Wednesday, January 13, 2010

Leftovers - 12/26/2009

We are still trying to catch up from the  Google Blogger hiccup with three Leftovers we need to post as well as several other posts we have been planning.

The Leftovers from 12/26 are:

The Chicago Fed President, Evans, said the economy will continue to grow  over the next five years, but unemployment will remain high and inflation tame.  Consequently, there will be no need for the Fed to change its low interest rate policy.  He said, "I think the focus is going to be on how the economy is playing out, how unemployment is coming down and whether or not inflationary pressures remain as as they currently are."

Federal estate tax changes remain pending in Congress with a bill in the Senate and a bill in the House with different provisions. Both maintain a $3.5 million exemption but one indexes for inflation (Senate) and the other does not. Both maintain a 45% top tax rate.  The Senate bill unifies the gift tax and estate tax exemption and offers portability of federal estate tax exemption between spouses.  The House bill prevents the switch from step-up basis to carryover basis.

Financial reform with respect to  fiduciary responsibility continues to be watered down by lobbyists who have been able to have broker dealer representatives not held responsible for their firms limited product line (does this also excuse the firms preference for products?) and this is consistent with the position of the CFP Board, which has been actively recruiting financial salespeople.  They are attempting to also have fiduciary responsibility limited to each transaction and not a an entire client relationship.  The CFP Board has wanted to be named the regulatory body, despite no one financial planning association being a dominant designation and the CFP requiring the least course work, experience, or education.  It appears FINRA may be the default regulator.  It needs to be the proposed Consumer Financial Protection Agency, but the lobbyists may be successful in getting it killed.

Small business bankruptcies in California are up 81%.

Geithner says banks need to lend to business for the economy to grow and strengthen.  Treasury wants TARP rules relaxed to allow small business lending -- wants to commit $30-40 billion -- but he wants it to go to large banks when it should go to local banks.  Geithner also said a double dip (he refused to use the actual phrase) is not going to happen, that it is completely within the capacity of the government  to revent, and the the government will do what is necessary to prevent it from happening..

Greece budget cuts will reduce their deficit in 2010 to 9.1% of GDP from 12.7%.

Russia's economy is estimated to grow 2.5-5.0% in 2010, but it is estimated to shrink 8.7% in 2009.

Latvia warned Sweden to resume lending to Latvia or risk choking off recovery in Latvia.

Japan's exports are up 4.9% November - the most is 7 years -- but down 6.2% vs year ago.  The jobless rate is up to 5.2% from 5.1%; consumer prices down 1.7% vs year ago (9th month down); household spending up 2.2% (4th month).

GMAC is reported to be in talks with Buffet to sell its residential mortgage company, Residential capital, which needs $250 million net worth to maintain loan compliance.

The 3rd largest radio company with 224 stations, Citadel Broadcasting, filed bankruptcy to restructure its hefty debt load.

Food prices in India rose 19% through mid-December.  It could boost inflation as overall growth accelerates.  A Central Bank interest rate hike is expected in April.

Lloyd's (45% UK owned) agreed to pay 3.6 billion over 15 years to raise 2 billion in capital by selling hybrid Tier 1 securities on December 15th.

AIG's CEO stopped the public offering of its worldwide casualty unit, Chartis, calling it a central holding for future growth of AIG.  Goldman Sach's selling of mortgage backed CDO's while shorting the same securities over a two year period is becoming more documented as investigators pry into the AIG bailout.

Upton Sinclair: "It is difficult to get a man to understand something, when his story depends upon his not understanding it."

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