twentyfivedollarbill

Archive for January, 2012|Monthly archive page

Stocks: Investors welcome Europe’s fiscal pact

In Uncategorized on January 31, 2012 at 11:14 pm

premarkets, CNNMoney

Click the chart for more premarket data.

NEW YORK (CNNMoney) — U.S. stocks are poised for a higher open Tuesday, after European Union leaders agreed to strengthen a financial firewall and sign a fiscal pact.

World markets rose, and in the United States SP 500 (SPX), Dow Jones industrial average (INDU) and Nasdaq (COMP) futures were about 0.4% higher. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

During their meeting in Brussels,on Monday, European Union leaders agreed to implement the European Stability Mechanism, a permanent rescue fund, in July. The €500 billion ESM was originally set to enter into force next year, when a temporary bailout fund expires.

The leaders of all but two members of the 27-nation EU also agreed to sign a fiscal pact, which was designed to prevent governments from running excessive deficits and racking up unsustainable debts.

EU leaders back fiscal pact, bigger firewall

But the first summit of the year ended without new solutions for the debt crisis in Greece. Without a deal with private-sector creditors, the country jeopardizes its access to bailout funds, and might not be able to make a €14 billion debt payment that’s due March 20.

“There’s positive news coming out of Europe, but it’s still very tenuous with Greece,” said Jeffrey Phillips, chief investment officer of Rehmann Financial. “Every time we see something positive there, we seem to see it reverse in four or five days.”

Stateside, investors will be mulling quarterly results from companies including Exxon Mobil (XOM, Fortune 500), UPS (UPS, Fortune 500), Pfizer (PFE, Fortune 500) and Mattel (MAT, Fortune 500).

U.S. stocks recovered most of their lost ground Monday afternoon, but struggled to pull out of the red as concerns over Greece continued to weigh on the market.

World markets: European stocks posted solid gains in mid-day trading. Britain’s FTSE 100 (UKX) added 0.7%, the DAX (DAX) in Germany gained 1% and France’s CAC 40 (CAC40) climbed 1.5%.

Shares of European banks traded in the United States also rose in premarket trading. ING (ING) climbed about 4%, while Deutsche Bank (DB) and UBS (UBS) both gained more than 1%.

Meanwhile, Asian markets ended modestly higher. The Shanghai Composite (SHCOMP) ticked up 0.3%, the Hang Seng (HSI) in Hong Kong added 1.1% and Japan’s Nikkei (N225) rose 0.1%.

Economy: The Case-Shiller 20-city home price index showed home prices dropped 1.3% month-over-month in November.

Later in the day, the January edition of the Conference Board’s Consumer Confidence Index is also set for release, as is the Congressional Budget Office’s 10-year budget and economic outlook.

The Consumer Confidence Index is expected to hit 67 in January, up from 64.5 in the month prior, according to a survey of analysts by Briefing.com.

Companies: RadioShack (RSH, Fortune 500) shares plunged 29% in premarket trading, after the electronics retailer warned late Monday that its fourth quarter earnings will fall far short of expectations.

Exxon Mobil shares rose 0.3% in premarket trading, after the oil giant reported its quarterly earnings climbed to $9.4 billion on revenue of $121.6 billion.

Mattel shares rose 2.5% in premarket trading, after the toymaker beat Wall Street estimates on quarterly earnings and raised its annual dividend 35%. Worldwide sales of Barbie dolls, Hot Wheels and American Girl toys posted solid gains, although revenue overall fell short of analysts’ expectations.

Mattel’s top competitor, Hasbro (HAS), will release its corporate results Monday.

Pfizer was hurt in the fourth quarter by the loss of its patent for Lipitor, a drug for treating high cholesterol. But the drug maker still beat Wall Street expectations on earnings and revenue, sending its shares rising 1% in premarket trading.

UPS shares rose 0.5% in premarket trading, after the courier beat forecasts on earnings but fell short on revenue. In a statement, Kurt Kuehn, UPS’s chief financial officer, said the company expects 2012 to bring “mixed economic growth around the world.”

Following their quarterly reports, shares of McKesson (MCK, Fortune 500) rose 3.8%, Eli Lilly (LLY, Fortune 500) rose 3.2%, and McGraw-Hill Companies (MHP, Fortune 500) rose 2.5%. Agribusiness giant Archer-Daniels-Midland (ADM, Fortune 500) saw its shares slump 4.4%.

After the closing bell on Tuesday, online retailer Amazon (AMZN, Fortune 500) will report its results.

Currencies and commodities: The dollar fell against the euro and the British pound, but gained versus the Japanese yen.

Oil for March delivery gained $1.44 to $100.22 a barrel.

Gold futures for April delivery rose $7.60 to $1,741.90 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.88% from 1.84% late Monday.  To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/xBm8qcLx_qU/index.htm

American Airlines to lay out cuts to unions

In Uncategorized on January 31, 2012 at 11:14 pm

The union representing American Airlines maintenance workers believes the company is getting ready to shift some of the maintenance worker overseas in a cost-cutting move.

The union representing American Airlines maintenance workers believes the company is getting ready to shift some of the maintenance worker overseas in a cost-cutting move.

NEW YORK (CNNMoney) — American Airlines’ parent is meeting with its unions this week to lay out cost cuts it wants to implement as part of its bankruptcy reorganization — moves that could cost many of the company’s 81,000 workers their jobs and a portion of their pension benefits.

AMR Corp. said at the time of its Nov. 29 bankruptcy filing that it was forced to file because of the need to achieve a more competitive labor structure. Most other major U.S. airlines have already cut labor costs by their own trips through bankruptcy over the last 10 years.

Among the moves that American’s unions expect include having aircraft flown overseas to low-cost maintenance facilities for the extensive overhaul required for planes on a regular basis. Most U.S. airlines, including United Continental (UAL, Fortune 500), Southwest Airlines (LUV, Fortune 500) and Delta Air Lines (DAL, Fortune 500), already have costly maintenance performed at overseas facilities.

AMR (AAMRQ), which owns both American and feeder airline American Eagle, is the only major carrier to perform the work in-house at U.S. facilities.

“This is the dirty little secret of U.S. aviation. You don’t know where the plane that you’re flying was repaired,” said Jamie Horwitz, spokesman for the Transport Workers Union. “You assume standards are high for the person who works on your fuel line, but it doesn’t necessarily follow.”

The Transport Workers represent 11,000 mechanics at American and its feeder airline, American Eagle, as well as 15,000 other ground workers such as baggage handlers, plane cleaners and dispatchers. It is vowing to fight any company plans to shift work overseas.

“(On Wednesday) we get the bad news, but it’ll be the beginning of a prolonged battle,” said Horwitz.

Horwitz said there are two major American-owned facilities doing the heavy maintenance work — one in Tulsa, Okla., which has 6,500 union members, and another outside of Dallas with 2,200 union members.

Horwitz and industry experts say almost all other U.S. airlines already have outsourced regular overhaul maintenance required for aircraft to facilities in countries such as China, El Salvador and throughout South America.

Mike Boyd, an industry consultant, said U.S. maintenance workers are far more efficient performing the maintenance, but probably are paid three times as much.

“When you have very low wages in El Salvador or China, that’s very hard to compete with,” Boyd said.

Horwitz said the Transport Workers Union is hopeful it will be able to block any attempt by American to shift the heavy maintenance work overseas.

“We think the environment about creating jobs, keeping jobs, offshoring work to Third-World countries like El Salvador, it’s a much different issue today than in 2003 when other airlines went through bankruptcy,” he said. “We certainly would like to make it a major issue in Congress.”

The unions representing pilots and flight attendants previously said they’re prepared for the company to try to institute longer hours in a bid to increase productivity. American flight crews work shorter hours than their counterparts at other major carriers. That would likely cut the flight crew jobs as well.

AMR spokesman Tim Smith wouldn’t comment on what the company will lay out for the employees, saying it will be the start of a negotiating process.

“We need a competitive cost structure,” he said. “It doesn’t necessarily mean we get to that the way others have done.”

He also wouldn’t comment on whether the company will seek to move its pension plans, which it estimates are underfunded by $5 billion, to the Pension Benefit Guaranty Corp., a federal agency that protects the pensions of workers in private-sector retirement plans.

The Pension Benefit Guaranty Corp. has issued numerous statements since the American bankruptcy that it would seek to keep the airline from dumping its pensions on the agency, which is already facing a deficit of its own. The agency’s estimate is that the American pensions are underfunded by $10 billion.

If the company is successful in shifting its pensions to the agency, workers would likely lose promised retiree health-care benefits. Many, especially the pilots, would have their pension benefits slashed. To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/4lTI43UAZb0/index.htm

Exxon reports $9.4 billion profit

In Uncategorized on January 31, 2012 at 11:14 pm

Exxon stock

Click chart for more on XOM.

NEW YORK (CNNMoney) — Exxon reported a 2% rise in fourth-quarter earnings Tuesday as higher oil prices offset declining production volumes.

The largest U.S. oil company also defended its focus on natural gas, which is part of its plan to develop unconventional energy sources in the United States.

Prices for natural gas have remained in a deep slump, falling more than 25% in the fourth quarter.

David Rosenthal, the company’s vice president of investor relations, blamed mild winter weather and weak economic growth in Europe for cutting into demand.

But Exxon is optimistic about the future prospects for the fuel that’s used to heat buildings and generate electricity.

“We remain bullish on the future of natural gas as an energy source,” Rosenthal told analysts in a conference call. “Given the steep decline in conventional gas, unconventional gas will pay dominant roll going forward.”

Natural gas prices fell 8% Tuesday, while oil prices edged higher.

The biggest winners of Obama’s natural gas push

Before the market opened Tuesday, Exxon reported net income of $9.4 billion, or $1.97 a share, in the fourth quarter. That’s up from $9.25 billion, or $1.86 a share, in the same period in 2010.

Analysts were expecting earnings of $1.96 a share, according to a survey by Thomson Reuters.

Revenue rose 15% to $121.6 billion, the company said.

For the full year, Exxon earned $8.43 per share, in 2011. Analysts were expecting annual profits of $8.42 per share.

Shares of Exxon (XOM, Fortune 500) were down 2% in midday trading.

The results reflected higher oil prices, which jumped 25% in the quarter. But the industry has struggled to increase production as global oil supplies become more scarce.

Oil-equivalent production fell 9% in the fourth quarter, though it was up 1% for the full year.

Rosenthal said overall production was impacted by entitlement volumes, which reflect payments made to governments and other partners, and other quotas.

The company said earnings from oil exploration and production rose 18% to $8.8 billion in the quarter. But lower volumes and a negative impact from Exxon’s production mix reduced earnings by $1.4 billion.

Forget Iran, Iraq is threatening oil prices

Exxon said earnings from its oil and gas refining operations declined during the quarter, citing tighter profit margins. Earnings from the company’s chemicals business also declined.

Rival oil company Chevron (CVX, Fortune 500) reported a 3% decline in quarterly profits last week, as its oil and gas production fell to the lowest levels in years. ConocoPhilips (COP, Fortune 500) also reported declining production volumes, even as profits rose in the quarter.

On Saturday, Exxon announced plans to sell its stake in a Japanese refining business to TonenGeneral Sekiyu for $3.9 billion.  To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/bneI__jxhOI/index.htm

Home prices post steep decline in November

In Uncategorized on January 31, 2012 at 11:14 pm

chart-home-prices.top.gif

NEW YORK (CNNMoney) — Home prices posted a steep, month-over-month drop in November, falling 1.3%, according to the latest SP/Case-Shiller 20-city report. Prices fell in 19 of the 20 cities the index covers.

Prices are down 3.7% from a year ago, and off 32.8% since they peaked in the summer of 2006. The index is currently only 0.6% above its March, 2011 low.

“Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall,” said David Blitzer, spokesman for SP.

Phoenix, one of the hardest hit metro areas in the country, was the only place to record a gain in November. Prices there rose 0.6% month-over-month but are down 3.6% from a year ago.

Home prices in Chicago posted the steepest decline of any city on the index, falling 3.4% month-over-month. Atlanta prices were down 2.5% and Detroit prices fell 2.4%.

Has Obama’s housing policy failed?

The drop in home prices was more than housing bear Peter Morici, professor at the University of Maryland Smith School of Business, anticipated. He had forecast a 0.8% drop.

“We’ve had more robust sales activity in the housing market lately,” he said.

Morici thinks recent home price weakness stems at least partially from the fact that more sellers have accepted the weak market conditions and are putting their homes up for sale. Retirees and other home owners had postponed sales, trying to wait out the decline.

“Sooner or later, you have to get rid of that house,” he said.

Steal this house: 7 great foreclosure deals

Pat Newport, a housing market analyst for IHS Global Insight, agrees that’s part of the story.

“People are a lot more flexible on price than they were three years ago,” he said. “They’re willing to lower their asking prices to move their houses.”

He thinks a bigger contributor to the market malaise is sales of properties in foreclosure. Many homes sold these days are either short sales or homes that were repossessed from mortgage borrowers who could not pay their loans.

Foreclosures: America’s hardest hit neighborhoods

“That probably explains the steep declines in Atlanta,” said Newport. “That city has a large number of foreclosed properties.”

Atlanta continues to be a standout for price drops. Its 2.5% November fall followed a 5% drop in October, a 5.9% plunge in September and a 2.4% slide in August. It also posted the weakest annual return, down 11.8%.

Other poor performers over the 12 months ended in November were Las Vegas, where prices were hard hit by foreclosure sales and fell 9.1%, and Seattle, which recorded a 6.3% decline. Detroit, up 3.8% and Washington, with a gain of 0.5%, were the only cities in positive territory for the past 12 months.
 To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/ZuNoZPG_0FI/index.htm

Debt collector to pay $2.5 million penalty

In Uncategorized on January 31, 2012 at 11:14 pm

The FTC fined debt collector Asset Acceptance for $2.5 million.

The Federal Trade Commission fined debt collector Asset Acceptance for $2.5 million.

NEW YORK (CNNMoney) — The Federal Trade Commission has slapped a prominent debt collector with a $2.5 million penalty for misrepresenting its debt collection powers.

The FTC accused Asset Acceptance, a subsidiary of Asset Acceptance Capital Corp. (AACC), of making “a range of misrepresentations when trying to collect old debts.”

For now on, as a result of the settlement, the company’s debt collectors must inform debtors “whose debt may be too old to be legally enforceable” that the company cannot sue to collect the money, the FTC said in a statement Monday.

The FTC also said the settlement requires Asset Acceptance to investigate disputes when debtors dispute the accuracy of a debt. The company also isn’t allowed to include the debt on credit reports without alerting the affected debtors.

Debt collectors to the rescue

Asset Acceptance, based in Warren, Mich., announced in a news release that the settlement ends an FTC investigation stemming back to 2006 “without admission by Asset Acceptance of the FTC’s claims.” To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/C6ycvB9Fj_g/index.htm

Revive Made in USA? Easier said than done

In Uncategorized on January 31, 2012 at 11:14 pm

Matt Moman, an independent entrepreneur, is struggling to find a U.S. manufacturer to make his Corona  Extra Lime bottle openers.

Matt Moman, an independent entrepreneur, is struggling to find a U.S. manufacturer to make his Corona Extra Lime bottle openers.

NEW YORK (CNNMoney) — President Obama wants companies to manufacture their products in the United States, but small business owners say that’s about as easy as walking a minefield.

Building an American factory or partnering with one is fraught with challenges including higher labor and material costs, complex regulations and – in some states – a debilitated manufacturing infrastructure.

“The government and states have to support” small business more, said Mei Xu, owner of Chesapeake Bay Candles.

Xu, who is Chinese American, knows the hurdles well. She has imported her candles from China and Vietnam for 17 years. But she decided to open her first factory in Maryland last June because China was becoming too expensive.

In April 2009, she picked a 124,000-square-foot factory/warehouse off the I-695 Baltimore beltway in Maryland that once belonged to a liquor distributor and proceeded to rent it.

But consumer goods manufacturing had been dead for decades in the area; and the office of permits and licenses could not immediately tell her the proper codes for her manufacturing facility.

So Xu hired contractors and engineers to update the facility and bring it in compliance with fire codes. Then she had to apply for a permit and wait to be approved. That entire process delayed the factory’s opening by six months and cost her an additional $2 million.

“We didn’t pay that with a small business loan,” she said. “That came from our savings.”

Still, she’s not bitter. Her factory has created 50 new jobs in the area. And she hopes to grow that to 100 this year. “We’re trying to do the right thing and bring jobs back even though Made in USA is still more expensive,” she said.

Be a kick butt entrepreneur

Florida-based inventor and entrepreneur Matt Moman wants to produce his Chinese-made Corona Extra Lime bottle openers in the United States. But he doesn’t have the financial means to open a U.S. factory.

“It doesn’t make good business sense,” said Moman, who created the bottle opener in 2007. “I’m an inventor, not a manufacturer. Labor is still so much more expensive [in the United States]. I can’t do it.”

But finding a U.S. manufacturer willing to make his openers is proving difficult. He has reached out to two manufacturers in south Florida who were interested but told Moman that the quantity of openers he needs is too small for them, and they’d eventually lose money making them.

Meanwhile, Moman is losing money.

After he invented the opener, Moman snagged a licensing deal with Corona. Since then the item has done well in the United States, selling in stores, such as Walgreens (WAG, Fortune 500).

But rising labor costs in China have begun to eat into his revenues. And production delays have meant missed business opportunities.

“It took half a year for me to get my first delivery” of the lime bottle openers, said Moman. His latest frustration is tied to the production delay of football-shaped bottle openers he was hoping to get before the Super Bowl.

He placed the order last fall and it took three months for the same Chinese supplier to make them. “The earliest that I can now get them to retailers is at the end of February,” he said. “We missed the Super Bowl. That’s a huge miss for us.”

Having a domestic manufacturer would have sped up the process, he said.

RedNek Wine Glass makes $5 million in sales

If he finds an interested manufacturer “who sees the potential” in his products, Moman is willing to give a significant portion of shares in his company to the owner.

Plaid Enterprises, an Atlanta crafts company, manufactures most of its products in the United States, including its line of hobby paints.

“Plaid Enterprises would love to become 100% all-American,” said Leanne Melton, the company’s supply chain manager.

The hitch: The brushes and craft pieces made by U.S. companies are more expensive then the ones made in China.

Melton did succeed in finding a U.S. supplier of iron-ons — literally in the company’s backyard — after 12 years of importing that product from China. That supplier was just two miles from Plaid Enterprise’s Atlanta office.

“I couldn’t believe it,” she said. “They made the same items and their price was 40% less.” To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/oMz9xI_3xi8/index.htm

S&P, Dow wrap up best January in 21st century

In Uncategorized on January 31, 2012 at 11:14 pm

U.S. stocks

Click chart for more markets data.

NEW YORK (CNNMoney) — January offered up an apology to discouraged investors.

Unlike 2011, when markets spiked and sunk several hundred points each day but ultimately closed out the year relatively flat, all three indexes mostly climbed higher throughout the month with occasional dips.

The Nasdaq climbed 8% in January and the SP 500 and Dow each added 3.4% and 4.4%. Absent, so far in 2012, are the heart wrenching daily drops and pops in stocks.

Even with a choppy trading day Tuesday, it was the best January for the SP and Dow since 1997 and since 2001 for the Nasdaq.

Facebook: Bankers trade fees for bragging rights

U.S. stocks traded in a narrow range Tuesday, after worse-than-expected U.S. housing and manufacturing data tempered the modest enthusiasm over Europe’s progress on a new fiscal pact.

The Dow Jones industrial average (INDU) slid 21 points, or 0.2%.The SP 500 (SPX) shed 0.6 points, or 0.1%. The Nasdaq added 2 points, or or 0.1%.

Investors parsed through a mixed bag of earnings from Exxon Mobil (XOM, Fortune 500), UPS (UPS, Fortune 500), Pfizer (PFE, Fortune 500) and Mattell (MAT, Fortune 500). But weak reads on Midwest manufacturing and home prices were the main drivers pushing the market down from an initial boost.

Stocks got an early boost after European Union leaders agreed Monday to strengthen a financial firewall and most members of the 27-nation group will sign a new fiscal compact. But the first summit of the year ended without new solutions for the debt crisis in Greece.

Without a deal with private-sector creditors, the country jeopardizes its access to bailout funds, and might not be able to make a €14 billion debt payment that’s due March 20.

“There’s positive news coming out of Europe, but it’s still very tenuous with Greece,” said Jeffrey Phillips, chief investment officer of Rehmann Financial. “Every time we see something positive there, we seem to see it reverse in four or five days.”

EU leaders back fiscal pact, bigger firewall

U.S. stocks recovered most of their lost ground Monday afternoon.

World markets: European stocks closed posting solid gains. Britain’s FTSE 100 (UKX) added 0.8%, the DAX (DAX) in Germany gained 1.1% and France’s CAC 40 (CAC40) climbed 1.5%.

Meanwhile, Asian markets ended modestly higher. The Shanghai Composite (SHCOMP) ticked up 0.3%, the Hang Seng (HSI) in Hong Kong added 1.1% and Japan’s Nikkei (N225) rose 0.1%.

Economy: The Case-Shiller 20-city home price index showed home prices dropped 1.3% month-over-month in November.

Later in the day, the January edition of the Conference Board’s Consumer Confidence Index is set for release, as is the Congressional Budget Office’s 10-year budget and economic outlook.

The Consumer Confidence Index is expected to hit 67 in January, up from 64.5 in the month prior, according to a survey of analysts by Briefing.com.

Companies: RadioShack (RSH, Fortune 500) shares plunged 29%, after the electronics retailer warned late Monday that its fourth quarter earnings will fall far short of expectations.

Exxon Mobil shares dropped 2%, after the oil giant reported its quarterly earnings climbed to $9.4 billion on revenue of $121.6 billion.

Mattel shares closed up 1.3%, after the toymaker beat Wall Street estimates on quarterly earnings and raised its annual dividend 35%. Worldwide sales of Barbie dolls, Hot Wheels and American Girl toys posted solid gains, although revenue overall fell short of analysts’ expectations.

Mattel’s top competitor, Hasbro (HAS), will release its corporate results Monday.

Pfizer was hurt in the fourth quarter by the loss of its patent for Lipitor, a drug for treating high cholesterol. The drug maker beat Wall Street expectations on earnings and revenue, but its shares slide 1.3%

UPS shares dropped 0.9%, even though the courier beat forecasts on earnings but fell short on revenue. In a statement, Kurt Kuehn, UPS’s chief financial officer, said the company expects 2012 to bring “mixed economic growth around the world.”

Online retailer Amazon (AMZN, Fortune 500) reported results after the bell Tuesday, missing analysts’ estimates on revenues but beating profit expectations. Shares dropped nearly 9% in trading after the close.

Currencies and commodities: The dollar fell against the euro and the British pound, but gained versus the Japanese yen.

Oil for March delivery dropped 37 cents to $98.39 a barrel.

Gold futures for April delivery rose $7.40 to $1,740.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury moved higher, pushing the yield down to 1.80% from 1.84% late Monday.  To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/CvtrjI8hVEM/index.htm

Deficits to decrease

In Uncategorized on January 31, 2012 at 11:14 pm

chart-deficit-debt-forecast-2.top.gif

NEW YORK (CNNMoney) — Federal deficits are expected to fall over the next few years but then start to climb, pushing the nation’s accumulated debt to levels not seen since just after World War II, according to new estimates from the Congressional Budget Office released Tuesday.

A big driver of the deficits in the next decade is a series of costly tax and spending decisions that Congress is expected to make.

Those include making the Bush-era tax cuts permanent before they expire at the end of this year; permanently adjusting the Alternative Minimum Tax for inflation to protect the middle class from having to pay it; and permanently preventing a pay cut for Medicare doctors.

Another going assumption: Congress will not let $1.2 trillion in spending cuts mandated under law to take effect starting in 2013.

Under this so-called “alternative fiscal scenario,” the CBO notes, deficits would average 5.4% of gross domestic product between 2013 and 2022. In the absence of those policy decisions — that is, if lawmakers just adhered to current law — the average would be just 1.5%.

Bush tax cuts: The real endgame

In 2012, the CBO is forecasting a $1.1 trillion deficit, or 7.2% of GDP. That would be nearly two percentage points below last year’s deficit.

For years 2013 through 2017, the CBO estimates, deficits will range from $899 billion to $981 billion before climbing back over the $1 trillion mark.

All told, over the next decade the country would add nearly $11 trillion to the debt held by the public, which currently stands at roughly $10.5 trillion. That doesn’t include debt owed to government trust funds such as Social Security.

Nearly half of that new debt would result from increased interest costs.

Interest rates have remained very low, but the CBO expects them to increase as the economy recovers. That coupled with growth in the federal debt means the country will spend $5.3 trillion in interest over the next decade.

In 2022 alone, Uncle Sam would owe nearly $900 billion in interest, or 3.6% of GDP.

Fed to keep rates low until 2014

The CBO report underlines the importance of the fiscal decisions Congress must make this year.

Allowing all the tax cuts to expire and scheduled spending cuts take effect would slow economic growth and increase unemployment somewhat in the next two years, according to the report.

Conversely, if Congress extends the tax cuts and cancels the spending cuts the economy would do somewhat better in the near-term.

For example, the CBO estimates that under the alternative fiscal scenario, real GDP would be between 0.5% and 3.7% higher and unemployment would be between 0.3 to 1.8 percentage points lower in the fourth quarter of 2013.

But the economic effects would be reversed later on. More fiscal restraint now can improve the economy in the long run, while more looser fiscal policies today can be detrimental after a few years.

“Dramatic increases in taxes or cuts in spending … will tend to hold back the economy [in the near term],” CBO Director Douglas Elmendorf said in a briefing Tuesday. “At the same time, letting the debt skyrocket the way it does in the alternative scenario will ultimately be very, very damaging to the economy and unsupportable [in the long run].”

If lawmakers wanted to boost the economy now and still rein in debt over time, they would need to impose fiscal restraint more slowly, Elmendorf explained. Striking that balance, however, means making big changes from current policies by the end of the decade.

Translation: Lawmakers would need to raise more tax revenue, cut entitlement spending or do some combination of the two.

And there’s no advantage in waiting to make those tough choices, Elmendorf said.

“The longer that we wait as a country to make the sort of choices that we have to make, the harder it will be to make them because more debt will have accumulated, because people will then have less time to plan how they will react to these various changes.” To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/j8Vw87VOCXc/index.htm

Colbert super PAC rakes in $1 million

In Uncategorized on January 31, 2012 at 11:14 pm

Colbert super PAC reports $1 million in cash.

Colbert on the campaign trail.

NEW YORK (CNNMoney) — Stephen Colbert’s super PAC is working with some serious cash.

Americans For A Better Tomorrow, Tomorrow reported Tuesday that it has raised $1,023,121, according to a document filed with the Federal Election Commission.

An addendum to the disclosure contained language from Colbert that is not usually included in FEC reports.

“Yeah! How you like me now, F.E.C? I’m rolling seven digits deep! I got 99 problems but a non-connected independent-expenditure only committee ain’t one!” Colbert said.

The primary disclosure form, which runs through Dec. 31, lists donations of $825,475, which means Colbert raised almost $200,000 in the month of January alone.

In a statement posted to the super PAC’s website, Colbert said the money had been raised “in full accordance with the law.”

“It’s the way our founding fathers would have wanted it, if they had founded corporations instead of just a country,” Colbert said.

Most donations to the super PAC were under $250, but disclosure forms list some interesting donors who chose to give more. (Campaign finance the Stephen Colbert way.)

A $500 donation from Gavin Newsom, the Lieutenant Governor of California, is listed.

“I applaud Stephen Colbert exposing the absurdity of our current political financing system. I’m proud to support Colbert’s message with a donation. And I like his haircut,” Newsom said in a statement.

Adding a touch of star power, an actor named Bradley Whitford gave $250. It could not be immediately confirmed that the West Wing star did in fact donate.

A Rolling Stones tribute band called the Sticky Fingers Band gave $400. The band bills itself as “the greatest rock and roll tribute band in the world” on its website.

Colbert has spent the better part of a year using his show on Comedy Central to take viewers on a tour of the opaque world of campaign finance law. (Where the money is: A campaign spending primer.)

Armed with the ability to accept unlimited sums of money from corporations, unions, associations and individuals, Colbert’s super PAC has set about doing what other super PACs do: spending unlimited sums to overtly advocate for or against political candidates.

Americans for a Better Tomorrow, Tomorrow ran ads in advance of the Iowa straw poll touting the candidacy of “Rick Parry.”

And while Colbert hit the campaign trail in South Carolina, the super PAC ran ads that referred to Mitt Romney as “Mitt the ripper.”

“If Mitt Romney really believes corporations are people,” the ad said, “then Mitt Romney is a serial killer.”

In one episode, Colbert enlists his lawyer, Trevor Potter, to create a tax-exempt 501(c)(4) so that he can obtain secret donations in a “completely transparent” way.

“Can I take this (c)(4) money and donate it to my super PAC?” Colbert asked after signing paperwork that registered the shell corporation in Delaware. “You can,” Potter said.

The camera then cuts to Colbert, whose face displayed a look of total shock. “Wait,” Colbert said. “What is the difference between that and money laundering?”  To top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/c8nelToUXno/index.htm

Don’t outlive your savings: How annuities can help

In Uncategorized on January 31, 2012 at 11:14 pm

NEW YORK (CNNMoney) — Given advances in medicine, I’m worried my wife and I might outlive our retirement savings. I’ve started reading about annuities, but I’m confused about the difference between immediate annuities and another type I’ve heard referred to as a deferred income annuities. Can you explain the difference? — Daniel R.

Immediate annuities have been around since the days of the Romans, when someone with cash could purchase “annua,” or annual payments for life.

For the most part, immediate annuities work pretty much the same today (except the payments are usually monthly): You hand over a lump sum to an insurance company (or a financial services firm that represents the insurer) and in return you receive lifetime monthly payments, the size of which depends on the amount you invest, your age, gender and the prevailing level of interest rates.

Currently, a 65-year-old man investing $100,000 in an immediate annuity would receive payments of about $585 a month for life, while a woman would receive $540 or so (because women have a longer life expectancy).

There are a number of variations to this basic immediate annuity formula. If you want to be sure that the annuity payments will continue — not just for your lifetime, but as long as a spouse or other loved one is alive — you can choose a “joint-and-survivor” option. The trade-off is that the payment will be smaller than an immediate annuity for a single life.

But be aware that in return for the guarantee of lifetime payments, you typically give up all access to the money you put into the annuity. It’s no longer available for emergencies.

That said, in exchange for a smaller guaranteed payment, some immediate annuities will refund a portion of your money to your heirs if you die before you receive monthly payments equal to your original investment. I don’t think that option makes much sense, though, as it undermines the purpose of an annuity, which is to assure you have lifetime income.

You’re better off putting whatever money you want to leave to heirs — or have available for unexpected expenses — into more liquid assets like stocks, bonds or cash. And then go for the larger payment with whatever amount you decide to put into the annuity.

Best New Money Moves

As for the deferred income annuity you mention, it goes by many names. Some people refer to it as an advanced life delayed annuity. I’ve even heard people use the oxymoronic term “deferred immediate annuity” to describe it.

But the most frequently invoked name for this type of annuity is a longevity annuity, and it works as follows: You turn over a lump sum to the insurer just as with an immediate annuity. But unlike with an immediate annuity, the longevity annuity’s payments don’t start until much later, say 10 or 20 years down the road.

So, for example, a 65-year-old man who invests $50,000 in a longevity annuity that doesn’t make payments for 20 years would begin receiving $2,489 a month at age 85 for the rest of his life, while a 65-year-old woman would receive payments of $1,977, according to figures run by The Hartford.

By postponing the income for many years, you can protect yourself against outliving your dough late in life while devoting fewer of your assets to an annuity today. By assuring you’ll have something to fall back on later, it can also help you maximize your retirement spending — even if you run through all or most of your assets in the meantime.

Should I contribute to a traditional or Roth 401(k)?

The downside is that if you don’t live to 85, or whatever age you stipulate the payments to begin, you get nada. So if you think you might run through your other assets before you reach the age when the annuity’s payments start — or if you are uncomfortable with the idea that you could die before payments begin and so never see any of that dough — then a longevity annuity probably isn’t for you.

Some longevity annuities do have refund options, but their payments are lower and, in my opinion, erode the true value of such an annuity. For more on the pros and cons of longevity annuities — and why they’re better suited for taxable accounts or Roth IRAs, click here.

Ask the Help Desk your money questions

While an annuity’s payments are guaranteed, that guarantee depends in large part on the financial strength of the insurer issuing the annuity. State insurance guaranty associations also provide a safety net of sorts if an insurer fails, but the coverage guaranty associations offer varies from state to state.

There are a few simple steps you can take to reduce the chance of your annuity payments drying up in the future, which include diversifying your annuity stash among several insurers, limiting yourself to insurers that get high ratings from A.M. Best and other ratings firms and restricting the amount you invest with any single insurer to the maximum coverage offered by the guaranty association in your state.

I recommend you check out the Annuities section of our Ultimate Guide To Retirement as well as this MONEY Magazine story, which lays out a reasonable strategy for turning savings into reliable income for life.

Bottom line: Under the right circumstances, either of these may be able to help protect you against the risk of outliving your assets. Just be sure to take the time to understand and evaluate them before you decide to buy.

MONEY magazine is researching an article on ways to reduce the financial pain of college. We’re looking for families that can talk about new and creative ways that they’re raising cash for college and cutting costs while they’re there. Sound like you? Tell us your story and you might even get your picture in the magazine! E-mail Beth_Braverman@moneymail.comTo top of page

Article source: http://rss.cnn.com/~r/rss/money_latest/~3/LaGUXuVkefc/index.htm