Joseph Lazzaro
New York - http://
Joseph Lazzaro is a veteran financial editor with more than 10 years in financial news and financial publishing. Lazzaro served as Managing Editor of New York-based financial news web site WallStreetItalia.com / WallStreetEurope.com for four years. Lazzaro, who holds an ABD/Ph.D. in American Government and International Economics from the University of Connecticut, also served as a News Editor for the Pulitzer Prize-winning Hartford [Connecticut] Courant, prior to graduate school. He is based in New York.
Posted Oct 15th 2008 3:40PM by Joseph Lazzaro
Filed under: Indices, Technical Analysis, S and P 500, DJIA, Recession, Financial Crisis
Is it time to rein-in expectations regarding
the Dow? Indeed it is, if technical analysis and historical p/e ratios mean anything.
Those with visions of a Dow of 11,000 dancing inside their heads need to take a step back, for context and perspective, on the likelihood of a Dow push to that level in the near future.
The U.S. economy is in recession, it's shedding jobs, downward corporate earnings revisions are likely, and the world's major economic regions
are attempting to re-liquefy credit markets and prevent a global financial crisis from further damaging economies, worldwide.
The above, as CNN Talk Show Host Larry King would say, 'ain't exactly signs of prosperity.'
And the Dow has responded: down more than 30% since hitting its all-time high above 14,000 a year ago.
Keep your eye on 8,500 / 8,200 / 8,000Earlier in this space yours truly noted that the Dow had technical support at the 8,500 to 8,200 levels, and of course psychological support at 8,000.
Continue reading Reiterating modest expectations: Think holding Dow 8,000
Posted Oct 15th 2008 3:00PM by Joseph Lazzaro
Filed under: Politics, Presidential elections, Recession, Financial Crisis
With unemployment rising and the signs of slowdown all around, is a second tax rebate or second stimulus check from Congress up ahead?
The U.S. economy continues to slow. More than 800,000 jobs have been lost since the slowdown began about a year ago, and many economists say the lay-offs are likely to continue or even increase.
Meanwhile, the world's major industrialized nations are striving
to stabilize the global financial system and end a credit crunch that could further damage economies around the world.
Well, the answer to the question about a second stimulus check may very well rest on the answer to this one: Who are you voting for on
Election Day, November 4?Key factor: 2008 ElectionCongressional Democrats, led by House Speaker Nancy Pelosi, D-California, have vowed to push for a second stimulus package totaling up to $150 billion to help jump-start the anemic U.S. economy,
The San Francisco Chronicle reports.
Continue reading Is a second stimulus check up ahead?
Posted Oct 15th 2008 12:40PM by Joseph Lazzaro
Filed under: Commodities, Oil, Recession, Financial Crisis
OPEC again cut its forecast for 2009 global oil demand, the cartel announced Wednesday in its monthly report, raising the specter that hawkish cartel members will push for production cuts at a special meeting next month.
OPEC now believes (pdf) that 2009 global oil demand will increase by 800,000 barrels per day to 87.21 million barrels, compared to the previous forecast of a 900,000 barrel per day rise.
OPEC said its production in September averaged 32.16 million barrels per day, down about 310,000 from August.
Energy prices continue to fallEnergy prices retreated Wednesday on the news.
Oil fell $3.44 to $75.21 per barrel. The other major energy commodities also fell in early trading Wednesday, continuing their nearly month-long downtrend.
Heating oil fell about 5 cents to $2.20 per gallon,
unleaded gasoline declined about 8 cents to $1.80 per gallon, and
natural gas fell 7 cents to $6.66 per million BTUs.
In its report, OPEC said that even if governments are successful in unfreezing credit markets, the fallout in the real economy is expected to be considerable. The credit drag, combined with decelerating growth in both developed and developing world economies, will weigh on oil demand throughout 2009. OPEC has called a special meeting for November 18 to address what it argues is an oversupplied global oil market.
Continue reading Oil falls to $75 after OPEC cuts 2009 global oil demand forecast
Posted Oct 15th 2008 11:00AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Federal Reserve, Financial Crisis
The credit market thaw continues.
Interest rates for three-month loans in dollars fell again early Wednesday, after three major central banks offered lenders unlimited dollars for the first time.
The London three-month rate for dollars decreased 9 basis points to 4.55%,
Bloomberg News reported Wednesday. Meanwhile, a comparable euro rate dipped 5 basis points to 5.18% and the London interbank overnight rate, or LIBOR, fell 4 basis points to 2.14%.
The European Central Bank, Bank of England, and Swiss National Bank all offered lenders unlimited dollars for the first time,
Bloomberg News reported.
Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.
Coordinated dollar offering helpsEconomist Peter Dawson told BloggingStocks Wednesday the coordinated dollar offering, combined with Tuesday's $250 billion U.S. bank recapitalization by the U.S. Treasury, should keep short-term interest rates heading in the right direction: lower.
Continue reading Short-term interest rates drop further
Posted Oct 15th 2008 7:32AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Politics, Recession, Financial Crisis
As the United States, Europe and worlds other major economic powers
implement programs and policies to end a financial crisis that threatens to severely damage economies worldwide, a number of myths and misnomers -- some promoted by the current U.S. administration -- are being dispelled, and we'll review each in the months ahead.
BloggingStocks has asked economist David H. Wang, a colleague and friend of yours truly, to help dispel a few of these myths.
Wang approaches the economic scene from a unique perspective. Wang was born and raised in
Communist China for 22 years, before moving permanently to the United States in 1989 for graduate school, completing his Ph.D. in economics in 1995.
Myth: "The best thing government can do for business is get out of the way."Pretty thin argument here, Wang said. As the events of the last year demonstrate, government getting out of the way -- creating a no- / low- regulation banking sector and market -- can lead to very negative and in some cases disastrous results.
"Businesses in financial services and mortgage financing were permitted to have free rein over mortgages and mortgage finance," Wang said. "The market was the judge."
Continue reading The government should just get out of the way and other economic myths
Posted Oct 14th 2008 12:55PM by Joseph Lazzaro
Filed under: Forecasts, Bad news, Industry, Competitive strategy, Employees, Boeing Co (BA)
In the space of a short month, the financial universe has been reordered.
Europe and the United States have launched major interventions plans to stabilize the global financial system. China has cut interest rates and pledged to help further to normalize financial flows. The Treasury Secretary of Russia and the U.S. Treasury Secretary are negotiating with the same goal in mind.
There's even been progress on New York's Second Avenue Subway Line, second only to, perhaps, the Burma Road in the length of time needed to complete a public works project.
Meanwhile, in Seattle . . . Boeing and the union representing machinists remain at loggerheads over a new contract, with work idled since September 6.
The work stoppage is costing Boeing (NYSE: BA) about $100 million per day, Bloomberg News reported. Even worse, lack of progress toward a new contract with the International Association of Machinists and Aerospace Workers could ultimately cost both sides much more, says stock analyst C. Leonard Bauer.
"If the strike is not settled in a week it invariably will force another roll-out delay in the first 787 Dreamliners, and in other airplanes, which would be major operational setbacks for Boeing and the machinists," Bauer said. "We're talking purchase delays and order cancellations by airlines. That will both lower projected revenue and result in lost jobs." Bauer added that he does not have a rating on nor own shares in Boeing or any airplane manufacturer.
Continue reading Through it all, Boeing and machinists' union keep fighting
Posted Oct 14th 2008 12:35PM by Joseph Lazzaro
Filed under: Politics, Housing, Recession, Financial Crisis
Washington Post Business Columnist
Steven Pearlstein does not 'hold it all in,' as they say, regarding who he thinks is most to blame for the financial crisis.
Pearlstein cites the ineptitude of Wall Street and the nation's financial regulators. The crisis would have occurred whether Lehman Brothers was saved or not, because bad debt had overwhelmed the global financial system. A government intervention was inevitable, essential, and an act of leadership, in Pearlstein's view.
Conversely, Wall Street's top executives have shown little leadership, if any, he said. Their silence and invisibility throughout the crisis "attests to their moral and political bankruptcy," Pearlstein said, a perfect match for the financial bankruptcy they caused for investors, creditors, and customers.
Further, Pearlstein is particularly angered by Wall Street's top executives unwillingness to commit to a plan to enable borrowers to refinance mortgages into government guaranteed mortgages set at 85% of current market value of the property, and at the executives' utter lack of comment before the cameras, particularly regarding credit lines to businesses.
Political & Economic Analysis: Columnist Pearlstein clearly lays the blame for the financial crisis at the feet of Wall Street's top officials. Still, the mortgage process -- and the failure of a substantial portion of the subprime/Alt-A mortgage market -- involved many players: bank executives/lenders, mortgage brokers, appraisers, securitization specialists, ratings agencies, and borrowers.
Continue reading Pearlstein: Who to blame for the financial crisis
Posted Oct 14th 2008 11:09AM by Joseph Lazzaro
Filed under: Forecasts, Federal Reserve, Recession, Financial Crisis
The thaw in credit markets continues.
Interest rates for one-week loans in dollars fell considerably early Tuesday, after the United States Government announced it would invest $250 billion in banks, in a recapitalization plan that mirrors those announced by Europe's major powers on Monday.
The London one-week rate for dollar loans decreased 50 basis points to 4.08%,
Bloomberg News reported Tuesday. Meanwhile, the LIBOR-OIS spread, a gauge of cash demand, fell 14 basis points to 340 basis points. The TED spread, the difference between what banks and the U.S. Treasury pay to borrow money for three months, fell 12 basis points to 445.
Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.
Action seen further reducing banks' anxietyEconomist Peter Dawson told BloggingStocks Tuesday the actions taken this weekend and over the past two days by industrialized nations and their respective central banks will continue to loosen credit markets and decrease anxiety that's tightened the flow of money, globally.
Continue reading Short-term interest rates drop on U.S. bank rescue plan
Posted Oct 13th 2008 5:09PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Federal Reserve, Financial Crisis
Gosh. Golly. Gee Whiz.
That was the reaction Monday of traders and economists to the European Union's coordinated decision
to invest a staggering $2.4 trillion in interbank loan guarantees and bank recapitalizations, ft.com reported, to end the global financial crisis.
(Of course, 'gosh, golly' etc. were not exactly the reactions of traders and economists -- this is a family-appropriate financial blog -- but you get the point.)
Europe's decision sparked a global rally in stocks.
The Dow closed up 936.42 points -- the largest one-day point gain in its history -- to 9,387.61.
Europe takes the leadAt minimum, Europe is saying that its economic stake in the current global financial system is so large that it's willing to err on the side of over-committing public funds, economist Peter Dawson said.
"Europe's response is very large, unexpected, and it could prove to be the pivotal move in this crisis," Dawson said. "Europe appears to be saying, 'well the United States is doing what it can do, given its political constraints' now let's do what our political culture allows. Basically, Europe is saying 'the storm of fear starts to lose its strength here.' "
The measures were both sweeping and unprecedented in size and scope, Dawson said. Germany said it offered about $680 billion in loan guarantees and will invest $108 billion in its banking system,
ft.com reported. France said it would provide up to $435 billion in loan guarantees and invest as much as $52 billion. The United Kingdom has committed about $70 billion for investment in key banks, along with a guarantee for banks deposits and interbank lending. The Netherlands, Spain, and other nations announced similar plans.
Continue reading E.U. commits $2.4 trillion and says ball is now in your court, U.S.
Posted Oct 13th 2008 2:18PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Financial Crisis
One of the world's leading investors is expressing cautious optimism - - underscoring cautious - - regarding the fate of the global financial system.
Billionaire investor George Soros said Monday a pledge by European leaders to guarantee new bank financing is "a positive step" may help stabilize global financial markets,
Bloomberg News reported.
Soros: We're finally getting the leadership we need"In the last 72 hours, I think the European governments got religion and realized that this is a serious problem,'' Soros said at a press conference in Washington,
Bloomberg News reported. "People are looking for some leadership and finally they are getting it." Soros is chairman of the $20 billion Fund Management LLC.
Along with
actions by the major central banks to increase the supply of dollars in the global money supply, Europe's major industrialized nations announced fiscal policies to back bank-to-bank loans and recapitalize banks,
The New York Times reported Monday. Britain said it will invest $73 billion in its banks, Germany is investing up to 500 billion euros or about $680 billion, and France will create an agency to offer state guarantees for banks and to channel money to them.
Further, Soros underscored that the United States government must recapitalize solvent banks,
ft.com reported Monday. The U.S. said it intends to do that, but has not yet released details of its plan. Soros would like the U.S. government's recapitalization to take the form of preferred shares, which would dilute existing shareholders, but with private capital given the right to subscribe on the same terms, if private investors are able to put up more money,
ft.com reported.
Continue reading Soros sees ray of light in bank recapitalization plan
Posted Oct 13th 2008 11:15AM by Joseph Lazzaro
Filed under: International markets, Federal Reserve, Financial Crisis
Thus far, credit conditions remain a cold as
Rutland, Vermont on a January night, but there are hints of a thaw in the making.
Interest rates for three-month loans in dollars dipped Monday, after policy makers in the United States and Europe
offered unlimited dollar funds and Europe governments took actions to recapitalize and bolster banks.
The London three-month rate decreased 7 basis points to 4.75%,
Bloomberg News reported Monday. Also, the euro interbank offered rate, or Euribor, for one-week loans dropped 26 basis points to 4.37%.
Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.
Actions seen lowering banks' anxietyEconomist Peter Dawson told BloggingStocks Monday the actions taken this weekend and Monday by industrialized nations and their respective central banks will help loosen credit markets and decrease anxiety that's tightened the flow of money, globally.
"Central bank actions to supply dollars will help re-liquify the markets. I can't say if this one action will stop the pack-rat-like hoarding of dollars, but eventually players in the system are going to realize that no matter how many dollars they hoard, central banks have more to add," Dawson said. "Regarding fiscal policy, the guarantees by governments to banks will help reduce bank-to-bank fear that banks they lend to are insolvent, which should inch us back toward more-typical bank-to-bank lending."
Continue reading Short-term interest rates dip on U.S., Europe liquidity actions, bank rescues
Posted Oct 13th 2008 10:31AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Federal Reserve, Financial Crisis
The U.S. Federal Reserve is leading an unprecedented effort by major central banks to push dollars into the global financial system,
the Fed announced Monday, backstopping government fiscal policies to restore confidence,
The European Central Bank, Bank of England, and the Swiss Central Bank, will offer unlimited dollar fund auctions with maturities of seven days, 28 days, and 84 days at a fixed interest rate. The Bank of Japan may offer similar measures,
the Fed said.
The Fed added that "central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets."
Dollar falls on increased currency supplyThe dollar fell early Monday against the world's other major currencies on the news, as traders adjusted positions to the increased supply of dollars. The
dollar fell one half cent to $1.3615 versus the
euro, 1.5 cents to $1.7286 versus the
British pound and one-third yen to 100.37 versus
Japan's yen.
Economist Richard Felson told BloggingStocks Monday the major central banks' effort is clear: keep financial markets adequately supplied with dollars amid a world that's hoarding dollars.
"It's one of the paradoxes of this current global financial crisis that despite the fact that the crisis originated in the United States, banks and financial institutions around the world are hoarding dollars. The reason is the dollar is still the world's reserve currency and investors are engaging in a flight to safety. The consequence has been a credit crunch," Felson said. "The central banks' policy should help alleviate that crunch by ensuring that there's adequate dollar liquidity. It's the correct move."
Continue reading Fed, ECB lead effort to increase dollar supply in global markets
Posted Oct 12th 2008 9:10AM by Joseph Lazzaro
Filed under: Forecasts, Recession, Financial Crisis
U.S. investors have just experienced their worst point-loss week in history, as measured by the Dow, as the nation, and the world, implements policies to end the global financial crisis.
In times like these investors/readers turn to the likes of Warren Buffett or George Soros to analyze the financial and economic state of things.
However, today we turn to another trusted source for time-tested counsel, advise, and wisdom: Lawrence Peter "Yogi" Berra, retired Hall of Fame catcher for the New York Yankees, owner of 10 World Series championship rings, and author of 'yogiisms' -- incisive malapropisms that reveal eternal truths.
After Yogi came out of a hitting slump in the Yanks' pennant-winning season of 1952, a New York newspaper reporter asked Yogi if it was his bad knee that had caused the slump to start earlier that month.
"No it wasn't my knee, it was my head," Yogi replied. "Ninety percent of this game is half-mental."
Continue reading Yogi is right: Ninety percent of this (economics) game is half-mental
Posted Oct 11th 2008 6:10PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Recession, Financial Crisis
Readers of this space know that economist David H. Wang, a colleague and friend of yours truly, approaches the economic scene from a unique perspective.
Wang was born and raised in Communist China for 22 years, before moving permanently to the United States in 1989 for graduate school, completing his Ph.D. in economics in 1995.
Of course Wang still talks with family and friends in China, and right now there's this joke making the rounds in the great centers in Beijing and Shanghai.
Question: What's the difference between U.S. President George W. Bush and Chairman Mao?
Answer: Chairman Mao actually put some bankers in jail.
**
As officials and citizens in China, India, Russia, Brazil, and many other developing nations look on, the United States is attempting to end a financial crisis that threatens to severely damage economies worldwide.
In the process, Wang and other economists agree, a number of myths and misnomers -- some promoted by the current U.S. administration, are being dispelled, and we'll review each in the months ahead.
Continue reading Is the market always right?
Posted Oct 10th 2008 4:50PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Recession, Financial Crisis
Twenty five trillion dollars in global market capitalization wiped out. At least $500 billion -- and most likely in excess of $1 trillion added to the United States' national debt.
The Fed has loaned money to corporations, added massive liquidity to banks, cut interest, and the
U.S. Treasury may invest directly in private banks, if it doesn't nationalize them.
And the currency of the nation primarily responsible for the global financial crisis -- the dollar -- how has it fared?
The
dollar has been firm, for the most part, even rising against the
euro and
British pound. However, the dollar has fallen against
Japan's yen. As of Friday at 2:35 p.m. EDT, the dollar had risen 2 cents versus the euro to $1.3382 and 1.5 cents versus the pound to $1.6947, but had fallen one-half yen to 99.33.
Continue reading Despite stock rout and more U.S. debt, dollar is firm (so far), except vs yen
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