Normalization

Normalization is an economic effect (not necessarily a term) that describes in any supply-demand economy, when the economy is not in equilibrium will generally aim to return to equilibrium. Various economic models explain how markets vs government should create this return to equilibrium. In the United States, capitalism generally leads towards a market based economy with minimal government intervention. How one defines “minimal” is all relative but the Obama administration would argue that the amount of bailout is not 100% but enough for the road to recovery. The point is this, the economy is on the way to recovery and equilibrium but the market will get there. Two examples would be that the banks are preparing to return the bailout money and that the market reached the 10,000 level and has remained in the vicinity.

Surge

Based on the optimistic forecast by major Dow components, the market surged to close at about 10,200 points. The Group of 20 said that they would be keeping at par with the economy, which in these times is a decent enough prediction, but probably not enough good news for some. At this time though, mental factors can help more so than actual results but we need to stay away from emotional decisions which have repeatedly proven to have disastrous results (i.e. tech bubble and housing growth to name the most recent factors).

 

http://money.cnn.com/2009/11/09/markets/markets_newyork/index.htm

House of Representatives House Bill

CNBC Link: http://www.cnbc.com/id/33539388

President Obama’s Weekly Address: Small Business Recovery

  

3rd Quarter GDP

Today's report by CNN said that the US GDP grew by about 3.7%, the first growth in almost a year. On the other hand, the growth could have also been the government's infusion of money into the financial and auto markets.

http://bit.ly/KVibn #cnnmoney

10,000 Part 2

The stock market has been closing around 10,000 points lately but cannot seem to stay above the coveted mark to show the recovery and stability of the United States stock markets. Although many will give many different speculations as to why this is so, there are only a few fundamental reasons for this.

(1) The market needs time to recover.

(2) There is a lack of flow of funds to ensure the stability at the levels financial leaders want to be at.

and

(3) There are simply too many people in the market trying to do the same thing and many doing the opposite and/or taking advantage of the system.

Instead of focusing on one aspect of the problem at a time (i.e. bailout money, lack of/inadequate regulation, bonuses/excessive compensation, etc.), we have to take all the factors as a whole and go from there. Individually, these issues would shake the system, but would not cause it to collapse. Taken as a whole, you get the present result. Finally, time is needed for the situation to get on stable footing. One year may seem like a lot of time, but this problem took years to build up so years may be needed to fix it.

Dubai - World's Tallest Building

10,000

The Dow has reached the closest it has been to  10,000 points in nearly a year since the financial crisis began. The market is currently being led by Intel and JPMorgan Chase.

Read the full article here on CNN.

Health Care Reform Bill

Yesterday, the Senate Finance Company approve over $800 billion in funds to support the health care reform bill proposed by President Obama to run for 10 years. The vote passed 14-9 with only one republican vote going for the bill.

Weak Dollar / Replacing Oil’s Currency

It would seem that the world market is of mixed minds. One one hand, nations are enjoying how the dollar has weakened, resulting in cheaper American based goods and services. On the other hand, this weaker dollar has resulted in a loss of faith in the dollar. This has led many to question why the world should be backed in the so called strongest currency in the world. Some nations have felt that maybe one start would be to change the currency of oil from the American dollar to some other currently stable currency such as the Euro. The first thing to do is to see how other currencies react to the weaker dollar to see if they can handle the stress of being on the world market versus the old more local based currency trading. The full CNN article can be read here.

Mortgages Under 5%

CNN reports that one good result of this financial crisis is gradually lower mortgage interest rates for new home buyers. It would seem that the system is slowly normalizing as the recent rapid rise of the housing market had over-inflated prices. In economics, this normalization is met at an equilibrium point where the rates would be at a place where consumers and suppliers are in agreement. The markets are rarely at this point as everyone cannot be in agreement all the time. The equilibrium point is a good point to measure how off base the market is. The full CNN article can be read here.

8% Boost for IRS

The White House is looking to give additional funding to the IRS to crack down on those who use off shore funds to get around United States tax laws. They estimate that an additional $17 billion can be collected by the end of 2010 with these additional funds. This comes on the heals of off shore banks working with the United States to help crack down on these tax evaders. The full article can be read on WSJ.com here.

President Obama’s Budget Change

President Obama announced where he plans on making his budget cuts. He wants to start by changing tax rules for families making over $250,000/year. Although he blames much of the current economic troubles on the previous administration, it is not limited to the administration as it is also falls on the private sector’s greed and irresponsibility. Although is budget cuts would help reduce the deficit, as baby boomers retire and look to collect more in social security and Medicare benefits, this deficit could rise again. More on the president’s plans can be read here.

Curse of 10,000

In short, this "curse" is based on the trend that the Dow has trouble staying above the 10,000 mark.

Full Article: http://finance.yahoo.com/tech-ticker/article/yftt_348728/The-Curse-of-Dow-10,000?tickers=^DJI,^GSPC,SPY,DIA,QQQQ,^IXIC

Romans' Numeral 70

Definition: Months needed to recreate the jobs lost since the start of the recession


Source: CNN Daily Podcast 09/21/2009

FDIC Bailout

The FDIC is looking to the Fed to receive bailout funds as it is not receiving enough money to support itself. Basically, the FDIC is setup to receive its money from insured banks, but as over 90 banks have failed, their cash flow has been greatly impaired. Also, they are geared more for a bull market rather than the bear but they have suffered from a more social problem. This problem is that in good times, they were not saving enough in case bad times came, or they were greedy and spent the money they were saving for other investments.

Read the full story here.

(Article Link: http://finance.yahoo.com/tech-ticker/article/yftt_336131/Now-the-FDIC-Needs-a-Bailout?tickers=TBT,UDN,UUP,TIP,^DJI,^GSPC)

President Obama's Speech to America's Students

H.R. 3200 - (National) Health Reform Bill

After a great length of time reading the preliminary health care bill, I have come to the conclusion that there are very few things that the bill would accomplish. Although there are many social and political issues, I will not be discussing those. I am simply going to layout a few simple points as to what the bill aims to accomplish.

1. National Health Care - A minimal health care system for all Americans, funded through company's who make a certain amount of income each year (this has yet to be finalized as to which number would be looked at).

2. Private Health Insurance - The bill aims to provide basic health care needs to all Americans but private insurance companies would not be changed. Existing health care plans as well as Medicare and Medical are not affected.

3. Costs - As far as the bill is concerned, each benefits category by age group will maintain the same level of coverage per group. If costs change for anyone in a group, the costs are averaged through that group to level out the costs. No other groups should technically be affected by any other group.

4. Loss of Policy - A policy can only be revoked in cases of fraud. If no fraud is found, a policy is to remain in effect unless cancelled by the policyholder.

5. Policy Changes - All affected parties must be given adequate notice as to any changes to the policy in any way.

6. Plan Financing - Initial startup costs for the program will be repaid over a 10 year period from the plan's account. All further health care costs will only be paid out from the health care plan's general account. No other funds will be allowed to be used for this program and the funds from this program can not be used to fund other programs.

7. New/Transfer Accounts - All costs/benefits must be made and the taxpayer is ultimately held reponsible.

8. No coverage for undocumented aliens.

9. Additional tax - An additional tax to be determined (currently at 2.5% of gross income) if the requirements to enroll in the health care plan are not met. This tax is limited to the national average premium for the year.

In general the bill proves to be an interesting piece of legislation. The problem with a bill like this is that much of it should be in place to regulate private health care because these costs are the real issue. Providing health care for everone seems like a downside to those who save and are able to pay for their own health care. There are enough people who are barely able to make ends meet with the rising costs of health care.

Term: Stochastic

A process in which a behavior is determined by predictable actions and a random element.

http://en.wikipedia.org/wiki/Stochastic

State of California IOU's

California could end it's IOU program on September 4th, according to the state controller.

Read the article here.

Unemployment Figures

The President released the umemployment figures for the month of July. Watch the speech below or click here for the full report and transcript.

President's Weekly Address: This Economic Storm Will Pass (from 7/31/09)

The President talks about improvemnts to the American Economy. Read the article here as well as watch the video. The video can also be watched in the player below.

Microsoft-Yahoo Deal

Read the article on Yahoo! Finance here.

Credit Card Fees

The Obama Administration is looking to help consumers with their credit cards. In the first of hopefully many overhauls, the credit card fee structure is being changed, limiting the hiking of sudden late fees and phone payment charges among others. The administration is looking to change spending habits by helping people manage their money better and understand that there are always consequences to actions.

http://online.wsj.com/article/SB124272801896734045.html

President Obama: GM Bankruptcy Speech

Visit msnbc.com for Breaking News, World News, and News about the Economy

Equity Swap

An Equity Swap is a swap agreed to right now for a future exchange. It involves, like any other swap, a principal and payment intervals.

http://en.wikipedia.org/wiki/Equity_swap

Bank of American to finance Fontainebleau

Bank of America will reportedly be funding Fontainebleau in their new multibillion dollar resort project which recently came odd speculation when MGM Grand and their Saudi partners were having a falling out over money issues.

Read the Wall Stree Journal article summary here. Search Google for the blog title for the full article.

Collateralized Debt Oligation (a.k.a. CDO)

Collaterilzed Debt Obligation's are in essence asset backed securities that are made up of a portfolio of underlying assets, mainly fixed income assets.They are assigned risk classes then packaged to sell to financial institutions. The major downside to CDOs is that rather than spreading risk through diverisification, they pass along risk through the financial system so the risk is technically supposed to be minimized through sharing. Many major investors and financial giants like Warren Buffet and Alan Greenspan claim to not understand CDOs mainly because of the way the risk is spread and the way they are setup.

Read more about CDOs, Tranches (the asset classification system), Asset-Backed Securities, and
Structured Finance here:

Collateralized Debt Obligation
Tranche
Asset-Backed Securities
Structured Finance

Unemployement

Once again, unemployment has risen from the previous week and more than analyst estimates. Unemployment rose to 640,000 from 613,000 and 5000 more than estimates for this week. Another closely related figure is the amount of unemployment claims as people try and find ways to make ends meet to ride out the current financial and economic crisis.

http://www.msnbc.msn.com/id/30364714/

Bank Stress Test

Critics are now criticizing the government's stress tests for major banks to check their durability during recession like conditions. The critics are saying now that the wrong areas are being tested and are questioning if they actualy reflect what will happen in the real world.

http://www.msnbc.msn.com/id/30368110/

David Kellerman

David Kellerman, the acting financial office of Freddie Mac, was found dead today of an apparant suicide. An autopsy will still be conducted but he was found in the morning by his wife and the police were called.

http://mobile.latimes.com/inf/infomo?view=page2&feed:a=latimes_1min&feed:c=businessnews&feed:i=46438485

http://money.cnn.com/2009/04/22/news/Freddie_Mac_CFO/index.htm

http://www.msnbc.msn.com/id/30344303/

Bank Stress Test

Results of the Bank Stress Tests are expected to be released next week showing how good or bad the banks are doing right now. In essence, the tests are expected to determine exactly how they are doing and their standing in the grand scheme of things.



More Information:
CNBC
Yahoo! Finance

Rule of 72 (of 70, of 69)

This is an appromate means to find out the number of years it will take to double one's investment. Either of these three numbers give a close approximation but they are still estimates. More accurate dollar amounts and periods are reserved for software programs such as spreadsheets and proprietary software.

http://en.wikipedia.org/wiki/Rule_of_72

Business vs Personal Expenses

The saying that goes keep your life and work separate is most important when it comes to running a business. This is important at any level of business regardless as to sole proprietorships, partnerships and corporations. Although as you go from left to right, it can become easier so to speak as to keeping things separate, many small to medium size business owners still make the mistake of thinking that since it is their company, they can do whatever they want. This is after all the purpose of accounting. You want to track your business related income and expenses. By mixing in personal expenses, the line is blurred as to what was business related and what was personal. Though not recommended, if one account is used for personal and business expenses, there are ways to keep the expenses separate. This is important to show that a draw was made for personal expenses while other draws were made for business related expenses. This can be difficult when a business is run out of the home, mainly for tax purporses as an entire home is difficult to prove is used to operate a business unless there is tangible proof of it. Otherwise, an office must be defined in order to show that is all that will be claimed on the return. Otherwise, this cannot be claimed or should not be claimed as a defined space cannot be used for business related operations.

Tax Return Tips

1. The IRS now allows payments and refunds to more than one account to accomodate where the money is coming from or going to. It is very important to check your account number and routing number as it can get difficult to fix a mistake if you had your money sent or paid from an incorrect account.

2. Never send cash when filing your return as this is NOT an acceptable form of payment.

3. Remember to attach a payment voucher when sending in your payment as it makes it easier for the IRS to process the payment.

4. It is always better to send as much paperwork as you can as backup for your tax return when mailing it in as it allows the IRS to see where you got your numbers from. Also, be sure to keep the exact same copies of whatever you are sending in to ensure that your return matches what the IRS will be keeping on file.

Cramer: Depression is Over

Watch this video as Jim Cramer explains on his show Mad Money why he thinks the depression is over.

http://www.cnbc.com/id/15840232?play=1&video=1081118742

House Passes Budget

The House has passed a budget to last through 2010. It effectively covers job creation for health care, energy, and education, tax cuts for the middle class, and reduce the deficit.

Read the article here: http://www.speaker.gov/newsroom/legislation?id=0291

Watch Speaker Nancy Pelosi's speech here:

G20 Pledge

The G20 Summit met to decide on how to best use $1 Trillion in funds for developing nations as well as fix/change loopholes for tax breaks and tax havens. An agreement hasn't been reached for a stimulus package though. This news brought a surge to the stock markets bringing them up over 8000 points. A side note is that changes may be made to the mark-to-market rule so it becomes harder for accountants to fudge the numbers to make the financial statments look good or favorable towards the company.


http://www.cnbc.com/id/30002420
http://www.msnbc.msn.com/id/30004815/
http://finance.yahoo.com/news/Wall-Street-jumps-on-G20-hope-rb-14829282.html?sec=topStories&pos=main&asset=TBD&ccode=TBD

G-20 Summit

President Obama is heading to Europe to represent the US in the G-20 Summit. He is going to mixed reviews as several European nations feel that the current economic crisis is due to the US and the US is providing solutions to a problem we started. He may still receive his "rock star" status though but the next few days will tell what may prove to help or hurt Obama's presidency as well as supporting the world wide economy.

http://www.msnbc.msn.com/id/29972593/

GM, Chrysler Restructuring

President Obama announced today that the government would not be providing GM & Chrysler with a government bailout or loan, at the moment. GM would receive 60 days while Chrysler would receive 30 days to provide the government with a plan to show some significant restructuring and plan to keep the companies in float before they could receive some sort of federal assistance.

Bear Stearns and the Financial Crisis

An interesting article on the (secret) history of Bear Stearns and how it relates to the current financial crisis.

http://money.cnn.com/2009/03/02/magazines/fortune/cohan_houseofcards.fortune/index.htm?postversion=2009030410

Roller Coaster Ride

This week was a roller coaster ride in the markets as they improved after the announcement by the government that they would buy back abou $500b in bad loans to improve balance sheets. Then the market dropped after everyone's excitement died down. Another jump came when the treasury secretary announced more details in the finance package to help stimulate the economy. The market cooled a bit after the excitement died down (again). There was also a slight jump after the President's press conference and town hall meetings where he explained his stance on how to fix the current economic crisis.

Ex-Dividend Rate

The Ex-Dividend Date is the final date to purchase a stock in order to receive dividends on that particular stock.

http://en.wikipedia.org/wiki/Ex-dividend_date

Presidential Press Conference 3/24/09

Positive Day

The markets closed up today as the Fed announced that they would be buying about half of the bad mortgages sitting on the balance sheets of many banks. Many saw this as a way to hopefully allow banks to start lending again and to improve the numbers on financial statements.

American Stock Markets

It looks like the American stock markets have slightly rebounded after yesterday's drops with an unseen upswing in speculation for the housing market and possible positive Fed releases. Some are hoping that Fed Chairman Bernanek is trying to build momentum with his optimism to spark a renewed flame to build a positive road to recovery.

http://business.smh.com.au/business/markets/us-stocks-advance-20090318-916j.html

Developing Story: AIG Bonuses

In a letter to AIG CEO, New York Attorney General Andrew Cuomo said that the bonuses should not have been paid out due to the current crisis and have been disclosed. Working with the President, Cuomo have mentioned that some sort of law would be placed in effect to tax the bonuses at high rates to return the money to the American taxpayers if the money was not willingly returned. Although AIG said the payments were made under contract, Cuomo countered that they shouldn't have been made if the company knew they couldn't afford it in the face of this economic crisis.

http://biz.yahoo.com/ap/090317/aig_cuomo.html

http://www.cnn.com/2009/POLITICS/03/17/aig.bonuses/index.html

http://i.cdn.turner.com/cnn/2009/images/03/16/aig.letter.3.16.09.pdf

5th Day Rally

Althougth the markets ended low, the markets still didn't seem to show any signs that it wanted to fall again, even in the midst of the President's and taxpayer's seeming outrage at AIG's bonuses.

5th Day Rally

Today could mark the 5th day the markets have had a positive surge. Many hope that this signals that the markets have finally hit bottom and can now rebound into a recovery period as well as showing some hope that the stimulus actually helped. This is being hampered by the AIG bonsuses but many want this be only a minor speedbump.

http://biz.yahoo.com/ap/090316/wall_street.html

AIG Bonus

AIG is causing an outrage in that they plan to pay out several billion dollars in bonuses. President Obama is seeking legal ways to block this as this is an outrage to taxpayers who have already lost so much and don't think that bonuses should be paid to irresponsible management.

http://www.cnn.com/2009/POLITICS/03/16/AIG.bonuses/index.html

http://www.msnbc.msn.com/id/29714402/

http://www.cnbc.com/id/29717766

http://biz.yahoo.com/ap/090316/aig_outrage.html

Madoff >= $820m

According to papers filed in court this week, it would appear that Bernie Madoff is worth about $820m. This is reported to be his real estate worth according to an article posting on the Wall Street Journal website.

http://www.cnn.com/2009/CRIME/03/14/madoff.worth/index.html

Cramer's Stock Market Manipulation

Watch Jim Cramer's full explanation on how he manipulates the stock market as previews on Jon Stewart's The Daily Show.

The Daily Show with Jon Stewart, 3/12/09

If you didn't watch this episode, here is the quick recap. Jon Stewart basically called out CNBC and clarified that CNBC did not due its due diligence in reporting to accurately represent the information that they were reporting and that Jim Cramer were trying to admit their mistake saying that it is "...easy after the fact..." These quotes I think accurately reflect what Stewart has been trying to say all along.

"Wouldn't 150 years translate to a life sentence for anyone?" - in reference to the sentence for Madoff

"It's not a f**king game." - to Jim Cramer in his intro to Cramer about the amount of money people lost

"They burned the f**king house down and walked away with our money." - Stewart describing the current financial crisis

Watch the full episode on Hulu here -> http://www.hulu.com/watch/62203/the-daily-show-with-jon-stewart-thu-mar-12-2009

Uptick Rule

The Uptick Rule is regulatation limiting the amount of short sales in the market in a given period. The rule was eliminated in 2007 by the SEC but calls have been made to reinstate the rule as a method of regulation in the markets.

http://en.wikipedia.org/wiki/Uptick_rule

Positive Note

It seems that the markets want to start on a positive note this Friday morning as Wall Street was showing positive numbers on the heals of banks telling Washington that they do not need anymore bailout money at the moment. Let us see how this day goes...

GM doesn't need $2b

GM told President Obama's auto task force today that it doesn't need th $2b that it orginally asked for (this month). They say that they are still having trouble but will not ask for the money until they actually need it. The market rallied a bit after this information was released.

http://finance.yahoo.com/news/GM-says-it-doesnt-need-2B-apf-14619404.html

Mark to Market Accounting

The Mark to Market Accounting calculates the value of financial instruments to expire at some point in the future at current prices. This has been used in oil barrels when it seems that the quantity is running low to allocate dollar amounts based on future expected returns and rates. It has also been used in several accounting scandels and bank frauds such as Enron to generate paper returns.

http://en.wikipedia.org/wiki/Mark-to-market

Madoff pleads guilty

Today, financier Bernie Madoff plead guilty to all 11 counts of operating a Ponzi scheme. He admitted to running the scheme and "knew this day would come." He could face a maximum of 150 years in jail.

http://money.cnn.com/2009/03/12/news/newsmakers/madoff_courtappearance/index.htm

New Direction for Finance Today

As we are in special economic and financial times, I am taking this blog in a new direction. Rather than providing general overviews of current finacial events and explaining (or even not explaining) terms that everyone may or may not know, I am deciding to post headlines and terms in short bursts and provide links to articles that I feel accurately represent events and terms. This way as little as possible is lost in translation and as much as possible is covered.

California's Budget (or lack thereof)

It would seem that in the midst of the country's passing of the stimulus package, the state of California still can't seem to pass its own budget, even through threats of job losses, paycuts, and cut hours. Reuters reported that state legislators were unable to pass a budget and now the state will face severe job losses as the economy keeps losing ground.

http://www.reuters.com/article/politicsNews/idUSTRE51G0J420090217

$787b Economic Recovery Package

President Obama signed into effect a new $787 billion Economic Rovery Package known as American Recovery and Reinvestment Act. After much debate questions are still being asked as to how we will know that it's working. One main way will be the increase in consumer and commercial spending and people get the confidence to go out and spend money.

http://money.cnn.com/2009/02/17/news/economy/obama_stimulus_meas_success/index.htm?postversion=2009021713

President Obama's Economic Recovery Plan

President Obama described his discontent with the state of jobs in America today and his plans for the economy and how he believes it can be fixed. He followed his speech with a Q&A session.


Speech:
http://www.cnbc.com/id/15840232?video=1028137668

Q&A Session:
http://www.cnbc.com/id/15840232?video=1028243476

Stimulus Package

It seems like President Obama's stimulus package, after much debate seems like it will be passed for about $700b. Though it seems lately that even after much debate, more debate is still done as someone has an unusual question that causes everyone to panic and make a decision that takes a turn for the worse. The President though seems to speak his mind and is saying that the bill needs to be passed, it needs transparency, and it needs to be done soon as the economy seems to on a downhill slide and more and more people are losing their jobs every week.

Record Setting Layoffs

In what can be considered one of the worst days to hit the point home about the recessions, 71,400 jobs were lost today as a result of the economic and financial crisis affecting the United States in many years. In what is being dubbed 'Bloody Monday' jobs are being cut mainly because in recent years sales have focused mainly on the consumer, and frankly the consumer is just about out of money because of the housing market collapse, and the effects of essentially two wars (abroad and domestic). Although some say this is too be expected, others are surprised at how hard people are being hit, especially since many view this as something that is not technically their fault to begin with. Many are not hopeful as close to 200,000 job cuts are to be expected.

http://money.cnn.com/2009/01/26/news/economy/job_cuts/index.htm

Financial Future

As everyone looks forward to tomorrow's inaguration of President-Elcect Obama, the most pressing concern is the economy. The present seems to belong to banks falling apart or failing (Citigroup and BofA) and scandals (Madoff and Mike Corona), investment managers are looking to the future and how to get earnings back up and stimulate the economy according to Obama's plan which he wants to have ready within the next week or so.

For more information, read this article on CNBC.com.

Obama's Economic Plan

Obama's economic team says President-Elect Obama wants to see the remaining bailout package broadened in its use to help stabalize the economy. They also want more transparency as to how the money is being spent to help recognize if the money is being used properly or not. Obama has spoken with President Bush to keep him informed about what is currently being done so Obama can immediately get to work when he starts later this month.

http://finance.yahoo.com/news/Obama-team-spells-out-need-apf-14031921.html

Wal-Mart and Obama

Although the first day of the trading year brought a bit of hope to investors, it seems that even the world's largest retailer can't avoid the recessionary environment as its shares slid today. Even on the day that Obama would unveil his economic plan, it seems that it did not help matters any or provide any hope for the future. The only hope lies in the abilities of the new administration even though the stock markets are still on a roller coaster ride downhill.

http://finance.yahoo.com/news/Market-dips-as-WalMart-gloom-rb-14006323.html