Oil fell back on Friday from its three-day bull run, paring nearly $2 in morning trade, but otherwise remaining on course to end the month up more than 4% from January, its first monthly gain since June 2008.
OPEC production cuts and a bounce in U.S. demand for gasoline this week have pushed oil prices up, and analysts at JP Morgan said supply tightness meant "the crude market is finally in balance."
U.S. crude for April delivery was down 1.71 cents to $43.51 a barrel after closing at $45.22 on Thursday, a $2.72 jump.
"With the impact of OPEC production cuts clearly being felt in the markets, we anticipate continued bullishness in the coming week with refinery runs expected to rise sharply, resulting in a crude draw," JP Morgan analysts wrote in their Global Energy Strategy note.
OPEC has been implementing a 5% reduction in its share of global production since September, totaling 4.2 million barrels per day, in order to support falling oil prices.
Oil touched a record high of $147.27 in July, and in the course of six months fell more than $100 to $32.49 in December as the global economy shuddered into a rapid and deep recession.
Signs of recovery from the recession have been lacking, with leading industrialized and developing countries releasing economic data regularly that show slumping consumer demand, rising unemployment and frozen credit liquidity.
Geneva-based consultants Petrologistics track OPEC supply and earlier this week said the Organization of the Petroleum Exporting Countries are on track to deliver 89% compliance with the production cuts by the end of February.
Lightening gloom
A steep 3.4 million barrel drawdown in gasoline stocks announced earlier in the week sparked the rally that has lifted crude prices 13% in this week alone. NYMEX March RBOB registered its highest front-month settlement since November.
The United States will rack up the biggest budget deficit since World War Two, while jobless claims jumped to a record 5.1 million, and in Asia Japan factory output recorded a record monthly fall in January.
OPEC members continue to mull the possibility of another output cut at its meeting in March, with the United Arab Emirates cutting allocations for Asian refiners in April.
Venezuela said it wanted OPEC to agree on a new oil output cut, but relatively small member Ecuador said oil prices were stabilizing now, brushing off possibility it might urge a cut.
Market players are closely eyeing March heating oil and RBOB gasoline contracts that expire on Friday as well as key economic data, including euro zone January inflation and unemployment figures and U.S. fourth-quarter GDP.
The U.S. GDP figures are expected to show the world's largest economy had contracted at a 5.4% annual rate, the deepest slide since the first quarter of 1982.
U.S. durable goods orders, an important gauge of business activity, fell for a sixth month to a six-year low in January, suggesting that dried-up credit markets have had a severe impact on industries around the world.
Friday, February 27, 2009
Monday, February 23, 2009
Dow and S&P 500 at '97 lows
The Dow and S&P 500 tumbled to levels not seen in nearly 12 years Monday, as investors continue to worry that the government's efforts to slow the recession won't be sufficient.
The Dow Jones industrial average (INDU) lost 250 points, or 3.4%, ending at the lowest point since May 7, 1997.
The S&P 500 (SPX) index lost 26 points, or 3.5%, ending at the lowest point since April 11, 1997.
The Nasdaq composite (COMP) lost 53 points, or 3.7%. The tech-fueled index has held up better than the rest of the market so far this year, closing at the lowest points since Nov. 20, 2008.
"It's fear-based selling," said Dave Hinnenkamp, CEO at KDV Wealth Management. "The fact that we're touching these multi-year lows tells you we don't know where the bottom of this thing is."
Stocks gained in the morning on reports that the government may boost its stake in Citigroup as it briefly assuaged fears that the troubled bank would have to be nationalized. But the early advance quickly petered out, as the worries of the last few weeks returned.
"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.
"The skepticism is back," Kiddoo said. "I think we need to hear some optimistic talk from our leaders and soon."
Stocks are now extra vulnerable with the major gauges at the multi-year lows, said Gary Webb, CEO at Webb Financial Group.
"Worries about how long it will take for the government programs to have an impact and worries about the health of the banks and the autos are all there," Webb said.
But there is also just the day-to-day reality that many investors are losing money and don't know when they are going to stop losing money, he said.
After the close of trade, JPMorgan Chase said it was cutting its divided to 5 cents per share from 38 cents per share currently.
Tuesday preview: Economic reports are due on home prices and consumer confidence.
The S&P/CaseShiller Home Price index, which is due before the market open, is expected to have fallen at a record 18.25% annual pace in December, according to a consensus of economists surveyed by Briefing.com. The index tracks home prices in 20 major metropolitan areas.
The Conference Board's February Consumer Confidence index is expected to have fallen to 36.0 in February from 37.7 in January. That reading would be the lowest since the Conference Board began tracking the index in 1967.
A pair of retailers report quarterly earnings Tuesday morning. Dow component Home Depot (HD, Fortune 500) likely earned 15 cents per share versus 40 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters. Target (TGT, Fortune 500) is expected to have earned 83 cents versus $1.23 a year ago.
Federal Reserve Chairman Ben Bernanke begins the first day of his two-day semi-annual testimony before Congress on monetary policy. On Tuesday, he speaks at a Senate Banking Committee hearing and on Wednesday at a House Financial Services Committee hearing.
On Tuesday evening, President Obama addresses the joint session of Congress, with his speech due to start at 9:00 p.m. ET.
Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.
Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi gained 9.7%.
Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.
The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.
Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares ended unchanged.
Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 9.5%.
A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500), Oracle (ORCL, Fortune 500), Dell (DELL, Fortune 500) and Apple (AAPL, Fortune 500).
Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares fell 1.4%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost seven to one on volume of 1.61 billion shares. On the Nasdaq, decliners topped advancers by seven to two on volume of 2.07 billion shares.
Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.
Reports are due later this week on housing, manufacturing and gross domestic product growth.
Bonds: Treasury prices inched higher, with the yield on the benchmark 10-year note falling to 2.77% from 2.79% Friday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, most Asian markets ended mixed, while European shares ended lower.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery fell $1.59 to settle at $38.44 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell $7.20 to settle at $995 an ounce.
The Dow Jones industrial average (INDU) lost 250 points, or 3.4%, ending at the lowest point since May 7, 1997.
The S&P 500 (SPX) index lost 26 points, or 3.5%, ending at the lowest point since April 11, 1997.
The Nasdaq composite (COMP) lost 53 points, or 3.7%. The tech-fueled index has held up better than the rest of the market so far this year, closing at the lowest points since Nov. 20, 2008.
"It's fear-based selling," said Dave Hinnenkamp, CEO at KDV Wealth Management. "The fact that we're touching these multi-year lows tells you we don't know where the bottom of this thing is."
Stocks gained in the morning on reports that the government may boost its stake in Citigroup as it briefly assuaged fears that the troubled bank would have to be nationalized. But the early advance quickly petered out, as the worries of the last few weeks returned.
"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.
"The skepticism is back," Kiddoo said. "I think we need to hear some optimistic talk from our leaders and soon."
Stocks are now extra vulnerable with the major gauges at the multi-year lows, said Gary Webb, CEO at Webb Financial Group.
"Worries about how long it will take for the government programs to have an impact and worries about the health of the banks and the autos are all there," Webb said.
But there is also just the day-to-day reality that many investors are losing money and don't know when they are going to stop losing money, he said.
After the close of trade, JPMorgan Chase said it was cutting its divided to 5 cents per share from 38 cents per share currently.
Tuesday preview: Economic reports are due on home prices and consumer confidence.
The S&P/CaseShiller Home Price index, which is due before the market open, is expected to have fallen at a record 18.25% annual pace in December, according to a consensus of economists surveyed by Briefing.com. The index tracks home prices in 20 major metropolitan areas.
The Conference Board's February Consumer Confidence index is expected to have fallen to 36.0 in February from 37.7 in January. That reading would be the lowest since the Conference Board began tracking the index in 1967.
A pair of retailers report quarterly earnings Tuesday morning. Dow component Home Depot (HD, Fortune 500) likely earned 15 cents per share versus 40 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters. Target (TGT, Fortune 500) is expected to have earned 83 cents versus $1.23 a year ago.
Federal Reserve Chairman Ben Bernanke begins the first day of his two-day semi-annual testimony before Congress on monetary policy. On Tuesday, he speaks at a Senate Banking Committee hearing and on Wednesday at a House Financial Services Committee hearing.
On Tuesday evening, President Obama addresses the joint session of Congress, with his speech due to start at 9:00 p.m. ET.
Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.
Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi gained 9.7%.
Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.
The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.
Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares ended unchanged.
Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 9.5%.
A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500), Oracle (ORCL, Fortune 500), Dell (DELL, Fortune 500) and Apple (AAPL, Fortune 500).
Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares fell 1.4%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost seven to one on volume of 1.61 billion shares. On the Nasdaq, decliners topped advancers by seven to two on volume of 2.07 billion shares.
Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.
Reports are due later this week on housing, manufacturing and gross domestic product growth.
Bonds: Treasury prices inched higher, with the yield on the benchmark 10-year note falling to 2.77% from 2.79% Friday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, most Asian markets ended mixed, while European shares ended lower.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery fell $1.59 to settle at $38.44 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell $7.20 to settle at $995 an ounce.
The stock rally that wasn't
It looks like the government isn't going to let Citigroup fail. But that wasn't enough to save the market Monday.
At first, it looked like an explosive rally in Citi (C, Fortune 500) and other bank stocks was going to lead to a jubilant day for stocks, a Wall Street equivalent of the celebratory "Slumdog Millionaire" musical number on the Academy Awards. The Dow shot up about 75 points shortly after the market opened. Jai ho!
But the rally was short-lived. The overall market fell more than 3% by the end of the day, even though the S&P Bank Index had gained more than 2%, led by a 3% pop in Bank of America (BAC, Fortune 500) and 10% gain in shares of Citi.
What gives? Well, for one, the Citi news isn't really so great. The government may save Citi from complete collapse...but probably at the expense of existing shareholders.
Talkback: Would a government takeover of Citi be good or bad for the economy and markets?
And investors have plenty to be worried about beyond the banks.
In the tech sector, Hewlett-Packard (HPQ, Fortune 500) dove about 6%. The computer and printer maker cut its outlook for fiscal 2009 last week. Rival Dell (DELL, Fortune 500), which will report its latest quarterly results Thursday, fell about 5%.
Industrials and materials firms, two groups whose fortunes are closely tied to the economy, also sunk Monday. Dow components Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500) and DuPont (DD, Fortune 500) each fell about 6% to 8%.
"If it's not one thing, it's the other. Even though there may be more certainty about what's going to happen with banks, the focus is back on economic weakness," said Bill Stone, chief investment strategist with PNC Wealth Management in Philadelphia. "Industrials, materials and tech are three very cyclical groups."
It's a disturbing trend. I pointed out last week that even though bank stocks were getting kicked, there were some pockets of strength, particularly in the energy, healthcare and consumer staples sectors.
But now, it is starting to look like worries about how long the recession will last could weigh even on some of the "safer" areas. Companies across all sectors may have to cut back if there are no signs that the economy will at least stabilize, if not recover, soon.
"Investors are worried that economic deterioration will threaten capital spending," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.
Along those lines, investors seem to be flocking to other types of securities. The price of gold is hovering around $1,000 an ounce. And the yield on the U.S. 10-Year Treasury is now at about 2.78%, down from above 3% earlier this month. (Bond yields and prices move in opposite directions.
"Quite frankly, the worries are that business in general is so weak right now. So there shouldn't be much interest in stocks," said Subodh Kumar, an independent market strategist based in Toronto.
Ablin added that since fixing the banks could require so much attention from the government, investors may now be wondering how successful the broader stimulus bill -- signed into law last week -- will wind up being. In other words, the government may have too many balls in the air at once.
"There may be a perception that these bank bailouts are going to channel resources from broader stimulus," Ablin said. "It's one step forward, two steps back."
Add all that up and you have a decided lack of confidence. Kumar said that even corporate executives, known for being a bit more bullish than most, are starting to talk about how gloomy the economy is. And even though their pessimism is warranted, it's probably not helping the markets.
"Corporate titans are saying thing are getting worse and worse," said Kumar. "To be sure, CEOs are not the best judges of turning points. But they impact investor psychology. CEOs were ebullient a year ago and now in the past three months they have become particularly despondent."
So even though bank stocks are enjoying a moment in the sun -- for a day at least -- the rest of the economic headlines are too bleak to make anything else matter.
"Obviously, we need to get financials taken care of first, but right now, there's a complete lack of confidence," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala. "People don't see the light of the tunnel. It's a never-ending hit to the face and that is leading more and more to a bunker mentality."
At first, it looked like an explosive rally in Citi (C, Fortune 500) and other bank stocks was going to lead to a jubilant day for stocks, a Wall Street equivalent of the celebratory "Slumdog Millionaire" musical number on the Academy Awards. The Dow shot up about 75 points shortly after the market opened. Jai ho!
But the rally was short-lived. The overall market fell more than 3% by the end of the day, even though the S&P Bank Index had gained more than 2%, led by a 3% pop in Bank of America (BAC, Fortune 500) and 10% gain in shares of Citi.
What gives? Well, for one, the Citi news isn't really so great. The government may save Citi from complete collapse...but probably at the expense of existing shareholders.
Talkback: Would a government takeover of Citi be good or bad for the economy and markets?
And investors have plenty to be worried about beyond the banks.
In the tech sector, Hewlett-Packard (HPQ, Fortune 500) dove about 6%. The computer and printer maker cut its outlook for fiscal 2009 last week. Rival Dell (DELL, Fortune 500), which will report its latest quarterly results Thursday, fell about 5%.
Industrials and materials firms, two groups whose fortunes are closely tied to the economy, also sunk Monday. Dow components Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500) and DuPont (DD, Fortune 500) each fell about 6% to 8%.
"If it's not one thing, it's the other. Even though there may be more certainty about what's going to happen with banks, the focus is back on economic weakness," said Bill Stone, chief investment strategist with PNC Wealth Management in Philadelphia. "Industrials, materials and tech are three very cyclical groups."
It's a disturbing trend. I pointed out last week that even though bank stocks were getting kicked, there were some pockets of strength, particularly in the energy, healthcare and consumer staples sectors.
But now, it is starting to look like worries about how long the recession will last could weigh even on some of the "safer" areas. Companies across all sectors may have to cut back if there are no signs that the economy will at least stabilize, if not recover, soon.
"Investors are worried that economic deterioration will threaten capital spending," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.
Along those lines, investors seem to be flocking to other types of securities. The price of gold is hovering around $1,000 an ounce. And the yield on the U.S. 10-Year Treasury is now at about 2.78%, down from above 3% earlier this month. (Bond yields and prices move in opposite directions.
"Quite frankly, the worries are that business in general is so weak right now. So there shouldn't be much interest in stocks," said Subodh Kumar, an independent market strategist based in Toronto.
Ablin added that since fixing the banks could require so much attention from the government, investors may now be wondering how successful the broader stimulus bill -- signed into law last week -- will wind up being. In other words, the government may have too many balls in the air at once.
"There may be a perception that these bank bailouts are going to channel resources from broader stimulus," Ablin said. "It's one step forward, two steps back."
Add all that up and you have a decided lack of confidence. Kumar said that even corporate executives, known for being a bit more bullish than most, are starting to talk about how gloomy the economy is. And even though their pessimism is warranted, it's probably not helping the markets.
"Corporate titans are saying thing are getting worse and worse," said Kumar. "To be sure, CEOs are not the best judges of turning points. But they impact investor psychology. CEOs were ebullient a year ago and now in the past three months they have become particularly despondent."
So even though bank stocks are enjoying a moment in the sun -- for a day at least -- the rest of the economic headlines are too bleak to make anything else matter.
"Obviously, we need to get financials taken care of first, but right now, there's a complete lack of confidence," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala. "People don't see the light of the tunnel. It's a never-ending hit to the face and that is leading more and more to a bunker mentality."
Citi in talks over bigger U.S. stake - report
Citigroup Inc. is in discussions with regulators about a plan for the federal government to take a larger ownership stake in the bank, according to published reports.
The Wall Street Journal, citing sources familiar with the matter, reported that the government would convert a large portion of its preferred Citigroup shares to common shares.
The government received the preferred shares in return for investing $45 billion in Citi as part of the $700 billion bailout of the financial system.
According to the Journal, the talks involve Citi executives and regulators at the Federal Reserve and Office of the Comptroller of the Currency. Officials in the Obama administration have not said whether they support the plan, the Journal reported.
Citigroup spokesman Michael Hanretta declined to comment on the Journal report. On Friday, the bank issued a statement saying that its capital base is "very strong" and capital reserves were among the highest in the industry at the end of the fourth quarter.
"We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth," Hanretta said.
The Treasury Department, which has spearheaded recovery efforts for the financial system, declined to comment on the report, noting it has a policy of not discussing conversations with specific banks.
Yet the department noted that it was open to allowing financial institutions to covert government's existing preferred shares into new convertible preferred stock - a move that would ultimately allow Citigroup to strengthen its capital levels.
In many ways, that is exactly what government officials are reportedly considering, according to the Journal.
"We've made clear that we will do what is necessary to strengthen and stabilize the financial system so that it can provide the credit necessary to support economic recovery," Treasury spokesman Isaac Baker said in a statement to CNN.
The report is sure to stoke speculation about whether the Obama administration may have to nationalize large banks to stabilize the financial system.
The question of nationalization has weighed on the minds of investors in the two weeks since Treasury Secretary Tim Geithner announced a comprehensive stability plan that fell flat.
The issue came to a head Friday when nationalization fears helped drag down shares of Citi (C, Fortune 500) and Bank of America (BAC, Fortune 500) as much as 36% at one point.
BofA recovered most of its losses to finish down just 3.6%. But Citi's stock closed with a 22% loss.
The Obama administration has said it wants to keep the banking system in private hands, which seems to suggest it isn't aiming to run the likes of Citi and BofA. But that leaves the door open to an "intervention" -- a takeover of a troubled bank for the purpose of breaking it up, bringing in new capital and finding new owners and management.
The term nationalization has been used to cover a range of very different outcomes. Most obviously, it refers to the outright takeover of troubled firms, such as when the Treasury Department put mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) into conservatorship.
But it has also been used by some people to cover sizable investments that give government officials considerable say in a firm's activities -- such as the loan guarantees extended in recent months to Citi and BofA.
The Wall Street Journal, citing sources familiar with the matter, reported that the government would convert a large portion of its preferred Citigroup shares to common shares.
The government received the preferred shares in return for investing $45 billion in Citi as part of the $700 billion bailout of the financial system.
According to the Journal, the talks involve Citi executives and regulators at the Federal Reserve and Office of the Comptroller of the Currency. Officials in the Obama administration have not said whether they support the plan, the Journal reported.
Citigroup spokesman Michael Hanretta declined to comment on the Journal report. On Friday, the bank issued a statement saying that its capital base is "very strong" and capital reserves were among the highest in the industry at the end of the fourth quarter.
"We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth," Hanretta said.
The Treasury Department, which has spearheaded recovery efforts for the financial system, declined to comment on the report, noting it has a policy of not discussing conversations with specific banks.
Yet the department noted that it was open to allowing financial institutions to covert government's existing preferred shares into new convertible preferred stock - a move that would ultimately allow Citigroup to strengthen its capital levels.
In many ways, that is exactly what government officials are reportedly considering, according to the Journal.
"We've made clear that we will do what is necessary to strengthen and stabilize the financial system so that it can provide the credit necessary to support economic recovery," Treasury spokesman Isaac Baker said in a statement to CNN.
The report is sure to stoke speculation about whether the Obama administration may have to nationalize large banks to stabilize the financial system.
The question of nationalization has weighed on the minds of investors in the two weeks since Treasury Secretary Tim Geithner announced a comprehensive stability plan that fell flat.
The issue came to a head Friday when nationalization fears helped drag down shares of Citi (C, Fortune 500) and Bank of America (BAC, Fortune 500) as much as 36% at one point.
BofA recovered most of its losses to finish down just 3.6%. But Citi's stock closed with a 22% loss.
The Obama administration has said it wants to keep the banking system in private hands, which seems to suggest it isn't aiming to run the likes of Citi and BofA. But that leaves the door open to an "intervention" -- a takeover of a troubled bank for the purpose of breaking it up, bringing in new capital and finding new owners and management.
The term nationalization has been used to cover a range of very different outcomes. Most obviously, it refers to the outright takeover of troubled firms, such as when the Treasury Department put mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) into conservatorship.
But it has also been used by some people to cover sizable investments that give government officials considerable say in a firm's activities -- such as the loan guarantees extended in recent months to Citi and BofA.
Friday, February 13, 2009
Stimulus: Uncle Sam goes green
The economic stimulus bill aims to create millions of jobs around "shovel-ready" projects.
That's where Paul Prouty says he can help: He has 500 projects ready to go.
Prouty heads the U.S. General Services Administration, an under-the-radar government agency that owns or leases more than 352 million square feet of space in 8,600 federal buildings in 2,200 cities and towns.
Among other responsibilities, the agency is tasked with cutting costs and emissions in the buildings it controls. The stimulus bill provides GSA with $4.5 billion for energy efficiency.
"By investing in our backlog of well-planned, worthy and needed infrastructure projects, we can help stimulate jobs ... while stimulating long-term growth in energy efficient technologies, alternative energy solutions and green buildings," Prouty said in testimony Wednesday before a House committee.
The effort has long been at the top of President Obama's to-do list, dating back to his presidential campaign. It later became one of the key elements of his stimulus plan, as he promised to make 75% of federal buildings more energy efficient.
At a press conference last Monday night, Obama defended the measure from critics, saying it's money well-spent.
"We're creating jobs immediately by retrofitting these buildings. And we are saving taxpayers," Obama said. "Why wouldn't we want to make that kind of investment?"
Experts say the investment could create up to 130,000 jobs, save the government more than $1 billion in annual energy costs and improve worker productivity.
That could help trim the enormous $6.5 billion in energy costs the government spent on its buildings in 2007. And it would cut back on pollution - federal buildings account for nearly 10% of global carbon dioxide emissions, according to the Department of Energy.
To lower those costs and emissions, Congress passed the Energy Independence and Security Act in 2007 to reduce federal buildings' energy consumption by 30% by 2015.
Experts say the stimulus plan could help the government make major strides toward that goal.
"We won't go beyond the 30% goal with this plan, but this stimulus will certainly help them go further to achieve it," said Harry Gordon, chairman of architecture firm Burt Hill. "We achieved it in the past, and this will help to considerably reduce our carbon footprint."
Ready-to-go, ready to work
GSA said many retrofits will be cheap and fast, as energy efficiency improvements can be as simple as placing thicker insulation, installing LED lights, replacing windows and installing water-saving toilets.
The agency also said it is identifying a number of bigger projects that can be quickly deployed in federal buildings, including installation of solar panels on roofs, installing high-tech energy meters and smart lighting systems that adjust to daylight.
"The government is going to go for projects that have a greater impact, which provide a very rapid return on taxpayers' investment," Gordon said. "It will result in substantial energy use reductions, which will benefit taxpayers and reduce climate impact. Improving energy efficiency in buildings is truly the 'low-hanging fruit'."
One example of the 500 ready-to-go projects is the Internal Revenue Service building in Andover, Mass. The building has a structure and location that make it a good candidate for solar roof panels, which GSA said will reduce heating and cooling loads and provide electricity for the building.
Experts say the plan is timely and necessary due to high levels of construction unemployment and historically low levels of construction projects in companies' pipelines. Construction unemployment has risen to 18.2% in the country, with 1.7 million out-of-a-job construction workers waiting for work, according to the Labor Department.
"As soon as these contracts are awarded, contractors are going to beef up their labor force," said Ken Simonson chief economist at the Associated General Contractors of America. "GSA will begin to roll out those contracts within 90 days, and you'll start to see construction workers back to work."
More can be done
But some say the plan does not go far enough. Obama pledged to modernize more than 75% of federal buildings, but the $4.5 billion to update those buildings may be spread too thinly.
"You can certainly change light bulbs in 75% of buildings, but there is an opportunity to do much deeper retrofits in many buildings," said Andrew Goldberg, director of federal relations at the American Institute of Architects. "The question is how deep will those retrofits be."
The original House bill had proposed $7.7 billion for the projects, but the Senate compromise bill knocked it down. Experts say that will result in nearly 60,000 fewer jobs created.
"This decision, made behind closed doors without public consultation or review is short-sighted and contrary to the stated goals of the [stimulus bill], including the primary goal: job creation," said Gordon.
Still, experts say the plan is a good start, but much more needs to be done.
"Overall, agencies have identified far more projects that need funding to restore things to condition they were in, let alone add capacity," said Simonson, who estimates the need exceeds what's in this bill by multiple of five to 10.
"This is a good down payment, and will put several hundred thousand construction workers back to work, but it is not by any means enough to meet our long term goals."
That's where Paul Prouty says he can help: He has 500 projects ready to go.
Prouty heads the U.S. General Services Administration, an under-the-radar government agency that owns or leases more than 352 million square feet of space in 8,600 federal buildings in 2,200 cities and towns.
Among other responsibilities, the agency is tasked with cutting costs and emissions in the buildings it controls. The stimulus bill provides GSA with $4.5 billion for energy efficiency.
"By investing in our backlog of well-planned, worthy and needed infrastructure projects, we can help stimulate jobs ... while stimulating long-term growth in energy efficient technologies, alternative energy solutions and green buildings," Prouty said in testimony Wednesday before a House committee.
The effort has long been at the top of President Obama's to-do list, dating back to his presidential campaign. It later became one of the key elements of his stimulus plan, as he promised to make 75% of federal buildings more energy efficient.
At a press conference last Monday night, Obama defended the measure from critics, saying it's money well-spent.
"We're creating jobs immediately by retrofitting these buildings. And we are saving taxpayers," Obama said. "Why wouldn't we want to make that kind of investment?"
Experts say the investment could create up to 130,000 jobs, save the government more than $1 billion in annual energy costs and improve worker productivity.
That could help trim the enormous $6.5 billion in energy costs the government spent on its buildings in 2007. And it would cut back on pollution - federal buildings account for nearly 10% of global carbon dioxide emissions, according to the Department of Energy.
To lower those costs and emissions, Congress passed the Energy Independence and Security Act in 2007 to reduce federal buildings' energy consumption by 30% by 2015.
Experts say the stimulus plan could help the government make major strides toward that goal.
"We won't go beyond the 30% goal with this plan, but this stimulus will certainly help them go further to achieve it," said Harry Gordon, chairman of architecture firm Burt Hill. "We achieved it in the past, and this will help to considerably reduce our carbon footprint."
Ready-to-go, ready to work
GSA said many retrofits will be cheap and fast, as energy efficiency improvements can be as simple as placing thicker insulation, installing LED lights, replacing windows and installing water-saving toilets.
The agency also said it is identifying a number of bigger projects that can be quickly deployed in federal buildings, including installation of solar panels on roofs, installing high-tech energy meters and smart lighting systems that adjust to daylight.
"The government is going to go for projects that have a greater impact, which provide a very rapid return on taxpayers' investment," Gordon said. "It will result in substantial energy use reductions, which will benefit taxpayers and reduce climate impact. Improving energy efficiency in buildings is truly the 'low-hanging fruit'."
One example of the 500 ready-to-go projects is the Internal Revenue Service building in Andover, Mass. The building has a structure and location that make it a good candidate for solar roof panels, which GSA said will reduce heating and cooling loads and provide electricity for the building.
Experts say the plan is timely and necessary due to high levels of construction unemployment and historically low levels of construction projects in companies' pipelines. Construction unemployment has risen to 18.2% in the country, with 1.7 million out-of-a-job construction workers waiting for work, according to the Labor Department.
"As soon as these contracts are awarded, contractors are going to beef up their labor force," said Ken Simonson chief economist at the Associated General Contractors of America. "GSA will begin to roll out those contracts within 90 days, and you'll start to see construction workers back to work."
More can be done
But some say the plan does not go far enough. Obama pledged to modernize more than 75% of federal buildings, but the $4.5 billion to update those buildings may be spread too thinly.
"You can certainly change light bulbs in 75% of buildings, but there is an opportunity to do much deeper retrofits in many buildings," said Andrew Goldberg, director of federal relations at the American Institute of Architects. "The question is how deep will those retrofits be."
The original House bill had proposed $7.7 billion for the projects, but the Senate compromise bill knocked it down. Experts say that will result in nearly 60,000 fewer jobs created.
"This decision, made behind closed doors without public consultation or review is short-sighted and contrary to the stated goals of the [stimulus bill], including the primary goal: job creation," said Gordon.
Still, experts say the plan is a good start, but much more needs to be done.
"Overall, agencies have identified far more projects that need funding to restore things to condition they were in, let alone add capacity," said Simonson, who estimates the need exceeds what's in this bill by multiple of five to 10.
"This is a good down payment, and will put several hundred thousand construction workers back to work, but it is not by any means enough to meet our long term goals."
Treasury prices sit tight
Government debt prices traded in a narrow range Friday as investors assessed the Obama administration's economic rescue efforts and the volume of debt coming to market to fund the operations.
The House and Senate are slated to vote Friday on the $789.5 billion economic stimulus compromise reached earlier this week.
As the stimulus bill moves closer to passage, details were also emerging about President Obama's plan to help struggling homeowners by subsidizing mortgage debt in order to stem the tide of foreclosures. The plan has yet to be announced, but sources say the federal government would devote at least $50 billion to encourage banks to modify loans for struggling homeowners.
Earlier in the week, Treasury Secretary Tim Geithner outlined a rescue plan for the failing banking sector, but that announcement was shrugged off for its lack of clarity.
In order to fund the various rescue measures for the economy mired in recession, the government has had to bring a record volume of Treasurys to market. Treasury completed a record $67 billion quarterly refunding this week, which included the auction of 3-, 10- and 30-year issues.
Debt prices: The price of the newly 10-year note edged up 1/32 to 99-22/32 and its yield dipped to 2.79%. Bond prices and yields move in opposite directions.
The yield of the newly issued 30-year bond rose to 3.55% from 3.50% late Thursday. The 2-year note edged up 1/32 to 99-30/32 and its yield dipped to 0.91%.
The yield on the 3-month note fell to 0.25% from 0.30% the prior day. Demand for the shorter-term note has been seen as a gauge for investor confidence.
Lending rates: Bank-to-bank lending rates were almost unchanged. The 3-month Libor rate was 1.24% Friday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, held steady at 0.30%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were showed a decrease in confidence in the lending markets. The "TED" spread widened to 0.99 percentage point from 0.93 percentage point the previous day. The bigger the TED spread, the less willing investors are to take risks.
Another market indicator, the Libor-OIS spread, increased to 0.98 percentage points from 0.96 percentage point the previous day. The wider the spread, the less cash is available for lending.
The House and Senate are slated to vote Friday on the $789.5 billion economic stimulus compromise reached earlier this week.
As the stimulus bill moves closer to passage, details were also emerging about President Obama's plan to help struggling homeowners by subsidizing mortgage debt in order to stem the tide of foreclosures. The plan has yet to be announced, but sources say the federal government would devote at least $50 billion to encourage banks to modify loans for struggling homeowners.
Earlier in the week, Treasury Secretary Tim Geithner outlined a rescue plan for the failing banking sector, but that announcement was shrugged off for its lack of clarity.
In order to fund the various rescue measures for the economy mired in recession, the government has had to bring a record volume of Treasurys to market. Treasury completed a record $67 billion quarterly refunding this week, which included the auction of 3-, 10- and 30-year issues.
Debt prices: The price of the newly 10-year note edged up 1/32 to 99-22/32 and its yield dipped to 2.79%. Bond prices and yields move in opposite directions.
The yield of the newly issued 30-year bond rose to 3.55% from 3.50% late Thursday. The 2-year note edged up 1/32 to 99-30/32 and its yield dipped to 0.91%.
The yield on the 3-month note fell to 0.25% from 0.30% the prior day. Demand for the shorter-term note has been seen as a gauge for investor confidence.
Lending rates: Bank-to-bank lending rates were almost unchanged. The 3-month Libor rate was 1.24% Friday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, held steady at 0.30%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were showed a decrease in confidence in the lending markets. The "TED" spread widened to 0.99 percentage point from 0.93 percentage point the previous day. The bigger the TED spread, the less willing investors are to take risks.
Another market indicator, the Libor-OIS spread, increased to 0.98 percentage points from 0.96 percentage point the previous day. The wider the spread, the less cash is available for lending.
Glasses
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At Zennioptical.com , you can choose so many eyeglasses frame and style that suit your face feature. Here is one of my favorite eyeglasses .
If you are looking for some eyeglasses prescription that are in style and you can get their Prescription eyeglasses for only $8. Visit Zennioptical.com and get your high quality prescription eyeglasses now.
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