By JEFF BATER
December 31, 2007 10:21 a.m.
WASHINGTON -- Existing-home sales managed a small climb during November, the first increase in nine months, but that didn't change the overall bleak picture for the ailing housing industry.
Home resales rose to a 5.00 million annual rate, a 0.4% increase from October's revised 4.98 million annual pace, the National Association of Realtors said Monday. October's rate was originally estimated at 4.97 million.
The median price of a previously owned home was $210,200 in November, down 3.3% from $217,300 in November 2006. The median price in October this year was $206,900.
The NAR said disruptions in mortgage availability and pricing peaked in August, which caused sales to slow in subsequent months. The November resales increase was the first since February 2007; the sales level of 5.00 million was in line with Wall Street expectations.
"Near term, existing-home sales should continue to hover in a narrow range, just as they have since September, and that's good news because it'll be a further sign that the housing market is stabilizing," NAR chief economist Lawrence Yun said.
The housing slump has been a drag on the economy for nearly two years. In the third quarter, the economy roared despite the burden. But in the fourth quarter, which ends with the year, the economy is seen much weaker, restrained by the dead weight of housing. New-home sales retreated to a 12-year low in November, the government reported last week; that is, sales of single-family homes decreased by 9.0% to a seasonally adjusted annual rate of 647,000, the lowest since 621,000 in April 1995.
Also receding are prices for new homes. Falling prices can chill consumer spending, which makes up 70% of U.S. economic activity as measured by GDP. When consumers watch the value of their homes shrink, they tend to feel less wealthy, a mood that can act as a damper on spending plans and, in turn, slow economic growth.
But on a bright note, data from Freddie Mac show the average 30-year mortgage rate was 6.21% in November, down from 6.38% in October.
"Mortgage interest rates are near historic lows and the most current data shows decelerating price declines, along with a modest reduction in the number of homes on the market," Mr. Yun said.
Inventories of homes fell 3.6% at the end of November to 4.27 million available for sale, which represented a 10.3-month supply at the current sales pace. There was a 10.7-month supply at the end of October, revised from a previously estimated 10.8 months.
Regionally, existing-home sales were mixed in November. Sales rose 10.3% in the West and were unchanged in the Midwest. Demand fell 2% in the South and 3.3% in the Northeast.
Write to Jeff Bater at jeff.bater@dowjones.com
Monday, December 31, 2007
Sunday, December 30, 2007
The Housing Market May Not Be Great in 2008
Friday, December 28, 2007
SUZANNE PRATT: More bad news on the housing front today. Fresh data from the Commerce Department show sales of new homes plunged 9 percent last month to their lowest level in more than 12 years. The larger-than-expected drop in sales is the latest sign of deepening trouble for the housing market, the bleakest sector of the economy this year. As Erika Miller reports, most experts see no sign of a turnaround anytime soon.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you think housing was weak this year, brace yourself for next year. Many industry experts think we're only half way through the housing downturn. They say the problem is a classic case of too much supply, too little demand. S&P economist Beth Ann Bovino says the solution is for home prices to come down another 5 percent or so.
BETH ANN BOVINO, SR. ECONOMIST, STANDARD & POOR'S: Within the housing sector, we will need to see housing prices fall. This will actually help go through in a sense that inventory of unsold homes. When the prices start to drop a little bit, then you're going to see buyers become more interested.
MILLER: Experts say some previously sizzling markets like Florida could suffer double digit drops next year. On the other hand, prices are expected to barely dip in the northeast where inventories are leaner. Economists expect foreclosures to increase as much as 33 percent nationwide, adding to the housing supply. Lenders have also tightened mortgage requirements in response to the sub-prime crisis. That means a smaller pool of qualified home buyers. The most optimistic projections call for housing to stabilize in the second half of the year. Economists say much depends on whether the U.S. economy slips into recession.
BOVINO: We're at the brink, I guess you could say, of much more severe issues happening. We do see -- we have a 40 percent likelihood that there could be a recession in 2008. That would certainly extend the housing crisis even further out into 2009.
MILLER: All of this is of course good news for home buyers. Brokers say prices on new homes are the lowest they've been in years. But the outlook is bleak for the millions of families hoping to sell their homes. Economist Lakshman Achuthan recommends taking a good look at your asking price.
LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH: People are living in fantasy land, actually, where they think that their home price is going to just remain flat or maybe even go up in the next 12 months. It's just not going to happen.
MILLER: Economists are waiting to see a reduction in inventories before calling a turnaround. They also want to see an improving job market, which would help stimulate housing demand. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
SUZANNE PRATT: More bad news on the housing front today. Fresh data from the Commerce Department show sales of new homes plunged 9 percent last month to their lowest level in more than 12 years. The larger-than-expected drop in sales is the latest sign of deepening trouble for the housing market, the bleakest sector of the economy this year. As Erika Miller reports, most experts see no sign of a turnaround anytime soon.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you think housing was weak this year, brace yourself for next year. Many industry experts think we're only half way through the housing downturn. They say the problem is a classic case of too much supply, too little demand. S&P economist Beth Ann Bovino says the solution is for home prices to come down another 5 percent or so.
BETH ANN BOVINO, SR. ECONOMIST, STANDARD & POOR'S: Within the housing sector, we will need to see housing prices fall. This will actually help go through in a sense that inventory of unsold homes. When the prices start to drop a little bit, then you're going to see buyers become more interested.
MILLER: Experts say some previously sizzling markets like Florida could suffer double digit drops next year. On the other hand, prices are expected to barely dip in the northeast where inventories are leaner. Economists expect foreclosures to increase as much as 33 percent nationwide, adding to the housing supply. Lenders have also tightened mortgage requirements in response to the sub-prime crisis. That means a smaller pool of qualified home buyers. The most optimistic projections call for housing to stabilize in the second half of the year. Economists say much depends on whether the U.S. economy slips into recession.
BOVINO: We're at the brink, I guess you could say, of much more severe issues happening. We do see -- we have a 40 percent likelihood that there could be a recession in 2008. That would certainly extend the housing crisis even further out into 2009.
MILLER: All of this is of course good news for home buyers. Brokers say prices on new homes are the lowest they've been in years. But the outlook is bleak for the millions of families hoping to sell their homes. Economist Lakshman Achuthan recommends taking a good look at your asking price.
LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH: People are living in fantasy land, actually, where they think that their home price is going to just remain flat or maybe even go up in the next 12 months. It's just not going to happen.
MILLER: Economists are waiting to see a reduction in inventories before calling a turnaround. They also want to see an improving job market, which would help stimulate housing demand. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Growth Slows In Some States
By Conor Dougherty
From The Wall Street Journal Online
Population growth in several of the fastest-growing states is slowing -- in Arizona, Florida and Nevada, in particular -- in a trend both reflecting and fueling the housing-market malaise in those areas.
"This is our first chance to see what has been the migration impact of the housing-market slowdown, and it's showing up in these highflying states," says William Frey, a demographer at the Brookings Institution, a Washington think tank.
The Census Bureau's annual estimate of state population changes covers the 12 months that ended July 1. It shows that people continue to flee the Midwest -- especially Michigan, one of two states to lose people -- and that the Mountain states in the West continue to post large population gains as people arrive from California and elsewhere.
Arizona, Florida and Nevada are still among the fastest-growing states in the country, by percentage. Nevada saw an increase of 2.9%, or 72,955 people, tallying births, deaths and migration from inside and outside the U.S.
That was less than the previous year's 3.5% increase and lower than the 3%-plus growth rate for the six previous years. Arizona, the second-fastest-growing state, saw its population increase 2.8% in the most recent period, compared with a 3.6% rise in the previous year.
Florida, which has suffered heavily in the housing bust, saw the sharpest falloff in population growth. Florida grew 1.07%, slightly faster than the U.S. growth rate of 0.96%. During the year, 35,301 people moved to Florida from another state, 134,798 fewer than in the previous year. That is the slowest rate of domestic migration into Florida since at least 1990, the year the Census Bureau began publishing annual estimates of migration between states.
Pain in the manufacturing sector, especially auto manufacturing, continued to purge residents from the Midwest. Michigan lost 30,500 residents, a 0.3% decline. Ohio was essentially flat, gaining 3,404. Besides Michigan, the only state to lose population was Rhode Island.
Broadly, people in the Northeast and Midwest continue to leave for the West and South. Utah and Idaho were the third- and fourth-fastest-growing states, respectively. Colorado and Wyoming were eighth and ninth, respectively. Both states saw their rate of growth increase.
Residents of California, on the other hand, continue to leave: In the most recent period, 263,035 people left California for another state. The state's 0.8% population growth was mostly because of births.
In the South, states including Georgia and North Carolina have taken the fast-growing mantle away from Florida, while Texas continues to suck up new residents. Georgia and North Carolina grew 2.17% and 2.16%, respectively. Texas grew 2.12%. Those states also are among the biggest gainers in absolute terms. Texas gained 496,751 residents, more than any other state. Georgia had the third-largest increase, with 202,670, and North Carolina was fifth, with 191,590.
Following the exodus of residents after Hurricane Katrina, Louisiana added about 50,000 people in the year to July 1. There is still a ways to go, though: From July 2005 to July 2006, the state lost about 220,000 residents.
U.S. Census, 2007 VS. 2006
See a sortable chart of states' shifting populations.
Email your comments to rjeditor@dowjones.com.
-- December 28, 2007
Looking for an End To the Housing Slump
By Amy Hoak
From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008. But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
Email your comments to rjeditor@dowjones.com.
-- December 25, 2007
From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008. But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
Email your comments to rjeditor@dowjones.com.
-- December 25, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, December 28, 2007, at 6:00 p.m. EST.
Plunging November new home sales pushed the dollar down sharply today. At the close, the Dow gained 6 points, closing at 13,365, while the Nasdaq lost just over 2 points, closing at 2,674. Oil closed down $0.45 at $96.17 per barrel, and gold closed up $11.40 at $843.20 an ounce.
Citigroup, Merrill Lynch and JPMorgan Chase will write-off $18.7 billion, $11.5 billion, and $3.4 billion respectively in the fourth quarter, for a total of $33.6 billion in collateralized debt obligations.
New home sales fell 9 percent in November. In the past year, new home sales are down 34.4 percent nationwide. The Midwest has the worst decline, down 38.7 percent in the past year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much in collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The offices of The Wall Street Digest will be closed on Monday, December 31, and Tuesday, January 1, in observance of New Year's Day. The next Hotline Update will be on Wednesday, January 2, 2008, at 6:00 p.m. EST. Have a safe and joyous holiday weekend!
Plunging November new home sales pushed the dollar down sharply today. At the close, the Dow gained 6 points, closing at 13,365, while the Nasdaq lost just over 2 points, closing at 2,674. Oil closed down $0.45 at $96.17 per barrel, and gold closed up $11.40 at $843.20 an ounce.
Citigroup, Merrill Lynch and JPMorgan Chase will write-off $18.7 billion, $11.5 billion, and $3.4 billion respectively in the fourth quarter, for a total of $33.6 billion in collateralized debt obligations.
New home sales fell 9 percent in November. In the past year, new home sales are down 34.4 percent nationwide. The Midwest has the worst decline, down 38.7 percent in the past year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much in collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The offices of The Wall Street Digest will be closed on Monday, December 31, and Tuesday, January 1, in observance of New Year's Day. The next Hotline Update will be on Wednesday, January 2, 2008, at 6:00 p.m. EST. Have a safe and joyous holiday weekend!
U.S. Real Estate Snapshot Update
Chart Notes:
U.S. real estate did go lower from last update of October 14, we our now on an Elliott Wave 3 on the Daily Chart, Elliott Wave 3 is always the longest wave, EW 4 never materialized. We are below the 200 Moving Average for the first time ever, the blue line, going back to 1999 data on chart anyway. On the Monthly chart, the above chart, we are at the 50 FIB RET, which means we could recover from here. But if it breaks the 50, watch out! But it does look like an EW 4 Wave is complete, which means now could be a great time to buy real estate. But we need more confirmation to see which way it is going to go.
iShares Dow Jones U.S. Real Estate Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Real Estate Index (the Index). The Index measures the performance of the real estate sector of the United States equity market. The Index includes companies in sub sectors, such as real estate holding and development, and real estate investment trusts (REITs). The Fund uses a representative sampling strategy in seeking to track the Index that collectively has an investment profile similar to the Index.
Tuesday, December 18, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, December 18, 2007, at 6:00 p.m. EST.
The Bank of England and the European Central Bank added $500 billion to liquefy the banking system between now and year-end. At the close, the Dow gained almost 65 points, closing at 13,232, while the Nasdaq added almost 22 points, closing at 2,596. Oil closed $0.14 lower at $90.49 per barrel, and gold closed $8.10 higher at $807.40 an ounce.
Global liquidity is still at record levels, but the mortgage mess and tight credit conditions in the U.S. are creating a volatile stock market. The Fed is working with alternative methods to liquefy both the mortgage market and the banking system. The banking system may be temporarily broken, but huge sums of capital are available to fix it. The fear of the unknown is worse than the problem. The Bernanke Fed would like to fix the problem without creating more inflation. That will take more time than using the Greenspan fix, which amounted to shoving $200 billion into the banking system and worrying about inflation next year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 21, 2007, at 6:00 p.m. EST.
The Bank of England and the European Central Bank added $500 billion to liquefy the banking system between now and year-end. At the close, the Dow gained almost 65 points, closing at 13,232, while the Nasdaq added almost 22 points, closing at 2,596. Oil closed $0.14 lower at $90.49 per barrel, and gold closed $8.10 higher at $807.40 an ounce.
Global liquidity is still at record levels, but the mortgage mess and tight credit conditions in the U.S. are creating a volatile stock market. The Fed is working with alternative methods to liquefy both the mortgage market and the banking system. The banking system may be temporarily broken, but huge sums of capital are available to fix it. The fear of the unknown is worse than the problem. The Bernanke Fed would like to fix the problem without creating more inflation. That will take more time than using the Greenspan fix, which amounted to shoving $200 billion into the banking system and worrying about inflation next year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 21, 2007, at 6:00 p.m. EST.
Sunday, December 16, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, December 14, 2007, at 6:00 p.m. EST.
Rising inflationary pressures surprised stock traders this morning. Stock prices fell on fading hopes of future rate cuts by the Fed. At the close, the Dow plunged 178 points, closing at 13,339, while the Nasdaq dropped almost 33 points, closing at 2,635. Oil closed $0.90 lower at $91.31 per barrel, and gold closed $4.50 lower at $799.50 an ounce.
The November Consumer Price Index (CPI) was released this morning at 8:30. November prices soared by 0.8 percent, while the core inflation rate (minus food and energy) was up 0.3 percent. Both figures were higher than expected. By now, I’m sure the Fed would like to take back the December 11th 25-basis point cut in the Fed Funds rate. Bond prices fell sharply immediately after the announcement, followed by plunging stock prices from the opening bell at 9:30. However, hopes of further rate cuts were dashed at the same time. Rising inflation and a slowing economy is not an easy problem for the Fed. More volatility in the U.S. stock market will unfold going forward, which could push both foreign and U.S. investors offshore for better profits.
While slowing growth in the U.S. is becoming more obvious, there is no talk, not even a whisper, of slowing growth in China, India or Asia. China’s inflation rate is at the highest levels in 15 years, with the money supply growing at 18.5 percent. China’s retail sales were up almost 18 percent in November. As a result, the China ETF, iShares FTSE/Xingua China 25 Index (FXI), is forming what could eventually be a double top. Rising inflation is creating labor unrest, but police are not arriving on the scene to restore order. Almost a year ago, Fed Chairman Bernanke warned Chinese leaders that monetary inflation would produce increasing labor unrest. We are watching the China charts for a technical sell signal, which could come next week.
In the U.S., I would continue to avoid the following sectors: financial, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, December 18, 2007, at 6:00 p.m. EST.
Rising inflationary pressures surprised stock traders this morning. Stock prices fell on fading hopes of future rate cuts by the Fed. At the close, the Dow plunged 178 points, closing at 13,339, while the Nasdaq dropped almost 33 points, closing at 2,635. Oil closed $0.90 lower at $91.31 per barrel, and gold closed $4.50 lower at $799.50 an ounce.
The November Consumer Price Index (CPI) was released this morning at 8:30. November prices soared by 0.8 percent, while the core inflation rate (minus food and energy) was up 0.3 percent. Both figures were higher than expected. By now, I’m sure the Fed would like to take back the December 11th 25-basis point cut in the Fed Funds rate. Bond prices fell sharply immediately after the announcement, followed by plunging stock prices from the opening bell at 9:30. However, hopes of further rate cuts were dashed at the same time. Rising inflation and a slowing economy is not an easy problem for the Fed. More volatility in the U.S. stock market will unfold going forward, which could push both foreign and U.S. investors offshore for better profits.
While slowing growth in the U.S. is becoming more obvious, there is no talk, not even a whisper, of slowing growth in China, India or Asia. China’s inflation rate is at the highest levels in 15 years, with the money supply growing at 18.5 percent. China’s retail sales were up almost 18 percent in November. As a result, the China ETF, iShares FTSE/Xingua China 25 Index (FXI), is forming what could eventually be a double top. Rising inflation is creating labor unrest, but police are not arriving on the scene to restore order. Almost a year ago, Fed Chairman Bernanke warned Chinese leaders that monetary inflation would produce increasing labor unrest. We are watching the China charts for a technical sell signal, which could come next week.
In the U.S., I would continue to avoid the following sectors: financial, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, December 18, 2007, at 6:00 p.m. EST.
Tuesday, December 11, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, December 11, 2007, at 6:00 p.m. EST.
Wall Street was disappointed with the Fed's 25-basis point cut in the discount rate. Stock prices plunged after the mid-day announcement. At the close, the Dow sank 294 points, closing at 13,432, while the Nasdaq lost 66 points, closing at 2,652. Oil closed $1.28 higher at $89.14 per barrel, and gold closed $11.70 lower at $801.80 an ounce.
Wall Street was expecting a 25-basis point cut in the Fed Funds rate and a 50-basis point cut in the discount rate. The Fed did cut the Fed Funds rate by 25-basis points, but Wall Street was extremely disappointed with the 25-basis cut in the discount rate. Wall Street wanted a deeper discount-rate cut to assist the process of liquefying the credit markets. The Fed governors meet every two weeks, which will allow further rate cuts, as needed.
The dollar fell immediately after the Fed's rate cut. The Fed Funds rate is still more than 100-basis points above the 2-year Note. Consequently, I expect further rate cuts totaling 75- to 100-basis points during 2008.
I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as local currencies rise against the falling dollar. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 14, 2007, at 6:00 p.m. EST.
Wall Street was disappointed with the Fed's 25-basis point cut in the discount rate. Stock prices plunged after the mid-day announcement. At the close, the Dow sank 294 points, closing at 13,432, while the Nasdaq lost 66 points, closing at 2,652. Oil closed $1.28 higher at $89.14 per barrel, and gold closed $11.70 lower at $801.80 an ounce.
Wall Street was expecting a 25-basis point cut in the Fed Funds rate and a 50-basis point cut in the discount rate. The Fed did cut the Fed Funds rate by 25-basis points, but Wall Street was extremely disappointed with the 25-basis cut in the discount rate. Wall Street wanted a deeper discount-rate cut to assist the process of liquefying the credit markets. The Fed governors meet every two weeks, which will allow further rate cuts, as needed.
The dollar fell immediately after the Fed's rate cut. The Fed Funds rate is still more than 100-basis points above the 2-year Note. Consequently, I expect further rate cuts totaling 75- to 100-basis points during 2008.
I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as local currencies rise against the falling dollar. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 14, 2007, at 6:00 p.m. EST.
Thursday, November 15, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, November 13, 2007, at 6:00 p.m. EST.
Bank of America said it has more than $15 billion in net exposure to collateralized debt obligations (CDOs), but stock prices still soared today. At the close, the Dow soared almost 320 points, closing at 13,307, while the Nasdaq jumped almost 90 points, closing at 2,673. Oil closed down $3.22 to 91.42 per barrel, and gold closed down $6.60 at $801.10 an ounce.
The smart money allowed the Dow Average, the S&P 500 and the Nasdaq to drift down to the 200-day moving average before releasing what appears to be a coordinated buy program to take the market back up to new highs.
Global plans to build nuclear power plants for electricity are growing. China has a plan to build 200 nuclear plants to electrify China. The price of uranium is going to soar. Let's purchase the Nuclear energy ETF, Market Vectors Global Nuclear Energy symbol (NLR). Do not bottom-fish in the financial sector. Do not buy banks or brokerage houses. China and the emerging markets should have a big bounce tonight.
The condo/housing sector will not bottom until late 2009. In the meantime, buyers of foreclosed properties are purchasing them for 50 to 60 percent of the selling price. Home and condo prices will continue to fall as more foreclosed properties add to the housing glut.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 16, 2007, at 6:00 p.m. EST.
Bank of America said it has more than $15 billion in net exposure to collateralized debt obligations (CDOs), but stock prices still soared today. At the close, the Dow soared almost 320 points, closing at 13,307, while the Nasdaq jumped almost 90 points, closing at 2,673. Oil closed down $3.22 to 91.42 per barrel, and gold closed down $6.60 at $801.10 an ounce.
The smart money allowed the Dow Average, the S&P 500 and the Nasdaq to drift down to the 200-day moving average before releasing what appears to be a coordinated buy program to take the market back up to new highs.
Global plans to build nuclear power plants for electricity are growing. China has a plan to build 200 nuclear plants to electrify China. The price of uranium is going to soar. Let's purchase the Nuclear energy ETF, Market Vectors Global Nuclear Energy symbol (NLR). Do not bottom-fish in the financial sector. Do not buy banks or brokerage houses. China and the emerging markets should have a big bounce tonight.
The condo/housing sector will not bottom until late 2009. In the meantime, buyers of foreclosed properties are purchasing them for 50 to 60 percent of the selling price. Home and condo prices will continue to fall as more foreclosed properties add to the housing glut.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 16, 2007, at 6:00 p.m. EST.
Sunday, November 11, 2007
8 secret scores that lenders keep
Lenders track every last detail of your spending habits, then use the data to estimate not just how big a risk you are but how profitable a customer you might be
By Liz Pulliam Weston
Recently my husband and I received nearly identical balance-transfer offers from our respective Bank of America cards. The offers were identical, that is, except for the rates we'd be given. He was enticed with a 0% rate. Mine was 2.99%.
We live at the same address and share the same income. We both have high credit scores (although his are, annoyingly, a few points higher than mine).
So are these different offers evidence of rampant sexism on BofA's part? Hardly. The pitches were the result of complex and largely secret scoring systems that most financial institutions use to boost profits while limiting losses.
You've heard by now of credit scores, the three-digit numbers lenders use to gauge your creditworthiness. Credit scores predict how likely you are to default on a credit account or loan; they're used to help set interest rates and terms.
What you may not know is that credit scores are just the start of the way financial institutions evaluate you, and they're not even the most commonly used scores -- far from it.
While a credit card issuer might check your credit scores once a month as part of its regular account review process, the same company probably checks other kinds of scores every time you pull out your plastic.
"Every single transaction has some sort of score being generated," said credit scoring expert John Ulzheimer, president of Credit.com's education services and author of the book "You're Nothing But a Number." "Generally they're checking whether the transaction is likely to be fraudulent, but there are other reasons as well."
You're being judged by the type of transactions you make, how you pay your bills, how much profit you generate for your lenders and a host of other factors. The scoring formulas might be created by the credit bureaus, third parties or the lenders themselves. Banks and other financial institutions are tight-lipped about many of the details of these other scoring systems, but they're used to determine:
The kind of credit card offers you get.
Whether your credit limits are raised or suddenly lowered.
Whether your over-limit credit or debit transactions are approved.
Whether your card issuer calls you about a suspicious transaction, blocks it or shuts down your account.
How cooperative your issuer is about waiving fees or lowering your interest rate.
How quickly your issuer calls you if your payment is late.
Whether a collection agency contacts you about an old debt and how hard they push.
Your credit scores are just the start
Here are some of the ways you might be scored, roughly following the life cycle of a credit account: You're very familiar with credit-risk scores, but the other eight rarely see the light of day.
Credit-risk scores: These are the credit scores most of us know. The leading credit score, the FICO, was created by Fair Isaac and ranges from 300 to 850, with scores over 700 generally considered to be low risk.
Response score: This score predicts the likelihood a consumer will respond to an offer of credit, such as a new card or a balance transfer offer. Credit card issuers use response scores to decide whom to target and how to customize offers to appeal to particular consumers, said Chisoo Lyons, vice president for analytic research at Fair Isaac, which created the leading FICO credit score as well as many other scoring formulas.
Application score:This score scoops up data from your credit application that's not included in your credit scores, said Ulzheimer, who worked for Fair Isaac and for credit bureau Equifax before joining Credit.com. That data include how much you earn, how long you've lived at your current address and how long you've worked for your current employer. Application scores are typically used in combination with other scores, such as credit and bankruptcy scores, to determine whether to open the account, what rate to give and how much credit to extend.
Bankruptcy score:Credit scores typically predict the chance you'll miss a payment in the next two years. Bankruptcy scores predict the likelihood you'll throw in the towel on your debt entirely and file for Chapter 7 liquidation or a Chapter 13 repayment plan, said David Rubinger, spokesman for credit bureau Equifax, which produces the leading Bankruptcy Navigator Index or BNI. BNIs range from 1 to 300, with the higher the score, the lower the predicted risk. Most lenders use both credit scores and bankruptcy scores, Ulzheimer said, to help assess the risk that you won't pay.
Revenue score: Lenders want to maximize the profitability of each account, and one way they do that is to gauge how much money each account is likely to generate.
Attrition-risk score: Attrition risk refers to the likelihood a user will stop using a card, and attrition-risk scores are typically used in combination with other scores to determine what to do next if you look ready to bolt. If your account generates a lot of revenue and is deemed at low risk for default or bankruptcy, for example, the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate and pelting you with convenience checks. If your account isn't that profitable or is deemed risky, on the other hand, the issuer might just let you go.
Behavior score: Credit scores provide a snapshot of how a consumer is handling all of his or her credit accounts. Behavior scores, by contrast, typically focus on a single account (the one you have with that particular creditor) but take in a broad view. Does the user pay off her bills every month, carry a balance occasionally or frequently pay only the minimums on her cards? That information typically isn't available on a credit report, but is contained in the issuer's databases, along with other data that helps the score describe how she handles her account. A behavior score might be used in conjunction with other scores, such as credit or bankruptcy scores, to decide whether an overdue payment is an aberration (maybe he's traveling?) or a sign of impending financial crisis (maybe we should call the consumer today and find out what's going on).
Transaction score: These are the scores run each time you use your plastic to determine whether the transaction should be approved. Issuers are typically looking for signs the transaction might be fraudulent, but transaction data can be used in other ways as well (more on that in a minute).
Collection score: You've failed to pay for long enough that your card has been turned over to a collection agency. These agencies use collection scores to assess the likelihood that you'll be able to pay them and sort their list of debtors accordingly. Collection agencies watch for all kinds of evidence that your financial situation may be improving, Ulzheimer said, from better credit scores to another collector's account suddenly being reset to 0, indicating it's been paid off.
If, on the other hand, your credit is in the dumps or the amount involved is small, the collection agency may make minimal effort.
"Why spend time and effort to track you down if you're not likely to pay?" Ulzheimer said. "Probably the most cost-effective (tactic) is to write you a letter, put it on your credit report and wait for you to call them."
Waiting, watching, hoping
As several of the previous examples show, lenders and others often combine different types of scores to assess you. Sometimes the evaluations become pretty sophisticated.
One scoring model sold to lenders, the TRIAD Transaction Score created by Fair Isaac, takes into account credit risk, attrition, potential revenue and patterns in the user's charging behavior that might indicate higher or lower risk.
Let's say you typically spent $1,000 a month on your credit card, usually on toys, clothes and eating out at family restaurants. Then one month your spending changes -- you still spend $1,000, but now it's to get cash advances, buy groceries and gamble at the local racetrack.
The scoring formula may decide you've gone from Stable Family Guy to Desperate Unemployed Guy and flag the issuer that you've become a higher-risk customer.
Instead of a single three-digit number, TRIAD generates three numbers. Typically the scores will include a credit-risk score and an attrition score, both somewhere on a scale of 50 to 999 with higher numbers being riskier, plus a dollar figure to indicate the account's potential revenue generation.
If the issuer decides the risk of your default outweighs the profits you generate, it might reduce your credit limit. If you're a profitable customer, on the other hand, the card issuer might wait awhile to see if your situation improves.
Yes, it is rocket science
How issuers decide what to do with the scores depends on their companies' policies, and even those are often changing targets. Credit card issuers constantly tweak their systems to maximize profits and minimize losses.
"Those guys at NASA have nothing on the Ph.D.s who work for credit card companies," Ulzheimer said. "They're Mensa-level smart, and they are very, very sophisticated in the ways they use credit data."
Which is not to say issuers, or the scoring systems they use, never make mistakes. Case in point: an issuer sending two different offers to the same household, as they did to ours. Most issuers use software to make sure that doesn't happen, Ulzheimer said; they don't want us comparing notes. (Bank of America didn't return my calls about the issue.)
In fact, financial institutions in general aren't eager to reveal how they make the decisions they do -- and that's not likely to change soon. While you have a federal right to see your credit scores, that's not true with other scores, which lenders often consider proprietary information.
Is that a crisis for consumers? I have mixed feelings about that. You clearly need to see your credit scores, since they influence so much of your financial life across the board. But given how many of these other scores are in use, how different they are and how many ways they're applied, I'm not sure I really want to see them all.
Ulzheimer agrees. "I'm not sure how helpful it would be to get a list of 40 or 50 scores, each scaled differently and meant to measure different things," he said.
What do you think? Share your thoughts on the Your Money message board.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published Nov. 1, 2007
By Liz Pulliam Weston
Recently my husband and I received nearly identical balance-transfer offers from our respective Bank of America cards. The offers were identical, that is, except for the rates we'd be given. He was enticed with a 0% rate. Mine was 2.99%.
We live at the same address and share the same income. We both have high credit scores (although his are, annoyingly, a few points higher than mine).
So are these different offers evidence of rampant sexism on BofA's part? Hardly. The pitches were the result of complex and largely secret scoring systems that most financial institutions use to boost profits while limiting losses.
You've heard by now of credit scores, the three-digit numbers lenders use to gauge your creditworthiness. Credit scores predict how likely you are to default on a credit account or loan; they're used to help set interest rates and terms.
What you may not know is that credit scores are just the start of the way financial institutions evaluate you, and they're not even the most commonly used scores -- far from it.
While a credit card issuer might check your credit scores once a month as part of its regular account review process, the same company probably checks other kinds of scores every time you pull out your plastic.
"Every single transaction has some sort of score being generated," said credit scoring expert John Ulzheimer, president of Credit.com's education services and author of the book "You're Nothing But a Number." "Generally they're checking whether the transaction is likely to be fraudulent, but there are other reasons as well."
You're being judged by the type of transactions you make, how you pay your bills, how much profit you generate for your lenders and a host of other factors. The scoring formulas might be created by the credit bureaus, third parties or the lenders themselves. Banks and other financial institutions are tight-lipped about many of the details of these other scoring systems, but they're used to determine:
The kind of credit card offers you get.
Whether your credit limits are raised or suddenly lowered.
Whether your over-limit credit or debit transactions are approved.
Whether your card issuer calls you about a suspicious transaction, blocks it or shuts down your account.
How cooperative your issuer is about waiving fees or lowering your interest rate.
How quickly your issuer calls you if your payment is late.
Whether a collection agency contacts you about an old debt and how hard they push.
Your credit scores are just the start
Here are some of the ways you might be scored, roughly following the life cycle of a credit account: You're very familiar with credit-risk scores, but the other eight rarely see the light of day.
Credit-risk scores: These are the credit scores most of us know. The leading credit score, the FICO, was created by Fair Isaac and ranges from 300 to 850, with scores over 700 generally considered to be low risk.
Response score: This score predicts the likelihood a consumer will respond to an offer of credit, such as a new card or a balance transfer offer. Credit card issuers use response scores to decide whom to target and how to customize offers to appeal to particular consumers, said Chisoo Lyons, vice president for analytic research at Fair Isaac, which created the leading FICO credit score as well as many other scoring formulas.
Application score:This score scoops up data from your credit application that's not included in your credit scores, said Ulzheimer, who worked for Fair Isaac and for credit bureau Equifax before joining Credit.com. That data include how much you earn, how long you've lived at your current address and how long you've worked for your current employer. Application scores are typically used in combination with other scores, such as credit and bankruptcy scores, to determine whether to open the account, what rate to give and how much credit to extend.
Bankruptcy score:Credit scores typically predict the chance you'll miss a payment in the next two years. Bankruptcy scores predict the likelihood you'll throw in the towel on your debt entirely and file for Chapter 7 liquidation or a Chapter 13 repayment plan, said David Rubinger, spokesman for credit bureau Equifax, which produces the leading Bankruptcy Navigator Index or BNI. BNIs range from 1 to 300, with the higher the score, the lower the predicted risk. Most lenders use both credit scores and bankruptcy scores, Ulzheimer said, to help assess the risk that you won't pay.
Revenue score: Lenders want to maximize the profitability of each account, and one way they do that is to gauge how much money each account is likely to generate.
Attrition-risk score: Attrition risk refers to the likelihood a user will stop using a card, and attrition-risk scores are typically used in combination with other scores to determine what to do next if you look ready to bolt. If your account generates a lot of revenue and is deemed at low risk for default or bankruptcy, for example, the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate and pelting you with convenience checks. If your account isn't that profitable or is deemed risky, on the other hand, the issuer might just let you go.
Behavior score: Credit scores provide a snapshot of how a consumer is handling all of his or her credit accounts. Behavior scores, by contrast, typically focus on a single account (the one you have with that particular creditor) but take in a broad view. Does the user pay off her bills every month, carry a balance occasionally or frequently pay only the minimums on her cards? That information typically isn't available on a credit report, but is contained in the issuer's databases, along with other data that helps the score describe how she handles her account. A behavior score might be used in conjunction with other scores, such as credit or bankruptcy scores, to decide whether an overdue payment is an aberration (maybe he's traveling?) or a sign of impending financial crisis (maybe we should call the consumer today and find out what's going on).
Transaction score: These are the scores run each time you use your plastic to determine whether the transaction should be approved. Issuers are typically looking for signs the transaction might be fraudulent, but transaction data can be used in other ways as well (more on that in a minute).
Collection score: You've failed to pay for long enough that your card has been turned over to a collection agency. These agencies use collection scores to assess the likelihood that you'll be able to pay them and sort their list of debtors accordingly. Collection agencies watch for all kinds of evidence that your financial situation may be improving, Ulzheimer said, from better credit scores to another collector's account suddenly being reset to 0, indicating it's been paid off.
If, on the other hand, your credit is in the dumps or the amount involved is small, the collection agency may make minimal effort.
"Why spend time and effort to track you down if you're not likely to pay?" Ulzheimer said. "Probably the most cost-effective (tactic) is to write you a letter, put it on your credit report and wait for you to call them."
Waiting, watching, hoping
As several of the previous examples show, lenders and others often combine different types of scores to assess you. Sometimes the evaluations become pretty sophisticated.
One scoring model sold to lenders, the TRIAD Transaction Score created by Fair Isaac, takes into account credit risk, attrition, potential revenue and patterns in the user's charging behavior that might indicate higher or lower risk.
Let's say you typically spent $1,000 a month on your credit card, usually on toys, clothes and eating out at family restaurants. Then one month your spending changes -- you still spend $1,000, but now it's to get cash advances, buy groceries and gamble at the local racetrack.
The scoring formula may decide you've gone from Stable Family Guy to Desperate Unemployed Guy and flag the issuer that you've become a higher-risk customer.
Instead of a single three-digit number, TRIAD generates three numbers. Typically the scores will include a credit-risk score and an attrition score, both somewhere on a scale of 50 to 999 with higher numbers being riskier, plus a dollar figure to indicate the account's potential revenue generation.
If the issuer decides the risk of your default outweighs the profits you generate, it might reduce your credit limit. If you're a profitable customer, on the other hand, the card issuer might wait awhile to see if your situation improves.
Yes, it is rocket science
How issuers decide what to do with the scores depends on their companies' policies, and even those are often changing targets. Credit card issuers constantly tweak their systems to maximize profits and minimize losses.
"Those guys at NASA have nothing on the Ph.D.s who work for credit card companies," Ulzheimer said. "They're Mensa-level smart, and they are very, very sophisticated in the ways they use credit data."
Which is not to say issuers, or the scoring systems they use, never make mistakes. Case in point: an issuer sending two different offers to the same household, as they did to ours. Most issuers use software to make sure that doesn't happen, Ulzheimer said; they don't want us comparing notes. (Bank of America didn't return my calls about the issue.)
In fact, financial institutions in general aren't eager to reveal how they make the decisions they do -- and that's not likely to change soon. While you have a federal right to see your credit scores, that's not true with other scores, which lenders often consider proprietary information.
Is that a crisis for consumers? I have mixed feelings about that. You clearly need to see your credit scores, since they influence so much of your financial life across the board. But given how many of these other scores are in use, how different they are and how many ways they're applied, I'm not sure I really want to see them all.
Ulzheimer agrees. "I'm not sure how helpful it would be to get a list of 40 or 50 scores, each scaled differently and meant to measure different things," he said.
What do you think? Share your thoughts on the Your Money message board.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published Nov. 1, 2007
5 people who check your credit
It's not just lenders who check your credit score. A bad score can also make it costlier to get insurance, an apartment or a cell phone -- and harder to get a job
By Kiplinger's Personal Finance Magazine
How much do you know about your credit score? That three-digit number is tied inseparably to our financial lives, yet many young adults haven't given it the attention it deserves. Your score can play a role in your ability to rent an apartment, qualify for a loan or even get a job. It can also affect how much you'll pay on interest charges, insurance and even cell phone contracts.
Make building a stellar score a priority while you're young and you could actually save hundreds or thousands of dollars over your lifetime. However, if you don't take your credit seriously, a bad score -- or even a nonexistent score -- will cost you.
Who's keeping score?
Your credit score is basically used to predict the possibility that you won't pay your bills. Scores are compiled by Fair Isaac Corp. and are sometimes called FICO scores. The top possible number is 850, but topping 800 is probably unrealistic. A median score usually falls in the 720-to-725 range, meaning half of consumers fall above that point, half below. Even if you haven't given your FICO score much thought, there are plenty of others who have or will, so you'll want to aim for the mid-700s to make the best impression on:
1. Lenders. This group is the one most people associate with their credit score. Having a good rating can help you qualify for the best rates on a mortgage, car loan, credit card and even a small business loan if you've got that entrepreneurial spirit. A nonexistent score can make it impossible for you to qualify for a loan or credit card at
2. Insurers. The majority of auto insurance companies use your credit score when determining your rates, and the practice is also common among home insurers. A recent survey by Consumer Reports among eight popular auto insurers found that drivers with top scores could pay up to 31% less on their premiums than if credit scoring wasn't factored in, while those with bad scores would pay as much as 143% more.
3. Landlords. Increasingly, you may need a good credit score to rent an apartment. Landlords view your credit rating as a measure of your responsibility to pay bills on time. If your rating is below par or you don't have a credit score yet, you may have to find a friend or relative to co-sign your lease, or you could be required to pay a higher rent or security deposit
4. Employers. When you're applying for a job, potential employers can pull your credit report as long as they notify you first. And, in fact, about 35% of them do, according to the Society for Human Resource Management. Why? Bad credit can be a signal of irresponsibility, or employers might be worried you'll spend more time fretting about your financial woes than concentrating on the job.
5. Cell phone carriers. Even cell phone service providers may check your credit before signing you up for a plan. They want to make sure you're responsible and will pay your bill each month. Some utility providers may pull your report as well. If you have credit issues, you may not qualify for the best plan rates, you could be required to pay a deposit, or you could get turned down.
True cost of your score
So, how much does your credit score affect your finances? Say we have two friends, Jim and Mark. Both took steps right out of college to start building a credit report by getting their first credit cards and an auto loan. Jim made all his payments on time, never maxed out his credit cards and often paid more than the minimum required. Mark, however, frequently paid late, overextended his cards and applied for new credit to bail him out of his mismanaged debts.
Now both are ready to buy homes, and they each apply for a $250,000 30-year mortgage. Through Jim's responsibility, he's been able to build a score of 750, qualifying him for a loan with a 6.2% interest rate, according to Fair Isaac, the scoring bureau. Mark's score comes in around 650, netting him a rate at 7.3% interest. Jim's monthly mortgage payment is $1,536 while Mark pays $1,718 -- a difference of $182 per month. If they both live in their homes for 10 years before selling or refinancing, Mark will pay $21,840 more in monthly payments than his friend. Ouch.
Mark also gets burned on a new auto loan -- paying $1,332 more over three years on a $20,000 loan than Jim. Plus, Mark probably paid much more for his car insurance than Jim.
How to get started
Even if you don't plan on applying for a loan or getting a new apartment or a new insurance policy anytime soon, it's a good idea to start building your credit score now so it's there when you need it.
When you're starting from scratch, a good place to begin is in college, where lenders hand out credit cards like candy. But don't rush to indulge. Janet Bodnar, Kiplinger.com's Money Smart Kids columnist, advises students to get just one card their junior or senior year, use it occasionally and pay off the balance each month. It's much easier to qualify for a credit card while you're in school than after you graduate (lenders figure that Mom and Dad will bail you out while you're in college if you can't pay your bill).
If you're already out of school, or you don't trust yourself with a full-fledged credit card yet, a secured card will help you get off on the right foot. This card allows you to make a deposit with a lender (such as your bank or credit union), and the amount usually becomes your credit limit. The issuer takes on zero risk because if you don't pay on time, it can dip into your account to cover the bill. Most issuers require a deposit of $300 to $5,000. You build a history just as fast with a secured card as with a regular one. And after making payments on time for a year with a secured card, you should have an adequate history to switch to an unsecured card and get your deposit back.
A new scoring system from FICO may soon help young adults trying to build a credit history. It is based on alternative data such as whether you pay your electric bill on time and maintain a clean checking account. So you'd do well to keep all areas of your finances in tiptop shape.
Boost your score
Knowing what goes into your credit score can help you manage your debts well. Here's how to make the best impression on your credit history:
Pay on time. 35% of your score depends on your payment history.
Don't max out your cards. 30% of your score is based on how much you owe. You want to keep your "credit utilization" ratio -- the percentage of your credit limit that you've actually used -- no higher than 30% of your available credit limit.
Start while you're young. 15% depends on the average age of your accounts.
Avoid opening several accounts at once. Not only will this lower the average age of your accounts, but lenders will worry that you might go on a borrowing binge. 10% of your score depends on new credit.
Get the right kind of credit. This accounts for the final 10% of your score. Your experience with revolving credit, such as credit cards, on which you control how much you charge and pay off each month, carries more weight than installment debt, such as car loans and mortgages, with fixed payments. But don't simply stock up on a pocketful of Visas -- lenders like to see that your money skills are well rounded.
This article was reported and written by Erin Burt for Kiplinger's Personal Finance Magazine.
Published April 17, 2007
By Kiplinger's Personal Finance Magazine
How much do you know about your credit score? That three-digit number is tied inseparably to our financial lives, yet many young adults haven't given it the attention it deserves. Your score can play a role in your ability to rent an apartment, qualify for a loan or even get a job. It can also affect how much you'll pay on interest charges, insurance and even cell phone contracts.
Make building a stellar score a priority while you're young and you could actually save hundreds or thousands of dollars over your lifetime. However, if you don't take your credit seriously, a bad score -- or even a nonexistent score -- will cost you.
Who's keeping score?
Your credit score is basically used to predict the possibility that you won't pay your bills. Scores are compiled by Fair Isaac Corp. and are sometimes called FICO scores. The top possible number is 850, but topping 800 is probably unrealistic. A median score usually falls in the 720-to-725 range, meaning half of consumers fall above that point, half below. Even if you haven't given your FICO score much thought, there are plenty of others who have or will, so you'll want to aim for the mid-700s to make the best impression on:
1. Lenders. This group is the one most people associate with their credit score. Having a good rating can help you qualify for the best rates on a mortgage, car loan, credit card and even a small business loan if you've got that entrepreneurial spirit. A nonexistent score can make it impossible for you to qualify for a loan or credit card at
2. Insurers. The majority of auto insurance companies use your credit score when determining your rates, and the practice is also common among home insurers. A recent survey by Consumer Reports among eight popular auto insurers found that drivers with top scores could pay up to 31% less on their premiums than if credit scoring wasn't factored in, while those with bad scores would pay as much as 143% more.
3. Landlords. Increasingly, you may need a good credit score to rent an apartment. Landlords view your credit rating as a measure of your responsibility to pay bills on time. If your rating is below par or you don't have a credit score yet, you may have to find a friend or relative to co-sign your lease, or you could be required to pay a higher rent or security deposit
4. Employers. When you're applying for a job, potential employers can pull your credit report as long as they notify you first. And, in fact, about 35% of them do, according to the Society for Human Resource Management. Why? Bad credit can be a signal of irresponsibility, or employers might be worried you'll spend more time fretting about your financial woes than concentrating on the job.
5. Cell phone carriers. Even cell phone service providers may check your credit before signing you up for a plan. They want to make sure you're responsible and will pay your bill each month. Some utility providers may pull your report as well. If you have credit issues, you may not qualify for the best plan rates, you could be required to pay a deposit, or you could get turned down.
True cost of your score
So, how much does your credit score affect your finances? Say we have two friends, Jim and Mark. Both took steps right out of college to start building a credit report by getting their first credit cards and an auto loan. Jim made all his payments on time, never maxed out his credit cards and often paid more than the minimum required. Mark, however, frequently paid late, overextended his cards and applied for new credit to bail him out of his mismanaged debts.
Now both are ready to buy homes, and they each apply for a $250,000 30-year mortgage. Through Jim's responsibility, he's been able to build a score of 750, qualifying him for a loan with a 6.2% interest rate, according to Fair Isaac, the scoring bureau. Mark's score comes in around 650, netting him a rate at 7.3% interest. Jim's monthly mortgage payment is $1,536 while Mark pays $1,718 -- a difference of $182 per month. If they both live in their homes for 10 years before selling or refinancing, Mark will pay $21,840 more in monthly payments than his friend. Ouch.
Mark also gets burned on a new auto loan -- paying $1,332 more over three years on a $20,000 loan than Jim. Plus, Mark probably paid much more for his car insurance than Jim.
How to get started
Even if you don't plan on applying for a loan or getting a new apartment or a new insurance policy anytime soon, it's a good idea to start building your credit score now so it's there when you need it.
When you're starting from scratch, a good place to begin is in college, where lenders hand out credit cards like candy. But don't rush to indulge. Janet Bodnar, Kiplinger.com's Money Smart Kids columnist, advises students to get just one card their junior or senior year, use it occasionally and pay off the balance each month. It's much easier to qualify for a credit card while you're in school than after you graduate (lenders figure that Mom and Dad will bail you out while you're in college if you can't pay your bill).
If you're already out of school, or you don't trust yourself with a full-fledged credit card yet, a secured card will help you get off on the right foot. This card allows you to make a deposit with a lender (such as your bank or credit union), and the amount usually becomes your credit limit. The issuer takes on zero risk because if you don't pay on time, it can dip into your account to cover the bill. Most issuers require a deposit of $300 to $5,000. You build a history just as fast with a secured card as with a regular one. And after making payments on time for a year with a secured card, you should have an adequate history to switch to an unsecured card and get your deposit back.
A new scoring system from FICO may soon help young adults trying to build a credit history. It is based on alternative data such as whether you pay your electric bill on time and maintain a clean checking account. So you'd do well to keep all areas of your finances in tiptop shape.
Boost your score
Knowing what goes into your credit score can help you manage your debts well. Here's how to make the best impression on your credit history:
Pay on time. 35% of your score depends on your payment history.
Don't max out your cards. 30% of your score is based on how much you owe. You want to keep your "credit utilization" ratio -- the percentage of your credit limit that you've actually used -- no higher than 30% of your available credit limit.
Start while you're young. 15% depends on the average age of your accounts.
Avoid opening several accounts at once. Not only will this lower the average age of your accounts, but lenders will worry that you might go on a borrowing binge. 10% of your score depends on new credit.
Get the right kind of credit. This accounts for the final 10% of your score. Your experience with revolving credit, such as credit cards, on which you control how much you charge and pay off each month, carries more weight than installment debt, such as car loans and mortgages, with fixed payments. But don't simply stock up on a pocketful of Visas -- lenders like to see that your money skills are well rounded.
This article was reported and written by Erin Burt for Kiplinger's Personal Finance Magazine.
Published April 17, 2007
Thursday, November 8, 2007
Fed officials hint at potential for lower rates
By Ros Krasny Wed Nov 7, 6:06 PM ET
MILWAUKEE (Reuters) - Federal Reserve officials on Wednesday said more interest rate cuts could be needed if economic growth proves weaker than expected, just a week after hinting that rates would probably stay steady for now.
Uncertainty about how events will play out in the housing and financial markets make another rate cut more likely than a rate hike, William Poole, a voting member of the policy-setting Federal Open Market Committee in 2007, told reporters after a speech at Marquette University.
"It could be that the downdraft from the housing industry will spread to other sectors, which might require that recent rate cuts not be reversed, or even that additional cuts would be in order," he said.
The U.S. central bank has cut benchmark interest rates twice, by a total of three-quarters of a percentage point, over the past two months, bringing the federal funds rate at 4.50 percent from 5.25 percent.
In announcing its second cut on October 31, it said risks to growth and the risk of inflation were about evenly balanced, implying a reluctance to lower borrowing costs further.
Even so, financial markets lean heavily toward another one-quarter-point rate cut on December 11, the final FOMC meeting of the year. The implied prospects for a move jumped on Wednesday to 76 percent from 62 percent.
"While the concern over increasing inflation pressures continued to be prevalent, Fed speakers continue to note the downside risks from the housing and credit markets. This, in our view, leaves the door open to further rate cuts," Merrill Lynch economist David Rosenberg said in a research note.
The Fed, along with most other forecasters, anticipates a marked deceleration in growth in the fourth quarter after a surprisingly brisk outcome reported for the third quarter.
Fed Chairman Ben Bernanke is expected to expand on the Fed's outlook for the economy in testimony before Congress on Thursday.
With fourth-quarter economic softness on the radar, it will take an even weaker-than-expected result for the Fed to consider moving rates again, Poole said. A key risk is that falling home prices could cause consumption, the largest component of U.S. gross domestic product, to grow "significantly slower," he added.
LOCKHART SAYS GROWTH OUTLOOK UNCERTAIN
Meanwhile, Atlanta Fed President Dennis Lockhart said the outlook for a return to near-trend economic growth by late in 2008 situation remains uncertain given evidence of business spending retrenchment.
Despite recent signs of a resilient economy in the form of strong employment and personal spending, there is evidence of a business spending retrenchment, Lockhart said in a speech to the Huntsville, Alabama, Rotary Club.
"Recent feedback from our Reserve Bank board members and other contacts on the ground is somewhat more negative than the numbers suggest," he said.
However, in an interview published on The New York Times's Web site late on Tuesday, Philadelphia Fed President Charles Plosser said it would take a "drastic" fall in growth for him to support another rate cut.
Plosser, a well-known policy hawk, will get his first vote on the FOMC in 2008 since joining the Philly Fed in 2006.
The inclusion of that balance of risks assessment in the Fed's October 31 statement was not accidental, but rather a step toward the return to a more normal policy-making approach after the disruptive events of August and September, Poole noted.
On a day when crude oil prices approached $100 a barrel, gold prices spiked and the dollar sank to record lows, policy-makers also confronted the potential for inflation and inflation expectations to rise, only months after inflation seemed to have been brought under control.
"There are also important reasons to be concerned about the outlook for inflation," Fed Governor Kevin Warsh told the New York Association for Business Economics.
Poole looked for the Fed to strike just the right balance on policy to boost market confidence, doing "what is necessary, but not more" on interest rates.
"Excessive rate reductions would run the risk of increasing inflation in the future" and of setting up an "unpleasant environment" of rising inflation fears and higher long-term interest rates, he said.
Still, Fed Governor Frederic Miskin said it was important to not "overreact" to rising oil prices and take a longer-term view on their effect on inflation as the economy slows.
"We find that the impact of the dollar depreciation on the overall price level is actually quite limited," Mishkin said while testifying before the U.S. House of Representatives Small Business Committee.
(Additional reporting by Mark Felsenthal in Huntsville, Tamawa Kadoya in New York and Patrick Rucker in Washington)
MILWAUKEE (Reuters) - Federal Reserve officials on Wednesday said more interest rate cuts could be needed if economic growth proves weaker than expected, just a week after hinting that rates would probably stay steady for now.
Uncertainty about how events will play out in the housing and financial markets make another rate cut more likely than a rate hike, William Poole, a voting member of the policy-setting Federal Open Market Committee in 2007, told reporters after a speech at Marquette University.
"It could be that the downdraft from the housing industry will spread to other sectors, which might require that recent rate cuts not be reversed, or even that additional cuts would be in order," he said.
The U.S. central bank has cut benchmark interest rates twice, by a total of three-quarters of a percentage point, over the past two months, bringing the federal funds rate at 4.50 percent from 5.25 percent.
In announcing its second cut on October 31, it said risks to growth and the risk of inflation were about evenly balanced, implying a reluctance to lower borrowing costs further.
Even so, financial markets lean heavily toward another one-quarter-point rate cut on December 11, the final FOMC meeting of the year. The implied prospects for a move jumped on Wednesday to 76 percent from 62 percent.
"While the concern over increasing inflation pressures continued to be prevalent, Fed speakers continue to note the downside risks from the housing and credit markets. This, in our view, leaves the door open to further rate cuts," Merrill Lynch economist David Rosenberg said in a research note.
The Fed, along with most other forecasters, anticipates a marked deceleration in growth in the fourth quarter after a surprisingly brisk outcome reported for the third quarter.
Fed Chairman Ben Bernanke is expected to expand on the Fed's outlook for the economy in testimony before Congress on Thursday.
With fourth-quarter economic softness on the radar, it will take an even weaker-than-expected result for the Fed to consider moving rates again, Poole said. A key risk is that falling home prices could cause consumption, the largest component of U.S. gross domestic product, to grow "significantly slower," he added.
LOCKHART SAYS GROWTH OUTLOOK UNCERTAIN
Meanwhile, Atlanta Fed President Dennis Lockhart said the outlook for a return to near-trend economic growth by late in 2008 situation remains uncertain given evidence of business spending retrenchment.
Despite recent signs of a resilient economy in the form of strong employment and personal spending, there is evidence of a business spending retrenchment, Lockhart said in a speech to the Huntsville, Alabama, Rotary Club.
"Recent feedback from our Reserve Bank board members and other contacts on the ground is somewhat more negative than the numbers suggest," he said.
However, in an interview published on The New York Times's Web site late on Tuesday, Philadelphia Fed President Charles Plosser said it would take a "drastic" fall in growth for him to support another rate cut.
Plosser, a well-known policy hawk, will get his first vote on the FOMC in 2008 since joining the Philly Fed in 2006.
The inclusion of that balance of risks assessment in the Fed's October 31 statement was not accidental, but rather a step toward the return to a more normal policy-making approach after the disruptive events of August and September, Poole noted.
On a day when crude oil prices approached $100 a barrel, gold prices spiked and the dollar sank to record lows, policy-makers also confronted the potential for inflation and inflation expectations to rise, only months after inflation seemed to have been brought under control.
"There are also important reasons to be concerned about the outlook for inflation," Fed Governor Kevin Warsh told the New York Association for Business Economics.
Poole looked for the Fed to strike just the right balance on policy to boost market confidence, doing "what is necessary, but not more" on interest rates.
"Excessive rate reductions would run the risk of increasing inflation in the future" and of setting up an "unpleasant environment" of rising inflation fears and higher long-term interest rates, he said.
Still, Fed Governor Frederic Miskin said it was important to not "overreact" to rising oil prices and take a longer-term view on their effect on inflation as the economy slows.
"We find that the impact of the dollar depreciation on the overall price level is actually quite limited," Mishkin said while testifying before the U.S. House of Representatives Small Business Committee.
(Additional reporting by Mark Felsenthal in Huntsville, Tamawa Kadoya in New York and Patrick Rucker in Washington)
Microsoft CEO plays down Google threat
By YURI KAGEYAMA, AP Business Writer 1 hour, 8 minutes ago
TOKYO - Microsoft Chief Executive Steve Ballmer, in Tokyo to launch new Windows Live services, played down the threat of Google on Thursday, denying the rival was ahead in any way but in online searches.
"Google is not ahead of us," he told reporters at a Tokyo hotel. "In the area of search specifically, Google would lead."
Microsoft Corp. on Thursday began offering its Windows Live programming package for e-mail, instant messaging, blogging and photo-sharing in Japan. The product was announced in the U.S. Tuesday.
On Monday, Google Inc., which already offers similar services online for personal computers, said it will offer a new free software package for mobile devices called Android, scheduled to hit the market during the second half of next year.
Google is offering its technology to handset manufacturers so consumers will be able to use Google's search engine, e-mail and maps on mobile devices as easily as on personal computers.
Ballmer said it was difficult to comment on Google's mobile plans because they were still "just words on paper" that had yet to begin.
Ballmer expressed hopes for Microsoft's business in Japan, noting that Japanese consumers were ahead of the rest of the world in accessing the Internet on cell phones because of the popularity of the "i-mode" Net-linking mobile service that NTT DoCoMo launched in February 1999.
But Ballmer acknowledged Microsoft expects to continue to lose money in its global online business for some time. Although online advertising revenue is growing, Microsoft is still "in an investment mode" in online businesses, he said.
A Microsoft Japan official demonstrated some Windows Live features, including how 20 digital photos of a waterfall taken from various angles could be edited into a seamless panoramic photo, and then uploaded on a blog — all for free.
More than a dozen Japanese companies have signed on as partners for Windows Live, including top telecommunications company Nippon Telegraph and Telephone Corp., mobile and Internet services company Softbank Corp. and electronics maker NEC Corp., according to Redmond, Wash.-based Microsoft.
TOKYO - Microsoft Chief Executive Steve Ballmer, in Tokyo to launch new Windows Live services, played down the threat of Google on Thursday, denying the rival was ahead in any way but in online searches.
"Google is not ahead of us," he told reporters at a Tokyo hotel. "In the area of search specifically, Google would lead."
Microsoft Corp. on Thursday began offering its Windows Live programming package for e-mail, instant messaging, blogging and photo-sharing in Japan. The product was announced in the U.S. Tuesday.
On Monday, Google Inc., which already offers similar services online for personal computers, said it will offer a new free software package for mobile devices called Android, scheduled to hit the market during the second half of next year.
Google is offering its technology to handset manufacturers so consumers will be able to use Google's search engine, e-mail and maps on mobile devices as easily as on personal computers.
Ballmer said it was difficult to comment on Google's mobile plans because they were still "just words on paper" that had yet to begin.
Ballmer expressed hopes for Microsoft's business in Japan, noting that Japanese consumers were ahead of the rest of the world in accessing the Internet on cell phones because of the popularity of the "i-mode" Net-linking mobile service that NTT DoCoMo launched in February 1999.
But Ballmer acknowledged Microsoft expects to continue to lose money in its global online business for some time. Although online advertising revenue is growing, Microsoft is still "in an investment mode" in online businesses, he said.
A Microsoft Japan official demonstrated some Windows Live features, including how 20 digital photos of a waterfall taken from various angles could be edited into a seamless panoramic photo, and then uploaded on a blog — all for free.
More than a dozen Japanese companies have signed on as partners for Windows Live, including top telecommunications company Nippon Telegraph and Telephone Corp., mobile and Internet services company Softbank Corp. and electronics maker NEC Corp., according to Redmond, Wash.-based Microsoft.
Tuesday, November 6, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, November 2, 2007, at 6:00 p.m. EST.
Wall Street is worried about Citibank and the financial sector. At the close, the Dow gained 27 points, closing at 13,595, while the Nasdaq rose over 15 points, closing at 2,810. Oil closed up $2.44 to 95.93 per barrel, and gold closed up $14.80 at $808.50 an ounce.
GDP growth of 3.8 percent in the second quarter and 3.9 percent in the third quarter muted numerous forecasts of a U.S. recession. So did October’s Job Creation of 166,000 new jobs. That figure is nearly double what economists were expecting. The unemployment rate held steady at 4.7 percent.
The housing slump was more than offset by surging U.S. exports thanks to the declining U.S. dollar, which enhanced the competitive position of U.S. manufacturers. However, the American consumer suffers from a loss of purchasing power when the dollar declines. Oil and gold prices are rising because of the falling dollar. There is still rising consumer pain in the housing sector. Third quarter residential foreclosure filings nearly doubled to 635,159 year over year. California, Florida, Ohio, and Nevada have the most foreclosure problems.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
I have reorganized our portfolio recommendations into just two groups. Allocate no more than 25 percent of your portfolio to Group One: U.S. stock market recommendations, which offer no protection against the falling dollar. Allocate at least 75 percent of your portfolio to Group Two: Global/International investments which enhance your investment returns as the dollar declines against other countries.
The next Hotline Update will be on Tuesday, November 6, 2007, at 6:00 p.m. EST.
Wall Street is worried about Citibank and the financial sector. At the close, the Dow gained 27 points, closing at 13,595, while the Nasdaq rose over 15 points, closing at 2,810. Oil closed up $2.44 to 95.93 per barrel, and gold closed up $14.80 at $808.50 an ounce.
GDP growth of 3.8 percent in the second quarter and 3.9 percent in the third quarter muted numerous forecasts of a U.S. recession. So did October’s Job Creation of 166,000 new jobs. That figure is nearly double what economists were expecting. The unemployment rate held steady at 4.7 percent.
The housing slump was more than offset by surging U.S. exports thanks to the declining U.S. dollar, which enhanced the competitive position of U.S. manufacturers. However, the American consumer suffers from a loss of purchasing power when the dollar declines. Oil and gold prices are rising because of the falling dollar. There is still rising consumer pain in the housing sector. Third quarter residential foreclosure filings nearly doubled to 635,159 year over year. California, Florida, Ohio, and Nevada have the most foreclosure problems.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
I have reorganized our portfolio recommendations into just two groups. Allocate no more than 25 percent of your portfolio to Group One: U.S. stock market recommendations, which offer no protection against the falling dollar. Allocate at least 75 percent of your portfolio to Group Two: Global/International investments which enhance your investment returns as the dollar declines against other countries.
The next Hotline Update will be on Tuesday, November 6, 2007, at 6:00 p.m. EST.
Google opens battle for mobile Internet
46 minutes ago
SAN FRANCISCO (AFP) - Google has opened a battle for dominance of the mobile Internet with a broad alliance of companies backing its "open source" software for mobile devices, analysts say.
The announcement Monday of the "Android" platform aiming to bring the full power of desktop computing to mobile devices represents a challenge to Microsoft and Apple, and also firms like mobile phone maker Nokia, which is not part of the "Open Handset Alliance."
The announcement surprised analysts who had expected Google to announce the launch of its own gPhone to compete against Apple's popular iPhone.
"This is not about a Google phone," said telecom analyst Jeff Kagan. "This is about the growing and changing software experience for mobile phones. Cellphones are becoming the third screen in our lives. Television, computer and next is the mobile handset."
Greg Sterling, analyst at Search Engine Land, said Google is taking on companies like Microsoft, which has its own Windows Mobile platform for smartphones.
"Android is clearly competitive with proprietary mobile operating systems such as Windows Mobile, in the same way that the open source movement competes with many of Microsoft's core products," Sterling said.
But he said prospects for the alliance remain unclear, especially with key holdouts like AT&T, the largest US mobile operator, which has an exclusive deal with Apple's iPhone.
"Will Android-phones -- or an actual future gPhone -- be an iPhone killer? Expect in the wake of today's news a range of headlines declaring this to be the case. But until phones come on the market, no one can tell," Sterling said.
Analysts say Google is eager to become the key search engine for mobile phones and to get the advertising revenues that are starting to become available for the platform.
Michael Gartenberg of Jupiter Research said Google's plan may be attractive by sharing some ad revenue with mobile phone operators looking for new sources of cash to subsidize costly smartphones.
"If Google can deliver, the impact could be huge," he said. "At a time when both carriers and handset vendors are looking to cut costs and at the same time consumers are embracing more functionality in their mobile devices, Google could be coming to market with the right product at the right time."
But he added that other competitors may fight the Google effort to control the mobile phone.
"There are going to be challenges," Gartenberg said. "Neither Microsoft, (mobile maker) Research in Motion or Nokia are going to roll over and play dead with this announcement."
Google said the new initiative, which should be available next year, offers first comprehensive mobile operating platform that software developers are free to adapt in any ways they wish for video, audio, social networking and other features.
The 34-member alliance includes China Mobile, HTC, Intel, Motorola, Qualcomm, T-Mobile, Telefonica, LG and eBay.
Google chief executive Eric Schmidt declined to reveal whether the US-based Internet search colossus will release its own phone based on Android, which will allow for services and features supported by online ads.
"If you were to build a gPhone you would build it out of this platform," Schmidt said.
"Imagine not just a single Google phone, or gPhone, but thousands of gPhones made by a variety of manufacturers."
SAN FRANCISCO (AFP) - Google has opened a battle for dominance of the mobile Internet with a broad alliance of companies backing its "open source" software for mobile devices, analysts say.
The announcement Monday of the "Android" platform aiming to bring the full power of desktop computing to mobile devices represents a challenge to Microsoft and Apple, and also firms like mobile phone maker Nokia, which is not part of the "Open Handset Alliance."
The announcement surprised analysts who had expected Google to announce the launch of its own gPhone to compete against Apple's popular iPhone.
"This is not about a Google phone," said telecom analyst Jeff Kagan. "This is about the growing and changing software experience for mobile phones. Cellphones are becoming the third screen in our lives. Television, computer and next is the mobile handset."
Greg Sterling, analyst at Search Engine Land, said Google is taking on companies like Microsoft, which has its own Windows Mobile platform for smartphones.
"Android is clearly competitive with proprietary mobile operating systems such as Windows Mobile, in the same way that the open source movement competes with many of Microsoft's core products," Sterling said.
But he said prospects for the alliance remain unclear, especially with key holdouts like AT&T, the largest US mobile operator, which has an exclusive deal with Apple's iPhone.
"Will Android-phones -- or an actual future gPhone -- be an iPhone killer? Expect in the wake of today's news a range of headlines declaring this to be the case. But until phones come on the market, no one can tell," Sterling said.
Analysts say Google is eager to become the key search engine for mobile phones and to get the advertising revenues that are starting to become available for the platform.
Michael Gartenberg of Jupiter Research said Google's plan may be attractive by sharing some ad revenue with mobile phone operators looking for new sources of cash to subsidize costly smartphones.
"If Google can deliver, the impact could be huge," he said. "At a time when both carriers and handset vendors are looking to cut costs and at the same time consumers are embracing more functionality in their mobile devices, Google could be coming to market with the right product at the right time."
But he added that other competitors may fight the Google effort to control the mobile phone.
"There are going to be challenges," Gartenberg said. "Neither Microsoft, (mobile maker) Research in Motion or Nokia are going to roll over and play dead with this announcement."
Google said the new initiative, which should be available next year, offers first comprehensive mobile operating platform that software developers are free to adapt in any ways they wish for video, audio, social networking and other features.
The 34-member alliance includes China Mobile, HTC, Intel, Motorola, Qualcomm, T-Mobile, Telefonica, LG and eBay.
Google chief executive Eric Schmidt declined to reveal whether the US-based Internet search colossus will release its own phone based on Android, which will allow for services and features supported by online ads.
"If you were to build a gPhone you would build it out of this platform," Schmidt said.
"Imagine not just a single Google phone, or gPhone, but thousands of gPhones made by a variety of manufacturers."
Wall Street rises with energy shares, financials - GOOG $850
By Caroline Valetkevitch 14 minutes ago
NEW YORK (Reuters) - Stocks gained on Tuesday as record oil prices lifted shares of oil companies such as Exxon Mobil Corp (XOM.N), while investors scoured for bargains among beaten-down bank shares after Monday's sell-off of financials.
JPMorgan Chase & Co (JPM.N) rose 3.3 percent to $44.16.
Also, Goldman Sachs Group Inc (GS.N) repeated that market rumors that it may have to write down mortgage-related losses are "still untrue." The S&P financial index (.GSPF) was up 0.7 percent, while Goldman was up 1 percent at $220.40
Crude oil futures briefly rose more than $3 to a record high $97 a barrel on a weaker dollar and supply concerns. Exxon Mobil gained 2.9 percent to $90.18, leading advancers in both the blue-chip Dow average and the S&P.
"My feeling yesterday was that the bad credit market news reached a crescendo," said Al Goldman, chief market strategist at A.G. Edwards in St. Louis.
"How much worse can the news get? I think it's back to people beginning to realize the financials are deeply oversold and the economy is going OK."
The Dow Jones industrial average (.DJI) was up 43.00 points, or 0.32 percent, at 13,586.40. The Standard & Poor's 500 Index (.SPX) was up 7.63 points, or 0.51 percent, at 1,509.80. The Nasdaq Composite Index (.IXIC) was up 8.76 points, or 0.31 percent, at 2,803.94.
Web search company Google Inc (GOOG.O), whose price target was raised to $850 by broker research firm Sanford C. Bernstein, was up 1.4 percent at $736.03 on Nasdaq.
Shares of Research In Motion Ltd (RIM.TO) (RIMM.O) gained 1.9 percent to $130.45 after Credit Suisse raised its rating on the stock.
NEW YORK (Reuters) - Stocks gained on Tuesday as record oil prices lifted shares of oil companies such as Exxon Mobil Corp (XOM.N), while investors scoured for bargains among beaten-down bank shares after Monday's sell-off of financials.
JPMorgan Chase & Co (JPM.N) rose 3.3 percent to $44.16.
Also, Goldman Sachs Group Inc (GS.N) repeated that market rumors that it may have to write down mortgage-related losses are "still untrue." The S&P financial index (.GSPF) was up 0.7 percent, while Goldman was up 1 percent at $220.40
Crude oil futures briefly rose more than $3 to a record high $97 a barrel on a weaker dollar and supply concerns. Exxon Mobil gained 2.9 percent to $90.18, leading advancers in both the blue-chip Dow average and the S&P.
"My feeling yesterday was that the bad credit market news reached a crescendo," said Al Goldman, chief market strategist at A.G. Edwards in St. Louis.
"How much worse can the news get? I think it's back to people beginning to realize the financials are deeply oversold and the economy is going OK."
The Dow Jones industrial average (.DJI) was up 43.00 points, or 0.32 percent, at 13,586.40. The Standard & Poor's 500 Index (.SPX) was up 7.63 points, or 0.51 percent, at 1,509.80. The Nasdaq Composite Index (.IXIC) was up 8.76 points, or 0.31 percent, at 2,803.94.
Web search company Google Inc (GOOG.O), whose price target was raised to $850 by broker research firm Sanford C. Bernstein, was up 1.4 percent at $736.03 on Nasdaq.
Shares of Research In Motion Ltd (RIM.TO) (RIMM.O) gained 1.9 percent to $130.45 after Credit Suisse raised its rating on the stock.
Tuesday, October 30, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, October 30, 2007, at 6:00 p.m. EST.
A drop in consumer confidence made investors cautious today ahead of tomorrow's rate decision by the Fed. At the close, the Dow dropped almost 78 points, closing at 13,792, while the Nasdaq lost a fraction of a point, closing relatively flat at a six-year high of 2,817, reached yesterday. Oil closed down $3.15 to $90.38 per barrel, and gold closed down $4.80 at $787.80 an ounce.
The Consumer Confidence Index fell much lower-than-expected in October to 95.6 from September’s revised reading of 99.5. It was the third monthly decline in a row and the lowest consumer confidence reading in two years, when hurricanes caused devastation in New Orleans and to refineries in the Gulf of Mexico. The report raised concerns for retailers and investors alike, as lowered consumer confidence heightens worries for a disappointing holiday season and slowing spending by consumers heightens worries for economic growth.
The Federal Reserve is meeting this week to review monetary policy. The deepening housing slump and declining consumer confidence could force the Fed to cut interest rates by 25- to 50-basis points. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out, but U.S. stock prices should move higher in November and December after the rate cut is announced tomorrow afternoon.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 2, 2007, at 6:00 p.m. EST.
A drop in consumer confidence made investors cautious today ahead of tomorrow's rate decision by the Fed. At the close, the Dow dropped almost 78 points, closing at 13,792, while the Nasdaq lost a fraction of a point, closing relatively flat at a six-year high of 2,817, reached yesterday. Oil closed down $3.15 to $90.38 per barrel, and gold closed down $4.80 at $787.80 an ounce.
The Consumer Confidence Index fell much lower-than-expected in October to 95.6 from September’s revised reading of 99.5. It was the third monthly decline in a row and the lowest consumer confidence reading in two years, when hurricanes caused devastation in New Orleans and to refineries in the Gulf of Mexico. The report raised concerns for retailers and investors alike, as lowered consumer confidence heightens worries for a disappointing holiday season and slowing spending by consumers heightens worries for economic growth.
The Federal Reserve is meeting this week to review monetary policy. The deepening housing slump and declining consumer confidence could force the Fed to cut interest rates by 25- to 50-basis points. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out, but U.S. stock prices should move higher in November and December after the rate cut is announced tomorrow afternoon.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 2, 2007, at 6:00 p.m. EST.
Consumer confidence trips up Wall St
By Kristina Cooke Tue Oct 30, 5:32 PM ET
NEW YORK (Reuters) - Stocks fell on Tuesday after a weak outlook from Procter & Gamble, disappointing earnings from U.S. Steel and a report showing consumer confidence at a two-year low fueled worries about the economy, consumer spending and corporate profits.
Adding to the nervous atmosphere was some uncertainty about the outcome of Wednesday's Federal Reserve interest-rate decision, while a 3 percent pullback in oil prices hit energy stocks.
Stocks have risen recently, in part, on a widely held view the Fed would cut rates on Wednesday by at least a quarter-percentage point to limit the damage from the housing slump and tighter credit conditions.
But an article by Greg Ip, the Wall Street Journal's Fed watcher, said that a cut is "no sure thing," planting a seed of doubt in investors' minds.
"There is some uncertainty about what the Fed will do tomorrow and that is weighing on the market," said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.
"Some earnings disappointments and forward guidance is not encouraging, and there is a feeling that if we don't get help from the Fed, then the fourth quarter and first quarter next year could see even slower economic growth."
The Dow Jones industrial average (.DJI) was down 77.79 points, or 0.56 percent, to end at 13,792.47. The Standard & Poor's 500 Index (.SPX) was down 9.96 points, or 0.65 percent, at 1,531.02. The Nasdaq Composite Index (.IXIC) was down 0.73 points, or 0.03 percent, at 2,816.71.
Procter & Gamble(PG.N), a Dow component, dropped 4 percent to $68.95 after its outlook for the rest of the year disappointed Wall Street. That decline marked P&G's second-biggest daily percentage drop in five years.
U.S. Steel (X.N) posted a 35 percent slide in third-quarter profit and warned of an earnings decline in the fourth quarter, sending it shares down 7 percent to $104.62 on the New York Stock Exchange.
Large tech stocks extended their recent rally, capping the Nasdaq's decline. Microsoft (MSFT.O), Apple (AAPL.O) and Google (GOOG.O) gained as investors sought safety in big-cap technology stocks perceived as sheltered from the global credit storm. Technology was the only S&P sector to end higher.
Apple's shares rose 1 percent to $187.00 after the computer maker said it sold more than 2 million copies of its latest operating system.
Google's stock shot up 2.3 percent to $694.77 on a report the Web search leader is expected to announce Google-powered phones may be on the market by mid-2008.
Shares of Merrill Lynch (MER.N) fell after the investment bank ousted Chief Executive Stan O'Neal just days after reporting the biggest quarterly loss in the company's history. No successor was named.
Merrill's shares fell 2.8 percent to $65.56 on the NYSE.
Energy stocks slid with oil prices, which tumbled from record highs as investors locked in profits. Exxon Mobil (XOM.N) fell 2.6 percent to $91.14.
The Conference Board's index of consumer sentiment fell to 95.6 in October, its lowest reading since the aftermath of Hurricane Katrina in 2005. The sharp drop caught economists by surprise. September's reading was revised to 99.5.
Trading was moderate on the NYSE, with about 1.22 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.16 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancers by a ratio of about 5 to 3 on the NYSE and by 3 to 2 on the Nasdaq.
(Additional reporting by Jennifer Coogan)
NEW YORK (Reuters) - Stocks fell on Tuesday after a weak outlook from Procter & Gamble, disappointing earnings from U.S. Steel and a report showing consumer confidence at a two-year low fueled worries about the economy, consumer spending and corporate profits.
Adding to the nervous atmosphere was some uncertainty about the outcome of Wednesday's Federal Reserve interest-rate decision, while a 3 percent pullback in oil prices hit energy stocks.
Stocks have risen recently, in part, on a widely held view the Fed would cut rates on Wednesday by at least a quarter-percentage point to limit the damage from the housing slump and tighter credit conditions.
But an article by Greg Ip, the Wall Street Journal's Fed watcher, said that a cut is "no sure thing," planting a seed of doubt in investors' minds.
"There is some uncertainty about what the Fed will do tomorrow and that is weighing on the market," said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.
"Some earnings disappointments and forward guidance is not encouraging, and there is a feeling that if we don't get help from the Fed, then the fourth quarter and first quarter next year could see even slower economic growth."
The Dow Jones industrial average (.DJI) was down 77.79 points, or 0.56 percent, to end at 13,792.47. The Standard & Poor's 500 Index (.SPX) was down 9.96 points, or 0.65 percent, at 1,531.02. The Nasdaq Composite Index (.IXIC) was down 0.73 points, or 0.03 percent, at 2,816.71.
Procter & Gamble(PG.N), a Dow component, dropped 4 percent to $68.95 after its outlook for the rest of the year disappointed Wall Street. That decline marked P&G's second-biggest daily percentage drop in five years.
U.S. Steel (X.N) posted a 35 percent slide in third-quarter profit and warned of an earnings decline in the fourth quarter, sending it shares down 7 percent to $104.62 on the New York Stock Exchange.
Large tech stocks extended their recent rally, capping the Nasdaq's decline. Microsoft (MSFT.O), Apple (AAPL.O) and Google (GOOG.O) gained as investors sought safety in big-cap technology stocks perceived as sheltered from the global credit storm. Technology was the only S&P sector to end higher.
Apple's shares rose 1 percent to $187.00 after the computer maker said it sold more than 2 million copies of its latest operating system.
Google's stock shot up 2.3 percent to $694.77 on a report the Web search leader is expected to announce Google-powered phones may be on the market by mid-2008.
Shares of Merrill Lynch (MER.N) fell after the investment bank ousted Chief Executive Stan O'Neal just days after reporting the biggest quarterly loss in the company's history. No successor was named.
Merrill's shares fell 2.8 percent to $65.56 on the NYSE.
Energy stocks slid with oil prices, which tumbled from record highs as investors locked in profits. Exxon Mobil (XOM.N) fell 2.6 percent to $91.14.
The Conference Board's index of consumer sentiment fell to 95.6 in October, its lowest reading since the aftermath of Hurricane Katrina in 2005. The sharp drop caught economists by surprise. September's reading was revised to 99.5.
Trading was moderate on the NYSE, with about 1.22 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.16 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancers by a ratio of about 5 to 3 on the NYSE and by 3 to 2 on the Nasdaq.
(Additional reporting by Jennifer Coogan)
Van Wyk Aims to Transform Red Hat for Future Growth
Elizabeth Montalbano, IDG News Service 2 hours, 26 minutes ago
Having established itself as the leading enterprise Linux vendor, Red Hat is in a pivotal phase of reinventing itself as a broader open-source software provider and a long-term technology leader a la Microsoft and Oracle. It's a tall order, and among other things it will take a business plan that lets the company move smoothly through this make-or-break stage.
Coming up with that internal plan lies on the shoulders of 30-year IT veteran Nick Van Wyk. Van Wyk joined Red Hat last year from EMC, taking a newly created role as vice president of operations to optimize Red Hat's subscription model and create better business processes to support the company's channel.
Two weeks ago, Red Hat also appointed him to a new role as senior director, transformation, in charge of examining the company's internal processes and operations to "reposition all of our systems to support the next stage of our evolution," he said.
That stage includes capitalizing on its April 2006 purchase of JBoss and the open-source middleware package that comes along with it, as well as growing from a company with annual revenue of about US$500 million to a billion-dollar company. Red Hat, whose affections toward other vendors can be fickle, also is challenged to build out a stronger ecosystem of partners to support not only Red Hat Enterprise Linux OS but also JBoss and any new technologies it brings to the table.
In the current technology business climate, Red Hat is a bit of an anomaly. The company has managed to exist for nearly 10 years with one core competency: a Linux server distribution it supports and provides maintenance for. The company has branched out into other areas of software, such as desktop Linux and virtualization, but for the most part, the server OS has been its bread and butter.
Recognizing it can't subsist long on this diet in an environment of consolidation and diversification, Red Hat made a calculated risk and purchased JBoss. It's now trying to position itself to make the most out of that and possible other new product developments or purchases, Van Wyk said.
"As we move forward, we will more be described as an open source services and solutions company," he said. "That's an enhanced position for Red Hat."
In its present situation, Red Hat has "a base, a critical mass of applications from which to grow," said George Weiss, vice president and distinguished analyst at Gartner. But investors are more interested in what comes next than in how well Red Hat is currently executing, he said.
"It's not a look at the present basis, it's what you can do to instill market confidence that you have a sufficiently scalable business model, and the operating system alone is not going to be it," Weiss said.
Van Wyk knows full well the pressure on the company, and said that during Red Hat's two-to-three-year transformation, the company will be making changes to ensure it can meet both the internal and the external needs of scaling an IT company.
The company is currently examining how it handles a host of functions, among them lead management, partner relationship management, subscriptions, financial systems and technical support. The next step in the transition will be to make changes where necessary to ensure the business is operating efficiently and providing the highest levels of customer service, he said.
"This whole idea of ease-- the ease of doing business with Red Hat, the ease of support, the automation of those technologies, the time to acquire OS technologies, zero time to subscribe-- those are all built into [our goals]," Van Wyk said. "These are things that have been said to us that customers want to have."
Van Wyk declined to go into detail about exactly how Red Hat will execute on this strategy, saying the company won't really have a clear idea of the changes it will make until the initial assessment is complete.
One thing Red Hat should consider is more acquisitions, said Raven Zachary, open source research director for The 451 Group. But Red Hat should move fast to acquire companies that will help them get into new markets-- such as database and data management-- because larger IT vendors are eyeing similar purchases.
"They have companies like Oracle, Microsoft, IBM and SAP competing for the same targets," he said. "Red Hat doesn't have the capital to compete with those suitors. They need to move very quickly before we get into an era where the largest IT vendors are competing for these targets."
Having established itself as the leading enterprise Linux vendor, Red Hat is in a pivotal phase of reinventing itself as a broader open-source software provider and a long-term technology leader a la Microsoft and Oracle. It's a tall order, and among other things it will take a business plan that lets the company move smoothly through this make-or-break stage.
Coming up with that internal plan lies on the shoulders of 30-year IT veteran Nick Van Wyk. Van Wyk joined Red Hat last year from EMC, taking a newly created role as vice president of operations to optimize Red Hat's subscription model and create better business processes to support the company's channel.
Two weeks ago, Red Hat also appointed him to a new role as senior director, transformation, in charge of examining the company's internal processes and operations to "reposition all of our systems to support the next stage of our evolution," he said.
That stage includes capitalizing on its April 2006 purchase of JBoss and the open-source middleware package that comes along with it, as well as growing from a company with annual revenue of about US$500 million to a billion-dollar company. Red Hat, whose affections toward other vendors can be fickle, also is challenged to build out a stronger ecosystem of partners to support not only Red Hat Enterprise Linux OS but also JBoss and any new technologies it brings to the table.
In the current technology business climate, Red Hat is a bit of an anomaly. The company has managed to exist for nearly 10 years with one core competency: a Linux server distribution it supports and provides maintenance for. The company has branched out into other areas of software, such as desktop Linux and virtualization, but for the most part, the server OS has been its bread and butter.
Recognizing it can't subsist long on this diet in an environment of consolidation and diversification, Red Hat made a calculated risk and purchased JBoss. It's now trying to position itself to make the most out of that and possible other new product developments or purchases, Van Wyk said.
"As we move forward, we will more be described as an open source services and solutions company," he said. "That's an enhanced position for Red Hat."
In its present situation, Red Hat has "a base, a critical mass of applications from which to grow," said George Weiss, vice president and distinguished analyst at Gartner. But investors are more interested in what comes next than in how well Red Hat is currently executing, he said.
"It's not a look at the present basis, it's what you can do to instill market confidence that you have a sufficiently scalable business model, and the operating system alone is not going to be it," Weiss said.
Van Wyk knows full well the pressure on the company, and said that during Red Hat's two-to-three-year transformation, the company will be making changes to ensure it can meet both the internal and the external needs of scaling an IT company.
The company is currently examining how it handles a host of functions, among them lead management, partner relationship management, subscriptions, financial systems and technical support. The next step in the transition will be to make changes where necessary to ensure the business is operating efficiently and providing the highest levels of customer service, he said.
"This whole idea of ease-- the ease of doing business with Red Hat, the ease of support, the automation of those technologies, the time to acquire OS technologies, zero time to subscribe-- those are all built into [our goals]," Van Wyk said. "These are things that have been said to us that customers want to have."
Van Wyk declined to go into detail about exactly how Red Hat will execute on this strategy, saying the company won't really have a clear idea of the changes it will make until the initial assessment is complete.
One thing Red Hat should consider is more acquisitions, said Raven Zachary, open source research director for The 451 Group. But Red Hat should move fast to acquire companies that will help them get into new markets-- such as database and data management-- because larger IT vendors are eyeing similar purchases.
"They have companies like Oracle, Microsoft, IBM and SAP competing for the same targets," he said. "Red Hat doesn't have the capital to compete with those suitors. They need to move very quickly before we get into an era where the largest IT vendors are competing for these targets."
Google in talks with Verizon Wireless: sources
2 hours, 4 minutes ago
NEW YORK (Reuters) - Google Inc is in active talks with number-two U.S. mobile carrier Verizon Wireless about putting Google applications on phones it offers, people familiar with the matter told Reuters on Tuesday.
"There are good useful talks going on and they could result in a deal," one of the sources said.
So far talks between the Web search leader and Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, revolve around technology and potential business models such as advertising-sponsored services, one of the people said.
Verizon Communications Chief Operating Officer Denny Strigl said during an investor call on Monday that the operator talks to a lot of companies including Google, but did not elaborate.
France Telecom on Tuesday denied its mobile business, Orange, was in talks with Google to introduce handsets running its software after it was named as a potential partner in a Wall Street Journal story earlier on Tuesday.
Google shares rose 2.3 percent on Tuesday to $694.77.
The Journal reported that Google was expected in two weeks to announce advanced software and services, enabling handset makers to sell Google-powered phones by mid-2008, citing people familiar with the matter. Google declined to comment.
Google has moved rapidly in the past year to extend its reach beyond text-based, pay-per-click Web search ads into a variety of new markets, including online video, television, radio and print advertising.
Google has also expanded into enterprise software, which has traditionally been Microsoft Corp's domain.
According to the Journal, the Google-powered phones are expected to meld several of its applications, including Google Maps, YouTube and Gmail.
The ground-breaking part of the plan, according to the newspaper, is Google's aim to make the phone's software "open," right down to the operating system which controls applications and interacts with hardware.
This will grant independent software developers access to the tools they need to build phone features, the Journal said.
(Reporting by Sinead Carew, Ritsuko Ando, Michele Gershberg and Justin Grant in New York, Astrid Wendlandt in Paris)
NEW YORK (Reuters) - Google Inc is in active talks with number-two U.S. mobile carrier Verizon Wireless about putting Google applications on phones it offers, people familiar with the matter told Reuters on Tuesday.
"There are good useful talks going on and they could result in a deal," one of the sources said.
So far talks between the Web search leader and Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, revolve around technology and potential business models such as advertising-sponsored services, one of the people said.
Verizon Communications Chief Operating Officer Denny Strigl said during an investor call on Monday that the operator talks to a lot of companies including Google, but did not elaborate.
France Telecom on Tuesday denied its mobile business, Orange, was in talks with Google to introduce handsets running its software after it was named as a potential partner in a Wall Street Journal story earlier on Tuesday.
Google shares rose 2.3 percent on Tuesday to $694.77.
The Journal reported that Google was expected in two weeks to announce advanced software and services, enabling handset makers to sell Google-powered phones by mid-2008, citing people familiar with the matter. Google declined to comment.
Google has moved rapidly in the past year to extend its reach beyond text-based, pay-per-click Web search ads into a variety of new markets, including online video, television, radio and print advertising.
Google has also expanded into enterprise software, which has traditionally been Microsoft Corp's domain.
According to the Journal, the Google-powered phones are expected to meld several of its applications, including Google Maps, YouTube and Gmail.
The ground-breaking part of the plan, according to the newspaper, is Google's aim to make the phone's software "open," right down to the operating system which controls applications and interacts with hardware.
This will grant independent software developers access to the tools they need to build phone features, the Journal said.
(Reporting by Sinead Carew, Ritsuko Ando, Michele Gershberg and Justin Grant in New York, Astrid Wendlandt in Paris)
Monday, October 29, 2007
"Market Monitor"-Douglas Jimerson
"Market Monitor"-Douglas Jimerson,, Editor and Publisher of "National Trendlines."
Friday, October 26, 2007
PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, editor and publisher of "National Trendlines." And welcome back to NIGHTLY BUSINESS REPORT, Doug, good to see you.
DOUGLAS JIMERSON, EDITOR & PUBLISHER, NATIONAL TRENDLINES: Thank you, Paul. It's great to be back.
KANGAS: As we know, the big question on Wall Street for some time has been is the worst of the housing slump over or will it linger still longer?
JIMERSON: I fear it has much farther to go and we've been talking about this for several years, but I think that real estate is, is the type of industry that takes many years to work through its cycles. So we're probably looking at the slowdown into 2009.
KANGAS: And will continue to affect the stock market over here?
JIMERSON: I think so. (INAUDIBLE) It puts us in a trading range type of market, most likely.
KANGAS: In your latest market letter, you advise your conservative investment subscribers to allocate 20 percent of their assets in government bonds and the other 80 percent in cash. That sounds like you're awfully bearish on our market.
JIMERSON: We have just taken the money out of the NASDAQ. I think when we have the big news like we had today for Microsoft, the stock jumps 9 percent, that's time to take the money off the table and wait for an opportunity.
KANGAS: During your last visit with us in May you made two great calls. First you said the tech stocks were starting to look awfully good and it turned out to be an excellent call. And you also said take some profits in the energy group and they got hit pretty good there during the summer. So I congratulate you on those two good calls.
JIMERSON: Thanks.
KANGAS: On that last visit with us, you gave our viewers three "buy" recommendations. Let's see how they've done since then. Dennison Mining (DNN), that's a uranium mining company, right?
JIMERSON: Yes, it is.
KANGAS: Down 9.3 percent and still having a tough time convincing the nation to go nuclear.
JIMERSON: Well, but we have our first licensing since '73 of a nuclear plant. So I think the time has come. Now, this is a long-term opportunity so I would stay with it.
KANGAS: Look at the winner you've got, Fidelity China Region (FHKCX) up 57.3 percent. This is where you would put your funds over in Asia now?
JIMERSON: Absolutely. And that represents the whole country and that whole region. So there's an opportunity to be diversified, focused on China, which is like the U.S. of the 1960s.
KANGAS: OK. There was a third recommendation you made back in May, RYDEX Series Trust - OTC (RYDCX), this is a NASDAQ high-tech sector, basically, right?
JIMERSON: Correct. And that was a great buy during the summer. Now it's time to stand aside.
KANGAS: Oh, so now you're out of that?
JIMERSON: Yes.
KANGAS: How about some new recommendations, Doug?
JIMERSON: Well, I think right now the buy is China. So go with that Fidelity China Fund.
KANGAS: The same one that you recommended back in May?
JIMERSON: Absolutely. Look at the momentum.
KANGAS: I know, but you're not afraid of that huge, massive run up?
JIMERSON: There are going to be setbacks. It's going to be volatile. That is a volatile fund but I would stay with it because that's a real, a story of an economy that is really growing.
KANGAS: OK, let's move on to another recommendation.
JIMERSON: And then as we look to Asia, we see that Japan has been lagging for quite some time.
KANGAS: Pretty choppy performance in this fund (FJPNX - Fidelity Japan).
JIMERSON: Correct. And that's why this is an opportunity because I, I think that Japan is undervalued. I think we'll see the yen continue to strengthen. I think that's an opportunity for investors for the long term.
KANGAS: All right. How about a third recommendation?
JIMERSON: Thirdly, we like Bucyrus (BUCY) which is a mining equipment manufacturer. It goes along with that Dennison theme. And what we're doing here is investing in a company that is supplying these mines in countries like China and Australia, that are rich in natural resources.
KANGAS: So Bucyrus is based in the U.S., but does a lot of international --
JIMERSON: .prospering from the international business as we see.
KANGAS: OK. We have a minute left. Any further thoughts you'd like to impart to our viewers?
JIMERSON: I think we have to remember that just as we think in real estate, location, location, location, think in those terms in today's investment environment in the way you invest. The U.S. is not the location to be right now. Real estate is weak here. That's going to continue to drag on our economy.
KANGAS: How about Europe?
JIMERSON: Europe is beginning to slow. And it is more tied to what our growth is. So I think we need to look to Asia. And at the same time, I think we need to be very careful about the areas that have had big runs.
KANGAS: And diversify widely in Asian investments.
JIMERSON: Correct.
KANGAS: Do you personally own any of the securities we mentioned earlier or have any other disclosure about them to make?
JIMERSON: No, I do not.
KANGAS: OK. All right, very interesting things that you've had to say to us this evening. It's always good to have you with us, Doug.
JIMERSON: Thanks a lot, Paul.
KANGAS: My guest, Doug Jimerson of "National Trendlines."
Friday, October 26, 2007
PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, editor and publisher of "National Trendlines." And welcome back to NIGHTLY BUSINESS REPORT, Doug, good to see you.
DOUGLAS JIMERSON, EDITOR & PUBLISHER, NATIONAL TRENDLINES: Thank you, Paul. It's great to be back.
KANGAS: As we know, the big question on Wall Street for some time has been is the worst of the housing slump over or will it linger still longer?
JIMERSON: I fear it has much farther to go and we've been talking about this for several years, but I think that real estate is, is the type of industry that takes many years to work through its cycles. So we're probably looking at the slowdown into 2009.
KANGAS: And will continue to affect the stock market over here?
JIMERSON: I think so. (INAUDIBLE) It puts us in a trading range type of market, most likely.
KANGAS: In your latest market letter, you advise your conservative investment subscribers to allocate 20 percent of their assets in government bonds and the other 80 percent in cash. That sounds like you're awfully bearish on our market.
JIMERSON: We have just taken the money out of the NASDAQ. I think when we have the big news like we had today for Microsoft, the stock jumps 9 percent, that's time to take the money off the table and wait for an opportunity.
KANGAS: During your last visit with us in May you made two great calls. First you said the tech stocks were starting to look awfully good and it turned out to be an excellent call. And you also said take some profits in the energy group and they got hit pretty good there during the summer. So I congratulate you on those two good calls.
JIMERSON: Thanks.
KANGAS: On that last visit with us, you gave our viewers three "buy" recommendations. Let's see how they've done since then. Dennison Mining (DNN), that's a uranium mining company, right?
JIMERSON: Yes, it is.
KANGAS: Down 9.3 percent and still having a tough time convincing the nation to go nuclear.
JIMERSON: Well, but we have our first licensing since '73 of a nuclear plant. So I think the time has come. Now, this is a long-term opportunity so I would stay with it.
KANGAS: Look at the winner you've got, Fidelity China Region (FHKCX) up 57.3 percent. This is where you would put your funds over in Asia now?
JIMERSON: Absolutely. And that represents the whole country and that whole region. So there's an opportunity to be diversified, focused on China, which is like the U.S. of the 1960s.
KANGAS: OK. There was a third recommendation you made back in May, RYDEX Series Trust - OTC (RYDCX), this is a NASDAQ high-tech sector, basically, right?
JIMERSON: Correct. And that was a great buy during the summer. Now it's time to stand aside.
KANGAS: Oh, so now you're out of that?
JIMERSON: Yes.
KANGAS: How about some new recommendations, Doug?
JIMERSON: Well, I think right now the buy is China. So go with that Fidelity China Fund.
KANGAS: The same one that you recommended back in May?
JIMERSON: Absolutely. Look at the momentum.
KANGAS: I know, but you're not afraid of that huge, massive run up?
JIMERSON: There are going to be setbacks. It's going to be volatile. That is a volatile fund but I would stay with it because that's a real, a story of an economy that is really growing.
KANGAS: OK, let's move on to another recommendation.
JIMERSON: And then as we look to Asia, we see that Japan has been lagging for quite some time.
KANGAS: Pretty choppy performance in this fund (FJPNX - Fidelity Japan).
JIMERSON: Correct. And that's why this is an opportunity because I, I think that Japan is undervalued. I think we'll see the yen continue to strengthen. I think that's an opportunity for investors for the long term.
KANGAS: All right. How about a third recommendation?
JIMERSON: Thirdly, we like Bucyrus (BUCY) which is a mining equipment manufacturer. It goes along with that Dennison theme. And what we're doing here is investing in a company that is supplying these mines in countries like China and Australia, that are rich in natural resources.
KANGAS: So Bucyrus is based in the U.S., but does a lot of international --
JIMERSON: .prospering from the international business as we see.
KANGAS: OK. We have a minute left. Any further thoughts you'd like to impart to our viewers?
JIMERSON: I think we have to remember that just as we think in real estate, location, location, location, think in those terms in today's investment environment in the way you invest. The U.S. is not the location to be right now. Real estate is weak here. That's going to continue to drag on our economy.
KANGAS: How about Europe?
JIMERSON: Europe is beginning to slow. And it is more tied to what our growth is. So I think we need to look to Asia. And at the same time, I think we need to be very careful about the areas that have had big runs.
KANGAS: And diversify widely in Asian investments.
JIMERSON: Correct.
KANGAS: Do you personally own any of the securities we mentioned earlier or have any other disclosure about them to make?
JIMERSON: No, I do not.
KANGAS: OK. All right, very interesting things that you've had to say to us this evening. It's always good to have you with us, Doug.
JIMERSON: Thanks a lot, Paul.
KANGAS: My guest, Doug Jimerson of "National Trendlines."
Couple dead serious about selling house
Mon Oct 29, 9:24 PM ET
WEXFORD, Pa. - It could be the deal of a lifetime. A Pittsburgh-area couple, Bob and Ricki Husick, are offering anyone who buys their home full cash-back upon their death and even their full inheritance, currently worth at least $500,000.
The Husicks have been trying to sell their home for almost a year, but have failed to do so in the current shaky market.
Bob Husick said he's asking $399,900 for the four-bedroom, three and a half bath home about 20 miles north of Pittsburgh.
According to the Husicks' offer, the buyer would get the money back when the couple dies. And if the buyer agrees to care for them in old age, they could also inherit their retirement home in Arizona, bringing the estate's current value to about $500,000.
WEXFORD, Pa. - It could be the deal of a lifetime. A Pittsburgh-area couple, Bob and Ricki Husick, are offering anyone who buys their home full cash-back upon their death and even their full inheritance, currently worth at least $500,000.
The Husicks have been trying to sell their home for almost a year, but have failed to do so in the current shaky market.
Bob Husick said he's asking $399,900 for the four-bedroom, three and a half bath home about 20 miles north of Pittsburgh.
According to the Husicks' offer, the buyer would get the money back when the couple dies. And if the buyer agrees to care for them in old age, they could also inherit their retirement home in Arizona, bringing the estate's current value to about $500,000.
Oil strikes record near $94
By Matthew Robinson Mon Oct 29, 3:35 PM ET
NEW YORK (Reuters) - Oil jumped to a record high near $94 a barrel on Monday as stormy weather disrupted supplies from giant exporter Mexico and the dollar wallowed near record lows.
Mexican state oil company Pemex has shut a fifth of the nation's crude production and halted the bulk of exports as storms kept ships bottled at ports across the country, a top U.S. supplier.
U.S. crude settled up $1.67 at $93.53 a barrel after striking a record $93.80 earlier. London Brent settled $1.63 higher at $90.32 a barrel.
Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have lured a fresh wave of investment capital.
"Every new bullish factor pushes U.S. crude irrationally closer to $100 barrel," said SGCIB, adding: "Prices will fall if the FOMC does nothing."
The U.S. Federal Reserve's Federal Open Market Committee meets on October 30-31, and Wall Street is betting on another rate cut as the U.S. housing downturn deepens.
Expectations of a cut have helped push the dollar to record lows against a basket of currencies and boosted the price of dollar-denominated commodities.
FUNDS RUSH IN
Central banks also have poured billions of dollars into financial markets to help ease the credit crisis, and much of that money has been invested in energy, commodities and emerging markets.
"There's huge amount of speculation from hedge funds and others, they are all focused on the $100 barrel mark," said Frances Hudson of Standard Life Investments.
"If volatility decreases significantly, they'd stop playing."
Oil cartel OPEC has shrugged off calls from importer nations to raise crude output, blaming politics and speculation -- not a supply shortfall -- for high prices.
"I haven't any signal that there is any shortage of crude ... I believe a big portion of the oil price today is related to geopolitics and fear factors, and we cannot solve it," Qatari Oil Minister Abdullah al-Attiyah said.
"Sometimes there is a shortage of oil products but not of crude. This is because of limitations of refinery (capacity)."
The possibility of a large-scale Turkish incursion into northern Iraq to root out Kurdish rebels also is keeping the oil market on edge. The tension has sparked worries of a broader conflict in the oil-rich Middle East.
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks rose 600,000 barrels in the week to October 26. Distillate stocks were seen off 1.1 million barrels while gasoline stocks were forecast to have fallen 300,000 barrels.
(Additional reporting by Janet Mcbride in London; Fayen Wong in Sydney and Elena Moya in London)
NEW YORK (Reuters) - Oil jumped to a record high near $94 a barrel on Monday as stormy weather disrupted supplies from giant exporter Mexico and the dollar wallowed near record lows.
Mexican state oil company Pemex has shut a fifth of the nation's crude production and halted the bulk of exports as storms kept ships bottled at ports across the country, a top U.S. supplier.
U.S. crude settled up $1.67 at $93.53 a barrel after striking a record $93.80 earlier. London Brent settled $1.63 higher at $90.32 a barrel.
Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have lured a fresh wave of investment capital.
"Every new bullish factor pushes U.S. crude irrationally closer to $100 barrel," said SGCIB, adding: "Prices will fall if the FOMC does nothing."
The U.S. Federal Reserve's Federal Open Market Committee meets on October 30-31, and Wall Street is betting on another rate cut as the U.S. housing downturn deepens.
Expectations of a cut have helped push the dollar to record lows against a basket of currencies and boosted the price of dollar-denominated commodities.
FUNDS RUSH IN
Central banks also have poured billions of dollars into financial markets to help ease the credit crisis, and much of that money has been invested in energy, commodities and emerging markets.
"There's huge amount of speculation from hedge funds and others, they are all focused on the $100 barrel mark," said Frances Hudson of Standard Life Investments.
"If volatility decreases significantly, they'd stop playing."
Oil cartel OPEC has shrugged off calls from importer nations to raise crude output, blaming politics and speculation -- not a supply shortfall -- for high prices.
"I haven't any signal that there is any shortage of crude ... I believe a big portion of the oil price today is related to geopolitics and fear factors, and we cannot solve it," Qatari Oil Minister Abdullah al-Attiyah said.
"Sometimes there is a shortage of oil products but not of crude. This is because of limitations of refinery (capacity)."
The possibility of a large-scale Turkish incursion into northern Iraq to root out Kurdish rebels also is keeping the oil market on edge. The tension has sparked worries of a broader conflict in the oil-rich Middle East.
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks rose 600,000 barrels in the week to October 26. Distillate stocks were seen off 1.1 million barrels while gasoline stocks were forecast to have fallen 300,000 barrels.
(Additional reporting by Janet Mcbride in London; Fayen Wong in Sydney and Elena Moya in London)
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, October 26, 2007, at 6:00 p.m. EST.
Energy and technology stocks pushed the market higher today. At the close, the Dow jumped almost 135 points, closing at 13,806; the Nasdaq gained 53 points, closing at 2,804. Oil closed up $1.40 to $91.86 per barrel, and gold closed up $16.50 at $787.50 an ounce.
Oil set a new record high today on tight inventories and the Turkey/Iraq squabble. Third quarter California Home Foreclosures soared 166.6 percent year-over-year. Mortgage lenders sent out 72,571 default notices during July, August, and September.
The FOMC will meet on October 30th and 31st, to review monetary policy. The deepening housing slump could force the Fed to cut interest rates by 25 to 50 basis points on October 31. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out. U.S. stock prices should move higher in November and December after the rate cut on October 31.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tue
Energy and technology stocks pushed the market higher today. At the close, the Dow jumped almost 135 points, closing at 13,806; the Nasdaq gained 53 points, closing at 2,804. Oil closed up $1.40 to $91.86 per barrel, and gold closed up $16.50 at $787.50 an ounce.
Oil set a new record high today on tight inventories and the Turkey/Iraq squabble. Third quarter California Home Foreclosures soared 166.6 percent year-over-year. Mortgage lenders sent out 72,571 default notices during July, August, and September.
The FOMC will meet on October 30th and 31st, to review monetary policy. The deepening housing slump could force the Fed to cut interest rates by 25 to 50 basis points on October 31. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out. U.S. stock prices should move higher in November and December after the rate cut on October 31.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tue
Monday, October 22, 2007
Study Shows Timely Payments On New Mortgages Rise
By James R. Hagerty
From The Wall Street Journal Online
In a glimmer of good news for the U.S. home-mortgage market, more people are managing to keep up with payments on loans made in recent months, according to new data from First American LoanPerformance, a San Francisco research firm.
The trend reflects more-conservative lending policies adopted by mortgage companies this year in the wake of a surge in defaults and foreclosures, said Mark Carrington, director, analytical sales and support, at First American LoanPerformance.
Even so, defaults continue to rise in proportion to the overall number of home loans outstanding nationwide, most of which were made between 2003 and 2006, when lending standards were growing more lax. That means foreclosures are likely to keep rising, adding to a glut of homes already on the market and weighing on prices.
To assess recent results, LoanPerformance looks at loans that are four months old or less. During this year's second quarter, 6.6% of subprime loans in that category already had been blemished by payments at least 60 days overdue, LoanPerformance found. That was down from 7.2% in the first quarter and a peak of 7.6% in last year's third quarter. "It's still really high, but at least it's dropping now," Mr. Carrington said.
LoanPerformance says its loan-servicing data base covers about 80% of the national mortgage market. Subprime loans are those to borrowers with weak credit records or high debt in relation to their income.
For prime loans, the rate of new loans going bad declined to 0.6% in the second quarter from 0.8% in the first quarter.
A rash of all-but immediate defaults on loans last year alarmed investors and helped force dozens of lenders out of business. Investors who buy loans often can force lenders to buy back those that go sour within a few months. That can mean big losses for the lenders.
Lenders have blamed the early defaults partly on fraudulent loan applications from people who never intended to make payments and partly on a drop in home prices that has prompted some buyers to walk away from their obligations. Partly as a result, lenders are screening loan applicants more carefully for signs of fraud and requiring buyers to put up larger down payments.
The lax practices of recent years continue to haunt lenders. Including all subprime loans in the database, 18.8% were 60 days or more overdue in July, up from 17.5% in June, according to LoanPerformance. Making matters worse, borrowers face sharply higher payments on those loans after an initial two- or three-year period of easier terms expires.
"Market Monitor"-Jim Grinney
"Market Monitor"-Jim Grinney, Senior Vice President & CIO for Northern Trust Bank of Florida
Friday, October 19, 2007
PAUL KANGAS: My guest "Market Monitor" this week is Jim Grinney, senior vice president and chief investment officer for Northern Trust Bank of Florida. Jim, welcome back to NIGHTLY BUSINESS REPORT.
JIM GRINNEY, SR. V.P. & CHIEF INVEST. OFFICER, NORTHERN TRUST BANK: Thanks for having me back.
KANGAS: Give us your thoughts on today's steep downturn on Wall Street. What's behind it all?
GRINNEY: Markets (INAUDIBLE) was moved from the international growth to the domestic weakness. Remember, we had Intel and Coke report above average earnings because of international growth. Today, Caterpillar and Honeywell and 3M threw water on their parade. Earnings were up, but at the time, they said they were pulling estimates for next year or guiding estimates down because of the domestic weakness. And when the focus turned to that, at the same time, we had oil hitting a new high of $90 a barrel. We also had S&P reducing the ratings on several of the mortgage-backed securities. This is the anniversary of Black Monday.
KANGAS: Psychological impact.
GRINNEY: Psychological impact, yes.
KANGAS: You think we're going to go through this OK and make a comeback?
GRINNEY: At some point, yes. If the other part of the question is, are we done yet, we're not. If you look at the mortgage market in the next 12 months, remember, $480 billion of mortgages are going to re-price in the next 12 months. Of that amount, about $250 billion are considered sub- prime. So we're not done with this yet. Now what's this going to do to corporate America? We're not sure. How is this going to spill off to the consumer? The consumer has been pretty resilient so far. At some point, it's got to take an effect. We're looking for GDP as a result to slow from the 3 or 4 percent level down to 1 1/2 percent, but at this point no recession.
KANGAS: Will the Fed cut rates again to get things moving?
GRINNEY: The bond market is telling you there's 100 percent probability.
KANGAS: This month.
GRINNEY: This month in October. And I personally think it's a little bit more of a 50-50, whether they do it now or later. I do think we're going to see weakness that will prompt them to lower rates and tame inflation.
KANGAS: Speaking of 50-50, will it be a 50 basis point cut or 25?
GRINNEY: No, more like a 25 basis point cut. Again, the growth is not weak enough yet for them to be motivated to do more than 25.
KANGAS: There must be a point where the very weak mortgage lending stocks should be bought. Are we there yet?
GRINNEY: I don't believe so. Given what I just told you about the amount of re-pricing yet to come, I still want to get more of that out of the way. There's too much uncertainty right now.
KANGAS: On your last visit with us in late August, you recommend two stocks to buy. Let's see how they've done since then. Look at that, Cisco (CSCO), nobody liked it, but you did and it's up almost 50 percent. Great call. Still with it?
GRINNEY: Still with it.
KANGAS: Johnson & Johnson (JNJ) can't seem it get out of its own way, but it certainly didn't lose much? Are you still liking Johnson & Johnson?
GRINNEY: Long-term prospects are good.
KANGAS: I know you aren't going to recommend any individual stocks, but which stock sectors do you like and which would you avoid now?
GRINNEY: I think the obvious ones to avoid are any of those that deal with the mortgage-backed market. Secondarily, those that deal with consumer discretionary spending. The ones to emphasize are probably those again that have good international exposure because that area will continue to be relatively strong. And specifically, some of the sectors like the industrials, like the materials, those that are benefiting from the global infrastructure growth, whether you're looking at roads in India or bridges in Minnesota.
KANGAS: So the weak dollar is helping those big international firms, obviously.
GRINNEY: It is. Exports are very strong. The port of Long Beach recently reported that the outbound shipments are up 27 percent over last year.
KANGAS: Jim, our time is up, unfortunately. But thanks for being with us once again.
GRINNEY: Thank you.
KANGAS: My guest, Jim Grinney of Northern Trust Bank of Florida.
Friday, October 19, 2007
PAUL KANGAS: My guest "Market Monitor" this week is Jim Grinney, senior vice president and chief investment officer for Northern Trust Bank of Florida. Jim, welcome back to NIGHTLY BUSINESS REPORT.
JIM GRINNEY, SR. V.P. & CHIEF INVEST. OFFICER, NORTHERN TRUST BANK: Thanks for having me back.
KANGAS: Give us your thoughts on today's steep downturn on Wall Street. What's behind it all?
GRINNEY: Markets (INAUDIBLE) was moved from the international growth to the domestic weakness. Remember, we had Intel and Coke report above average earnings because of international growth. Today, Caterpillar and Honeywell and 3M threw water on their parade. Earnings were up, but at the time, they said they were pulling estimates for next year or guiding estimates down because of the domestic weakness. And when the focus turned to that, at the same time, we had oil hitting a new high of $90 a barrel. We also had S&P reducing the ratings on several of the mortgage-backed securities. This is the anniversary of Black Monday.
KANGAS: Psychological impact.
GRINNEY: Psychological impact, yes.
KANGAS: You think we're going to go through this OK and make a comeback?
GRINNEY: At some point, yes. If the other part of the question is, are we done yet, we're not. If you look at the mortgage market in the next 12 months, remember, $480 billion of mortgages are going to re-price in the next 12 months. Of that amount, about $250 billion are considered sub- prime. So we're not done with this yet. Now what's this going to do to corporate America? We're not sure. How is this going to spill off to the consumer? The consumer has been pretty resilient so far. At some point, it's got to take an effect. We're looking for GDP as a result to slow from the 3 or 4 percent level down to 1 1/2 percent, but at this point no recession.
KANGAS: Will the Fed cut rates again to get things moving?
GRINNEY: The bond market is telling you there's 100 percent probability.
KANGAS: This month.
GRINNEY: This month in October. And I personally think it's a little bit more of a 50-50, whether they do it now or later. I do think we're going to see weakness that will prompt them to lower rates and tame inflation.
KANGAS: Speaking of 50-50, will it be a 50 basis point cut or 25?
GRINNEY: No, more like a 25 basis point cut. Again, the growth is not weak enough yet for them to be motivated to do more than 25.
KANGAS: There must be a point where the very weak mortgage lending stocks should be bought. Are we there yet?
GRINNEY: I don't believe so. Given what I just told you about the amount of re-pricing yet to come, I still want to get more of that out of the way. There's too much uncertainty right now.
KANGAS: On your last visit with us in late August, you recommend two stocks to buy. Let's see how they've done since then. Look at that, Cisco (CSCO), nobody liked it, but you did and it's up almost 50 percent. Great call. Still with it?
GRINNEY: Still with it.
KANGAS: Johnson & Johnson (JNJ) can't seem it get out of its own way, but it certainly didn't lose much? Are you still liking Johnson & Johnson?
GRINNEY: Long-term prospects are good.
KANGAS: I know you aren't going to recommend any individual stocks, but which stock sectors do you like and which would you avoid now?
GRINNEY: I think the obvious ones to avoid are any of those that deal with the mortgage-backed market. Secondarily, those that deal with consumer discretionary spending. The ones to emphasize are probably those again that have good international exposure because that area will continue to be relatively strong. And specifically, some of the sectors like the industrials, like the materials, those that are benefiting from the global infrastructure growth, whether you're looking at roads in India or bridges in Minnesota.
KANGAS: So the weak dollar is helping those big international firms, obviously.
GRINNEY: It is. Exports are very strong. The port of Long Beach recently reported that the outbound shipments are up 27 percent over last year.
KANGAS: Jim, our time is up, unfortunately. But thanks for being with us once again.
GRINNEY: Thank you.
KANGAS: My guest, Jim Grinney of Northern Trust Bank of Florida.
Apple 4Q earnings beat analyst views
By MAY WONG, AP Technology Writer 2 hours, 5 minutes ago
SAN JOSE, Calif. - Apple Inc.'s fiscal fourth-quarter profits jumped 67 percent to cap a year that saw unprecedented momentum in its Macintosh computer business, continued demand for iPods and the successful launch of the iPhone.
For the three months that ended Sept. 30, Apple said Monday it earned $904 million, or $1.01 per share, compared with $542 million, or 62 cents per share, in the year-ago quarter.
Apple easily beat the expectations of analysts polled by Thomson Financial, who predicted earnings per share of 86 cents on sales of $6.07 billion.
Revenue totaled $6.22 billion, compared with $4.84 billion in the same quarter last year.
Apple's stock price, which has more than doubled since January, rose $3.94, or 2.3 percent, to close at $174.36. After the earnings report, shares climbed about $12, almost 7 percent, in extended trading.
Apple said it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent, while it sold 10.2 million iPods, up 17 percent. The debut of a slate of new iPods in September helped accelerate sales and is expected to boost holiday revenues, Apple officials said.
The company has sold more than 120 million iPods since the product's 2001 debut.
Yet the iPhone, a combination cell phone and media player, is already tracking better than the iPod, Apple's chief operating officer Tim Cook told analysts in a conference call.
In the first full quarter of iPhone sales — a number many on Wall Street were waiting for — Apple said it sold 1.12 million units, bringing the cumulative total to 1.39 million since the product debuted on June 29.
"It took us over two years to achieve a comparable number for the iPod," Cook said. "So we're thrilled here."
Sales of the iPhone picked up in September after Apple knocked $200 off the price of the 8-gigabyte model, bringing it down to $399, Cook said, but he declined to be more specific.
The swift price cut just 10 weeks after the gadget hit the market angered some early customers, a response that prompted Apple to make amends by offering them a $100 store credit.
Apple's efforts to prevent customers from modifying, or "unlocking," iPhones to work on networks other than Apple's carrier partner in the United States, AT&T Corp., also frustrated users — and sparked lawsuits.
Apple's "guess" is that buyers of 250,000 of the 1.4 million iPhones sold so far intended to unlock them, Cook said.
In an apparent about-face that allayed developer grumblings, Apple announced last week it will open the device to third-party applications.
Despite the complaints, Apple came out shining.
For the full fiscal year, Apple earned a record $3.5 billion, up more than 75 percent from last year when it earned $1.99 billion. Yearly sales reached over $24 billion, a 24 percent jump from fiscal 2006.
"We had a fantastic quarter and year," said Peter Oppenheimer, Apple's chief financial officer.
Apple's fortunes have skyrocketed in recent years as its iPods became a cultural phenomenon. The portable players, which work with Macs as well as Microsoft Corp. Windows-based machines, have also drawn more people to Apple's software and design, leading to what analysts call a "halo effect" on Mac sales.
After hovering for years with a 2 percent to 3 percent share of the PC market in the United States, Apple's slice has now grown to 8 percent, according to the latest figures from market researcher Gartner Inc.
Now, many investors are betting Apple's foray into the cell phone market will be another lucrative engine.
The iPhone "is a game-changing product," said Stephen Coleman, chief investment officer at Daedalus Capital LLC.
Based on income from the iPhone alone, he said, "I expect Apple's earnings to continually grow materially at 50 percent a year, for the next three years."
Apple reiterated Monday its previous target of selling 10 million iPhones in 2008, helped by the launch of the iPhone in Europe next month, then in Asia next year.
For the current quarter, Apple said it expects earnings of about $1.42 per share on revenue of about $9.2 billion. Analysts on average had been expecting earnings of $1.39 per share on sales of $8.58 billion.
"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," said Steve Jobs, Apple's CEO.
SAN JOSE, Calif. - Apple Inc.'s fiscal fourth-quarter profits jumped 67 percent to cap a year that saw unprecedented momentum in its Macintosh computer business, continued demand for iPods and the successful launch of the iPhone.
For the three months that ended Sept. 30, Apple said Monday it earned $904 million, or $1.01 per share, compared with $542 million, or 62 cents per share, in the year-ago quarter.
Apple easily beat the expectations of analysts polled by Thomson Financial, who predicted earnings per share of 86 cents on sales of $6.07 billion.
Revenue totaled $6.22 billion, compared with $4.84 billion in the same quarter last year.
Apple's stock price, which has more than doubled since January, rose $3.94, or 2.3 percent, to close at $174.36. After the earnings report, shares climbed about $12, almost 7 percent, in extended trading.
Apple said it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent, while it sold 10.2 million iPods, up 17 percent. The debut of a slate of new iPods in September helped accelerate sales and is expected to boost holiday revenues, Apple officials said.
The company has sold more than 120 million iPods since the product's 2001 debut.
Yet the iPhone, a combination cell phone and media player, is already tracking better than the iPod, Apple's chief operating officer Tim Cook told analysts in a conference call.
In the first full quarter of iPhone sales — a number many on Wall Street were waiting for — Apple said it sold 1.12 million units, bringing the cumulative total to 1.39 million since the product debuted on June 29.
"It took us over two years to achieve a comparable number for the iPod," Cook said. "So we're thrilled here."
Sales of the iPhone picked up in September after Apple knocked $200 off the price of the 8-gigabyte model, bringing it down to $399, Cook said, but he declined to be more specific.
The swift price cut just 10 weeks after the gadget hit the market angered some early customers, a response that prompted Apple to make amends by offering them a $100 store credit.
Apple's efforts to prevent customers from modifying, or "unlocking," iPhones to work on networks other than Apple's carrier partner in the United States, AT&T Corp., also frustrated users — and sparked lawsuits.
Apple's "guess" is that buyers of 250,000 of the 1.4 million iPhones sold so far intended to unlock them, Cook said.
In an apparent about-face that allayed developer grumblings, Apple announced last week it will open the device to third-party applications.
Despite the complaints, Apple came out shining.
For the full fiscal year, Apple earned a record $3.5 billion, up more than 75 percent from last year when it earned $1.99 billion. Yearly sales reached over $24 billion, a 24 percent jump from fiscal 2006.
"We had a fantastic quarter and year," said Peter Oppenheimer, Apple's chief financial officer.
Apple's fortunes have skyrocketed in recent years as its iPods became a cultural phenomenon. The portable players, which work with Macs as well as Microsoft Corp. Windows-based machines, have also drawn more people to Apple's software and design, leading to what analysts call a "halo effect" on Mac sales.
After hovering for years with a 2 percent to 3 percent share of the PC market in the United States, Apple's slice has now grown to 8 percent, according to the latest figures from market researcher Gartner Inc.
Now, many investors are betting Apple's foray into the cell phone market will be another lucrative engine.
The iPhone "is a game-changing product," said Stephen Coleman, chief investment officer at Daedalus Capital LLC.
Based on income from the iPhone alone, he said, "I expect Apple's earnings to continually grow materially at 50 percent a year, for the next three years."
Apple reiterated Monday its previous target of selling 10 million iPhones in 2008, helped by the launch of the iPhone in Europe next month, then in Asia next year.
For the current quarter, Apple said it expects earnings of about $1.42 per share on revenue of about $9.2 billion. Analysts on average had been expecting earnings of $1.39 per share on sales of $8.58 billion.
"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," said Steve Jobs, Apple's CEO.
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