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Archive for the ‘Economy’ Category

Longest economic expansion in more than 150 years!

Saturday, July 4th, 2015

According to Allen Sinai, Decision Economics, the current economic expansion in U.S. may exceed the 10-year expansion of 1990s. If that is true (of course… no one would predict what would happen next month, especially given current Greek situation), this is not a bad time to buy a house or start a business. Below charts from Business Week article are giving lot of hope.


















Source: Business Week

Jobless rate down to 7.5% – More signs of economic recovery?

Sunday, May 5th, 2013

On Friday, U.S. markets cheered after taking a look at unemployment numbers. Unemployment rate is at the lowest level since December 2008. U.S. Labor Department also significantly raised hiring estimates for the two prior months, by a combined 114,000 jobs. Without much argument, this is clearly a sign of economic recovery in U.S. But, the question is will it sustain? Especially with crazy housing boom (and the subsequent bidding wars for real estate properties) in many parts of the country.

The Dow Jones Industrial Average rose 142.38 points, or 1%, to 14973.96. In an interesting development, gold futures are losing momentum which may indicate that investors are willing to sell gold to move back into stocks. Investors start accumulating gold when they feel that other investments are relatively worse and gold is the safe bet. They start selling gold when they feel that other investments are relatively better off.

Some Fed officials are adjusting their hopes for a stronger economic rebound. Economic growth has averaged about 2% a year during the recovery. “We are likely to see brief swings above and below that rate from time to time, but I don’t see a compelling case for a sustained departure anytime soon,” Jeffrey Lacker, president of the Richmond Fed, said in a speech Friday.

It’s not all rosy. The Institute for Supply Management’s non-manufacturing index released on Friday fell to 53.1 in April, from 54.4 in March. This index is still above 50 which typically indicates improvement for the service sector. However, the decline from previous month is something to watch out for.

U.S. Services Sector Continues to Grow

Sunday, December 9th, 2012

U.S. economy is definitely on the recovery mode. Housing data is positive in the recent weeks. Recently, The Institute for Supply Management (ISM) said its services index rose to 54.7 in November from 54.2 in October. The reading topped economists’ forecasts for growth of 53.5, according to a Reuters survey. Any reading above 50 is the good news; it indicates the expansion in services sector.

The survey’s business activity index also jumped to 61.2 in November from 55.4 in October. On the negative side, the employment index fell to 50.3 from 54.9. It’s better to keep an eye on ISM indexes to gauge the growth of the economy especially if you are an investor.

U.S. Jobless Rate Drops to Three Year Low!

Saturday, January 7th, 2012

Something is cooking up… It looks like economic recovery is gaining momentum. Economic recovery is depending on the recovery in the job market. Luckily we are seeing some strong evidence that job market is improving. US unemployment rate dropped to near three-year low of 8.5%. Nonfarm payrolls are increased by 200,000 in December according to the Labor Department. Economists were expecting 150,000 gain in nonfarm payrolls.

Right now, 13 million workers are unemployed. It is going to take many more months to recoup all the losses in the job market. However we hope that the current momentum in job market recovery would continue for the next six months provided Europe debt crisis doesn’t get worse.

Bank of America to charge $5 per month fee for debit card

Thursday, September 29th, 2011

Banks are getting more desperate and are finding ways to dig hole for themselves. Bank of America plans to charge $5 month for debit cards that are used for purchases. If you use the card just at ATMs, you will not be charged.

Relevant details are here.

Banks are not just giving away the debit card for purchase. Every bank charges the transaction fee from merchants. That alone is not enough, now they need to get the money from consumers too. Well, it’s just a matter of time before they realize the blunder corporate move.

Update: Just like we said, Bank of America realized their blunder and backed off. Read New York Times article for more information about Bank of America cancelling the debit card fee.

Outlook for Economy Brightening

Wednesday, January 26th, 2011

Whether it’s going to be true or not, just reading this news make me feel optimistic. Associated Press survey found growing optimism among leading economists.

Economists predict that U.S. economy will grow 3.2% in 2011 and employers would create 2.2 million jobs. You can read the complete story here. As we have written many times before, jobs are there. But, the employers are not able to find right candidates at right price. If more jobs are available for job-seekers with different set of skills (such as manufacturing, construction, etc), it’s going to improve the overall optimism even better.

Gold Keeps Going Up!

Saturday, October 2nd, 2010

Gold bulls are enjoying time of their life! Gold keeps rallying to new heights because there is widespread expectations that Federal Reserve bank is keen to implement quantitative easing policy, if US does not see economic growth. Every major country in the world is trying to weaken their own currency to improve their export markets. When the local currencies weakened, gold offers sweet spot for the currency traders. Almost all the metal traders are looking at $1,350 an ounce by the end of this year. Don’t be surprised if this target is met in the next two weeks. When there is uncertainty in the world and economy, gold is the place to be.

Few weeks ago, London Bullion Market Association conference in Berlin made the prediction that gold will rise to a record of $1,450 an ounce in the next year! There were even talks about gold going to $2,000 an ounce.

If you’re pessimistic about the world economy, you should be bullish on gold and other metals such as silver, platinum and palladium. However, if the economy improves in many major countries, the interest in gold will subside down considerably.

If you want to trade gold, you don’t need to buy and hold the metal. You can trade Gold ETF (GLD). If you are experienced with options, you can sell covered calls on GLD  and make decent money as long as gold price doesn’t go down dramatically. If you are bullish on gold, selling puts on GLD is also an attractive option.

Disclaimer: I don’t own GLD at the time of this writing.

August Job Data Encourages Market

Friday, September 3rd, 2010

This morning the August employment report was released and it has given a nice boost to the stock market today. The private sector job growth for the month was 67,000 jobs. Analysts had been expecting the private sector job growth to be only 20,000 jobs. The unemployment rate stayed edged up to 9.6% in August.

The past few weeks has seen all kinds of important economic information whipsaw the market in both directions. We have seen weekly jobless claims reach 500,000, which hurt the market badly. We have seen impressive manufacturing numbers, which helped the market in a big way. For the individual investor, it is certainly hard to tell what to make of the recent economic numbers.

What should you do in this kind of environment with uncertainty about the state of the economy? At this point it seems the economic recovery is still continuing, albeit at an extremely slow pace. As I have said many times before, the biggest key will always be the employment market. If employers start hiring on a larger scale, the growth for the overall economy will definitely show up.

Keep in mind that often times in a recovery from such a terrible recession like the one we saw in 2008 and 2009 it takes quite a while for the growth to get back into high gear. Why is this the case? Quite frankly, everyone is a little scared to invest their money. Personal investors are worried that the same market crash could occur that happened in late 2008. Institutions and money managers are waiting for more clear signs that the economy is strengthening. At the same time, corporations are also scared to put their cash to work. This is precisely why we see so many companies with huge amounts of cash on their balance sheet today.

I think for the next few weeks and months it would be wise to take a wait and see approach to the state of the economy and the stock market. Watch the weekly jobless claims number and the important economic data closely. If you need to be invested in the market in the short-term, it would be wise to consider high dividend yielding stocks because of their relative safety.

Corporate Earnings Results Mostly Positive

Friday, July 23rd, 2010

Are you keeping track of the corporate earnings results from home? If you are an invested in this market, I strongly suggest you keep a close eye on earnings reports. So far the earnings news from this quarter has been quite good. Some major companies such as UPS, Caterpillar, 3M, AT&T, Intel, and American Express have really topped analyst’s expectations quite easily.

What is most encouraging about the results thus far? The single most encouraging thing about the positive surprises this earnings season is that they are spread out among many different industries and sectors. If a company like 3M is surprising to the upside, it speaks well about several industries. Caterpillar and UPS have struggled for several quarters, so for them to be so upbeat is a welcome change for the market.

If you look closely at American Express and their earnings report, they mentioned that customer spending is almost back to pre-recession levels. As I pointed out in last week’s post, Intel was upbeat about business spending rising in a big way. This combination certainly speaks well for the long-term prospects of the recovery.

Make no mistake about it; there are plenty of obstacles yet to overcome. The unemployment rate is still extremely high and consumers and investors need to regain confidence in the economy and the market. In the short-term I think you should expect continued volatility as the economic news remains fairly mixed. Remember, this is a time of year that the stock market does not typically fare very well. August and September are notorious for being bad months for the market. In light of the fact that corporate earnings results are starting to come around, it may be prudent to start putting together a shopping list of stocks you may want to purchase in the fall after the market has discounted some high quality names.

Financial Reform Bill Deal Reached

Friday, June 25th, 2010

It’s been talked about for months now, but today the deal was finally reached by negotiators early this morning. The negotiation wasn’t easy and it ended up lasting through much of the night, but lawmakers finally came to a compromise and now the United States Bank Financial Reform Bill is ready to go to a vote in both the House and the Senate.

There is much debate in Washington as to whether this move was the right one to make, with democrats saying it will avert another financial disaster and republicans saying it will slow down the economy in the long run. The only thing that is definitely true at this point is that the landscape is about to change for banks in the United States. The financial industry as a whole is about go through the biggest changes in many years.

There is a delicate balance that needs to be reached where economic expansion can continue without too much regulation, but some regulation needs to be in place in order to keep Wall Street and the banks under control. Derivatives trading will be watered down quite a bit, which is probably a good thing for the safety of the economy. Many lawmakers said that the goal of the bill is to regulate areas where banks and investment firms have found that there was no regulation. These areas were used to run up record profits, but when these markets collapsed, we ended with firms that were “too big to fail.”

In the short-term it is hard to say how this will affect the stock market in the United States. It’s quite unclear as to how this will change the business of some financial firms, but the certainty that a reform bill is now set should help the overall trading pattern in financial stocks. The true test of this bill will be in the long run, when we determine whether or not adequate steps were taken to keep us out of another credit crisis like we saw two years ago.

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