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Stocks Fall as Dollar Hits New Low

Tue, 15 Jul 2008 10:25:00 EST

The Dow dropped well below the 11,000 mark as Fed Chairman Bernanke warned that the economy faces numerous difficulties.

Bernanke told Congress the U.S. economy is faced with "numerous difficulties," such as strains in financial markets, a shaky job market and ongoing weakness in the housing market. These difficulties are persisting despite the Fed's massive interest rate cuts and expanded lending efforts over the past year.

U.S. officials' comments come only days after the Fed and the Treasury said they would lend financial support to mortgage financiers Fannie Mae and Freddie Mac if necessary. The well-being of the government-chartered companies has drawn Wall Street's attention in recent weeks as the companies together hold or guarantee more than $5 trillion in mortgages -- nearly half the nation's total.

Investors are worried about a number of things - among them the weak dollar that just hit another new low according to Bloomberg.

"The markets are reacting negatively to the renewed credit crisis in the U.S. and that's hurting the dollar across the board," said Roberto Mialich, a Milan-based currency strategist at Unicredit Markets & Investment Banking, a unit of Italy's largest lender. "The market is speculating that Bernanke will offer a gloomy outlook for the U.S. economy."

The dollar fell to $1.6038 per euro, the lowest since the euro's inception in 1999, and was at $1.6006 as of 7:22 a.m. in New York, from $1.5908 yesterday. The U.S. currency also dropped to 104.61 yen, the lowest level since June 9, from 106.14 yen yesterday. The yen traded at 167.69 per euro, from 168.89 yesterday, when it weakened to 169.75, the lowest since the single currency's debut.

The dollar may fall to between $1.62 and $1.63 in the coming month, Mialich said.

Lately its been financial stocks getting the biggest drubbing. Stocks opened lower and they have remained in negative territory so far this monring.

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Dow Falls Under 11,000

Fri, 11 Jul 2008 14:00:00 EST

Concern over Fannie Mae and Freddie Mac combined with rising oil prices has helped push the Dow below the 11,000 mark for the first time in over two years. Shares of Fannie Mae and Freddie Mac have plunged nearly 50% today. The AP reports that investors were not impressed with remarks by Treasury Secretary Henry Paulson. Some investors were hoping for a government bailout.

Investors seemed unimpressed by a statement from Treasury Secretary Henry Paulson, who said the government's focus is ensuring that Fannie Mae and Freddie Mac remain as presently constituted to carry out their mission.

The government-chartered companies at times each lost more than 40 percent on growing speculation that a government bailout is needed. A collapse of the two financiers would cause further shock to the financial system, and trigger more losses to banks and brokerages with significant holdings of mortgage-backed securities.

The troubles at Fannie Mae and Freddie Mac are just the latest depressing turn in a year-old credit crisis that shows no sign of ending, disappointing stock traders who just months ago who thought the worst was perhaps over.

The Dow fell as low as this morning 10,980.37. The last date the Dow traded below 11,000 was on July 25, 2006. Since falling below the 11,000 mark the Dow has climbed back just barely above it again.

Oil prices also remain near record highs. Concern that Israel may launch an attack on Iran are helping to boost oil prices.

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Vanguard Group Founder Jack Bogle Tells Investors to Stay the Course

Wed, 9 Jul 2008 18:00:00 EST

The Dow dropped more than 230 points today as concern over financials continued. The Vanguard Group Founder Jack Bogle told investors to change nothing in the video from Fox Business below. He dismissed the idea of "doubling down" and said investors should focus on staying the course. Bogle also said the market today is being driven by speculation.

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Starbucks to Close 600 Stores in U.S.

Tue, 1 Jul 2008 18:00:00 EST

MSNBC.com reports that leading coffee retailer now plans to close 600 stores in the U.S. Previously, they planned to close just 100 stores. It's a clear sign the economy is moving in a negative direction and that some consumers are cutting back on spending. The company may also let 12,000 employees go that work both full and part-time jobs.

The company said it now plans to close 600 company-operated stores in the United States, up from its previous plans to close 100 stores. The company also said it now plans to open fewer than 200 stores in its coming fiscal year.

The Seattle-based gourmet coffee retailer said the company used several criteria in deciding which stores to close, including whether they were profitable or expected to become profitable in the near future. In a statement, it added that "consideration was given to the impact of current and anticipated economic trends."

Starbucks, known for sometimes going so far as to open stores across the street from one another, has recently acknowledged that it may have lost some of its luster during a long period of rapid store openings and expansion into everything from breakfast sandwiches to movie promotions. The company also has been feeling the pinch from a down economy, which has made $4 coffee drinks less palatable for many Americans.

MSNBC also says Starbucks runs 16,000 Starbucks stores worldwide.

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Bank for International Settlements Foresees Deeper Downturn

Mon, 30 Jun 2008 11:40:00 EST

The Bank for International Settlements says that we could be in for a deeper downturn than most people are expecting. They point to the credit crisis and rising inflation as the reason for their gloomy view.

"In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth and temporarily rising inflation," the BIS said in its annual report.

"While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."

The Basel-based bank added that the current "consensus view is still that the global economy will slow only modestly further in 2008" and that growth continued to be strong in the euro zone, Japan, and major emerging market economies.

Often called the central bank of central banks, the BIS said during its last fiscal year central banks worldwide reacted to the financial and monetary policy situation differently, and that given their countries' different economic situations, a "one size fits all" monetary policy can't necessarily be predicted or suggested.

The bank said that with inflation rising, a global bias toward higher interest rates was probably appropriate. Higher interest rates can cool inflation, but run the risk of lower growth.

An article in Bloomberg suggests that today's stock market situation is more like 1974 than it is like 1994. Everything seems to point toward a significant downturn.

"Between inflation and the liquidity crisis, this is one of the toughest markets I've seen," said Dreman, who oversees about $15 billion in Jersey City, New Jersey. "But it's not a market you sell into. Any losses you take by being too early will be more than offset by buying cheaply."

Asian stocks were down again recently. Oil prices opened higher again today setting another new record.

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Consumer Confidence Index at 16-Year Low

Tue, 27 May 2008 18:00:00 EST

The BBC reports that the Consumer Confidence Index is at a 16-year low. The index is currently at 57.2 - a fall from the 62.8 mark in April. The graph on the right from the Conference Board's release shows just how much the Index has fallen.

The Conference Board blamed the pessimism on the short-term outlook for the US economy as well as weakening business and job conditions.

The figures tell a similar story to the University of Michigan's Index, which hit a 28-year low in May.

"There is a fear the economy is in a recession or going into one and people may find their jobs in jeopardy," said David Coard from the Williams Capital Group in New York.

"When you talk to people on the street they seem to be really being squeezed at the pump and the supermarket while their income isn't keeping up."

Sadly, a turnaround in the short term is unlikely.

"Consumers' inflation expectations, fuelled by increasing prices at the pump, are now at an all-time high and are likely to rise further in the months ahead," said Lynn Franco, director of the Conference Board Consumer Research Center.

"As for the short-term outlook, the Expectations Index suggests little likelihood of a turnaround in the immediate months ahead."

Warren Buffett has also been gloomy on the economy lately saying that the recession will be "long and deep."

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Dark Pools Growing in Popularity

Fri, 16 May 2008 18:00:00 EST

Reuters says anonymous trading via dark pools is growing in popularity. Pension and hedge funds are some of the biggest users of dark pools. These funds use dark pools to move large amounts of stock without revealing who they are.

When pension funds and hedge funds want to sell or buy shares...usually thousands at a time...they prefer to do it anonymously....and usually.. on an electronic trading system. These so called "dark pools" are changing the face of trading but could systems designed to make trading more efficient have the opposite effect?

Reuters says these dark pools make up about 10% of the trade. Reuters explains how they work in the video below. Wikipedia lists several of these dark pool crossing networks.

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Baby Boomers Feeling More Financial Stress

Mon, 12 May 2008 18:00:00 EST

An article from U.S. News published on Yahoo's website says that many baby boomers are concerned about retirement. Even those with $1 million saved for retirement are getting more concerned. This concern is growing as the economy worsens. The article says a survey from Bell Investment Advisors and Opinion Research Corp. found that nearly 30% of 60-year-old baby boomers with investable assets of $1 million or more say they "feel more financial stress now than six months ago."

But even millionaires aren't immune to making irrational investment choices as the media endlessly report a looming recession. Some 23 percent of affluent boomers say they are planning to change their investment strategy in response to a potential recession, with 69 percent seeking more conservative investments like money market funds and bonds. Only 21 percent said they would invest more in stocks or stock mutual funds.

That could be a mistake, says Jim Bell, founder and president of Bell Investment Advisors. In many cases, these conservative investments barely keep pace with inflation, especially as interest rates on consumer products like certificates of deposit have dropped with each Federal Reserve cut in interest rates.

"Bonds and cash have the false allure of safety since their principal fluctuates less than that of equities, but equities along with commodities will better allow boomers to maintain their standard of living over decades," Bell says. "Boomers must learn to live with the volatility of equities if they want to keep their purchasing power intact."

You can find a couple retirement calculators online here and here. What is probably fueling concerns is the rising prices in basics like gasoline and food. Inflation like this can quickly overtake the pace of a slow-growing CD. Even a solid investment strategy can be thwarted by rapidly growing inflation. This is why the government needs to get a handle on it and get these fuel costs in check.

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Falling Dollar Equals Rising Oil Prices

Thu, 17 Apr 2008 08:00:00 EST

Josh Landis and Mitch Butler of the "Fast Draw" team take a close look at what determines the price of oil and the impact price fluctuations have on the overall U.S. economy. The main factor driving up the prices is falling value of the U.S. dollar. Since 2001 the value of the U.S. dollar has been plunging against currencies like the Euro. Speculators also help to drive up oil prices.

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1st Quarter Was Brutal

Wed, 2 Apr 2008 08:00:00 EST

The 1st Quarter of 2008 is gone and that will be a relief to investors. Here's a look at the damage done in Q1.

Dow fell 7.6%

Nasdaq fell 14%

S&P 500 fell 9.9%

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