsWang said that if Citigroup, whose CEO Vikram Pandit said
has adequate capital, for some reason cannot, when needed, find additional capital in the private sector, then "the Fed and or U.S. Treasury will step in, and take necessary measures to stabilize the bank," Wang said. If the U.S. Treasury is the primary funder, "that action, and other forthcoming, planned actions by the Treasury may use up a considerable amount of TARP funds, requiring a TARP 2."
Continue reading Congress may have to approve a 'TARP 2,' economist says
Posted Nov 21st 2008 1:18PM by Joseph Lazzaro
Filed under: Forecasts, Economic data, Recession
To look at it optimistically, it's a period of risk aversion.
Economists, business executives, analysts, and certainly employees are hoping it doesn't become an 'era of risk aversion' - - a
longer period where businesses shun expansions and new projects, and investors avoid stocks.
Further, the risk-aversion theme is prompting investors large and small to flock to the 10-year U.S. Treasuries bond, also called 10-year notes, the yield for which was
3.05% on Friday at mid-day. (Bond prices move in the opposite direction of yield. Hence, when demand is strong, such as now, a rise in bond prices pushes their yield lower.)
Moreover the 10-year yield is likely to fall further in the next two quarters, as more investors flock to safe investments amid the U.S. recession, so says economist Richard Felson.
"We're seeing the value of safety come to the forefront. In this climate, investors don't care about yield, their primary concern is capital preservation," Felson said. "And despite the increase in debt the United States is likely to record over the next two years, the lowest risk investment remains U.S. Treasury notes. It's quickly becoming a sort of electronic mattress, the way savers used to store money in mattresses decades ago. Investors are saying, 'Here, take my money and store it until conditions improve.' "
Continue reading U.S. 10-year bond quickly becoming an electronic 'mattress' for savers
Posted Nov 21st 2008 12:19PM by Joseph Lazzaro
Filed under: Other issues, Duke Energy (DUK)
The latest trend in the utilities sector could deliver an unpleasant 'jolt' (pun intended) to electric power generation companies, if it continues.
U.S. electricity consumption unexpectedly dropped in Q2 and Q3, on a year-over-year basis,
The Wall Street Journal reported Friday (
subscription required), although
The Journal cautioned that the data is early and incomplete.
Major electric power suppliers
Xcel Energy (NYSE:
XEL),
Duke Energy (NYSE:
DUK) and
American Electric Power (NYSE:
AEP) all reported declines in residential electricity use in recent quarters, compared to the previous year,
The Journal reported.
An electric puzzleEconomist David H. Wang told BloggingStocks Friday electricity demand is a function of more factors than one might assume. The economic cycle, seasons, weather extremes, demographics, household formation, increased efficiency, technological change, and even popular culture trends are among the major factors affecting electricity demand.
Wang believes the major factor in the recent dip is the current U.S. recession. "I will defer to more-comprehensive U.S. Energy Department and power association data later, but I think without question the economic downturn is a major factor. When people lose jobs, many tend to give up housing and live with roommates or relatives. This decreases electricity use. Also, home foreclosures result in empty homes, which obviously use less energy than occupied homes."
Continue reading U.S. utilities encounter a shocker: A dip in power demand
Posted Nov 21st 2008 11:40AM by Joseph Lazzaro
Filed under: Good news, Commodities, Oil
There have been almost no bright spots during the U.S. economic downturn -- no investor or typical citizen would trade minor pluses for the credit market and economic conditions the U.S. currently faces -- but at least one area of commerce offers some encouraging news.
The nation's average price for
gasoline has dropped below $2 to $1.99 per gallon, according to a survey by motorist group AAA.
Technically, the price dropped 2 cents to $1.989 per gallon, but the macro point is the important fact: gasoline prices have fallen at their fastest rate since 1981-1983, when prices declined after the end of the
1979-80 oil shock caused by the Iranian Revolution, which devastated Iran's oil sector.
During that period, U.S. gasoline prices fell from about $1.50 per gallon to about $1.10, or from about $3.50 per gallon to about $2.40 in current dollars, economist Peter Dawson said.
Hence, the drop in gasoline prices this late summer / fall has been a record-setter in percentage terms. "The price drop has been stunning. We've dropped 50%, from an average price over $4.00 a gallon to under $2.00, and we've done it in less than a year. That's just stunning," Dawson said. "Historically, it's taken a year or longer for prices to retreat after an oil shock, and in the case of the 1979-1980 oil shock, several years."
Continue reading Average U.S. gasoline price falls to $1.99 and is likely to drop more
Posted Nov 20th 2008 6:10PM by Joseph Lazzaro
Filed under: Law, Politics, Financial Crisis
This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.
Just say it's been "a long and winding financial road" for billionaire investor George Soros -- but one that's had more smooth traveling than detours.
True, the Hungarian-born Soros was fined $2 million by a French court in 2002 for insider trading, which France's highest court upheld on an appeal on June 14, 2006, but other than that transgression, critics would be hard pressed to find other operational/financial flaws.
Soros is perhaps best known for one of the most cunning and successful short-term plays in investment fund history. On September 16, 1992 Soros sold short more than $10 billion worth of the British pound, after the Bank of England failed to raise interest rates. Soros' profit on the ensuing fall in the pound: about $1.1 billion.
Further, the other dimensions of Soros life that some critics would cite -- his social activism and philanthropy -- are viewed as positives by many others. Soros has promoted nonviolent democratization in Central and Eastern Europe, and other states, and pledged hundreds of millions of dollars to numerous universities globally and to antipoverty programs in Africa, among many other charitable acts.
Continue reading Financial Felons: George Soros
Posted Nov 20th 2008 3:29PM by Joseph Lazzaro
Filed under: Forecasts, Bad news, Economic data, Recession
From a macroeconomic standpoint, the fiscal stimulus package can't get passed soon enough.
The Conference Board's index of
leading economic indicators (pdf) fell 0.8% in October, with six of 10 components dragging the index lower. Economists
surveyed by Bloomberg News had expected the LEI index to decline by 0.6% in October.
From April-October 2008, the leading index declined 2.4% or a negative 4.7% annual rate, compared to a 1.2% decrease or a negative 2.3% annual rate over the previous six months, the Board said.
Economist Richard Felson told BloggingStocks Thursday the October LEI data documents what many on both Main Street and Wall Street sense: economic conditions are worsening.
"The LEI data shows an economy that's slowing. The recession is getting worse, so look for more of the same regarding job lay-offs and downsizings, as well corporate revenue and earnings declines, and earnings guidance reductions," Felson said. "As it stands now, the economy is likely to remain in recession through at least end of the second quarter of 2009, which points to the need for federal fiscal stimulus, and other measures. The individual states are doing what they can to increase private sector demand, but many are cash-strapped themselves, facing budget deficits."
Continue reading Look for more of the same, as leading economic indicators remain lame
Posted Nov 20th 2008 1:18PM by Joseph Lazzaro
Filed under: Forecasts, Commodities, Oil, Recession
In his 30 years studying economics first in China, then since 1989 in the United States, economist David H. Wang has seen it all.
Or at least he thought he had seen it all, he said.
Oil: a $100 plunge"Oil is just about set to total a $100 fall in less than five months, which is unbelievable. It's hard to fathom," Wang said.
But, if
oil, which dropped $3.41 to $49.91 early Thursday, falls $2.64 more, it will have recorded the mind-boggling $100 plunge Wang spoke about.
Oil hit a record high of $147.27 per barrel in July on what analysts then largely argued was an inability of global oil supply to keep up with oil demand growth in Asia, stemming from surging emerging market GDP growth.
However, what we now know, with the advantage of hindsight, Wang says, is that the truly ridiculous $147 price for oil this summer was fanned primarily by a liquidity bubble - - in the form of dollars and a low-interest yen deployed to commodities by institutional investors, among other oil market players. Oil demand played a role, Wang added, "but not to the degree that excess liquidity did, chasing a high-return asset [oil]. Likewise with the weak dollar."
Continue reading Crude oil falls below $50 on U.S., global recession concerns
Posted Nov 20th 2008 10:10AM by Joseph Lazzaro
Filed under: Forecasts, Indices, Technical Analysis, DJIA, Recession
Once again,
Dow 8,000 has come back into focus.
For those investors who may not follow indices closely, the 8,000 level has a psychological but not technical support, the latter of which measures such things as the number of investors who are buying / selling, whether investors are committing more money to the market etc.
Even so, right now, a battle is taking place between the bulls and the bears: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls argue that the worst news is behind us, and that government stimulus, fiscal and monetary, will get the U.S. economy moving again.
The Dow Jones Industrial Average Wednesday closed below 8,000 at 7,997. If the bears can keep the Dow below 8,000 and then push it through 7,800, then 7,600, it will not be a pleasant time for investors.
Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion regarding where the Dow is headed, near-term.
Continue reading Bulls vs. Bears battle for Dow 8,000 continues
Posted Nov 20th 2008 9:55AM by Joseph Lazzaro
Filed under: Bad news, Employees, Economic data, Recession
What's the most-riveting statistic in this week's jobless claims report? Continuing claims, which surpassed 4 million for the first time.
Continuing claims rose 109,000 in the week ended November 8. Economists pay close attention to continuing claims because it provides them with a comprehensive indicator of long-term job market conditions.
Continuing claims have risen more than 45% in the past year, which is not good news for job aspirants or for corporate revenue and earnings moving forward, so says economist Peter Dawson.
"The 4 million continuing claims total means those laid off are having a hard time finding suitable, comparable employment. There are very few jobs available, which is the major reason behind the rise in the unemployment rate," Dawson said. "Further, without falling continuing claims, it's really hard for corporate revenue and earnings to increase, and of course the stock market's low level reflects this."
Meanwhile, U.S. initial jobless claims rose 27,000 to 542,000 for the week ended November 15, the U.S. Labor Department said. Claims for the previous week were revised to 515,000. Economists
surveyed by Bloomberg News had expected this week's initial jobless claims to total 505,000.
Continue reading Tell-tale stat: 4 million continuing U.S. unemployment claims
Posted Nov 19th 2008 5:53PM by Joseph Lazzaro
Filed under: Forecasts, Politics, Federal Reserve, Recession
The case for a large fiscal stimulus package has received a shot in the arm, but as with so many economic developments during this decade, there's an upside and a downside.
A group of about
100 CEOs has urged President-elect Barack Obama to "quickly implement" a stimulus package of roughly $500 billion. The CEOs said the package should emphasize investment in infrastructure, including roads, bridges and other construction, as well as alternative energy projects. Their second priority: improving education.
Economist David H. Wang has extracted positive and negative threads from the CEOs' statement.
"On the one hand, the added CEO support will be welcome, I am sure, by the Obama Administration, as it builds the case for its stimulus package," Wang said.
"On the other hand, the fact that CEOs are calling for government spending, which is not a traditional CEO stance, tells you about the seriousness of our economic problem," Wang said. "The U.S. economy is in rough shape and there are few signs of improvement."
Continue reading 100 CEOs call for about $500 billion in fiscal stimulus
Posted Nov 19th 2008 3:45PM by Joseph Lazzaro
Filed under: Oil, Recession
As any experienced trader will tell you, the goal is to cut your losses and let your winners ride.
Automated trading and algorithms have removed much of the subjective component from trading, but there are still trading firms and systems that rely on human judgment.
Pride and oil-long positions don't mixThat component can lead to outsized gains but also large losses, the latter being the case if you believed oil had merely corrected
from $147 per barrel to the
$120 level this summer. Energy Trader Jim Dietz, fortunately, was not one of those, but there were traders who established positions at $120, held on hoping that the psychologically-important $100 level would provide support (it didn't), then sustained major losses as oil crashed through first $90, then $80, then $70.
Oil, which fell another 64 cents Wednesday at mid-day, is now trading at $53.75. Dietz said all known, short-term oil bulls -- at least the smart ones -- are out of the market.
"The bear market in oil will continue through the spring of next year, at least, and we can now see what the $147 oil price was a leverage-fed bubble," Dietz said. "The dominant issue now is the demand side. We have year-over-year oil and gasoline use declines in the U.S. and if China's consumption flat-lines, we'll fall well below $50 per barrel." Dietz added that he was currently short unleaded gasoline and oil, with monthly contracts.
Continue reading Oil nears $50, which is not good news if you bought at $120
Posted Nov 19th 2008 3:00PM by Joseph Lazzaro
Filed under: Industry, Ford Motor (F), General Motors (GM), Recession
The first rule of public relations is never get in a fight with anyone who buys ink by the barrel. And a major tenet of investing is don't take a stock position in conflict with Congressional policy, once Congress has committed to a program.
The wisdom behind the second adage, like the first, is obvious enough: Congress has the ability to suddenly and substantially change the investment landscape.
Case in point: Congress, which is currently hearing testimony on a performance-based rescue package for
General Motors (NYSE:
GM),
Ford (NYSE:
F), and Chrysler, could end up further funding reform by the Big Three by buying millions of the companies' vehicles for the U.S. government's auto fleet.
'Catching three fish with one cast'Economist David H. Wang says the tactic has appeal in several areas -- economic, industrial, energy.
"It would help the three companies retain essential employees while transforming their operations, it would keep more industrial spin-off jobs in the U.S., and it would save energy by increasing U.S. government auto fleet efficiency," Wang said. "It would be like catching three fish with one cast and I think the new Obama administration would look very favorably on the energy efficiency aspect, both private and public sector dimensions."
Shares of GM fell 30 cents to $2.79, while Ford declined 16 cents $1.52 in Wednesday morning trading.
Continue reading Should Congress buy millions of Big 3 vehicles for government fleet?
Posted Nov 19th 2008 10:30AM by Joseph Lazzaro
Filed under: Industry, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM), Recession
It's rapidly becoming the world's largest parking lot.
Is it the
Cross Bronx Expressway at 6 p.m.? No, it's the Long Beach, California port, which along with the Los Angeles port is rapidly becoming a defacto storage lot,
The New York Times reported, as thousands of unwanted, new foreign cars pile up, their future unknown.
The reason? Foreign new car sales have plunged as consumers cut back spending amid the caution-inducing U.S. recession and unemployment levels rise, which historically has led to a decline in new car sales. New car dealers order cars months in advance but have the authority to reject delivery if demand declines.
Further, if you thought only U.S. automakers
General Motors (NYSE:
GM),
Ford (NYSE:
F) and Chrysler had lots and storage fields of unsold new cars, you're mistaken, so says economist Peter Dawson.
"This recession is an equal-opportunity pain inflicter for auto manufacturers, and it's hitting foreign car manufacturers as well," Dawson said. "
Toyota (NYSE:
TM), Nissan, even Mercedes-Benz are seeing their inventories build, despite promotions and sales incentives."
Continue reading Unsold foreign cars piling up at U.S. ports
Posted Nov 18th 2008 5:14PM by Joseph Lazzaro
Filed under: Politics, Housing, Recession
Most investors know that there's a difference between Democratic Party leadership and Republican Party leadership, as it relates to U.S. fiscal and economic policy.
However, although more economically-cohesive than the Democratic Party, the Republican Party is not monolithic, and there's perhaps no better example of these often nuanced differences in policy than the positions on home mortgage assistance policy held by U.S. Treasury Secretary Henry Paulson, and
FDIC Chairman Sheila Bair. Paulson has been slow on payment reliefAlthough he has shown support for mortgage refinance programs aimed at achieving lower payments - - 'payment relief' in Washingtonspeak - - Paulson has steered clear of policies that would mandate that banks unilaterally lower principals, or interest rates, preferring to stick with a voluntary approach, whereby banks basically negotiate with borrowers on a case-by-case basis.
That traditional Republican response, economist David H. Wang said, "has prevented mortgage refinancings from occurring for those who don't truly need them," but it also has increased the at-risk mortgage pool, delaying the housing sector's recovery.
A solution to the above, in Wang's view? Adopt the FDIC plan backed by Bair, whereby the Treasury would use its funds to speed refinancings for at-risk homeowners in owner-occupied homes. Wang agreed with Bair that the FDIC plan could prevent 1.5 million foreclosures by the end of 2009.
"It could prevent even more, perhaps as many as 1.8-2 million foreclosures, and until the U.S. ends these waves of foreclosures, very little good news will occur from a GDP standpoint, which is why Bair's plan should be enacted," Wang said. "I also think President-elect Obama should appoint her to a Special Advisor post in the Obama Administration, solving the home foreclosure problem is that critical to the nation's economic health."
Continue reading Should Obama name FDIC's Bair as a Special Advisor for Mortgage Policy?
Next Page >
Comfort Zone Investing: Getting beyond today
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
