Relief at the approval of a second bailout package for Greece is driving global stocks higher.
The euro109 billion ($156 billion) deal will not only lend money to the financially struggling country, but also reduces the size of Greece’s crushing debts by asking investors who hold Athens’ bonds to make sacrifices.
A first bailout of euro110 billion last year did not put Greece back on its feet financially cash advances pay day loan.
The three major European indexes rose, led by banking stocks. Asian shares were also up strongly. Commerzbank was up 1.1 percent, Deutsche Bank 1.3 percent, and Italy’s Unicredit 0.5 percent.
Several years ago at a strategy meeting I was thumbing through some charts and a fundamental analyst asked me what I was trying to do. I replied
President Barack Obama says people need to be patient about the economic recovery and that training workers for manufacturing jobs will help with the turnaround.
The recession didn’t happen overnight and won’t end that way, either, the president said Saturday in his weekly radio and online address.
“It’s going to take time,” Obama said.
Recent polling found broad disapproval with Obama’s handling of the economy as the 2012 presidential election takes shape. It reached 59 percent in a Washington Post-ABC News poll.
Job growth slowed sharply in May and unemployment inched up to 9.1 percent. Economic indicators also showed that manufacturers cut 5,000 jobs last month. Those were the first job losses in that sector in seven months.
No president since World War II has won a second term with a jobless rate above 7.2 percent, and Obama’s options for achieving faster economic growth before the November 2012 election appear limited.
Obama scheduled a visit to Durham, N.C., on Monday for a session with his jobs council on how Washington can encourage private-sector hiring. Council members and administration officials also planned to hear from businesses in the region.
Last Wednesday, Obama announced an effort by the private sector, colleges and the National Association of Manufacturers to help half a million community college students become trained and certified for manufacturing jobs. They would get a credential guaranteeing that they are skilled.
“If you’re a company that’s hiring, you’ll know that anyone who has this degree has the skills you’re looking for,” the president said Saturday. “If you’re a student considering community college, you’ll know that your diploma will give you a leg up in the job market.”
Obama said other steps, such as providing students with a quality education and investing in new jobs in the clean energy sector, will aid economic growth.
In the weekly Republican message, also on jobs, Rep. Adam Kinzinger, R-Ill., recalled the administration’s promise that unemployment would go no higher than 8 percent after Obama pumped billions of dollars into the economy soon after taking office.
Kinzinger said the “road to refueling our economy and creating jobs” includes tackling government debt, simplifying tax laws, limiting regulations, passing free-trade agreements with Colombia, Panama and South Korea, and boosting domestic energy production.
“These are some of the steps we need to take to get government out of the way and let our economy grow and get back to producing jobs,” he said.
A top European Central Bank official says Greece could get another euro20 billion ($28 billion) in aid from its fellow euro countries and raise three times that through new austerity measures such as selling government property.
Lorenzo Bini Smaghi, a member of the ECB’s executive board, is quoted by the Financial Times as saying Greece needs between euro60 billion and euro70 billion through next year.
That gap could be filled in several ways, Bini Smaghi said, giving a rough sketch of a plan for additional assistance that was split between government and private-sector contributions.
The private sector money would come partly from selling government property as well as rolled-over investments from Greek banks and issuance of short-term government debt.
The government half would be split, two-thirds from the euro area countries, or about euro20 billion, and the rest from the International Monetary Fund.
He said the plan “has to be studied further” and would in any case require concrete commitments from the Greek government to keep working to fix its finances. Greek political parties, however, failed last week to agree to a new plan of austerity measures.
Bini Smaghi again rejected any reduction of the debt through restructuring _ that is, Greece delaying repayment or paying less than the full amount owed. He said that would mean a “major, economic, social and even humanitarian disaster.” He did say Greek banks might renew some of ther holdings, presumably voluntarily.
Earlier in the financial crisis, European officials successfully pressed banks to voluntarily maintain their exposures to troubled countries in Eastern Europe.
Greece already got a rescue package last year worth euro110 billion from the eurozone and the IMF. But its economy continues to deteriorate and the government says it won’t be able to tap financial markets as planned next year.
EU officials are under pressure to secure Greece’s financing for at least a year ahead, with Luxembourg’s Prime Minister Jean-Claude Juncker saying last week that otherwise the IMF’s rules would not permit it to pay out the next installment of its loans to Greece in June.
Bini Smaghi said “if the Greek government agrees to the programme, the IMF will disburse and I am convinced that the euro area countries will disburse their part.”
World markets snapped out of the doldrums Tuesday despite fears that Europe’s debt crisis was spreading to larger economies.
Oil prices rose to near $99 a barrel after Goldman Sachs raised it crude forecasts due to concerns that the shutdown of output from Libya will drain spare OPEC supplies. In currencies, the dollar slipped against the yen and the euro.
European markets were higher in early trading. Britain’s FTSE 100 rose 0.5 percent to 5,867.94. Germany’s DAX gained 0.5 percent to 7,158.02, and France’s CAC-40 was 0.4 percent higher to 3,921.15.
Wall Street was poised to rise after sinking Monday. Dow Jones industrial futures rose 30 points to 12,392, and S&P 500 futures were 3.9 points higher at 1,319.10.
A choppy day of trading in Asia ended with key benchmarks higher.
Japan’s Nikkei 225 rose 0.2 percent to close at 9,477.17 after ending the morning session down. Shares of Toshiba rose 2.1 percent, a day after the company announced it will move into the wind power business through an alliance with Korea’s Unison Co. Ltd., a wind power equipment manufacturer.
Hong Kong’s Hang Seng was marginally higher to 22,730.78 after emerging from the red in the morning.
South Korea’s Kospi rose 0.3 percent to 2,061.76, with Kia Motors Corp., the country’s second-largest auto maker, gaining 1.9 percent and Hynix Semiconductor, a world leader in memory chip making, rising 1.3 percent.
Australia’s S&P/ASX 200 lost 0.3 percent to 4,628.80, with some mining shares hit by worries that a slowdown in Chinese manufacturing would lead to falling demand for commodities. Energy Resources of Australia Ltd. fell 2.3 percent. BHP Billiton Ltd., the world’s largest mining company, lost 0.1 percent.
Taipei-based Foxconn Technology Co. Ltd., the world’s biggest contract electronics manufacturer, was down 2.6 percent after an explosion at one of the company’s factories in China that makes the iPad 2 killed three employees and injured 15 on Friday.
Mainland Chinese shares were mixed as weak economic indicators and pessimistic forecasts for the near-term outlook weighed on sentiment fast cash without a hassle.
The benchmark Shanghai Composite Index lost 0.3 percent to 2,767.06, the lowest close in four months, while the Shenzhen Composite Index of China gained 0.1 percent to 1,150.91. Shares in precious metals, nonferrous and biotechnology companies gained.
“Funds are in short supply and investors are fretting over slowing economic growth and inflation,” said Peng Yunlang, an analyst based in Shanghai.
Europe’s debt crisis shook markets Monday as fears over the solvency of Greece combined with concerns that Spain, or even Italy, may be dragged into the turmoil that has already seen three countries that use the euro common currency bailed out.
Late last week, Fitch ratings agency downgraded Greece’s debt further into junk status. Then Standard & Poor’s said Saturday that Italy was in danger of having its debt rating lowered if it could not reduce its borrowing and improve economic growth. On Monday, Fitch cut Belgium’s outlook.
The turmoil was felt on Wall Street, where stocks took a pounding Monday. The Dow Jones industrial average fell 1.1 percent to close at 12,381.26. The Standard & Poor’s 500 index fell or 1.2 percent to 1,317.37 The Nasdaq composite index fell 1.6 percent to 2,758.9.
Benchmark crude for July delivery was up $1.14 to $98.87 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost $2.40, or 2.4 percent, to settle at $97.70 on Monday.
Goldman Sachs said the civil conflict in Libya, which has shut down almost all the country’s 1.6 million barrels a day of oil production, will eventually push prices higher.
The euro rose to $1.4095 from $1.4060 in late trading Monday in New York. The euro had dipped below $1.40 earlier in the day for the first time since March. The dollar slipped to 81.93 yen from 81.97 yen.
Steve Caldwell was in greeting cards and then health products before he decided handyman services were the wave of the future.
He saw a market filling up with seniors and busy two-income families, who didn
The stars are aligned for Barack Obama’s re-election in November 2012. He won’t join Jimmy Carter to be the second Democrat in 120 years to lose a second term.
Five things are playing in Obama’s favor.
First, the Republicans — driven by their most conservative members in Congress — will face a primary with many candidates who will advance harsh ideological positions. Michele Bachmann, Newt Gingrich, Donald Trump and others might as well be on the Democratic National Committee payroll. House Budget Committee Chairman Paul Ryan’s reverse Robin Hood plan to cut more than $6 trillion in spending over a decade will provide the outrage, stoked by a sitting president possessed of verbal discipline.
The field of Republican weaklings is already getting smaller. This week, Mississippi Governor Haley Barbour dropped out of the race for the presidency.
Second, the Republican governors’ attacks on unions are turning off the swing voters and Reagan Democrats in Ohio, Florida, Pennsylvania and Wisconsin. Imagine the voter reaction if millions of workers lose their right to collective bargaining, and the impact that cuts in benefits and wages will have on their lives.
Democratic governors, such as Jerry Brown of California, Pat Quinn of Illinois and Andrew Cuomo of New York, are cutting — but not taking away — workers’ bargaining rights. This is a politically useful contrast for Obama. Reagan Democrats, who have won many elections for the Republicans, are a big plus for Obama in the contested states.
No Challenge
Third, no candidates are emerging to challenge Obama in the primaries. A discussion of Obama’s forgotten campaign promises and record would have public support among Democrats. Even so, the liberal base has nowhere to go to send a message about war, free-trade agreements, raising the minimum wage or union membership.
Nor does a third party or independent candidacy pose a threat, given the winner-take-all, two-party system.
Fourth, Obama has neutered much of the big corporate lobby’s zeal to defeat him. He decided from the beginning not to prosecute executives from Wall Street banking, brokerage and rating firms. Multinational companies are pleased with Obama’s position on trade, on not disturbing the many corporate subsidies, handouts and giveaways, such as the corn-ethanol subsidy.
Shelters for Wealthy
By 2014, Obamacare will deliver some 30 million subsidized customers to health-insurance companies. The auto industry is forever grateful for its bailout. Obama hasn’t moved on corporate-tax reform, tax shelters for the wealthy, or the preferential capital-gains tax treatment on the 20 percent service fees of hedge fund managers. Don’t forget last December when Obama agreed to extended tax cuts for the rich while the budget deficit gets larger guaranteed cash advance.
The military-industrial complex about which President Dwight Eisenhower warned in his farewell address 50 years ago, is still uncontrollable, leading departing Defense Secretary Robert Gates to express serious concerns. Obama has even surprised George W. Bush and Dick Cheney and his cohort of neocons, who can scarcely believe how militarily aggressive Obama has been on just about every move that liberals used to call impeachable offenses by former President George W. Bush.
Big Business
Then there’s Jeffrey Immelt, the chairman and chief executive officer of General Electric Co., who can attest to Obama’s outreach to big business. GE Capital was bailed out. The company effectively paid no federal income taxes on $14.2 billion in 2010 profit and received a $3.2 billion benefit. Immelt got a $15.5 million pay raise. And in January, Obama appointed him chairman of the President’s Council on Jobs and Competitiveness while letting him stay as head of a company receiving many government contracts and having regulation problems with the federal authorities. The corporate state doesn’t get much better than that.
Fifth, since the Republicans have little to offer by way of creating jobs, Obama need only show improvement in macroeconomic indicators, as Ronald Reagan did in 1983-1984, and proceed to showcase all the tax breaks he has signed into law for big and small businesses. Poor Americans who continue to bear the brunt of the recession are hardly going to vote Republican. It will be easy for Obama, with his oratorical skills, to paint the Republican-controlled House of Representatives as obstructionist, especially as he develops an economic plan for his second term.
Black Swans
There remain the Black Swans, events that defy prediction as those in Japan and the Middle East have shown. Handling them with firmness and calmness from the White House is what most people expect of a president. Obama will surely not repeat Bush’s mistakes after Hurricane Katrina in 2005.
Obama is averse to conflict with corporate power and disarmingly expedient in compromising with Republicans, leaving the latter to argue largely among themselves. The political duopoly lets the tactical Obama use the Bully Pulpit to his political advantage, even if his principles perish. Obama can look forward to four more years in 2012.
(Ralph Nader is the founder of Public Citizen and author of the book “Only the Super-Rich Can Save Us!” The opinions expressed are his own.)
Stocks are opening higher on strong earnings reports from Ford and 3M.
Before the market opened Tuesday, Ford Motor Co. reported its best first quarter earnings since 1998. The automaker beat Wall Street’s earnings estimates with stronger sales of new vehicles.
3M Co. said its quarterly profit jumped 16 percent from a year ago, beating analysts’ estimates. 3M raised its full-year earnings expectations despite taking a hit from the earthquake in Japan.
The Dow Jones industrial average is up 22 points, or 0.2 percent, at 12,504. The S&P 500 index is up 5 points, or 0.4 percent, at 1,339. The Nasdaq composite is up 6 points, or 0.2 percent, at 2,832.
Weak earnings reports dragged the Dow and S&P 500 lower on Monday.
Japan’s car sales plunged nearly 40 percent in March following the tsunami and nuclear disaster, an industry group said Friday.
Automakers sold 279,389 cars in Japan last month, down 37 percent _ the biggest ever year-on-year drop for March, the Japan Automobile Dealers Association said.
The plunge in sales was due to weak consumer sentiment following the March 11 earthquake and tsunami, which decimated much of northern Japan, and the ensuing radiation leaks at the coastal Fukushima nuclear power plant.
“People are simply reluctant to buy cars at this time. The tsunami and the ongoing nuclear disaster have depressed consumer sentiment,” said association spokesman Masashi Miyajima.
Miyajima said many people in the quake-hit areas were also canceling car purchases.
The tsunami caused massive disruptions in the supply of auto parts, forcing Toyota Motor Corp. and others to suspend production.
Federal Reserve staff and policy makers identified a housing bubble in 2005, and failed to alter a predictable path of interest-rate increases to slow down the expansion of mortgage credit, transcripts from Open Market Committee meetings that year show.
Led by then-Chairman Alan Greenspan, the FOMC raised the benchmark lending rate in quarter-point increments to 4.25 percent from 2.25 percent at the end of December 2004. The committee also removed uncertainty about the pace of rate increases by telegraphing that future moves would be “measured” in every statement.
The “measured” pace language helped fuel the housing boom by keeping longer-term interest rates low and was inappropriate at the time given the uncertainties about both inflation and asset prices, said Marvin Goodfriend, a professor at Carnegie Mellon University in Pittsburgh.
“It was a major mistake of the Fed,” said Goodfriend, who attended some of the 2005 meetings as a policy adviser to the Richmond Fed. “It gave markets a sense that the Fed was on top of everything to a degree that wasn’t the case. It gave the impression that this was a mechanical adjustment to normality. The market was overconfident.”
Transcripts from February show then-New York Fed President Timothy F. Geithner raising alarms about the low expectations of risk and volatility in financial markets. Geithner called the economic outlook at the time “implausibly benign.”
Low Volatility
“The confidence around this view, which is evident in low credit spreads — low risk premia generally — and low expected volatility, leaves one, I think, somewhat uneasy,” said Geithner, who is now U.S. Treasury Secretary.
The FOMC in June heard presentations from staff economists, with some raising alarms about housing markets, the transcript shows. Those warnings didn’t translate into a more aggressive policy. The committee raised the benchmark lending rate a quarter-point at that meeting and said “policy accommodation can be removed at a pace that is likely to be measured.”
“An estimated 4 percent of borrowers are highly leveraged and could lose all of their home equity if house prices were to fall 10 percent,” Andreas Lehnert, now the deputy director of the Office of Financial Stability Policy and Research at the Board, told the committee. “One might wonder if financial institutions and investors have, in the face of the continuing housing boom, dropped their defenses against the mortgage losses that would accompany a house-price bust.”
Reports Dismissed
New York Fed researcher Richard Peach dismissed press reports describing a bubble in housing markets.
“Hardly a day goes by without another anecdote-laden article in the press claiming that the U.S. is experiencing a housing bubble that will soon burst, with disastrous consequences for the economy,” Peach told the committee.
“Housing-market activity has been quite robust for some time now, with starts and sales of single-family homes reaching all-time highs in recent months and home prices rising rapidly, particularly along the East and West coasts of the country,” he said. “But such activity could be the result of solid fundamentals.”
Greenspan followed the presentation with questions about the effect of underlying land prices in housing indexes, and the quality of data on whether home purchases were for investment or residences.
“There was a fundamental failure of economic analysis to understand what was going on in the potential for house prices to stop rising,” said William Poole, the former St. Louis Fed president who attended the meetings in 2005. “The high degree of assurance that we all felt that house prices could not decline on a national average basis in a fundamental way — that was a significant mistake.”
House prices in the last decade peaked at a 15.7 percent year-over-year gain in the first quarter of 2005. By the first quarter of 2009, prices were falling at a 19 percent year-over- year rate, according to the S&P/Case-Shiller U.S. Home Price Index.
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