Saturday, July 11, 2009

Noteworthy - Week of July 5th

GM's emergence from bankruptcy on Friday, just 40 days after entering it, headlined the week. There are big expectations of the leaner, hopefully, profitable GM. The company is likely to be either a big hit or miss for the Obama administration.

Not to be outdone, Google announced this week that it will be developing an operating system that would be the biggest direct threat yet to Microsoft's key revenue stream.

Exiled Honduran President Manuel Zelaya attempted to fly back to Honduras early in the week, however, acting president Roberto Micheletti ordered the Honduran military to stop the plane from landing. The UN and other Western nations are attempting to force Honduras into reinstating Zelaya, even though they have not agreed with him in the past, but the country is not backing down. Talks regarding the future of the country headlined the remainder of the week.

The G8, which met in Italy during the week, came up short in its promises for food aid, trade and climate change. Most agree that the summit was a failure on most fronts.

There is talk in Washington of a second stimulus, although only 15% of the current stimulus has been spent, leading analysts, and even Warren Buffett, to question the state of the economy and the purpose of the the first bill, as the White House stated that it underestimated the state of the economy, which it inherited from the Bush administration. Most economists do not favor another round of spending. It is unlikely, given the growing concern of their constituency, that Congress would be able to pass a second stimulus, at least any time soon.

This week Senator Jim DeMint of South Carolina introduced senate amendment 1367, also known as the Federal Reserve Sunshine Amendment, which would allow the Comptroller General of the U.S. to audit the Federal Reserve for the first time in its nearly 100 year history. The amendment was blocked by the Democrat majority under rule 16 but not after Senator DeMint forced the President of the Senate to agree that majority was using legislation on appropriations, rule 16, on some of their high profile bills as well. Here is a video link to the exchange.

Later in the week, the Federal Reserve once again argued that an audit of the Fed could raise inflation fears and lead to higher long-term interest rates. Weeks ago, Chairman Bernanke warned of the same consequences before Congress as viewed here.

California, which remains $26 billion over budget for the year, is urging its more than 2,000 state vendors to reduce their contract rates by as much as 15% in order to reduce its deficit. Last week California issued IOUs on its debt, however, large banks have no interest in them. The state is also looking into desalination as a means of supplying the state with additional water supply, however, environmentalists point to the process requiring a lot of energy and also as harmful to marine life.

Amid concerns over the health of Citigroup, CEO Vikram Pandit gave into U.S. regulators and started a shakeup of the company's leadership. Other top bankers are starting to leave the firm in droves, as the multinational trails its banking peers.

Large U.S. companies are lobbying Congress against its proposed derivative regulations.

AIG is seeking approval from the Obama administration's new compensation czar as to whether the company can release its $235 million worth of retention bonuses that were previously approved of by the board.

Congress is having a difficult time trying to rework a health care reform bill that would keep its cost under $1 trillion.

More than 150 people died in ethnic violence this week in the far western province of Xinjiang, China.

Retailers are attempting to leverage the recession to lower their rents even further amid slumping sales.

Billionaire and energy magnate is pulling the world's largest wind farm project in the Texas panhandle amid financing issues related to the credit crunch, as well as ultra cheap and abundant natural gas resources, which he continues to urge as the primary way that the U.S. can reduce its foreign oil dependency.

The housing market is facing renewed downward pressure as holders of subprime bonds are flooding the market at a time in which foreclosed homes are much lower than banks are willing to sell them at.

Treasury interest costs as a percentage of tax revenue is growing rapidly.

Fixed rate credit cards may disappear amid interest rate concerns by banks.

Western nations are focusing their attention to oil speculators as the U.S., U.K. and France seek stricter international regulation amid concerns over continued fears over spikes in oil prices.

Apartment vacancy hit a 22-year high during the second quarter, up 7.5% from 6.1% a year earlier.

Support is waning in the senate for imposing the first-ever tax on employer-provided health insurance. Attention is shifting, however, to taxing the wealthy for a health care overhaul.

The high-end wine market is suffering during the downturn, as many customers move down the price chain to less expensive alternatives.

Many retailers are offering unbelievable incentives in order to attract business.

Small business won a major lawsuit regarding tax deductions this week against the IRS.

Vornado Realty Trust is seeking $1 billion to start a private equity fund, which will focus on distressed properties in the New York City and Washington D.C. markets.

Bargain hunters are starting to gain interest in California's debt.

Telecom companies are being looked into for possible antitrust action.

Drug companies are targeting poorer nations as sales in traditional strongholds slow.

Government-backed Treasury bonds' spectacular run appears to be over, according to a report in The Wall Street Journal.

Men have a higher rate of unemployment than women.

MGM Mirage is resisting requests by people who purchased condos of its new City Center project to renegotiate its prices.

Best Buy is adding electric bikes and scooters and Segways to its store inventory in California, Oregon and Washington.

Small investors are piling into emerging markets, junk bonds and energy, afraid of being left behind in the latest market boon, just as the markets begin to turn again.

Marc Andreesssen, founder of Netscape, has secured $300 million in venture capital, during one of the leanest periods ever for start-ups.

The IMF sees an end to the global recession in 2010.

PIMCO, the largest fixed income manager in the world, withdrew its Public Private Investment Partnership (PPIP) application in June, citing "uncertainties" over how the plan would be implemented. The PPIP is the government's latest effort to bolster bank balance sheets by having public funds purchase toxic assets from the banks.

The Financial Times issued analysis this week on how we can learn from the Lehman Brother's bankruptcy in order to prevent a future scenario from occurring.

Young consumers, who don't have financial commitments are seen as being recession-proof by retailers.


Europe:


Switzerland stated that it might confiscate UBS' relevant data in cases involving tax evasions in the U.S., should a court in Miami rule that the Swiss bank is obligated to provide the client names in such cases. The statement escalates the ongoing dispute with U.S. authorities as Switzerland attempts to defend its long standing privacy policy. Liechtenstein agreed to end its bank secrecy policy on tax data.

The Nabucco Pipeline, which would carry natural gas from the Caspian Sea to Central Europe is gaining support in the EU.

The credit crunch continues to effect Germany, as the ECB sees the crisis affecting the growth rate of the Euro-Zone.

Bulgaria's center-right party defeated the ruling socialist party this week.

Russia announced that it will not back the debt of state-run Finance Leasing Co., which became the first state-run company to default on foreign debt in more than a decade in last December, adding to the growing investor concern in Russia. Meanwhile, oil giant, Gazprom, is spending more than it is taking in and its stock price is taking the brunt.


Africa/Middle East:


Iranians continue to protest the country's latest election, continuing hopes of a revolution in the religiously devout nation.


Asia:

China, Russia and now India are demanding a new world reserve currency over fears of the U.S. dollar.

Pepsi plans on spending $1 billion in Russia over the next three years to propel growth internationally as U.S. growth slows.

Affirmative action is making an impact in Asia.

India is planning a radical improvement to its horrendous infrastructure system in the coming year, according to the country's highway minister. The emerging nation also issued a new budget this week that will likely widen its deficit by the greatest margin in 18 years, as it attempts to spur growth by increasing welfare and social spending.

China and Australian firm Rio Tinto continue to duke it out over the ore miner's proposed merger with BHP Billiton, now stating that the firm spied on China and "stole state secrets for a foreign country."


Commodities:

The U.S. Natural Gas Fund, an ETF that tracks the price of natural gas, ran out of shares to issue this week as it missed a regulatory deadline to issue new shares. The fund has swelled to $3.7 billion from $670 million in February.

Small investors are starting to hoard gold in growing numbers as fears of future inflation continues to rise.

The EU fined natural gas giants E.On and GDF Suez $1.53 billion for conspiring in a non-compete clause in each other's markets.

OPEC cut its oil expenditure forecast by a third citing that the recession and increased energy efficiency has deeply reduced expected demand, although the International Energy Agency raised its forecast for oil demand in 2010. Meanwhile, oil fell this week to near $60/barrel, its lowest level in more than 5 weeks, as supply continues to remain strong.

Exxon-Mobile may have found a very large shale-gas deposit in Canadian British Columbia that could bring promise for alternative gas exploration.


Miscellaneous:

Finally, word has it that President Obama is taking notes from Italian Prime Minister Silvio Berlusconi, who last year appointed former showgirl Mara Carfagna and is allegedly more than just colleagues with her. Check out this video of Mr. Obama's latest visit to Italy for the G-8 Summit. Not shy to his own extramarital issues, as is Mr. Berlusconi, French Prime Minister Nicolas Sarkozy appears to be taking his lessons more seriously.

Michael Jackson was laid to rest this week in what was one of the largest memorials in recent history.

Los Angeles is cracking down on cannabis clubs, many of which take advantage of a loophole in medical marijuana legislation.

This week's Alan Abelson article.

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