US JOBS REPORT SEPTEMBER 2018

Event- On a seasonally adjusted basis, total nonfarm employment rose by 201,000 in August, according to the US Bureau of Labor Statistics (BLS) in its monthly jobs report. Temporary help services employment rose by 0.3% in August, adding 10,000 jobs, and the temporary penetration rate remained at 2.04%. The national unemployment rate remained at 3.9%.

Background and Analysis- On a year-over-year (y/y) basis (August 2018 over August 2017), total nonfarm employment was up 1.6%, and monthly job gains have averaged approximately 194,000 over the past 12 months. Temporary help employment was up 2.9% y/y, with monthly job gains averaging approximately 7,100 over the past 12 months.

Of the 15 major industry groups, the three that most drove total nonfarm employment growth in August (on a seasonally adjusted basis) include professional services excluding temporary help (+43,000), healthcare and social assistance (+40,700), and construction (+23,000). There were four decliners. After two months of being in the top three, manufacturing declined by 3,000 jobs. The information and government industry groups, which have generally been the two weakest groups over the past year, were weak again this month with declines of 6,000 and 3,000 jobs, respectively. Retail trade, which has been quite volatile this year, was down this month by 5,900 jobs. On a year-over-year basis, natural resources/mining led all industry groups in terms of percentage growth in employment, with 8.1%, followed by construction and transportation/warehousing, with 4.3% and 3.3% growth, respectively.

BLS Revisions- The change in total nonfarm payroll employment for July was revised from +157,000 to +147,000 and the change for June was revised from +248,000 to +208,000. With these revisions, total nonfarm employment gains during the two-month period were 50,000 less than previously reported.

The change in temporary help services employment for July was revised from +27,900 to +10,900 and the change for June was revised from -7,500 to -6,500. With these revisions, temporary help employment growth was lower than previously reported by 16,000 jobs.

Staffing Industry Analysts’ Perspective- Despite the tightening labor market, companies were able to find 201,000 more employees to add last month, and average growth over the past three months has been a steady 185,000. In temporary help, downward revisions to June and July more than offset growth in August. Nevertheless, average growth in temporary help jobs over the past three months is 4,800 (which makes up 2.6% of the increase in total employment, greater than the current temporary penetration rate of 2.0%).

Average hourly earnings has garnered increasing attention as many have been wondering when the tightening labor market would finally yield higher wages. While we don’t want to make too much out of one month, data for the month was quite favorable, with growth of 0.4% in August, and 2.9% year-over-year (up from 2.7% in the prior month). It would make sense to see wage growth gain a bit of traction as it will become increasingly difficult for companies to find workers to meet the demand of an economy expected to remain strong into 2019 at least. The unemployment rate cannot get much lower, leaving additions to the labor force as the other source for new employees. (The labor force declined in August and the average gain over the past three months is only 79,000). As the pool of available new employees diminishes, companies will increasingly need to hire workers who already have jobs, which could accelerate movement from lower-wage service jobs in the leisure/hospitality and retail industry groups into industries such as manufacturing, construction, and natural resources/mining. Along with greater pay within industries, a mix shift from lower-wage to higher-wage industries could also contribute to average wage growth.

2018 USA Real Estate Investing Economic Outlook

The U.S.A. economic outlook for this year for all major commercial real estate sectors, are expected to have extensive growth because of the impact of President Donald Trump’s economic and business reactivation policies; tax reform, infrastructure spending, immigration policy, health care policy, business spending, deregulation and investment among others.

The country’s continued economic resurrection and rising employment in 2018, should benefit all major asset classes.

Office:

U.S. office market growth should continue in 2018, but at a slower pace, due to higher completions and the tight labor market’s impact on tenant demand.

Industrial & Logistics:

Although we are well along in the economic cycle, in the e-commerce/multi-channel cycle we are not, so demand for high-quality, well-located industrial real estate should not wane anytime soon. In most markets, a lack of quality space options is challenging those seeking to expand their supply chains.

Retail:

Changing demographics, consumer expectations and multi-channel retailing will continue to reshape retail and its real estate environment in 2018. The consumer trend toward off-price and discount retail will continue, with mid-range retailers seeking new ways to limit share losses to lower-priced players.

Multifamily:

Developers are poised to register the second-highest annual completions count of this cycle in 2018, down by 9.2% from 2017’s cycle peak. Because apartment starts began to slow in 2017, the multifamily market will get a reprieve from new supply by late 2018 and throughout 2019.

Hotel:

Forecasts for continued U.S. economic expansion portend a favorable year ahead for the U.S. lodging industry, with forecasts of income and employment growth, coupled with slowing supply growth, promising increased demand for hotels.

Data Centers:

The U.S. wholesale data center market continues to thrive, with sustained record-setting absorption levels for the past three years. Transformation and flexibility are the key themes in the multi-tenant data center space in 2018.

Medical Office:

The direction of health care policy and payment mechanisms may remain uncertain, but rapid growth in the older population will remain a significant tailwind for medical-office demand in the years ahead.

Seniors Housing:

The seniors housing market improved in 2017 and is set to improve further in 2018, largely due to lower construction levels.

Winston Rowe & Associates prepared this article. They are a national due diligence and advisory firm specializing in structuring complex commercial real estate transactions.

They can be contacted at 248-246-2243 or visit them online at http://www.winstonrowe.com

Forecasted $280 Billion In Commercial Property Foreclosures In 2013

A perfect storm is brewing across the nation. Commercial property owners are facing balloon payments coming due this year, with no way to raise the money.

Here’s Why:

In today’s risk adverse national banking climate. Most of the national lenders are quick to jettison commercial mortgages that either does not meet their current portfolio requirements or the property owners that survived the recent global economic down turn.

Has left many commercial property owners with low cash reserves, bruised personal credit and static business growth.

This leaves commercial property owners searching to find a lender that will refinance their loan because they are facing the immediate foreclosure and loss of their future business income.

Winston Rowe & Associates is a firm that specializes in assisting commercial property owners facing foreclosure due to balloon payments and discounted payoff note.

Best of all, they do not have any upfront fees.

Commercial property owners have been turning to Winston Rowe & Associates, because a principle is always available to speak with prospective clients. Taking the time to understand their unique situation and then providing a solution.

Commercial property owners can contact Winston Rowe & Associates at 248-246-2243 or email them at processing@winstonrowe.com

Why Winston Rowe & Associates:

National lending platform

Never an upfront or advance fee

All commercial property types considered

Purchase, refinance and cash out solutions

They also have many other solutions that meet almost every need. Check them out online at http://www.winstonrowe.com

Winston Rowe & Associates has some of the most aggressive rates and terms available, while managing every step of the financing process from document collection to commitment negotiation and closing.

Winston Rowe & Associates provides no upfront or advance fee due diligence and advisory services in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

State review of Detroit finances finds ‘serious problem,’ calls for action

WINSTON ROWE & ASSOCIATES WEBSITE

 

Detroit — The state has completed its most recent review of Detroit’s finances and found “a serious financial problem” that merits further action, state officials said late Friday.

The review, which began Tuesday and could have taken up to 30 days, was completed in four, with the result possibly moving the city closer to an emergency financial manager. According to a statement released late Friday by state Treasury spokesman Terry Stanton, the review found: The city violated a state law that requires it to amend its budget “as soon as it becomes apparent that such an amendment is necessary.”

The city continues to show “significant cash flow problems” and expects a deficit at the end of its fiscal year on June 30. “Due to financial reporting problems, city projections change from month to month, making it difficult to make informed decisions regarding its fiscal health.” A cash flow estimate in August projected the city’s deficit would be $62 million by the end of the fiscal year. But estimates for October and November saw that number climb to $84 million and $122 million, respectively.

The city has not filed an adequate deficit elimination plan with the Treasury Department for the fiscal year that ended June 30, 2011. The next step, under the state’s Public Act 72, is to appoint a review team that will examine the city’s finances further, Stanton said, adding: “There is no statutory timelines in which that appointment must occur.” Detroit Mayor Dave Bing downplayed the announcement. In a statement released late Friday, he said: “This is part of the process. There is nothing new here. We continue to be focused on our financial restructuring plan.” State lawmakers during a marathon lame-duck session late Thursday approved a new emergency manager bill that has yet to be signed by Gov. Rick Snyder.

But even if that bill becomes law, it “would not take effect until late March and therefore would have no bearing on the current review,” the statement said. In an interview with The Detroit News editorial board earlier Friday, Snyder said he’s not ruling out bankruptcy for Detroit if an emergency financial manager is appointed, but his goal would be to first exhaust other options. Snyder, who has ordered a 30-day review of Detroit’s finances that could lead to the appointment of a financial manager, said it “wouldn’t be surprising” if the review came up with “very difficult conclusions” than what’s known now. “I don’t think (bankruptcy’s) a foregone conclusion,” Snyder said. in the interview. “I think it’s important to let the review team come back and do an updated assessment on where the facts are, because again, that’s a moving target. So I think the review team report is very important in terms of seeing what’s in there.”

The governor said he doesn’t want to imply “we’re going to go towards bankruptcy” but he wants to do what’s best for the city and its long-term liabilities. Snyder said that in hindsight, he would have “been more aggressive in the consent agreement or look at other options” in terms of forcing the city to restructure and control spending.

City officials have been at odds with the state over Detroit’s dwindling cash and the state’s reluctance to issue needed bond money because certain milestones have been missed. “This is new ground that we’re covering,” Snyder said. “And compared to the old ways things were operating in Detroit, I would still say, even with this path, it’s been an improvement. Again, my goal is not to run cities, Detroit or anyplace else.” The governor said he would not want to see a “free falling” Chapter 9 bankruptcy filing in which everyone throws up their hands over an insurmountable problem, “because the track record there is terrible.” “If (Chapter) 9 was to be seriously considered, one should be very thoughtful and careful about doing it and work very diligently to make sure every other option’s been considered, properly analyzed and understand what the path would be,” he said. Snyder said that an immediate settlement with creditors is an option, but he’s not engaged in any discussions to that effect.

The creation of the new and revised emergency management law, the governor said, “was to listen to what the people said in November.” “I think the loudest message that came out is there is a desire to have more local involvement in the whole process,” Snyder said. Snyder said the bill gives cities choices that allow them to control reform with accountability in place.

Since the law won’t go into effect until March, Detroit will still be governed under Public Act 72, Snyder said. Meanwhile Friday, Moody’s Investor Service stated in its weekly credit outlook that the state treasurer’s review of Detroit’s finances could lead to an emergency financial manager appointment and help stabilize the city’s finances. But it heightens the “probability of a potential Chapter 9 bankruptcy,” Moody’s said. “It is unclear at this time if the EFM would have sole authority over all of the city’s financial affairs or the sole legal authority to take actions related to existing contracts and obligations,” the report said. “Moreover, decisions made by the EFM could be stymied by legal challenges from the effected stakeholders, delaying or negating the possibility of any positive impacts.”

MICHIGAN RIGHT TO WORK LAW POISED TO PASS

(Reuters) – Michigan legislators on Tuesday approved laws that ban mandatory membership in public-and private-sector unions, dealing a stunning blow to organized labor in the home of the U.S. auto industry. Republican Governor Rick Snyder was poised to sign the bills into law within days.

That would make Michigan the 24th U.S. state with so-called right-to-work laws that prohibit unions from establishing a “closed shop” requiring employees to join unions and contribute dues.

As more than 12,000 unionized workers and supporters protested at the capitol in Lansing, the Republican-dominated House of Representatives gave final approval to the bills.

In less than a week, Michigan was transformed from a bastion of union influence to the verge of joining states, mostly in the South, that have weakened legal protections for unions. While labor leaders decried the legislation, Republican Representative Lisa Lyons said during the debate in the House that the right-to-work laws are not an attack on unions. “This is the day Michigan freed its workers,” she said. Opponents argue that they undermine a basic union tenet of bargaining collectively with employers for better wages, benefits and working conditions.

They also allow workers to opt out of a union, potentially reducing membership. By weakening unions, Republicans also could hurt the Democratic Party, which traditionally receives a significant portion of its funding and grassroots support from labor unions. Supporters of right-to-work say some unions have become too rigid and workers should be given a choice of whether to join.

They also say that a more flexible labor market encourages businesses to invest and open plants in right-to-work states. CRIES OF “SHAME” Right-to-work was approved to cries of “shame” from protesters inside the Capitol building, which was closed to visitors when it reached capacity of 2,200, Michigan State Police Inspector Gene Adamczyk said.

An estimated 10,000 more people demonstrated outside in cold and snowy conditions, including members of the United Auto Workers union, and teachers, who shut down several schools in the state to attend the rally.

A few protesters were ejected from the Capitol after they chanted slogans from the gallery during the debate. Protesters tore down two tents set up for supporters of right-to-work on the grounds of the Capitol but Adamczyk said two people were arrested after scuffling with officers.

The show of force by unionized workers recalled huge rallies in Wisconsin two years ago when Republicans voted to curb public sector unions. Teamsters union national president, Jim Hoffa Jr., whose father Jimmy Hoffa Sr. was one of the nation’s most famous labor leaders and disappeared in 1975 in Michigan, denounced Republican leaders in a speech to the protesters. “Let me tell the governor and all those elected officials who vote for this shameful, divisive bill – there will be repercussions,” Hoffa said. “Some day soon, they will face the voters of Michigan and they will have to explain why they sided with the billionaires to back this destructive legislation.” Unions have accused Snyder of caving in to wealthy Republican business owners who wanted right-to-work passed.

The right-to-work movement has grown in the United States in recent years. Indiana earlier this year became the first state in the industrial Midwest to approve right-to-work and several other states are watching the Michigan action closely. LEGAL CHALLENGES LOOM Wisconsin Republicans in 2011 passed laws severely restricting the power of public sector unions.

While Wisconsin did not attempt to pass right-to-work, the success of Republicans there in curbing powerful unions such as teachers and state workers encouraged politicians in other states to follow suit. Republicans in Michigan also were emboldened by the defeat in the November election of a ballot initiative backed by unions that would have enshrined the right to collective bargaining in the state constitution. Michigan is home of the heavily unionized U.S. auto industry, with some 700 manufacturing plants in the state.

The state has the fifth highest percentage of workers who are union members at 17.5 percent. Only New York, Alaska, Hawaii and Washington state are more heavily unionized. The Detroit area is headquarters for General Motors Co, Ford Motor Co and Chrysler, which is majority owned by Fiat SpA.

The UAW was founded in Michigan after a 1932 protest at a Ford plant in Dearborn left five people dead, increasing public sympathy for industrial workers during the Great Depression and leading to national legislation protecting unions. Democrats and unions have vowed to challenge the new laws in the courts, to try to overturn them in a ballot initiative and possibly oust some Republicans who voted for right-to-work through recall elections.

Democratic Representative Douglas Geiss said right-to-work laws would lead to a resumption of the protests that led to unions some 70 years ago. “There will be fights on the shop floor if many workers announce they will not pay union dues,” Geiss said.

120 Trillion: The True Size of Our National Debt – Really?

WINSTON ROWE & ASSOCIATES

The Congressional Budget Office released a new report this week showing that the federal government’s publicly held debt would top 101% of GDP by 2021, more than the value of everything produced in this country over the course of a year. Think of it like owing more on your credit cards than your entire family income. By 2035, the publicly held debt, CBO says, could top an almost unfathomable 190% of GDP.

And that was the good news.

The federal government actually has three different types of debt. Debt held by the public, which generated the headlines in the CBO report, is the type of government bonds that you — or the Chinese government — might own. Economists worry a lot about this type of debt because the government has to borrow the money from private credit markets.

The government borrowing competes with investment in the nongovernmental sector, leaving less money available for private investment in such things as factories and equipment, research and development, housing, and so on. Growing levels of publicly held debt can drive up interest rates in the long-run, and may already be choking off interbank lending.

But that’s not the only type of government debt. For example, there is “intragovernmental” debt, which is essentially debt that the federal government owes to itself, such as debt it owes to the so-called Social Security Trust Fund. If publicly held debt is like the money you borrowed from a bank, intragovernmental debt is like the money you swiped from your kid’s piggy bank. It may not be on your credit report, but you still have to pay it back.

Today, intragovernmental debt exceeds $4.6 trillion. The good news here is that intragovernmental debt is not projected to grow much in the future.

The bad news is that that is because both Social Security and Medicare are already running deficits — there’s nothing left to steal.

As if that’s not enough, there is also a third category of government debt: “implicit debt.” This represents the unfunded obligations of programs such as Social Security and Medicare — the amount that those programs owe in benefits in excess of the amount of taxes that they expect to take in. Think of it as bills you know are going to come in next month but haven’t been delivered yet.

According to the annual report of the Social Security system’s trustees, that program’s unfunded liabilities now exceed $18 trillion. Medicare is in even worse shape. The most recent estimate of its finances, also released this week, warns that Medicare owes $36.8 trillion more in benefits that it is expected to be able to pay for. And that is the optimistic outlook: It assumes that all the projected savings from President Obama’s health care reform actually happen as promised, something that even Medicare’s own actuaries are deeply skeptical of. If those savings don’t materialize, Medicare’s debt could actually top $90 trillion!

Add it all up, and total US debt actually exceeds 900% of GDP. That’s somewhere in excess of $120 trillion. We are beginning to talk real money here.

The CBO also contains bad news for those who believe that we can fix this problem simply by cutting “fraud, waste and abuse.” As CBO points out, the projected growth in the debt “is attributable entirely to increases in spending on several large mandatory programs: Social Security, Medicare, Medicaid, and (to a lesser extent) insurance subsidies that will be provided through [Obamacare].” There is simply no way to deal with our debt problems without reforming those entitlement programs.

Finally, the CBO report makes it clear that we have a debt problem because spending is too high, not because taxes are too low. In fact, even though taxes are currently at a near historic low as a proportion of the economy, that is largely a result of the recession. If the economy returns to normal growth rates (a big “if”), federal revenues will not only rise, but will actually be higher than the postwar average percentage of GDP by the end of the decade. In fact, this will happen even if the Bush tax cuts are extended and the Alternative Minimum Tax AMT continues to be patched.

GOP lawmakers who left negotiations with Obama this week over his unwillingness to pledge no new taxes understand this. The problem is the money going out, not coming in.

We face a simple choice: Cut spending or face fiscal catastrophe. The question is: Is Washington listening?

Michael D. Tanner is a senior fellow at the Cato Institute.

Reprint…

http://www.nypost.com/p/news/opinion/opedcolumnists/trillion_the_shocking_true_size_tOxcrobUBUup9IEW3vQAhJ

Republicans rip Obama for campaign-style approach to fiscal talks

WINSTON ROWE & ASSOCIATES WEBISTE

Frustrated Republican leaders took a swipe Tuesday at President Obama, reminding him “the election is over” as he opts for a campaign-style strategy to sell his tax-hike proposal to middle-class America and small business owners – rather than deal face-to-face with Republican lawmakers on Capitol Hill.

The president met last week with House Speaker John Boehner at the White House and spoke with him over the weekend. But as members of Congress return this week to Washington, Obama is instead hosting a series of events aimed at selling his plan while pressuring Republicans to extend tax cuts only to families earning $250,000 or less annually, which amounts to a tax hike on high-income families.

“The target of the president’s rallies should be the congressional Democrats who want to raise tax rates on small businesses rather than cut spending,” Boehner spokesman Mike Steel said Tuesday.

The president has invited small-business owners from across the country to meet Tuesday at the White House to discuss the impact of his tax policies on small businesses.

Among the 15 invited are Nikhil Arora, co-founder of Back to the Roots, west Oakland; David Bolotsky, chief executive officer of Uncommon Goods, New York; and Mandy Cabot, co-founder of Dansko, West Grove, Pa.

Senate Minority Leader Mitch McConnell signaled the president’s shift Monday when he said: “The election is over” and it’s time for the president to present a plan that “goes beyond the talking points of the campaign trail.”

Steel and other Republicans argue they are fulfilling their half of the bargain in the fiscal talks by agreeing to change the tax code to generate revenue to reduce the multitrillion-dollar deficit.

However, Democrats have to keep their end by presenting a plan to cut federal spending through such entitlement programs as Medicare and Social Security, they say.

Should the sides fail to strike a deal by January 1, a mix of tax increases and federal spending cuts equaling roughly $500 billion just in 2013 will take effect, which some economists say could plunge the U.S. economy back into a recession.

The president, who wants to extend tax breaks only for households earning more than $250,000 annually, is also meeting Wednesday with chief executive officers and middle-class taxpayers. On Friday, he is hosting a rally in the Philadelphia area where he is scheduled to lay out his plan to keep the country from going off the so-called “fiscal cliff.”

Meanwhile, Republicans will make their own appeal to Americas.

Boehner’s office said Tuesday that House Republicans will take their own message to small businesses across the country. Members in the coming days and weeks will hold events and visit local small businesses to emphasize “the threat to jobs posed by congressional Democrats’ small business tax hike.”

Twinkies likely to survive sale of Hostess

DETROIT (AP) – Twinkie lovers, relax.

WINSTON ROWE & ASSOCIATES WEBISTE

The tasty cream-filled golden spongecakes are likely to survive, even though their maker will be sold in bankruptcy court.

Hostess Brands Inc., baker of Wonder Bread as well as Twinkies, Ding Dongs and Ho Ho’s, will be in a New York bankruptcy courtroom Monday to start the process of selling itself.

The company, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, it’s asking the court for permission to sell assets and go out of business.

But with high brand recognition and $2.5 billion in annual revenue, other companies are interested in bidding for at least pieces of Hostess.

US industrial production drops 0.4 percent

WINSTON ROWE & ASSOCIATES

WASHINGTON (AP) — Americans cut back on spending at retail businesses in October, an indication that some remain cautious about the economic outlook. Superstorm Sandy also depressed car sales and slowed business in the Northeast at the end of the month.

The Commerce Department said Wednesday that sales dropped 0.3 percent after three months of gains. Auto sales fell 1.5 percent, the most in more than a year.

Excluding the volatile categories of autos, gas and building materials, sales fell 0.1 percent. That followed a 0.9 percent gain in September for that category. Online and catalog purchases fell 1.8 percent, the most in a year. Electronics and clothing stores also posted lower sales.

The government said Sandy “had both positive and negative effects” on sales. Some stores and restaurants closed and lost business. Others reported sales increases ahead of the storm as people bought supplies.

Most economists said they thought the storm overall held back sales. Still, they noted that consumers showed signs of cutting back on spending before the weather disrupted business.

“Looking past (Sandy’s) impact, U.S. consumers appeared to dial it back a notch,” said Robert Kavcic, an economist at BMO Capital Markets. “There was relatively broad-based weakness in this report.”

Paul Dales, senior U.S. economist at Capital Economics, said November will be a crucial test of the consumer. He noted that many could be starting to worry about tax cuts that will expire at the end of the year if Congress and the White House fail to reach a budget deal before then.

“A bounce-back would point to a temporary Sandy-induced softening, while another soft month would suggest that the threat of a sharp fall in after-tax incomes in the new year is worrying households,” Dales said.

In September, retail sales jumped 1.3 percent. Spending rose in nearly all categories. The buying spree helped lift economic growth in the July-September quarter and reflected growing consumer confidence. Consumer spending drives nearly 70 percent of economic activity.

The October decline in retail sales may be temporary, economists said. Kavic noted that auto sales may pick up in November as Americans replace cars damaged by the hurricane.

Superstorm Sandy hit the East Coast on Oct. 29 and disrupted businesses from North Carolina to Maine. The storm also lowered auto sales last month by about 30,000, according to TrueCar.com. Overall, car sales dipped to an annual pace of 14.3 million in October, down from a 14.9 million pace in September.

The storm cut retail spending in the Northeast by about 20 percent last week, according to MasterCard Advisors’ SpendingPulse, a retail data service. That figure excludes auto sales.

The Northeast accounts for about 24 percent of retail sales nationwide, the MasterCard Advisors’ report said. It typically generates $18.7 billion in sales for the week ended Saturday. But sales that week fell to about $15 billion.

The storm also cut power to roughly 8 million homes and businesses. Some are still without power. That may have had an impact on online sales.

Retail sales are likely to rebound this month, analysts said, because Americans are spending more on repairs and making up for lost shopping trips.

The Commerce Department’s retail sales report is closely watched because it is the government’s first look at consumer spending each month.

Hiring has picked up in recent months, which has boosted consumer confidence. Employers added 171,000 jobs in October and job gains in August and September were higher than first estimated. The unemployment rose to 7.9 percent from 7.8 percent as more of those out of work began searching for jobs.

A survey by the University of Michigan last week found that consumer sentiment improved for the fourth straight month to its highest level in five years….

China’s economy recovering but torrid growth over

WINSTON ROWE & ASSOCIATES WEBSITE

BEIJING (AP) — Zhang Hanzhong, who supplies locks for auto manufacturers, is part of a swath of China’s economy that is lagging in a two-speed recovery.

Business for retailers, hotels, photo studios and other service industries is picking up as China limps out of its deepest slump since the 2008 global crisis. But exporters and manufacturers who drove its boom over the past decade are struggling.

Zhang’s sales are down 20 percent with no rebound in sight, while labor costs are up.

“The second half of the year is even harder than the first half,” said Zhang, who employs 60 people at his factory in Meizhou in Guangdong province near Hong Kong.

China is recovering but the days of double-digit growth are gone. Faced with falling returns from a three-decade-old growth model fueled by exports and investment, Beijing is trying to rebalance the economy by promoting consumer spending, service industries and technology. It is a strategy that promises smaller but more sustainable gains. That could have global repercussions by dampening voracious demand for iron ore, industrial equipment and other imports that drove growth for suppliers from Australia to Africa to Germany.

“The world has to get used to the idea that China will grow at a 7 or 8 percent pace, and growth will be far less investment-intensive over the next decade,” said Mark Williams of Capital Economics. “So the projections for Chinese demand for commodities, capital goods, construction equipment and so on have to be revised down.'”

The Communist Party has committed in broad strokes to growth based on consumer spending and innovation in its five-year development plan that runs through 2015. A report in February by the World Bank and a Chinese Cabinet think tank said that to achieve that, the government will need to make politically daunting changes including curbing the dominance of state companies.

New leaders including General Secretary Xi Jinping who took power last week are under pressure to deliver on the party plans to overhaul the economy. But how far they will go to rein in politically favored state companies and other vested interests is unclear.

Growth slowed to a three-year low of 7.4 percent in the three months ending in September. That prompted concern the new leaders might feel compelled to boost spending on building bridges and other public works, setting back efforts to reduce reliance on investment. But retail sales and other indicators are improving, easing pressure for abrupt changes.

“The issue is how well they work together and whether they are able to overcome vested interests,” said Williams. “We really won’t know that until they’ve been in office for a little while.”

This year’s growth is explosive by Western standards but well below the 14.1 percent that China racked up in 2007 on its way to passing Japan as the second-largest economy in 2009.

Forecasters expected a Chinese recovery early this year. As the slump deepened, the International Monetary Fund and others cut growth forecasts for the year to below 8 percent — the weakest since the 1990s. Even after a recovery, they see it rising to only about 8.5 percent by 2014.

Beijing has yet to take many of the steps analysts say are required to achieve its goals, including pumping money into health and other social programs to free up household budgets for consumer spending. But the impact in some industries is clear.

A monthly survey by HSBC Corp. of Chinese service companies has shown activity expanding steadily for two years, while a parallel survey of manufacturers has shown activity contracting this year.

Already, retail spending is rising faster than overall growth as wages climb. In October, retail sales were up 14.5 percent over a year earlier.

In Huzhou, a city south of Shanghai in Zhejiang province, business is strong for entrepreneur’s Li Yong bedding factory. It employs 10 people and doesn’t bother to export because demand from Chinese customers is strong. Costs for labor, rent and materials up but so are sales.

“Our profits are up 10 percent this year from last year,” Li said.

Li buys all his materials in China, highlighting another trend that could blunt the payoff for its trading partners. As local companies develop the ability to deliver more sophisticated goods and services, they are serving Chinese consumers from domestic resources, limiting demand for imported materials and technology.

“I will think about using imported materials in the future, but for now, both the customers and I cannot afford it,” Li said.

China’s slowdown was due largely to government controls imposed to cool an overheated economy and inflation following its quick, stimulus-fueled rebound from the 2008 crisis.

At the same time, steelmakers and other heavy industry was under pressure from a government campaign to cut pollution and energy use by closing older facilities. Construction, a major source of jobs, was battered by a clampdown on land sales and building cool surging housing prices and stop speculation-driven investment.

Easing building curbs would be a quick way to generate jobs, but communist leaders resisted pleas from developers even as growth drifted lower, worried about setting back their rebalancing plans. Instead, the government is pushing companies to construct more low-cost housing, which the general public needs but that produces less profit and requires less imported steel for girders and copper for wiring.

Weaker manufacturing and construction activity already have cut China’s demand for foreign goods. Imports of steel products fell 39.9 percent in October from a year earlier. Copper imports were off 12.2 percent and those of raw wood were down 11.1 percent.

Government pressure to raise wages has put more money in consumers’ pockets but is squeezing companies, especially in labor-intensive industries that employ millions of people making shoes, toys and other low-tech goods.

Chen Shuhai’s 5-year-old wig factory is the sort of labor-intensive business that is being pushed out of China by higher costs.

Rent on his factory in Yiwu, a southern city famous for exporting buttons and other low-tech goods, doubled from 2009 to 2011. Monthly wages are up 10 percent this year to about 3,500 yuan ($550) for each of his 80 employees.

Chen said neighboring companies that exported to debt-crippled Europe have closed. Others are moving to Vietnam, India and other lower-wage markets.

“There is not much room left in China for the wig industry,” Chen said. “I don’t know what will happen to my factory.”

Longer-term, the government’s effort to create a consumer-driven economy might turn China into a market for tourism, insurance, health care and other service companies.

“The issue is whether it can do this smoothly, in which case growth can remain strong,” said Williams. If it works, “over the next 10 years, it will be another group of economies that are able to ride China’s coattails.”

Political Unrest & The US National Economy

Winston Rowe & Associates Website

On more than one occasion in recent months I’ve had conversations with real estate investors or lenders that have drifted into politics. “What do you think of the Tea Party?” “What do you make of Occupy Wall Street?” “What’s your impression of Congress?”

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And then, usually what comes next is a comment along the lines of, “I’ve never seen anything like this before.”

The rise of the Tea Party and Occupy movements—neither of which have leaders and both of which include members with diverse, if not conflicting concerns—would be amusing if the stakes weren’t so high.

But the issue is that there are major problems that need to be addressed—regulatory reform, tax reform, deficit reduction—many of which will affect the economy more broadly and commercial real estate specifically.

And with the gap between the two parties, the uncertain outcome of the 2012 election and the rise in populist anger, nobody seems to know how any of it is going to shake out.

The net result of this is a high level of political uncertainty. Couple that with a still shaky economic recovery marked by anemic job creation, questions about capital markets and convulsions in Europe stemming from sovereign debt crises, and the picture isn’t exactly pretty.

The first half of 2011 was playing out nicely. Investment activity was up. Risk tolerance by lenders and investors was increasing. And the CMBS market was recovering nicely. But even then there were creeping questions. For instance, fundamentals were not reviving as quickly as expected—leading some to believe that the investment market was getting ahead of itself.

So we had a few reality check moments as the summer progressed, starting with the debt ceiling debate. Perhaps most significant was a step back in the reemergence of the CMBS sector, which is now ending the year with things having slowed down some.

Simultaneously, the industry did seem to start to take note that the jobs market remains pretty awful and that, overall, fundamentals still have a long way to go before they’re really healthy.

Investment activity has since slowed in the second half of the year. We’re still on pace to exceed the volume posted in 2010, but it’s not looking like 2011 will be the robust year it seemed to start out to be. Deals are taking place, but not as many as we expected. And the whole context in which deals are taking place has changed.

Enter politics

And now we have a big political mess to wrestle with.

From my perspective, the importance of the questions being posed by the political uncertainty is precisely that it could have some massive implications for commercial real estate investment.

The first issue is the potential change in the way carried interest is taxed, which would affect thousands (if not tens of thousands) of real estate partnerships.

Also at issue is the fact that huge sections of the Dodd-Frank Act have yet to be written. The broad strokes are there. But the details have not been filled in.

So, for example, there’s a notion that securitizers will be required to retain a slice of what they originate. But the form this will take hasn’t been determined. In the worst case scenario, if it’s too restrictive, there is a risk that no one will want to be in the securitization business at all. And given the level of commercial real estate debt that will continue to need to be refinanced in the coming years, that would be a disaster.

And, of course, there’s the ever-present question of what to do with Fannie Mae and Freddie Mac. The two behemoths still need to be reformed. There has not been a whole lot of movement with that. But whatever happens with these agancies will have implications for the multifamily sector.

In additon, there is the question of deficit reduction. The emergence of the Occupy movement—and its targeting of Wall Street and the nation’s wealthiest 1 percent—may introduce new pressure on raising revenues as a way to deal with the deficit rather than dealing with the issue largely through spending cuts. And there very well could be pressure for other kinds of taxes, besides carried interest reform, that would affect commercial real estate firms and individual investors.

Ultimately, there are now a great many questions stemming from the political climate that promise to affect the commercial real estate industry. And, unfortunately, there is no sign that any of this is going to become any clearer in the near future.

Political Unrest & The US National Economy

Winston Rowe & Associates Website

The revelation this summer that the London Inter Bank Overnight Rate (LIBOR) has been the subject of manipulation sent shockwaves around the globe. If that rate—one of the cornerstones of the banking system—is being gamed, is there anything that we can trust?

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For the commercial real estate industry, LIBOR comes into play primarily for two kinds of loans: construction financing and short-term floating-rate bridge loans. Both products are priced at a spread to LIBOR.

But it’s impossible to say who has benefited and who was burned by the manipulation of LIBOR. For now, all we know is that Barclays has admitted to gaming the rate. Other banks are still being investigated. But Barclays reported higher LIBOR rates prior to the 2008 financial crisis and then lower ones after. That means borrowers, depending on when they got their loans, may have been either hurt or helped. The same is true for smaller banks that used LIBOR as the base on which they originated loans.

Still, a major disruption to or discontinuation of LIBOR would directly affect those areas of finance that govern real estate lending as well as contribute additional uncertainty to capital markets that still haven’t fully recovered from 2008.

The worst case scenario is LIBOR being dumped entirely. That would require loans based on LIBOR to use an alternative index. Such a change would affect existing and future loans. Most loans are structured with language that would allow the replacement of LIBOR with an alternative index. But there is little agreement as to what would be the obvious replacement for LIBOR.

Fortunately, this scenario seems unlikely.

Since the initial shock, the lending business has returned to normal. Borrowers are still receiving loans based on LIBOR. And there has been little disruption to the volume of construction and bridge loans being originated.

There has been some talk of making the way LIBOR is determined more transparent. This would certainly be welcome and leave the system less prone to manipulation. And it would not require moving to some other index off which to price floating rate debt.

So for now, the situation serves mostly as a warning to the sector rather than a true disruption.

Still, there are some causes for concern. For one thing, it is just the latest in a series of shocks to the finance system that continue to shake confidence in capital markets. Despite many improvements since the 2008 financial crisis, the system is still functioning at just a portion of the capacity it once had. And incidents like this just delay the recovery even further.

Secondly, the incident increases the potential for regulatory changes that would create further disruptions. So far, only Barclay’s has admitted to manipulating LIBOR. But investigations continue into other banks as do discussions of potential settlements with both U.S. and European oversight bodies. As details come out, the pressure for regulation could rise.

For example, in Britain there is real discussion of re-instituting rules mandating the separation of commercial banks and investment banks.

That conversation has not leapt across the Atlantic to enter the United States yet. But such a change—reinstituting something akin to the Depression-era Glass Steagall Act that was repealed in the late 1990s—would be a massive change to the financial system that could have loads of unintended consequences.

Thus, more than anything, what the LIBOR scandal should trigger is some caution for the sector. And it should have borrowers and investors contemplating the dangers of big changes to the financial sector if the scandal continues to blossom.

For now, it’s business as usual. But contingency planning would be an excellent idea.

London Inter Bank Overnight Rate (LIBOR)

Winston Rowe & Associates Website

The revelation this summer that the London Inter Bank Overnight Rate (LIBOR) has been the subject of manipulation sent shockwaves around the globe. If that rate—one of the cornerstones of the banking system—is being gamed, is there anything that we can trust?

GGP Refinances $1.2B in Property-Level LoansMultifamily Fundamentals Do Not Face a CliffVornado Partnership Refinances 1290 Avenue of the Americas with $950M LoanSeavest Healthcare Sells 14 Medical Office Buildings to Duke Realty for $332MRREEF Sells its Interest in Burbank Office BuildingMore Latest News

For the commercial real estate industry, LIBOR comes into play primarily for two kinds of loans: construction financing and short-term floating-rate bridge loans. Both products are priced at a spread to LIBOR.

But it’s impossible to say who has benefited and who was burned by the manipulation of LIBOR. For now, all we know is that Barclays has admitted to gaming the rate. Other banks are still being investigated. But Barclays reported higher LIBOR rates prior to the 2008 financial crisis and then lower ones after. That means borrowers, depending on when they got their loans, may have been either hurt or helped. The same is true for smaller banks that used LIBOR as the base on which they originated loans.

Still, a major disruption to or discontinuation of LIBOR would directly affect those areas of finance that govern real estate lending as well as contribute additional uncertainty to capital markets that still haven’t fully recovered from 2008.

The worst case scenario is LIBOR being dumped entirely. That would require loans based on LIBOR to use an alternative index. Such a change would affect existing and future loans. Most loans are structured with language that would allow the replacement of LIBOR with an alternative index. But there is little agreement as to what would be the obvious replacement for LIBOR.

Fortunately, this scenario seems unlikely.

Since the initial shock, the lending business has returned to normal. Borrowers are still receiving loans based on LIBOR. And there has been little disruption to the volume of construction and bridge loans being originated.

There has been some talk of making the way LIBOR is determined more transparent. This would certainly be welcome and leave the system less prone to manipulation. And it would not require moving to some other index off which to price floating rate debt.

So for now, the situation serves mostly as a warning to the sector rather than a true disruption.

Still, there are some causes for concern. For one thing, it is just the latest in a series of shocks to the finance system that continue to shake confidence in capital markets. Despite many improvements since the 2008 financial crisis, the system is still functioning at just a portion of the capacity it once had. And incidents like this just delay the recovery even further.

Secondly, the incident increases the potential for regulatory changes that would create further disruptions. So far, only Barclay’s has admitted to manipulating LIBOR. But investigations continue into other banks as do discussions of potential settlements with both U.S. and European oversight bodies. As details come out, the pressure for regulation could rise.

For example, in Britain there is real discussion of re-instituting rules mandating the separation of commercial banks and investment banks.

That conversation has not leapt across the Atlantic to enter the United States yet. But such a change—reinstituting something akin to the Depression-era Glass Steagall Act that was repealed in the late 1990s—would be a massive change to the financial system that could have loads of unintended consequences.

Thus, more than anything, what the LIBOR scandal should trigger is some caution for the sector. And it should have borrowers and investors contemplating the dangers of big changes to the financial sector if the scandal continues to blossom.

For now, it’s business as usual. But contingency planning would be an excellent idea.

THE EMPLOYMENT SITUATION — OCTOBER 2012

Total nonfarm payroll employment increased by 171,000 in October, and the unemployment

rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics

reported today. Employment rose in professional and business services, health care,

and retail trade.

 urricane Sandy                                |

  |                                                                               |

  |Hurricane Sandy had no discernable effect on the employment and unemployment   |

  |data for October. Household survey data collection was completed before the    |

  |storm, and establishment survey data collection rates were within normal ranges|

  |nationally and for the affected areas. For information on how unusually severe |

  |weather can affect the employment and hours estimates, see the Frequently Asked|

  |Questions section of this release.                                             |

  |                                                                               |

  |_______________________________________________________________________________|

 

 

Household Survey Data

 

Both the unemployment rate (7.9 percent) and the number of unemployed persons (12.3

million) were essentially unchanged in October, following declines in September.

(See table A-1.)

 

Among the major worker groups, the unemployment rate for blacks increased to 14.3

percent in October, while the rates for adult men (7.3 percent), adult women (7.2

percent), teenagers (23.7 percent), whites (7.0 percent), and Hispanics (10.0 percent)

showed little or no change. The jobless rate for Asians was 4.9 percent in October

(not seasonally adjusted), down from 7.3 percent a year earlier. (See tables A-1,

A-2, and A-3.)

 

In October, the number of long-term unemployed (those jobless for 27 weeks or more)

was little changed at 5.0 million. These individuals accounted for 40.6 percent of

the unemployed. (See table A-12.)

 

The civilian labor force rose by 578,000 to 155.6 million in October, and the labor

force participation rate edged up to 63.8 percent. Total employment rose by 410,000

over the month. The employment-population ratio was essentially unchanged at 58.8

percent, following an increase of 0.4 percentage point in September. (See table A-1.)

 

The number of persons employed part time for economic reasons (sometimes referred to

as involuntary part-time workers) fell by 269,000 to 8.3 million in October, partially

offsetting an increase of 582,000 in September. These individuals were working part

time because their hours had been cut back or because they were unable to find a

full-time job. (See table A-8.)

 

In October, 2.4 million persons were marginally attached to the labor force, little

different from a year earlier. (These data are not seasonally adjusted.) These

individuals were not in the labor force, wanted and were available for work, and had

looked for a job sometime in the prior 12 months. They were not counted as unemployed

because they had not searched for work in the 4 weeks preceding the survey. (See

table A-16.)

 

Among the marginally attached, there were 813,000 discouraged workers in October, a

decline of 154,000 from a year earlier. (These data are not seasonally adjusted.)

Discouraged workers are persons not currently looking for work because they believe

no jobs are available for them. The remaining 1.6 million persons marginally attached

to the labor force in October had not searched for work in the 4 weeks preceding

the survey for reasons such as school attendance or family responsibilities. (See

table A-16.)

 

Establishment Survey Data

 

Total nonfarm payroll employment increased by 171,000 in October. Employment growth

has averaged 157,000 per month thus far in 2012, about the same as the average monthly

gain of 153,000 in 2011. In October, employment rose in professional and business

services, health care, and retail trade. (See table B-1.)

 

Professional and business services added 51,000 jobs in October, with gains in

services to buildings and dwellings (+13,000) and in computer systems design (+7,000).

Temporary help employment changed little in October and has shown little net change

over the past 3 months. Employment in professional and business services has grown by

1.6 million since its most recent low point in September 2009.

 

Health care added 31,000 jobs in October. Job gains continued in ambulatory health

care services (+25,000) and hospitals (+6,000). Over the past year, employment in

health care has risen by 296,000.

 

Retail trade added 36,000 jobs in October, with gains in motor vehicles and parts dealers

(+7,000), and in furniture and home furnishings stores (+4,000). Retail trade has added

82,000 jobs over the past 3 months, with most of the gain occurring in motor vehicles

and parts dealers, clothing and accessories stores, and miscellaneous store retailers.

 

Employment in leisure and hospitality continued to trend up (+28,000) over the month.

This industry has added 811,000 jobs since a recent low point in January 2010, with

most of the gain occurring in food services.

 

Employment in construction edged up in October. The gain was concentrated in specialty

trade contractors (+17,000).

 

Manufacturing employment changed little in October. On net, manufacturing employment

has shown little change since April.

 

Mining lost 9,000 jobs in October, with most of the decline occurring in support

activities for mining. Since May of this year, employment in mining has decreased

by 17,000.

 

Employment in other major industries, including wholesale trade, transportation and

warehousing, information, financial activities, and government, showed little change

over the month.

 

In October, the average workweek for all employees on private nonfarm payrolls was

34.4 hours for the fourth consecutive month. The manufacturing workweek edged down by

0.1 hour to 40.5 hours, and factory overtime was unchanged at 3.2 hours. The average

workweek for production and nonsupervisory employees on private nonfarm payrolls edged

down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7.)

 

In October, average hourly earnings for all employees on private nonfarm payrolls edged

down by 1 cent to $23.58. Over the past 12 months, average hourly earnings have risen

by 1.6 percent. In October, average hourly earnings of private-sector production and

nonsupervisory employees edged down by 1 cent to $19.79. (See tables B-3 and B-8.)

 

The change in total nonfarm payroll employment for August was revised from +142,000 to

+192,000, and the change for September was revised from +114,000 to +148,000.

Sandy’s cost to economy: Up to $50 billion

NEW YORK (CNNMoney) — The estimated loss to the nation’s economy from Superstorm Sandy has climbed to as much as $50 billion, making it one of the nation’s most costly disasters.

 

Eqecat, which does loss estimates from catastrophes for the insurance industry, puts the total losses at between $30 billion and $50 billion. Its initial estimated loss earlier in the week was only $10 billion to $20 billion.

 

Eqecat said the higher estimate is due primarily to the large electric and utility losses, coupled with the transit and road closures that shut many businesses longer than expected. It also said further information about damage is raising the estimate.

 

It now believes the insured portion of the loss could reach in the $10 billion to $20 billion range, up from its earlier estimate of a $5 billion to $10 billion in insured losses.

 

Moody’s Analytics, a economic research firm, puts storm losses at $49.9 billion. About $30 billion of the loss comes from the physical storm damage, split fairly evenly between households, businesses, and public infrastructure such as rail lines, roads and water and sewage systems. The rest of the Moody’s estimate comes from lost business activity.

 

Mark Zandi, chief economist for Moody’s Analytics, said if he had to guess, he would estimate that the loss estimate is more likely to rise as the full extent of damage and the actual cost of repairs becomes better known.

 

“The property damages are typically revised up, and economic damages are revised down because businesses find a way to make the business back,” he said. “But a lot of estimates come from estimates about when power is restored. If that takes longer than estimated, it could be more costly.”

 

About 60% of the lost business output is likely to come from New Jersey, dwarfing the 15% from New York City and 14% from Philadelphia. The remaining lost output is from the Washington, D.C., area.

 

Moody’s estimates Sandy will be the third most costly U.S. natural disaster, trailing only the $157 billion total economic loss from 2005’s Hurricane Katrina and the $54.5 billion loss from 1992’s Hurricane Andrew when those losses are adjusted for inflation.

 

This is the second most costly hit to the affected area, trailing only the Sept. 11 terrorist attack. That caused $99 billion in damages nationwide, with most concentrated in New York. It is much greater than last year’s Hurricane Irene, which followed a similar track and caused about $12.6 billion in total economic losses.

 

The greatest amount of lost business in Moody’s estimate is $7 billion from financial services. Zandi said the two-day shutdown in the nation’s stock exchanges was particularly costly in terms of lost commissions and fees, since traders are not going to trade a share of stock twice just to make up for not being able to trade it during the shutdown. “That’s hard to get back,” he said.

 

Business and professional services, which include everything from high-priced legal and accounting services to messenger services, is the second biggest source of lost business, with an estimated $4.6 billon loss.

 

Zandi said the lost business estimates do not take into account the cost of the extra time residents of the area are having to spend dealing with the problems caused by the storm, such as long commutes, waiting in long lines for gasoline or even lost productivity at work due to increased fatigue.

 

“There’s so many ways it weighs on the economy that can’t be measured,” he said.

 

Despite the size of the loss, Zandi said the drag on the economy will be temporary, with rebuilding and recovery activity quickly making up for much of the economic damage from the storm. He believes any minor slowdown in the nation’s gross domestic product in the fourth quarter due to Sandy will be recouped early in 2013.

Jobless claims snap back up

NEW YORK (CNNMoney) — First-time claims for unemployment benefits are on a roller coaster. The number snapped back up last week, after falling to a four-year low the week before.

 

About 388,000 people filed for first-time unemployment benefits in the week ended October 13, up 46,000 from the previous week, the Labor Department said Thursday.

 

Obama’s economy

 A look at where the economy stood when Obama took office and what’s changed since.

View photosThe last two weeks have swung dramatically in both directions, with initial claims first dropping to a revised 342,000, the lowest level in four years, and then suddenly popping back up last week.

 

Economists attribute the volatility to the end of the quarter and the Columbus Day holiday.

 

“The volatility in the last few weeks appears to reflect seasonal adjustment challenges around the start of a quarter,” said Jim O’Sullivan, chief U.S. economist for High Frequency Economics.

 

Related: State unemployment rates

 

Economists often prefer to look at a four-week moving average, to smooth out some of the large swings in the data.

 

That indicator increased to 365,500 last week and has been hovering in the 360,000 to 380,000 range since July. Claims around that level suggest layoffs remain low — an encouraging sign for the economy — but don’t necessarily mean hiring has picked up.

 

“The labor market, just like the broader economy, is plodding along at a deliberate pace,” said Thomas Simons, money market economist for Jefferies.

 

Meanwhile, about 3.3 million Americans continued to file for their second week of unemployment benefits in the week ended October 6, the most recent data available.

Stocks Give Up Gains End Mixed This Week Winston Rowe & Associates

NEW YORK (CNNMoney.com) — Stocks gave back earlier gains to end mixed Tuesday, as investor optimism over the extension of Bush-era tax cuts gave way to speculation about a widening federal probe into insider trading.

 

Stocks held gains for most of the day as investors welcomed news that President Obama had reached a deal with Republican lawmakers Monday that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months. It would also lower the payroll tax by two percentage points for a year.

 

But the momentum faded late in the day after Obama, who had wanted the cuts for high-earning taxpayers to expire, said in a press conference that he would push to have them eliminated after the two-year extension is over.

 

“This gives us the time to have this political battle without having the same casualties for the American people,” he said.

 

Obama said the compromise was necessary to prevent taxes from going up for middle-class taxpayers. But it also reflects the newfound clout Republicans have on Capitol Hill following last month’s upset in the midterm elections.

 

Peter Boockvar, chief market strategist with Miller Taback & Co., said the market turned lower following a report that the government’s crackdown on insider trading is accelerating. But he said investors were also nervous about a major sell-off in the bond market.

 

“I think it has more to do with the shellacking in the bond market,” he said. While the deal to extend tax cuts was a positive, “investors can’t ignore the spike in interest rates,” he added.

 

The yield on the 10-year Treasury note jumped to its highest level since June, stoking worries that a rising interest rates could slow the sluggish economic recovery.

 

Stocks ended Monday’s session mixed after drifting around breakeven for most of the day. Investors spent most of the day mulling over Federal Reserve chairman Ben Bernanke’s pessimistic comments about the nation’s economy.

 

Companies: Bank of America (BAC, Fortune 500) agreed to pay $137 million in fines to federal and state regulators to settle charges of bid rigging in the municipal bond derivatives market. Shares rose 0.5%.

 

The Treasury Department said Monday afternoon it planned to sell 2.4 billion Citi (C, Fortune 500) common shares, priced at $4.35 a share.

 

That gives the government a $12 billion profit, including dividends and interest payments, on its $45 billion Citi bailout. Company stock rose 14 cents, or 4%, to $4.60 per share.

 

3M (MMM, Fortune 500) said it expects full-year earnings will be between $5.90 and $6.10 per share in 2011, on sales of up to $30.5 billion. Analysts had been expecting earnings of $6.20 per share, according to consensus estimates from Thomson Reuters. Shares of the company fell 3%.

 

AGL Resources (AGL) and Nicor Inc. (GAS) announced a merger creating a leading U.S. natural gas distribution company. The combined company will be known as AGL Resources. Shares of AGL were down 5.8%, while shares of Nicor rallied 4%.

 

Currencies and commodities: The dollar rose versus the euro and the yen, but remained weak against the U.K. pound.

 

Oil for January delivery fell 69 cents to end at $88.69 a barrel. Earlier, prices rose above $90 a barrel for the first time since October 2008.

 

Gold futures for February delivery fell $7.10 to settle at $1,409 an ounce, after reaching a new intraday high of $1,432.50 earlier in the session. Gold settled at a record $1,416.10 an ounce Monday.

 

Silver for March delivery gained 51 cents, or 1.7%, to $30.25 an ounce. Earlier in the session, silver topped $30.75 an ounce — a new 30-year high.

 

World markets: European stocks ended higher. Britain’s FTSE 100 added 0.9%, the DAX in Germany gained 0.8%, and France’s CAC 40 surged 1.9%.

 

Asian markets ended the session mixed. The Shanghai Composite added 0.7% and the Hang Seng in Hong Kong jumped 0.8%, while Japan’s Nikkei shaved 0.3%.

 

Economy: Consumer credit increased $3.3 billion in October, according to the Federal Reserve. Economists surveyed by Briefing.com had expected a $2.5 billion decrease. This follows September’s $2.1 billion increase in consumer credit.

 

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 3.16% — a level not seen since late June.

China Shows Signs Of Economic Recovery Taking Shape Winston Rowe & Associates

BEIJING (AP) — China’s worst slump since the global financial crisis leveled out in the latest quarter and retail sales picked up in a sign an economic rebound is taking shape, adding to hopes for a global recovery.

The world’s second-largest economy grew 7.4 percent from the year before in the three months ending in September, data showed Thursday. That was slower than the second quarter’s 7.6 percent growth but the decline was much gentler than in earlier quarters. Economists also pointed to quarter-on-quarter growth of 2.2 percent, the biggest such gain in a year, as a sign of recovery.

“This confirms that the economy is rebounding,” said Dariusz Kowalczyk, senior economist for Credit Agricole CIB in Hong Kong. “There is no room and no need for further major stimulus.”

The Chinese improvement came after unexpectedly strong U.S. housing starts boosted confidence that the world’s biggest economy is mending after five years in the doldrums. The U.S. Commerce Department said Wednesday that builders started construction on new single-family houses and apartments at the fastest pace in more than four years. The U.S. and Chinese numbers are rare good news for the world economy, which has slowed as Europe’s chronic debt crisis worsened and the American economy stagnated.

Beijing has cut interest rates twice since early June and is injecting money into the economy through higher investment by state companies and spending on building subways and other public works. But authorities have avoided a major stimulus after huge spending in response to the 2008 global crisis fueled inflation and a wasteful building boom.

Retail sales rose 14.4 percent, accelerating from the first half’s 14.1 percent growth. Investment in factories and other fixed assets improved, rising 20.5 percent in the first nine months of the year, up from a 20.2 percent rate for the first eight months.

“We can see a clear sign of steady economic growth,” said Sheng Laiyun, spokesman for the National Bureau of Statistics. “There is a smaller margin of decline and some major indicators have been growing faster.”

A rebound in Chinese growth would be good news for economies such as Australia, Brazil and African countries that supply its factories with iron ore and other commodities.

The slowdown over the past year and a half is due largely to government curbs imposed to cool an overheated economy and reduce reliance on exports by encouraging more domestic consumption. The slump worsened last year after global demand for Chinese goods plunged unexpectedly.

In line with the government’s hopes, retailing and other service industries aimed at Chinese consumers are growing relatively strongly while manufacturing and heavy industry have been battered by weak global demand and government curbs on construction. The government says stronger activity in services industries has helped to limit job losses.

Pan Wenhao, a 25-year-old wedding photographer in the tourist town of Lijiang in China’s southwest, said his photo studio’s revenues are up 50 percent compared with this time last year. He said tourism in Lijiang has grown by about 20 percent from last year.

“I expect my business to be much better in the future and I am confident about that,” Pan said.

But conditions are still tough for manufacturers that had relied mostly on exporting are now trying to sell more to China’s own consumers.

Xie Jun, owner of Dongguan Jincai Real Co. in the southern city of Dongguan, which manufactures headphones, mobile phones and computer accessories, said he is losing 100,000 to 200,000 yuan ($15,000-$30,000) a month and had to lay off 30 of his 100 employees. He began trying to make more sales in China a few years ago “but the market is limited.”

“We get less business, and even if the factory is running, we cannot make money from that,” Xie said. “Most of the businesspeople I know here have the same problem as me.”

China’s expansion is strong compared with the United States and Japan, where this year’s growth is forecast in low single digits, but the slowdown has been painful for companies that depend on high growth to drive demand for new factories and other goods.

The slump raised the risk of job losses and unrest, posing a challenge to the ruling party as it prepares for a once-a-decade handover of power to younger leaders. The further quarterly decline had been expected after officials including President Hu Jintao warned that growth might slow further before recovering.

Premier Wen Jiabao, the country’s top economic official, said Wednesday growth appeared to be stabilizing and expressed confidence China can meet its official targets for the year. Wen gave no growth forecast or a possible time frame for a recovery.

A Chinese recovery could help to boost demand for commodities but otherwise its contribution to global growth will be limited because the country meets much of its demand from its own factories, said Kowalczyk. He said that was reflected in the relatively weak September import growth of just 2.4 percent, well below the double-digit rates earlier this year.

“The impact on the rest of the world will be more psychological rather than real, major growth,” he said. “But it is good to know the risks from China to the global economy are sharply lower.”

Winston Rowe & Associates Global Oil Supplies Stabilize

LONDON (Reuters) – Oil dropped to $112 a barrel on Thursday, pressured by signs of a healthier supply outlook and a rise in U.S. jobless claims, offsetting Chinese data signaling stabilization in the economy of the world’s second-largest oil consumer.
U.S. crude inventories rose more than expected last week, a report showed on Wednesday. This weekend Britain’s largest oilfield, Buzzard, is scheduled to restart, increasing supply of crude underpinning the Brent contract.
Brent crude for December delivery was down $1.22 at $112.00 a barrel by 1352 GMT, after settling 78 cents lower. U.S. oil for November fell $1.08 to $91.04.
“Brent is currently under pressure,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt. “The fact that North Sea supply is due to rebound with the restart of the Buzzard field may also be a factor for the weaker tone of the Brent price.”
In a further addition to supplies, Sudan issued a tender to sell Dar Blend crude in November after parliaments in Khartoum and South Sudan ratified an agreement this week to end hostilities and restart southern oil exports.
The market made a further downward lurch after the U.S. jobs report. Initial claims for state unemployment benefits rose 46,000 to a seasonally adjusted 388,000, the Labor Department said on Thursday.
Oil had edged higher earlier in the session. China’s economy grew 7.4 percent in the third quarter from a year ago, in line with forecasts, while industrial production, retail sales and investment data were all slightly ahead of expectations.
Still, China’s growth rate fell short of the official 7.5 percent target and an expansion of 7.4 percent still represents a sharp slowdown for the country, where the economy grew 9.2 percent in 2011.
“The Chinese data was pretty neutral for the market,” said Tony Machacek, an oil futures broker at Jefferies Bache in London. “If support around $113-$112.50 gives way, we could fall quite a bit lower.”
Goldman Sachs, in a note to clients on Wednesday, cut its Brent price forecast for 2013 to $110 a barrel from $130, citing an increasing outlook for supply outside of the Organization of the Petroleum Exporting Countries.
The bank, which up until now had the highest oil price prediction among major forecasters, said it still expected the physical market to remain tight and maintained a near-term target of $120.
SUPPLY RISKS
Brent has gained more than 4 percent this year, partly due to supply-side concerns.
North Sea output has underperformed as fields including Nexen’s Buzzard shut for maintenance, supporting Brent. Buzzard, which has missed previous timetables to restart, is currently due to resume output by Sunday.
A strike in Norway earlier this year also cut North Sea supply, supporting prices. A union leader said on Thursday Norwegian oil service workers voted in favor of a proposed wage deal, avoiding another potential strike.
Iranian exports have fallen due to Western sanctions and the risk of wider supply disruption arising from Iran’s nuclear programme is still putting a floor under the market.
In another sign of Tehran defying international demands to curb its disputed nuclear programme, Western diplomats said Iran was believed to be increasing its uranium enrichment capacity at its Fordow plant buried deep underground.
Concerns about Europe’s debt crisis remain a bearish factor for oil. Germany and France clashed on Thursday over greater European Union control of national budgets and moves towards a single banking supervisor, before a summit of EU leaders.
In Greece, workers went on strike for the second time in three weeks over wage and pension cuts.

The U.S. Economy Will Struggle Until Sacrifices Are Made – Winston Rowe & Associates

Winston Rowe & Associates, a national no advance fee commercial real estate finance and advisory firm has prepared this article to address fundamental economic issues concerning the future of U.S. economy and commercial real estate.

Readers, who would like to learn more about Winston Rowe & Associates, can contact them at 248-246-2243 or visit them on line at http://www.winstonrowe.com

Not In My Back Yard (NIMBY):

Many American’s are dismayed by our high deficits, but they are quite vague about at government services they are willing to reduce or give up. At the same time most American’s have a not in my back yard (NIMBY) mentality and aren’t willing to cut back on any programs that benefit them.

The elderly want to maintain and increase all their benefits from Social Security, Medicare, and Medicaid. American car owners want to keep their gas-guzzling cars and get better roads, but they oppose any increase in today’s inadequate gas taxes.

American homeowners get more than twice as large a subsidy in tax savings than the federal government spends on all housing programs that benefit lower-income households combined.

It would be fairer to use tax credits for homeowner benefits instead of deductions from taxable income. Then every owner would get the same benefit per dollar spent on interest.

Currently the wealthiest owners get much bigger gains per dollar. Yet home builders, realtors, mortgage lenders, and banks oppose any changes in homeowner tax benefits.

In commercial markets, the federal government provides tax subsidies to developers who build affordable housing and road systems that attract home seekers into new suburban areas.

However, these benefits have been greatly reduced by declines in government revenues.

We Are Ripe For A Foreign Take Over Of Our Banking System:

Unfortunately, most political and business leaders are not willing to be honest with the public and the public needs to honest with themselves. The United States is a democratic republic, hence we did elect (hire) these people to run our States and Federal Government.

What should we do about this worsening situation? First, we should start telling the truth and demand that our political leaders do the same. Yet the truth is not always pleasing to hear. That the United States is going broke and is ripe for a foreign takeover of our global financial sector, which is the true power of our Republic. Currently, China is buying our banks.

Consider the reaction to Washington’s Blue Ribbon Panel recent deficit reduction findings, which proposed a detailed plan for cutting both budget deficits and the nation’s total debt. Nearly every elected politician has objected to its findings because they impose costs on some programs that benefit politicians.

No politician currently in office really wants to reduce our budget deficits and debt in the painful ways that would aid our long-term growth and prosperity. They know that they will either get recalled or not win another term, because we are a nation of NIMBY’s.

Get Ready For National Lower Standards of Living:

In order to escape from our situation of ever-rising debt to pay for consuming more than we earn, most Americans will have to adjust to lower living standards than we got used to from the mid-1990s through 2007. We should not maintain consumer spending at 70% of gross domestic product, but go back to about 60% to 62%.

That means spending more on investment and less on consumption, and changing our tax system to favor investment over consumption. This message isn’t something most elected officials and voters want to hear.

Another truth we must face is that real estate is not going to recover from its weak condition for several more years or decades to come. Housing is going to remain a drag on all property markets as long as unemployment and foreclosures remain high.

Loans on many commercial properties cannot be repaid without a large infusion of equity, which will not be easily forthcoming. Hence commercial foreclosures will increase substantially.

It is in the best interests of our industry to confront the basic problems facing not only real estate, but also the very nature of the American economy. That means facing up to many unpleasant and challenging truths we have been avoiding for a long time — especially living beyond our means by constantly borrowing from abroad.

Winston Rowe & Associates has an excellent knowledge based investor resource for commercial real estate valuation and market analysis located at:

http://www.winstonrowe.com/Free_Real_Estate_Resources.html

Winston Rowe & Associates provides no upfront commercial real estate loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Wisconsin, Wyoming

Obama Vs. Romney: 2012 Election Winner Determines Which Stocks Survive in 2013

With Election Day just over two months away, the Republican National Convention taking place this week, and the Democratic National Convention on docket for next week, the presidential race is now in full-throttle gear. Perhaps you’re wondering if and how the 2012 presidential election could affect the stock market.

Will it matter who wins? Are there specific industries or stocks that are likely to benefit if the President is reelected? How about if Romney is the victor?

Presidential Election Investment Theories Abound

There is a plethora of presidential election investment theories. Some are quite well supported by facts, others are myths, and many fall somewhere in between. Thus, it’s important to be skeptical about what you read on this topic.

There is just one certainty: There is NO sure thing about how this – or any – presidential election will affect the stock market.

Presidential Election Cycle Trend: Third & Fourth Years are the Charms

Before we drill down to the Obama vs. Romney win level, it’s important to be aware of the Presidential Cycle Trend, as it has a very strong track record. It suggests that the year of a presidential term is a more important factor for overall stock market performance than whether a Democrat or Republican occupies the White House.

The nutshell of this trend:  The U.S. stock market — and economy — tend to perform much better in the last two years of a president’s term than they do in the first two years.

This theory predicts 2013 will be a tough year for the stock market regardless of which candidate wins. However, even in flat or poor overall markets, there will always be some winning stocks, and likely some winning industries.

How the 2012 Presidential Election Could Affect the Stock Market

Bank of America equity analysts put together a report called Election 2012, which looks at the industries and individual stocks that could benefit most under both scenarios, a President Obama reelection or a Romney win. I’ve selected three sectors for each scenario — those with the strongest rationales — to highlight here.

My personal opinion is it’s generally best to place little overall weight on politics when investing, especially for the long-term. Stocks with strong fundamentals will usually perform well over the long-term, regardless of the shorter-term power fluctuations in the White House and Congress.

If Obama is Reelected

1. Life Sciences & Diagnostic Tools

Rationale: Democrats are generally viewed as being more generous when it comes to R&D funding. However, if the President is reelected but Republicans take control of Congress, the outlook could be negative for life sciences stocks as politicians lock horns over budget matters.

Some Stocks in Industry: Illumina (ILMN), Thermo Fisher (TMO), Life Tech (LIFE)

2. Pharmaceutical Distributors

Rationale: Progress on health care reform would benefit pharmaceutical companies who would experience an increase in sales to the newly insured. However, the positives from reform could be offset by deficit reduction effects. Therefore, the BofA report recommends investors should focus on pharmaceutical distributors, since they are not tied directly to government reimbursements.

Some Stocks in Industry: Amerisource (ABC), McKesson Corp (MCK), Cardinal Health (CAH)

3. Alternative Energy (AE)

Rationale: AE will likely benefit from an Obama reelection in two ways. First, stricter environmental requirements for businesses hurt the coal industry, so support AE.  The second is related to renewable tax credits. Obama supports the extension of the wind production tax credit, while Romney is leaning against it. An extension would be a positive for large renewable generators.

Some Stocks in Industry: NextEra Energy (NEE), Exelon Corp (EXC)

If Romney is Elected

1. Medical Supplies and Devices

Rationale:  According to the BofA report, a Romney win would more likely result in a more favorable (lenient) FDA and the increased likelihood that the Medical Device Tax would be repealed or modified.

Some Stocks in Industry: Stryker Corp (SYK), Medtronic (MDT), Zimmer (ZMH), St Jude Medical (STJ), Covidien (COV)

2. Managed Care

Rationale: If Romney wins and Republicans take control of Congress, they would likely work on repealing the President’s health care reform program. It’s widely believed they would eliminate incentives for moving health insurance enrollment to exchanges, and this would prevent the profit margin compression for health insurance companies currently providing Medicare.

Some Stocks in Industry: Humana (HUM), WellPoint (WLP), Coventry Health (CVH)

3. Transportation

Rationale: A Romney win would likely signal a softening on regulation in both the rail and trucking industries.

Some Stocks in Industry: CSX Corp (CSX), CP Rail (CP), Knight Transportation (KNX)

12 Signs That The Next Recession In The United States Has Already Begun

Economy

Is the U.S. economy in a recession right now?  Has the next recession in the United States already begun?  Unfortunately, there are a lot of economic numbers that are pointing in that direction.  U.S. retail sales have fallen for three months in a row, U.S. manufacturing activity is contracting and there are numerous indications that the labor market is getting weaker.

Of course there are some economists that will argue that we never even left the last recession.  For example, the percentage of working age Americans with jobs fell from above 63 percent in 2007 to under 59 percent during the last recession.  Since the end of the last recession, that number has not gotten back above 59 percent.  In fact, it has been below 59 percent for 34 months in a row.

In addition, we have continued to see poverty and government dependence steadily rise during this “economic recovery”.  Since Barack Obama became president, the number of Americans living in poverty has risen by 6 million and the number of Americans on food stamps has risen by 14 million.

So it would be really hard to argue with anyone that wants to say that the last recession never really ended.  However, the latest economic numbers indicate that things are about to get even worse for the U.S. economy, and that is not good news at all.

The following are 12 signs that the next recession in the United States has already begun….

#1 U.S. retail sales have declined for three months in a row, and that is a very bad sign.  Retail sales in America have fallen three months in a row only 27 times since 1947.  In 25 of those instances, the U.S. economy was either “in a recession or within three months of a recession.”

#2 Manufacturing activity in the mid-Atlantic region has declined for three months in a row.

#3 Overall, the U.S. manufacturing sector contracted last month for the first time in almost three years.  The following is from a recent article in the Los Angeles Times….

A factory index calculated by the Institute for Supply Management slid to 49.7 in June from 53.5 in May to the lowest reading since July 2009. Any level below 50 denotes tightening in the sector; anything above signifies growth.

#4 Sales of previously occupied homes dropped by 5.4 percent during June.

#5 Initial claims for unemployment benefits rose to 386,000 last week – another sign that the labor market is weakening again.

#6 According to one survey, only 23 percent of all U.S. businesses plan to hire more workers over the next 6 months.

#7 The Philadelphia Fed’s employment index indicates that there is bad news ahead for the labor market….

Labor market conditions at the reporting firms deteriorated this month. The current employment index decreased 10 points, to ‐8.4, its second negative reading in three months. The percent of firms reporting decreases in employment (18 percent) exceeded the percent reporting increases (10 percent).

#8 Unless Congress acts, the U.S. Postal Service is going to financially default for the first time ever on August 1st.

#9 The Conference Board’s index of leading economic indicators fell by 0.3 percent in June.

#10 A Washington Post survey that was conducted back in April discovered that 76 percent of all Americans believe that the U.S. economy is still in a recession.

#11 According to AARP, 600,000 American homeowners that are 50 years of age or older are currently in foreclosure.

#12 The unemployment rate in New York City is now back up to 10 percent.  That equals the peak unemployment rate in New York City during the last recession.

US Gas Prices, Oil Price & the Real Story

You know the story. When Obama took office:

Gasoline cost $1.95/gallon and oil, $45

Now Gasoline costs $3.72/gallon and oil, $125

Incredible. And we understand—because our politicians explained it to us, like so …

1.We should’ve drilled.

2.But Obama and his EPA stopped us.

3.So the supply of oil went down.

And, that pushes the price up, and high oil prices cause high gas prices. If we had drilled, supply would be up and the price would be down. Maybe down to $1.00/gal like under Clinton (March 1999).

National Jobs Report Winston Rowe & Associates

Employment in the U.S. nonfarm private business sector increased by 163,000 from June to July on a seasonally adjusted basis. The estimated gain from May to June was revised down slightly, from the initial estimate of 176,000 to a revised estimate of 172,000. Employment in the private, service-providing sector expanded 148,000 in July after rising a revised 151,000 in June. The private, goods-producing sector added 15,000 jobs in July. Manufacturing employment rose 6,000 this month, following a revised increase of 9,000 in June.

Federal Reserve Chairman Ben Bernanke

As the AP reads it, Federal Reserve Chairman Ben Bernanke stopped just short of “committing the Fed to any specific move, such as another round of bond purchases to lower long-term interest rates.” Bernanke gave a speech at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wy. today. As with all his speeches, it was being closely watched for signs on what the Federal Reserve would do next. With the unemployment rate stagnant, would the Fed unleash further stimulus? Or would the relative good news on the consumer spending and housing fronts we’ve gotten in recent weeks be enough to stave off new action

Investment Activity in Hotels is Set to Surge

Through the first five months of the year, the pace of hotel transactions has been steady and strong, but not spectacular. That could soon change.

 “There was an expectation that assets would be dumped on the market,” said Art Adler, Jones Lang LaSalle Hotels’ managing director and CEO of the Americas, during the NYU International Hospitality Industry Investment Conference in June. “Lenders are more disciplined now. A great deleveraging is coming in the next five years. There will be epic transaction volume … More mega deals are coming this year.”

 

Jones Lang LaSalle Hotels, which tracks transactions $10 million and up, reports U.S. deal volume reached $5.1 billion through May. The five-month mark is off last year’s total of $6.4 billion. The number does not include the $1.9 billion Blackstone purchase of Motel 6 as that hasn’t closed yet. Nor does it count note sales, foreclosures or other loan-to-own recapitalizations that would increase the transaction volume by 50 percent, estimated Larry Wolfe, Eastdil Secured’s senior managing director. If those transactions were counted, lodging’s deal volume would be at 2005 or 2006 levels, he said during the panel with Adler.

 

Despite an uneven economic recovery in the U.S. and continued concerns over Europe, operating performance continues to improve. Supply growth is at historic lows, while demand reaches new highs. Revenue per available room will climb 5.5 percent this year and another 5.4 percent next year, according to STR Chairman Randy Smith. And in 18 months, RevPAR will reach 2007 peak levels.

 

Steve Rushmore, HVS founder, followed Smith on stage and called today’s lodging environment the “best hotel buying opportunity in the U.S. since 1991.” After falling 31 percent in 2009, hotel values have risen 17 percent in 2010, 20 percent last year and HVS projects 17 percent increases this year and the next. For that reason, Rushmore believes single-asset transactions will be down this year while owners hold their assets to take advantage of the rise in values.

 

Still, a panel of leading hotel REIT executives said they would be net buyers this year, while a panel of the leading private equity players sent the same message. REITs accounted for 44 percent of the transaction volume through the first half of 2011, but only 27 percent this year. Private equity has accounted for 52 percent of the deals so far this year, but REIT activity is expected to pick up, saidAdler. This will bring even more assets to market.

 

Host Hotels & Resorts CEO Ed Walter said his firm would like to be a seller, and has been in some markets, but “it’s still a great time to buy and we’ll be a net buyer.” Dan Hansen, CEO of Summit Hotel Properties; Ken Cruse, CEO of Sunstone Hotel Investors; Gary Mendell, CEO of HEI Hotels & Resorts; and Mit Shah, CEO of Noble Investment Group, all concurred with that sentiment during a panel discussion about mergers and acquisitions.

 

The panelists all expressed concern over the economy and Europe, but as Hansen said, “the runway looks good and we’ll proceed with a measured pace.”

 

Another factor in the expected surge of transactions is the recovering and “maturing debt market,” noted Mark Elliott, senior managing director of Hodges Ward Elliott. He said all traditional debt sources, from CMBS to banks to insurance companies, are active. The terms, spreads and cost of debt may not be what they were a few years ago, but financing is available.

 

The tidal wave of distressed deals hasn’t yet arrived, and may not, because it’s been “a more orderly recapitalization” than anyone expected, said Wolfe. Elliott added that extend and pretend has proven to work in many cases: “People aren’t panicking.”

 

If Jones Lang LaSalle Hotels’ forecast of $15 billion in hotel transactions this year is to happen, that means close to another $10 billion in deals is still to come.

 

“Based on the pace recorded thus far, the firm remains confident that the transaction volume forecast of up to $15 billion will be met as momentum in the market further accelerates,” Adler said.

USA Bio Fuel Causing Global Food Price Volatility A Growing Concern

Given the exceptional drought in the US, current crop conditions in other grain producing regions, and the resulting increase in international food prices, the World Bank today expressed concern for the impacts of this volatility on the world’s poor, who are highly vulnerable to increases in food prices.

 “When food prices rise sharply, families cope by pulling their kids out of school and eating cheaper, less nutritious food, which can have catastrophic life-long effects on the social, physical, and mental well being of millions of young people,” said World Bank Group President Jim Yong Kim.  “The World Bank and our partners are monitoring this situation closely so we can help governments put policies in place to help people better cope.”

 “In the short-term, measures such as school feeding programs, conditional cash transfers, and food-for-work programs can help to ease pressure on the poor,” continued Kim. “In the medium- to long-term, the world needs strong and stable policies and sustained investments in agriculture in poor countries.  We cannot allow short-term food-price spikes to have damaging long-term consequences for the world’s most poor and vulnerable.”

 Thus far, crop projections do not indicate the potential for actual shortages in the major grains; however, stocks are low, and the harvests will continue to be dependent upon global weather, which leaves prices more vulnerable to higher volatility.   

 Food price volatility creates unpredictability in the market and poses fundamental food security risks for consumers and governments.  Volatility also discourages needed investment in agriculture for development due to increased financial risks and uncertainty for producers and traders.

 While the prices of many food staples have risen sharply, the Bank noted that the current conditions differ from the 2008 crisis.  In 2008, while other grains increased in price, rice and wheat prices rose the most, although the price fell quite substantially in 2009 due to a notable supply response by farmers seeking to benefit from higher prices. In 2012, prices have risen across all the non-rice grains – wheat, corn and soybeans:

 •Wheat prices are up over 50 percent since mid-June;

•The price for corn has risen more than 45 percent since mid-June; and

•Soybeans are up almost 30 percent since the beginning of June and up almost 60 percent since the end of last year.

As recently as early June, analysts had expected price declines after the new harvests, not spikes. There had been early planting of corn and some soybeans in the United States, and the disastrous drought was unpredictable at that stage.  Price increases will affect not only bread and processed food, but also animal feed and ultimately the price of the meat.

 In 2008, the price of rice more than tripled, which had a huge negative impact on the poor, especially in Asia.  Although current rice prices remain at elevated levels, existing rice stocks are relatively comfortable.  In addition, current prices of crude oil, fertilizers and international freight are at lower levels than in 2008, which will both ease the costs of importing food, and also the sowing and growing of next season’s crop.

 The impact of the U.S. drought on global markets is exacerbated by other countries also currently suffering from weather-related production issues. Almost continuous rain is causing problems for the wheat crop in many European countries, whereas the wheat crops in Russia, Ukraine and Kazakhstan have been hit hard by a lack of rain.  In India, monsoon rainfall is about 20 percent below the long-term annual average. July is the critical planting month and there may be major negative implications if rains do not pick up. 

 Should the current situation escalate, the World Bank Group stands ready to assist client countries through measures such as increased agriculture and agriculture-related investment, policy advice, fast-track financing, the multi-donor Global Agriculture and Food Security Program, and risk management products. We are also coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with non-governmental organizations, as well as supporting the Partnership for Agricultural Market Information System (AMIS) to improve food market transparency and to help governments make informed responses to global food price spikes. 

 The World Bank has long cautioned that we can expect to see volatile, higher than average grain prices until at least 2015.  In the poorest countries, where people spend up to two-thirds of their daily income on food, rising prices are a threat to global growth and social stability. However, higher prices can bring desperately needed income to poor farmers, enabling them to invest, increase their production and thereby become part of the global food security solution.

 There are nearly one billion hungry people worldwide. More than 60 percent of the world’s hungry are women. Malnutrition contributes to infant, child and maternal illness; decreased learning capacity; lower productivity and higher mortality. One-third of all child deaths globally are attributed to under-nutrition, and up to 80 percent of our brain architecture develops during the first 1,000 days of life, making access to nutritious food critical, particularly for young children.

 How the World Bank is helping

 •In FY12, which ended June 30, new Bank Group commitments to agriculture and related sectors reached over $9 billion.  This exceeded projected lending in the Bank’s Agriculture Action Plan, which foresaw an increase from an average of $4.1 billion annually in FY06-08 to $6.2-$8.3 billion annually in FY10-12. IBRD/IDA assistance in FY12 was the highest in 20 years.

•In response to drought in the Horn of Africa, the WBG is providing $1.8 billion to save lives, improve social protection, and foster economic recovery and drought resilience.

•A first-of-its-kind risk management product provided by the IFC will enable protection from volatile food prices for farmers, food producers, and consumers in developing countries.

•The Bank is supporting the Global Agriculture and Food Security Program (GAFSP), set up by the WBG in April 2010 at G20’s request. Seven countries and the Gates Foundation have pledged about $1.2 billion over 3 years, with $752 million received.

•The Global Food Price Crisis Response Program (GFRP) has reached 40 million people in 47 countries – through $1.6 billion in emergency support. From July 2012 onwards the Bank’s emergency response is channeled through the International Development Association’s Crisis Response Window and the recently approved Immediate Response Mechanism that will provide basis for emergency assistance in the future. 

•The Scaling Up Nutrition (SUN) framework for action to address under-nutrition was endorsed by over 100 partners, including the World Bank.

•The WBG is coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with non-governmental organizations.

•Supporting the Partnership for Agricultural Market Information System (AMIS) to improve food market transparency and help governments make informed responses to global food price spikes.

•Advocacy for more investment in agriculture research — including through the Consultative Group on International Agriculture Research (CGIAR) – and monitoring agricultural trade to identify potential food shortages.

•Supporting improved nutrition among vulnerable groups through community nutrition programs aimed at increasing use of health services and improving care giving. As part of its response to the food crisis, the Bank has supported the provision of some 2.3 million school meals every day to children in low income countries.

•IFC will invest up to $1 billion in the Critical Commodities Finance Program, aimed to support trade in key agricultural and energy-related goods, to help reduce the risk of food and energy shortages, as well as improve food security for the world’s poorest

article source: http://www.worldbank.org/en/news/2012/07/30/food-price-volatility-growing-concern-world-bank-stands-ready-respond

National Housing Markets Improving Winston Rowe & Associates

August 6, 2012 – A total of 80 metropolitan statistical areas across 32 states and the District of Columbia were listed as improving housing markets on the National Association of Home Builders/First American Improving Markets Index (IMI) for August, released today.

This included 75 markets that retained their places on the list along with five new ones, while nine areas fell from the list due primarily to slight movements in house prices. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months.

The five metros that were added to the list this month include Miami and Palm Bay, Fla.; Hinesville, Ga.; Terre Haute, Ind.; and Lubbock, Texas. “The list of improving housing markets in August includes metros across every region of the country, all of which have distinctly different characteristics in terms of their economic and employment bases as well as other factors,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “One thing that most markets have in common, however, is the tight lending environment for both builders and buyers that continues to drag on their positive momentum.” “The fact that we continue to see a strong core of metros showing up on the improving list each month adds to the growing evidence that the emerging housing recovery has a solid foundation on which to build as housing returns to its traditional role of driving economic growth,” observed NAHB Chief Economist David Crowe. “With nearly one quarter of all U.S. metros currently designated as improving housing markets, there is growing recognition among consumers that now is an opportune time to consider a home purchase,” added Kurt Pfotenhauer, vice chairman at First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six months following those measures’ respective troughs before being included on the improving markets list.

Trump to Acquire Miami’s Doral Hotel for $150M

The Trump Organization has announced that it will purchase Miami’s iconic Doral Hotel & Country Club for $150 million.
KBS REIT Acquires 46-Acre Office Park Near Seattle for $78.7MMid-Year 2012 Commercial Real Estate Investment OutlookCMBS Market Active, But Volume Still Dashes HopesCapmark Financial Group Receives $1.55B Distribution From Capmark BankKilroy Realty Makes $79M Hollywood Acquisition More Latest News
This is Trump’s second major hotel acquisition this year. Earlier this month, Trump Hotel Collection was selected by the U.S. General Services Administration to be the developer of Washington, D.C.’s The Old Post Office. Trump International Hotel, The Old Post Office, Washington, D.C. is slated for a 2016 opening.
Doral is legendary for its four championship golf courses, including the Blue Monster, which has hosted a Professional Golf Association Tour event every year since its opening in 1959, the Doral Open from 1962 to 2006, and the World Golf Championship (WGC) since 2007; a 700-room resort; extensive ballrooms and meeting facilities; the Pritikin spa; and the Golf School.
The Trump Organization is planning a multimillion-dollar renovation, with the intention of restoring Doral to its former grandeur. The Trump Hotel Collection, the hotel management division of The Trump Organization, will assume the management of the property by next June. The property will remain fully operational throughout the renovation, which is expected to conclude in late 2013.
The nearly 800-acre Doral Country Club includes 700 hotel rooms in 10 lodges; four golf courses; more than 86,000 sq. ft. of meeting space, including a 25,000-sq.-ft. ballroom; a 50,000-sq.-ft. spa with 33 treatment rooms; six food and beverage outlets; extensive retail; and a private members’ clubhouse.
Renovation of the main building, lodges, conference areas, spa and Champions Pavilion is planned to set a new tone for the resort, and the Members’ Clubhouse will be redesigned to include upgraded facilities and amenities. All four golf courses will be upgraded, and the driving range will be lengthened and expanded to more than twice its current size.

“It would be impossible for a developer today to replicate a property of this size in Miami at any cost,” Donald J. Trump, chairman and president, said in a statement. “When Doral first opened, it was considered the best resort in the world. The combination of the property’s incredible location in the heart of Miami and our very significant investment in upgrading the resort will enable us to return Doral to its former glory, if not surpass it.”

Ivanka Trump, executive vice president of development and acquisitions, is overseeing the purchase, redevelopment and repositioning along with her father.

The Trump Organization has retained renowned golf course architect Gil Hanse to work directly with Donald J. Trump and the PGA Tour leadership to renovate the Blue Monster.

Mid-Year 2012 Commercial Real Estate Investment Outlook

Investor sentiment withstands latest headwinds Low job growth, recession in Europe barely dampen buyer appetites.
Investor confidence in the commercial real estate recovery has not been shaken by the latest jolt of economic uncertainty. Investors’ views of commercial real estate barely budged in the second quarter, according to results from the NREI/Marcus & Millichap Investor Sentiment Survey. The Investor Sentiment Index, which measures investor views on key fundamentals such as rising property values and plans to increase holdings, dipped just 2 points from 166 in first quarter to 164 in second quarter…

US STOCKS-Futures climb before payrolls report; 4-day slide may end

NEW YORK, Aug 3 (Reuters) – U.S. stock index futures rose on Friday ahead of key data on the U.S. labor market, indicating the S&P 500 may reverse a four-day losing streak.

The Labor Department releases the July employment report at 8:30 a.m (1230 GMT). U.S. employment probably only inched up in July as the economy struggled to regain momentum, strengthening expectations of additional monetary stimulus from the Federal Reserve. Non-farm payrolls likely rose 100,000 last month, according to a Reuters survey, after gaining 80,000 in June.

The S&P 500 index has fallen more than 1.5 percent this week as investor hopes for further stimulus measures from central banks were dampened and a trading error at market maker Knight Capital Group Inc on Wednesday dealt another blow to confidence in market structure.

“It’s sort of a bounce back from yesterday’s disappointing comments from Draghi,” said Cort Gwon, chief strategist at HudsonView Capital Management in New York.

“But a big disappointment in the jobs number will accelerate the timetable for the Fed to do some sort of additional liquidity or QE3-type situation, so bad news could be good news if the jobs number is pretty bad.”

The S&P 500 decline comes after the benchmark index saw its best two-day run of the year to close out the prior week as European Central Bank President Mario Draghi heightened expectations for more immediate action to contain the euro zone debt crisis when he pledged to do “whatever it takes” to save the euro. But on Thursday, he dashed hopes for quick rescue measures.

Knight Capital shares slumped 7.4 percent to $2.39 in premarket trade as the company fought for survival after a $440 million trading loss caused by a software glitch wiped out much of its capital. U.S. securities regulators are looking into the events surrounding the trading glitch.

S&P 500 futures rose 12.1 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 99 points, and Nasdaq 100 futures gained 26.5 points.

Other economic data expected later in the session includes the Institute for Supply Management’s July non-manufacturing index at 10 a.m. (1400 GMT). Economists in a Reuters survey forecast a reading of 52.0 versus 52.1 in June.

Dow component Procter & Gamble Co posted a drop in quarterly sales and said it would repurchase $4 billion worth of its shares this fiscal year.

LinkedIn Corp gained 8.3 percent to $101.25 in premarket after the professional networking site reported higher-than-expected revenue and raised its full-year outlook as it pocketed more money from subscribers, services aimed at businesses and advertising.

NYSE Euronext said new strategies and cost cuts should help the trans-Atlantic exchange return to growth next year after losses in its three main business lines forced quarterly income down a fifth.

According to Thomson Reuters data though Thursday morning, of the 385 in the S&P 500 that have reported results, 67 percent have reported earnings above analyst expectations. Over the past four quarters, 68 percent of companies beat estimates.

European stocks rose, erasing most of the previous day’s pullback and resuming a week-long rally as investors judged the European Central Bank remains committed to bold action to fight the debt crisis. The FTSEurofirst 300 index of top European shares was up 1.6 percent.

Asian shares fell as investors shunned risk after the European Central Bank took no immediate action and only hinted at future steps to tackle the euro zone’s fiscal woes, following similar inaction from the U.S. Federal Reserve.

CNBC Get Used to ‘New Norm’ of 6-7% US Jobless Rate

The jobless rate in the United States will never go back to where it was before the global financial crisis and people will have to get used to a “new normal” of 6-7 percent even if the economy starts revving up from where it is now, observers tell CNBC.

As the U.S. government prepares to release nonfarm payroll numbers for July on Friday, economists expect about 100,000 jobs created during the month and the unemployment rate to remain steady at 8.2 percent. 80,000 positions were added in June.

However, some investors say the consensus is too optimistic and higher structural unemployment is here to stay.

“We really have a fundamental change in the workforce,” Michael Yoshikami, Founder and CEO of Destination Wealth Management told CNBC Asia’s “Squawk Box” on Friday.

“We should have realized that the unemployment rate is simply not going to go back where it was and we should start realizing that there is a new normal and the real unemployment rate in the United States will be 6-7 percent, where the recovery is in full steam, rather than 4 percent.”

Nonetheless, he expects job growth to be positive albeit “very sluggish” going forward.

Patrick O’Keefe, Director of Economic Research with consulting firm J.H. Cohn, agrees that job growth is simply not as robust as it should be and that unemployment will be higher than normal. He estimates that 65,000 positions were added in July and that the public sector will also continue to shrink as municipal governments cut workers.

“With respect to the trend rate of both GDP growth and employment growth, we should be looking at a slower trend rate of growth in total output and a higher natural rate of unemployment, or full employment rate, if you will,” O’Keefe said. “When you look at the indicators of demand in the economy, the output measure, income measures, the economy here is decelerating and employers are very reluctant to take on additional workers.”

Most of the growth that we’ll see in the coming month, as was the case in June, will be in temporary and part-time positions, he added.

Fed Will Act on ‘Disastrous’ Jobs Number

The U.S. Federal Reserve conceded on Wednesday that the economy has “decelerated somewhat” but stopped short of offering new stimulus to spur growth. Fed officials nevertheless showed it was prepared to do more to support an ailing economy.

U.S. economic growth slowed to 1.5 percent in the second quarter as consumer spending faltered, and unemployment remains high. Job growth slowed sharply in the second quarter to just 75,000 jobs per month from 226,000 in the first quarter.

While the Fed may need to act to prop up the economy, it is also treading a fine line between injecting too much liquidity and doing enough to provide a boost to the labor market that, while is weakening, is not “disastrous,” Yoshikami of Destination said. The Fed is closely watching the jobs number but it will take more than a below-consensus number for the Fed to act, he added.

“What’s really an issue is how the Fed going to walk that fine line, if the number is 65, 70, 75 (thousand),” he said. “Yeah, it’s under consensus, but it’s not disastrous. A disastrous number is green light for Fed action.”

The Fed has already expanded its balance sheet twice since 2008, the first time in 2008 by $600 billion in new assets and new liabilities. The second round was in 2010 when it purchased $1.25 trillion of mortgage-backed securities in order to support the sagging mortgage market.

O’Keefe expressed doubts that anything the Fed can do this time round that will turn the economy and labor market around.

“Even if they have a trick up their sleeve which is going to do something other than increase the excess reserves which is already at record levels and drive down interest rates that are already at record lows, it’s very hard to see what’s in the monetary toolbox that can do anything in the short turn to turn around the rate of growth,” O’Keefe said.

And even if the number on Friday came in at 65,000, it may not warrant “immediate action” from the Fed because it is a small difference between 100,000 in a labor market of 133 million people. Data will have to deteriorate further.

http://finance.yahoo.com/news/used-normal-6-7-us-073429220.html

GM earnings top forecasts despite Europe woes

Earnings at General Motors fell sharply due to “headwinds” in Europe, but still easily topped forecasts.
The world’s largest automaker reported that profits were down 41% from a year ago to $1.5 billion, or 90 cents a share, in the second quarter. Still, that was well ahead of the 74 cents a share of profit that analysts were expecting, according to Thomson Reuters.
GM shares jumped as much as 5% in premarket trading immediately following the report, but gave up those gains after the European Central Bank failed to take action to spur the EU economy. Shares were slightly lower in late morning trading.
Total GM sales fell 5% to $37.6 billion, even as the number of vehicles sold worldwide edged up slightly. The revenue decline was due to a strengthening of the dollar compared to a year ago.
GM’s operating profit in North America slipped 13%. But the big hit to earnings came from Europe, where GM lost $361 million. It was profitable in Europe a year earlier.
Sales in Europe fell in the face of high unemployment and widespread recession related to the European sovereign debt crisis.
CEO Dan Akerson told analysts that the company is in talks with German unions about a new comprehensive agreement that will address productivity, costs and the company’s excess capacity. The agreement is expected to be in place this fall.
“In the past, we haven’t moved fast enough to fix the things [in Europe] we can control,” he said. “But that has changed.”
GM’s international unit, which includes operations in China and other countries outside of the Americas and Europe, reported that profits fell just 3% from a year ago. But GM’s South American business posted a narrow loss.
The economic funk in Europe has become the most serious problem for the global auto industry. Last month, Ford Motor reported a 57% plunge in profits in the second quarter due to mounting European losses.
While Toyota Motor earnings are expected to improve when it reports results Friday, that’s because its operations were greatly affected by damage from the Japanese earthquake and tsunami last year. Toyota is also likely to note weaker demand in Europe.
Of the major U.S. automakers, Chrysler Group is the only one that has not been hurt by Europe, despite being owned by Italian automaker Fiat. Chrysler has a limited European footprint, and saw second-quarter earnings that were sharply higher.
Still, GM and other automakers may also have to contend with a weakening U.S. economy for the rest of the year.
GM reported a bigger than expected drop in U.S. sales in July. It was a disappointing month industrywide for car sales, raising worries that consumers are pulling back after strong demand in the first half of the year.
GM didn’t announce any immediate changes to stem losses in Europe. Executives refused to give any guidance on how large losses will be during the rest of the year or how long they’ll continue, saying only that it remains a challenging environment.
“We clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America,” said Akerson.
GM recently shook up management of its European operations, naming vice chairman Stephen Girsky as the interim head of operations there. But the problems in Europe are deeply entrenched. GM estimates that it has lost $14 billion in Europe over the last 12 years.
Still, even with the problems in Europe and some softening demand for its cars at home, the results reported Thursday mark an impressive turnaround for a company that was in bankruptcy only three years ago and kept alive through a government bailout.
Thursday’s results marked the tenth straight quarter of profitability, a milestone GM had not achieved in more than a decade.

White House presses for Cybersecurity Act

The White House rolled out its cybersecurity A-team Wednesday for an on-the-record telephone conference, with reporters hearing an appeal for the Senate to pass the Cybersecurity Act of 2012 now being debated on the Senate floor.

John Brennan, assistant to the president for homeland security and counterterrorism, was joined by Keith Alexander, chief of U.S. Cyber Command and head of the National Security Agency, as well as Jane Holl Lute, deputy secretary at the Department of Homeland Security, and Eric Rosenbach, deputy assistant secretary of defense for cyberpolicy.

“The risks to our nation are real and immediate,” Brennan said, adding that the White House doesn’t see the legislation as a partisan issue, but rather a matter of national security.

Brennan said that if passed, the new legislation would give the government the three legislative elements it needs to fend off cyberattacks: new information sharing between the government and private industry, better protection of critical infrastructure like the power grid and water filtration facilities, and authority for the Department of Homeland Security to unite federal resources to lead the government’s cybersecurity team.

“First and foremost, we see that the threat is real and we need to act now,” said Alexander, who recently returned from a hacker convention in Las Vegas, where he urged the best and the brightest to put their skills to work for the government.

He stressed that the new legislation would enable the government to prevent an attack, not just respond to one, and said the FBI, DHS, Cyber Command and the NSA can unite as a team to do so. He said he believes the current legislation adequately addresses privacy and civil liberty concerns that critics have raised.

Lute added that the status quo is simply unacceptable and that the current DHS cyberteam receives a phone call every 90 seconds reporting a new intrusion.

Brennan said President Obama has received regular updates on the status of the legislation this week. The urgent appeal comes as Congress prepares to take its August recess Friday.

Can Congress get out of the economy’s way?

The Federal Reserve has made clear it’s standing down for now on more steps to aid the economy.

So the job is back to Congress.

The U.S. economy, of course, faces a lot of risks. But one of the biggest is Congress itself.

And it’s a risk that Federal Reserve Chairman Ben Bernanke has said repeatedly he can’t counteract if lawmakers fail to agree on how to lessen the impact of the fiscal cliff.

That cliff is made up of $7 trillion worth of tax increases and spending cuts set to start taking effect 5 months from now.

Economists have warned that letting those policies take effect in full could push the economy into a recession next year.

“[I]f no action were to be taken, the size of the fiscal cliff is such that there’s I think absolutely no chance that the Federal Reserve … could or would have any ability whatsoever to offset … that effect on the economy,” Bernanke said a few months ago.

This month he was equally blunt, noting it is not the Fed’s role to crack the whip on lawmakers to act fiscally responsible. “Congress is in charge here,” he said.

So is Congress taking charge? Lawmakers are trying to show that they’re taking charge.

Leaders from both parties have made much of two bipartisan deals reached this week that must still be approved by both chambers of Congress.

The first is an agreement to fund the government for the first six months of fiscal year 2013, which starts in October.

“This agreement reached between the Senate, the House and the White House provides stability for the coming months,” said Senate Majority Leader Harry Reid on Tuesday.

Except that it really won’t.

Sure, it would prevent the threat of a government shutdown. But it does nothing to address any of the measures of the fiscal cliff, except to establish the funding level from which the so-called sequester of spending cuts must be made. Other than that, “this deal doesn’t affect the sequester whatsoever,” said budget expert Stan Collender.

The measure won’t be voted on until lawmakers return from summer recess in September.

Then there’s the bipartisan deal cut Wednesday by the top Democrat and Republican on the Senate’s tax-writing committee. That deal will extend for a year many smaller tax breaks that are set to expire or already have, and it eliminates 25% of the “usual” tax extenders.

“This win shows we’re able to come together to tackle tough problems,” said Sen. Max Baucus, the committee chairman.

Ranking member Orrin Hatch described it as a “first step towards … tax reform that shows that there is a path to resolving the challenges we face as a nation.”

But as tough problems and first steps go, it’s not that hard or that big a leap to agree on extending many popular tax breaks and add the cost — an estimated $205 billion — to deficits.

In the meantime, the House this week had a predictable partisan debate over how to extend the Bush tax cuts — a major part of the fiscal cliff. The Republican-preferred version passed.

But it will go nowhere in the Senate, which went through the same exercise last week. The Senate passed the Democratic-preferred version, which will go nowhere in the House.

Then there’s the specter of the nearly $1 trillion in spending cuts — half in defense and half in non-defense — that neither party likes but which Congress has yet to seriously focus on replacing.

The House Armed Services Committee on Wednesday held a hearing to discuss how the Obama administration will direct federal agencies to plan for the cuts.

Some of the hearing stayed on point, but the rest devolved into a blame game.

First there was back-and-forth on who is to blame for the sequester in the first place. Then it switched to which party is to blame for holding up a Bush tax cut extension. And then finally conversation turned to who was to blame for turning the hearing on a very bipartisan issue into a partisan food fight.

About 365,000 people filed jobless claims in the week ended July 28, up 8,000 from the previous week

About 365,000 people filed jobless claims in the week ended July 28, up 8,000 from the previous week, the Department of Labor said Thursday.

Jobless claims are closely correlated with layoffs and are seen as a key gauge of the strength of the job market.

It’s unclear whether last week’s slight rise is a negative sign for the job market, given initial claims have been more volatile than usual lately. Economists often prefer to look at a four-week moving average to smooth out the volatility, and this measure has been falling.

Meanwhile, 3.3 million people filed for their second week of unemployment benefits or more in the week ended July 21, the most recent data available.

WSJ Low-paying jobs are here to stay

Some 28% of workers are expected to hold low-wage jobs in 2020, roughly the same percentage as in 2010, according to a study by the Economic Policy Institute.

The study defines low-paying jobs as those with wages at or below what full-time workers must earn to live above the poverty level for a family of four. In 2011, this was $23,005, or $11.06 an hour.

The economy won’t support much growth in jobs with higher salaries, said Rebecca Thiess, policy analyst at the left-leaning Economic Policy Institute, who crunched government data to come up with these projections.

“Far too many economic pundits take for granted that the economy of the future will demand far greater skills and credentials,” she wrote in a recent paper.

While all eyes are on Friday’s monthly jobs report to find out how many positions were added in July, a growing number of economists are concerned with the quality of the jobs being created.

Lower wage occupations grew by 3.2% over the year ending in the first quarter of 2011, according to the National Employment Law Project. This was fueled mainly by the expansion of retail salespeople, office clerks, cashiers, food prep workers and store clerks, whose median hourly wages ranged from $7.51 to $13.52.

Four of the five occupations with the highest concentration of low-salary jobs are set to grow by 2020. These include farming, personal care, building and grounds maintenance and health care support. All have at least 45% of their employees earning at or below so-called poverty wages.

Only food preparation jobs, which have the greatest share of low-wage workers at nearly 74%, are expected to shrink a bit.

And lousy paying jobs are getting even lousier, as their pay has fallen. Workers at this end of the pay scale actually found their wages shrank in recent years, according to NELP. Between early 2008 and early 2011, low-wage workers’ median pay contracted by 2.3%, more than double the rate of mid-wage employees.

Meanwhile, higher wage workers enjoyed a small increase in pay.

Mid-wage jobs, which were hit especially hard during the recession, expanded by only 1.2%. Higher-salary occupations declined by 1.2%.

The predominance of low-wage jobs is not good for either workers or the economy, said John Schmitt, a senior economist at the Center for Economic and Policy Research. These jobs often lack pension benefits and health insurance, as well as sick days and vacation time. There is also little path for advancement.

If workers are making low wages, they can’t afford to shop and prop up the American economy, he said. Around two-thirds of the economy is consumer spending.

Also, since low-wage workers are better educated now than they have been in the past, college may increasingly seem like a questionable expense.

 

2012 Manufacturing Report Winston Rowe & Associates

Detroit MI – Investors rejoiced over Europe last week. On Monday, they got back to worrying about the United States.

Stocks sank after a business group reported that American manufacturing shrank in June for the first time in almost three years. The Dow Jones industrial average ended down nine points to 12,871. The Standard & Poor’s 500 is up three to 1,366. The Nasdaq composite index is up 16 to 2,951

The government reported a sliver of good news: U.S. construction spending rose in May by 0.9 percent, the most in five months.

But that was not enough to soothe investors.

On Friday, the Dow gained 277 points and the S&P had its best day of the year after European leaders announced a plan to make bailouts easier for troubled banks. Monday brought a reminder of how badly Europe needs help: Unemployment in the 17 countries that use the euro is at the highest level since the euro was launched in 1999.

France’s auditors warned that the country still has a big budget hole to plug, Cyprus prepared for talks on a bailout, and the highest court in Germany announced it would hear arguments from people who want to block the rescue plan. Investors will also watch this week to see whether the European Central Bank cuts interest rates.

n the U.S., investors will get plenty of economic news. Car companies report sales today, retailers like Target and Macy’s report monthly sales on Thursday, and a closely watched report on U.S. jobs will be released Friday.

Leo Grohowski, chief investment officer of Bank of New York Mellon’s wealth management division, said he hoped for “two steps forward, one step back” improvement in the U.S. economy.

Grohowski expects swings in the market until the November U.S. election, or at least until Europe works out more certain plans about how to free itself from heavy debt.

“So many investors are saying, “Look, I can’t go a day without hearing about the ongoing problems in the eurozone,”‘ Grohowski said, “So that’s just taken its toll on (stock) levels.”

Elsewhere, China’s manufacturing grew at the slowest pace in seven months in June.

U.S. Consumer Confidence Fell on Job Outlook

U.S. consumer confidence fell in the second quarter of 2012 on concern for the economy and job security.

Nielsen, a global information and measurement company, said its index of U.S. consumer confidence fell five points in the period to 87. Its lowest point on record was 80 points in the first half of 2009. The company surveyed 500 people in the U.S. online from May 4 to May 21.

The top concern for U.S. consumers was the economy, with 42 percent citing it as their main worry. Concern for job security also increased from 18 to 22 percent. Concerns for debt, rising fuel and food prices decreased, the survey said.

“Given the dramatic slowdown in hiring which has been steadily falling since January, consumers are concerned that the economy is stalling again,” said James Russo, the vice president of Global Consumer Insights at Nielsen.

One in three respondents said they were optimistic for job prospects in the next six months, one in two were confident for personal finances, and one in three said it was a good time to buy things they want and need, according to the survey.

Survey shows Chinese manufacturing growth slips in June to slowest pace in 7 months

BEIJING, China – A survey shows China’s manufacturing grew in June by its slowest pace in seven months, raising questions about efforts to prevent the world’s second-biggest economy from slowing too quickly.

The state-affiliated China Federation of Logistics and Purchasing said Sunday that its purchasing managers’ index fell 0.2 percentage points to 50.2 per cent in June, just above the 50 level that signifies expansion. The index was at 50.4 in May and 53.3 in April.

The European debt crisis is pinching China’s export manufacturers, while moves to control property prices have chilled construction spending, with worries economic growth will fall below 8 per cent in the second quarter.

Although high by Western standards, that is weak compared with years of double-digit growth and points to concerns about imports from countries reliant on Chinese demand.

http://www.winstonrowe.com

Europeans Agree to Use Bailout Fund to Aid Banks

BRUSSELS — In the face of pressure from the embattled euro zone countries Italy and Spain, European leaders agreed early Friday to use the Continent’s bailout funds to recapitalize struggling banks directly, cheering financial markets but prompting unease in Germany, whose taxpayers may face more risk.

Jose Barroso, president of the European Commission, after leaders of the 17-nation euro zone agreed on a deal that would help banks without adding directly to the sovereign debt of countries.

Stocks and the euro opened strongly higher in Europe and were still rising through mid-afternoon — a clear suggestion that the summit, by breaking new ground, had exceeded expectations. Analysts cautioned that earlier summit agreements had prompted market rallies that proved short-lived.

The decision, by leaders of the 17-nation euro zone, would allow help to banks without adding directly to the sovereign debt of countries, which has been a problem for Spain and potentially for Italy. Both countries have seen the interest rates on their debt rise to levels that would be unsustainable in the long term, and the Italian and Spanish prime ministers, Mario Monti and Mariano Rajoy, came here to push their colleagues to help.

Though the German chancellor, Angela Merkel, made concessions, they came with conditions, and some of the detail remained unclear Friday, prompting calls for more clarity to be provided quickly.

The deal was struck after the Italian and Spanish leaders said they would block all other agreements — on a 130 billion euro or $163 billlion growth pact, for example — until their colleagues did something to help take the pressure off the third- and fourth-largest economies in the euro zone.

If their countries could not go to the markets to roll over their debt, Mr. Monti and Mr. Rajoy argued, there would be an existential threat to the euro in the short to medium term.

Spain is seeking 100 billion euros to recapitalize its banks, damaged by a property bubble.

Mr. Van Rompuy called the agreement a “breakthrough that banks can be recapitalized directly,” which represents a concession by northern European countries, including Germany.

As a condition, though, the leaders agreed that the euro zone’s permanent bailout fund, the 500 billion euro European Stability Mechanism, due to come into being next month, could act only after a banking supervisory body overseen by the European Central Bank had been set up. That should happen by the end of the year, Mr. Van Rompuy said.

François Hollande, the French president, said Friday that the agreement offered a number ways to give troubled economies the rapid assistance that they had been seeking.

“It’s very important that we put into motion procedures for immediate action — that was something much hoped for,” he said. “Bank supervision for a recapitalization of the banks will take a bit more time, but this is a move in the right direction.”

“To have defined a vision for the economic and monetary union” was a fundamental step toward answering the question “what we do we want to do together,” Mr. Hollande said.

Graham Neilson, chief investment strategist at Cairn Capital, an asset management and investment company in London, noted that while the agreement represented progress, some fundamental issues were not addressed.

“The burden of future risk is being shared more widely, meaning the chances of a euro zone breakup have been lowered for the short term,” he said. “But at the same time, the longer-term ante is higher for all involved and the root causes of the structural imbalances remain.”

Ms. Merkel has argued that risks could only be pooled among euro nations if decision-making on key issues were also shared. She insisted that the decisions in Brussels were based on Germany’s basic philosophy of how to solve the crisis, through a series of checks and balances, with rewards for meeting conditions that are governed by a strict set of controls.

Unease emerged in Berlin, however, over the extent to which the principles of the euro zone bailout fund, the E.S.M., had been altered from the original agreement that is to be put to vote in Parliament later Friday.

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Obama Care Supreme Court Vote Was 5 to 4 Winston Rowe & Associates

WASHINGTON — The Supreme Court on Thursday upheld President Obama’s health care overhaul law, saying its requirement that most Americans obtain insurance or pay a penalty was authorized by Congress’s power to levy taxes. The vote was 5 to 4, with Chief Justice John G. Roberts Jr. joining the court’s four more liberal members.

What’s Next for Health Care?

Watch a video roundtable, via Google+, about the Supreme Court’s decision on the Affordable Care Act.

The decision was a victory for Mr. Obama and Congressional Democrats, affirming the central legislative achievement of Mr. Obama’s presidency.

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” Chief Justice Roberts wrote in the majority opinion. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

At the same time, the court rejected the argument that the administration had pressed most vigorously in support of the law, that its individual mandate was justified by Congress’s power to regulate interstate commerce. The vote was again 5 to 4, but in this instance Chief Justice Roberts and the court’s four more conservative members were in agreement.

The court also substantially limited the law’s expansion of Medicaid, the joint federal-state program that provides health care to poor and disabled people. Seven justices agreed that Congress had exceeded its constitutional authority by coercing states into participating in the expansion by threatening them with the loss of existing federal payments.

Justice Anthony M. Kennedy, who had been thought to be the administration’s best hope to provide a fifth vote to uphold the law, joined three more conservative members in an unusual jointly written dissent that said the court should have struck down the entire law. The majority’s approach, he said from the bench, “amounts to a vast judicial overreaching.”

The court’s ruling was the most significant federalism decision since the New Deal and the most closely watched case since Bush v. Gore in 2000. It was a crucial milestone for the law, the Patient Protection and Affordable Care Act of 2010, allowing almost all — and perhaps, in the end, all — of its far-reaching changes to roll forward.

Mr. Obama welcomed the court’s decision on the health care law, which has inspired fierce protests, legal challenges and vows of repeal since it was passed. “Whatever the politics, today’s decision was a victory for people all over this country whose lives are more secure because of this law,” he said at the White House.

Republicans, though, used the occasion to attack it again.

“Obamacare was bad policy yesterday; it’s bad policy today,” Mitt Romney, the presumptive Republican presidential nominee, said in remarks near the Capitol. “Obamacare was bad law yesterday; it’s bad law today.” He, like Congressional Republicans, renewed his pledge to undo the law.

The historic decision, coming after three days of lively oral arguments in March and in the midst of a presidential campaign, drew intense attention across the nation. Outside the court, more than 1,000 people gathered — packing the sidewalk, playing music, chanting slogans — and a loud cheer went up as word spread that the law had been largely upheld. Chants of “Yes we can!” rang out, but the ruling also provoked disappointment among Tea Party supporters.  

In Loudoun County, Va., Angela Laws, 58, the owner of a cleaning service, said she and her fiancé were relieved at the news. “We laughed, and we shouted with joy and hugged each other,” she said, explaining that she had been unable to get insurance because of her diabetes and back problems until a provision in the health care law went into effect.

After months of uncertainty about the law’s fate, the court’s ruling provides some clarity — and perhaps an alert — to states, insurers, employers and consumers about what they are required to do by 2014, when much of the law comes into force.

The Obama administration had argued that the mandate was necessary because it allowed other provisions of the law to function: those overhauling the way insurance is sold and those preventing sick people from being denied or charged extra for insurance. The mandate’s supporters had said it was necessary to ensure that not only sick people but also healthy individuals would sign up for coverage, keeping insurance premiums more affordable.

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U.S first-quarter GDP growth stays at 1.9%

The U.S. economy’s growth rate was unchanged in the first quarter at 1.9%, but corporate profits fell for the first time in four years while expansion in exports was much smaller than originally estimated, the government said Thursday.

For the most part, the Commerce Department’s third and final review of first-quarter gross domestic product was little changed. The data show an economy that slowed noticeably from the 3.0% growth rate at the end of 2011, with few signs of momentum heading into the second quarter of an election year.

The biggest revisions took place in corporate profits, exports and imports.

The economy is in an “unfortunate place” and the Fed is likely to have to take more steps to boost activity, says Chicago Fed chief Charles Evans.

U.S. orders for durable goods up

Orders for long-lasting U.S. goods bounced back in May after two straight declines, as demand for aircraft and heavy machinery increased.

• Deal near on student loans, highway bill

• Fewer delinquent mortgages in first quarter

• Pending home sales climb to two-year high

• Confidence fades as outlooks dim

• Kellner: Fed, Treasury at cross purposes

• U.S. economic calendar

• Global economic calendar

• Columns: Nutting | Delamaide | Kellner

By contrast, corporate profits rose $16.8 billion in the fourth quarter.

Companies paid sharply higher taxes in the first quarter compared to the fourth quarter owing to the expiration of a investment-tax credit. Corporate taxes surged by $83.3 billion in the first quarter, compared with a decline of $700 million in the final three months of 2011.

Meanwhile, exports rose at a slower 4.2% rate in the first three months of 2012, in contrast to the government’s prior estimate of 7.2%. And imports climbed a smaller 2.7%, less than the earlier reading of 6.1%.

Also in the revised report, the Commerce Department said personal consumption expenditures rose by 2.5% in the first quarter instead of by 2.7% as previously reported. Disposable income climbed a faster 0.7%, outpacing a 0.4% prior estimate.

Economists surveyed by MarketWatch had been expecting GDP to be unchanged at 1.9%.

In a separate report Thursday, the Labor Department said initial claims for jobless benefits were little changed at 386,000 in the week ended June 23..

JPMorgan stock hit by report that loss could balloon to $9B – USA Today

NEW YORK (AP) – Shares of JPMorgan Chase (JPM) tumbled Thursday as a published report said the bank’s losses on a bad trade may reach as much as $9 billion — far higher than the estimated $2 billion loss disclosed last month.

JPMorgan Chase Chairman and CEO Jamie Dimon testifies at a congressional hearing in Washington, on June 19, 2012, about the firm’s trading loss.

JPMorgan Chase Chairman and CEO Jamie Dimon testifies at a congressional hearing in Washington, on June 19, 2012, about the firm’s trading loss.

Sponsored LinksThe company’s stock dropped $1.26, or 3.4%, to $35.52 in early trading. Its shares are down more than 12% since the bank disclosed the trading losses.

The New York Times story cites an internal report that JPMorgan made in April that showed the losses could reach $8 billion to $9 billion in a worst-case scenario. The newspaper went on to say that because JPMorgan has already been unwinding its positions, some expect the losses will not be more than $6 billion to $7 billion.

A JPMorgan representative declined to comment.

In May, JPMorgan said the loss came from trading in credit derivatives designed to hedge against financial risk, and not to make a profit for the New York bank.

The New York Times, citing sources it did not identify by name, said the losses have grown recently as JPMorgan has been unwinding its positions. The newspaper said its sources were current and former traders and executives at JPMorgan, which is the largest bank in the U.S. by assets.

At the time of the loss, JPMorgan CEO Jamie Dimon apologized to shareholders. And just days after the loss was disclosed, Chief Investment Officer Ina Drew left the company. Drew oversaw the trading group responsible for the trade.

JPMorgan has lost about $23 billion in market value since the losses came to light on May 10.

The loss has heightened concern that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis in the fall of 2008.

In a hearing before the House Financial Services Committee last week, Dimon was dismissive when asked if JPMorgan’s losses could total half a trillion or a trillion dollars. He replied bluntly: “Not unless the Earth is hit by the moon.”

While Dimon avoided putting an exact number on the bank’s trading loss, he did say JPMorgan will have a solidly profitable quarter. JPMorgan plans to give more details related to its losses when it reports second-quarter earnings on July 13..

Pensions weigh down automakers – and state Detroit News

Back when bankruptcy was considered a distant theoretical possibility for Detroit’s automakers and their promised pension payouts sacrosanct, Bill Ford Jr. frequently gigged his counterparts at General Motors Corp.

One line favored by the executive chairman of Ford Motor Co., usually delivered in the spirit of his trademark ribbing? That the world’s largest automaker was nothing more than a pension fund that happened to build cars and trucks on the side.

Turns out he was right — and a whole lot more. Because the dirty little secret of the promises undergirding the pensions expected by tens of thousands of retirees from the automakers, from municipalities and counties struggling to meet their obligations, is that times change, liabilities expand exponentially and the unthinkable becomes reality.

The struggle to match pension promises to millions of retirees amid times of soaring debt, intensifying competition, flatlining capital markets and, in the public sector, declining revenue is shaping up to be the inter-generational battle of our age. Arguably nowhere will that fight be more concentrated between pensioners and corporate executives, taxpayers and public-sector retirees, than here in southeast Michigan.

Everything has changed.

GM goes bankrupt and, with the help of American taxpayers, emerges with a lean balance sheet — not counting the $134 billion in pension liabilities to salaried and hourly employees around the world. Chrysler Group LLC goes bankrupt. Delphi Corp., the former GM parts unit, goes bankrupt, emerges and dumps its salaried pension plan on the quasi-governmental Pension Benefit Guaranty Corp., shafting thousands of retirees.

Even pensioners for Ford, who saw the Blue Oval stumble toward collapse before new leadership managed to avoid bankruptcy, now are faced with the kind of pension choices certain to generate heat, light, possible boycotts and a lot of potential lawsuits — proving that there are strict limits to the gauzy notion of the extended Ford family.

Ford is offering salaried pensioners a buyout or the option to stay within the Ford plan and expose themselves to all the risk, considering the past six years, that could imply. GM is offering 42,000 salaried retirees a choice between a lump-sum pension buyout or payments from an annuity administered by Prudential Insurance Co. in a bid to off-load $26 billion of its $36 billion salaried pension liability.

Automakers can generate cash by selling more cars and trucks, but public entities generally cannot without raising taxes or cutting services. Many cities, counties and school districts, technically barred by the state constitution from reneging on pension obligations, increasingly struggle to meet those obligations and provide decent services to taxpayers in an unsustainable balancing act.

This week, the city of Stockton, Calif., moved to become the largest city in the nation to file Chapter 9 bankruptcy because of the dismal California economy, punishing pension costs and other contractual obligations, the Associated Press reported. Wayne County’s pension fund is only 50 percent funded, and pension and health care obligations to Detroit’s public-sector retirees are north of $12 billion.

Those trends will not be easily reversed in a slow-growth economy plagued by global instability and weak leadership. Nor will public- and private-sector retirees idly accept any economic rationale that changes the rules after the game has been played.

That wasn’t part of the deal, they say, accurately. They planned their lives around the promise, however hollow it actually may have been. They looked forward to it, assumed it would be there, bargained that the trade-off for a working life of devotion would be repaid after the working was done.

That it may not be, at least not in the form they’d long expected, amounts to a maddening turn of betrayal that should be understandable on a human level. As easy as it may be for those outside the system looking in to ridicule an apparent sense of entitlement, the truth is that those folks and many before them were told repeatedly that they were entitled.

That was part of the deal — until it wasn’t. Retirees didn’t make the promises; union bargainers and company management did. Most retirees didn’t fail, at some grand strategic level, to see the changing competitive landscape or to understand clearly that exponentially expanding obligations would become impossible to honor; union bargainers and company management did.

In other words, people in authority on both sides of the tables public and private (willfully?) deceived themselves and the people who lived by their decisions. They made short-term decisions that could not be justified, financed or sustained over the medium and long term unless things stayed the same, which they seldom do.

On multiple occasions since 1995, GM pumped a total of $34 billion in cash and stock into its pension plans, spokesman Jim Cain said Wednesday. They include a $10.3 billion contribution in 1995; some $5 billion in Hughes Electronics tracking stock in 2000 and $3 billion more after the sale of Hughes in 2003; more than $13 billion in proceeds from a $17.6 billion bond issue, the largest ever at the time; and $2 billion in cash and stock over the last two years.

It wasn’t enough, and GM would need to pump another $25 billion into its pension plans — salaried, hourly and those outside the United States — to reach the elusive goal of being fully funded. Until they aren’t and the process begins again, which is why GM and Ford are trying to change the rules and sooner or later the public sector will have to try, too.

From The Detroit News: http://www.detroitnews.com/article/20120628/OPINION03/206280341#ixzz1z5y06fiG

Top 10 Predictions For The Global & US Economy Winston Rowe & Associates

1. The United States will probably avoid a recession. The good news is that US domestic risks have diminished somewhat, and growth momentum has picked up modestly. Consumers seem willing to spend and businesses are more disposed to hire—albeit cautiously. This means that over the next year US growth will average between 1.5% and 2.0%. In the near term, the Eurozone sovereign-debt crisis is the biggest threat to the US economy. The longer-term outlook is clouded by uncertainty over how America’s burgeoning sovereign-debt problem will be fixed.

2.  The Eurozone is headed for a second dip. All indications are that the Eurozone will suffer through a recession in 2012—a mild one if the region’s sovereign-debt problems are resolved, or a deep one if they are not. Fiscal austerity is in full swing, bank credit is tightening, and confidence is plummeting. With few exceptions, the Eurozone economies will see negative growth next year, with the region as whole contracting by about 0.7%—at best. Possible, though unlikely, is a much worse recession triggered by messy sovereign defaults or euro exits.

3. Asia will continue to outpace the rest of the world. While Asia will not be immune to a recession in the Eurozone, growth in the region will remain resilient and will continue to be the strongest in the world (around 5.5%), for a number of reasons. Japan’s post-earthquake rebound will help underpin the region’s exports, offsetting some of the weakness in sales to Europe. Chinese growth can be expected to hold up at around 8% and further bolster Asian growth prospects—provided China’s housing downturn does not evolve into something much worse. Last but not least, easing inflation will give all Asian governments more leeway to stimulate, if necessary.

4. Growth in other emerging markets will hold up, for the most part. The Eurozone crisis and recession will have a differential impact on the rest of the emerging world. Hardest hit will be Emerging Europe, because Western Europe is its most important export destination and also because the region is dominated by subsidiaries of Western European banks—all of which are tightening credit. Latin America and Africa are relatively more vulnerable to the United States and China. Barring a catastrophe in either economy or another plunge in commodity prices, the growth in these regions should hold up fairly well.

5. Commodity prices will (mostly) move sideways. During the coming year, commodity prices are likely to get pulled down by weaker global demand—and pushed up by limited excess capacity and continuing robust growth in key economies, such as China and India. The biggest demand-side risk is the possibility of a hard landing in China. Supply-side risks are commodity-specific. In the case of oil, markets are worried about an escalation of the conflict over Iran’s nuclear weapons program. That said, the most likely scenario is for the price of oil and other commodities to fluctuate around current levels.

6. Inflation will diminish almost everywhere. With world growth softening and commodity prices off their peaks, inflation in every region of the world will decline in 2012. The drop in inflation is likely to be the most pronounced in the developed world because of vast amounts of excess capacity in both labor and product markets. In the emerging world, the recent declines in food prices are having the biggest impact. Without a spike in oil or food prices—triggered by a geopolitical events or bad weather—the inflation picture in 2012 will be quite benign.

7. Monetary policy will either be on hold or ease further. Easing inflationary pressures and increasing anxiety about the growth outlook have changed the priorities of central banks worldwide. Central bank actions can be broadly categorized in three ways: 1) those with policy rates already near zero (e.g., the Federal Reserve, Bank of England and Bank of Japan) will stay there indefinitely (or at least for a couple more years), in some cases with further quantitative easing in 2012; 2) some central banks that had been raising interest rates have now stopped (e.g., the Reserve Bank of India); and 3) some that had been tightening are now easing (e.g., the European Central Bank and the People’s Bank of China).

8. Fiscal policy is set to become even tighter in the United States and Europe. Notwithstanding the standoff over deficit reduction in the US Congress, fiscal policy in the United States is already tightening. Federal government purchases will contract (after adjusting for inflation) over the next several years, acting as a major drag on growth. State and local spending is also expected to fall for at least another year. In Europe, not only are the most indebted countries (Greece, Ireland and Portugal) in the midst of tough austerity programs, but three of the four largest Eurozone countries (France, Italy and Spain) are being pressured to drastically cut budget deficits and sovereign-debt levels.

9. With the exception of the euro, the dollar will keep sliding. Economic fundamentals alone would suggest that the dollar should keep sliding against most currencies, especially those of emerging markets. Not only is the US current-account deficit still extremely large, but both growth and interest rate differentials favor emerging-market currencies. However, the dollar will likely appreciate against the euro in the near term—as long as the Eurozone crisis drags on—rising to around $1.25 by next spring. If the Eurozone suffers a financial meltdown, the euro could easily go to parity against the greenback. In such a scenario, the dollar would likely rise against most currencies, as it did in 2008.

10. Most of the risks to the outlook are on the downside. While there are many risks facing the global economy, two look particularly threatening over the next year. The first is the possibility of a financial meltdown in the Eurozone, with some countries exiting, or a messy default by one or more of the large Eurozone countries, especially Italy or Spain. Such a “Lehman moment” for Europe would likely push the global economy into recession. The second big risk is a sharp slowdown in China’s growth (say to 5%) triggered by a bursting of its real estate bubble. Such a scenario would have the biggest impact on the rest of Asia and commodity-exporting emerging markets.

2012 Inflation Report Winston Rowe & Associates

Consumer prices will increase slowly this year — by about 2%, measuring December 2012 over December 2011. With oil prices likely to rebound this fall, figure on a slightly higher pace of inflation in the second half of the year than in the first.

The 0.3% fall in the Consumer Price Index in May — the first monthly drop in two years — was due entirely to lower energy prices. Gasoline prices sank 6.8% during that month, and all energy was down 4.3%. Excluding energy prices, which can move sharply up or down from month to month, prices rose 0.2% in May, as consumers paid more for rent, autos, health care and clothing.

Though overall inflation is down sharply so far this year, core inflation, which excludes the two volatile components of energy and food prices, hasn’t fallen at all. Over the past 12 months, core inflation has risen 2.3% — the same yearly pace as in January. That’s a bit higher than the Federal Reserve likes to see, and will weigh on any decision the Fed makes about launching a new round of bond purchases to try to lower interest rates and spur economic growth. We look for core inflation to drop a bit over the summer, as lower energy prices lower production costs and filter through to other items, then to strengthen in the fall when energy prices rise again, ending the year at roughly 2.3%.

Nudging inflation up this year: Apparel prices, which will increase by 4%, and food prices, rising by about 3%. Price hikes will be modest for most groceries in 2012, except for peanut butter — retail prices for that school lunch staple will be up 30% or more this year after a poor peanut harvest in 2011. However, gasoline prices will fall further in the next few months before rising later in the year, ending 2012 down about 5% from December 2011. Natural gas prices, down 14% in the last year, will stay low, then rise a bit toward the heating season.

Interest Rate Report 2012 Winston Rowe & Associates

Extraordinarily low interest rates will continue until the end of 2012, then rise about half a percentage point in 2013. Slow economic growth in the U.S. and months more of uncertainty about the euro crisis will make Treasury debt a safe haven for investors, and their purchases will keep most U.S. interest rates from rising much above recent record lows for the rest of the year. Faster growth next year and inflationary pressure from America’s growing debt burden will raise rates moderately in 2013.

The Federal Reserve’s move to extend until the end of the year its efforts to lower interest rates won’t have much effect, with 30-year home mortgages already below 4% and near all-time record lows. But the Fed’s plan to continue replacing shorter-term debt with long-term debt will probably head off the rate increase we had expected later this year, pushing it into 2013. Faced with a slowing economy, the Fed opted to continue the more cautious course of bond swaps, rather than purchasing more debt, to assuage concerns that the central bank’s growing debt risks triggering runaway inflation.

The rate on 10-year Treasury bonds, a benchmark for mortgages, will remain at 2% or below in 2012 and then rise to 2.5% by mid-2013. Rates for 30-year home mortgages, which fell below 3.7% in June, will rise to about 4% by year-end and 4.5% in 2013. Mortgage rates will rise due to a modest recovery in the housing market, as demand for new home loans increases later this year.

Global Energy Outlook Winston Rowe & Associates

Keep an eye on Egypt. Oil prices are a good bet to spike as disputes over the election to replace former President Hosni Mubarak likely erupt into violence. Egypt isn’t a big oil seller but it controls the Suez Canal, the passageway for much of the region’s oil.

Beyond spikes in the near term, we look for West Texas Intermediate (WTI) crude oil — the benchmark for U.S. oil pricing — to get back to $90 to $95 per barrel early this fall.

Motorists this summer can expect a national average gasoline price of $3.50 or less a gallon as oil’s recent drop feeds through to refiners. In fact, regular unleaded could slip as far as $3.30 in the next few weeks. West Coast drivers, however, will continue to pay somewhat higher prices in the wake of refinery woes there.

Truckers and other consumers of diesel fuel can expect more relief, too. At $3.74 per gallon, diesel has edged down from its recent high. Again, prices should ease a bit more in coming weeks, though the decline will be milder than for gasoline because of tight global markets for distillate fuels such as diesel.

Meanwhile, natural gas will stay relatively low, despite production cutbacks by drillers — good news for consumers and businesses that rely on it for cooking or for the production of chemicals and other goods. Attempts by gas producers to whittle down the huge oversupply have perked up gas prices to about $2.53 per million British thermal units, from a recent low of $1.87. Rising demand from electric utilities that are switching from coal to gas to generate power should help prop up prices this summer, but abundant supplies should keep natural gas under $3.

The increased consumption by utilities also should trim stocks enough by fall to set the stage for modestly higher gas prices during the 2012-2013 heating season.

Winston Rowe & Associates Trade Deficit Report

The trade deficit will continue to rise in 2012, although at a slower pace than last year as the recent modest U.S. growth limits the rise in imports and a global slowdown cuts into gains for exporters. An expected 11% increase in this year’s trade deficit, after a 13.6% rise in 2011, reflects continued growth in consumer spending and a likely second-half slowdown in exports.

Despite the 5% drop in the monthly trade deficit for April, import and export levels for the month were the second highest on record. The trade deficit will grow again in coming months as the U.S. economy accelerates faster than some of its largest trading partners. The annual trade deficit will climb above the $600-billion mark at the end of the year, and is likely to be a drag on economic growth for the rest of the year.

We expect exports to increase by about 8% this year, despite a 0.8% drop in April. That’s slower than the 14% gain last year as recession in Europe zaps demand for U.S. goods. Exports to the 27-nation European Union — the U.S.’ largest trading partner — fell 11% in April. Europe is the destination for about one-fifth of U.S. exports.

Imports will grow about 9% this year, less than the 14% gain last year, led by strong demand for consumer goods and foreign autos. Largely a correction from record-high imports in March, declines in capital goods, computers and industrial supplies contributed to the $4.1 billion in imports from March to April. A decline in pharmaceutical imports, which are often volatile, also contributed to April’s result. The value of oil imports, down in April as prices fell, will pick up again as prices recover and gasoline demand ticks up in the summer driving season.