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 Dec 4th 2008 6:15PM by Joseph Lazzaro
Filed under: Forecasts, Newspapers, Politics, Recession, Financial Crisis
Beige book weakness, nationwide. Holiday retail sales tepid at best (so far). Business investment lackluster. And Friday yet another employment situation report from the good statisticians at the
U.S. Department of Labor. Consensus: the U.S. economy probably shed another 300,000 jobs in November.
A decade of descentOne can't say we weren't warned about the recession that we're now in - - not with the increased concentration of wealth and concomitant increase in poverty, lack of job creation, and wage stagnation that accompanied the recent economic expansion, to go along with excessive leverage, system-wide.
New York Times (NYSE:
NYT) columnist and Nobel Prize-winning economist
Paul Krugman provides a little perspective on how we got here and also offers some hope, regarding these trying economic times.
On the signals, or signs, some in economics, corporate, and public policy circles are suggesting that we didn't have any signs of economic trouble ahead. "Why weren't we warned?"
Ah, but you were warned,
Krugman said. And these warnings were ignored. Item: Clear signs of a housing bubble, after the dot-com bubble a decade earlier. Item: The implosion, and required dissolving of Long Term Capital Management in 1998 - - just one hedge fund, but one that nevertheless temporarily paralyzed credit markets, globally. Item: The near-universal belief in the market's ability to self-correct, self-police, and if need be, self-punish transgressors, when there was little case precedent to hold that mistaken notion. In sum, there were plenty of warnings, Krugman argues.
Continue reading NYT's Krugman: The financial and economic warning signs were there
Posted Dec 4th 2008 2:17PM by Joseph Lazzaro
Filed under: Industry, Ford Motor (F), General Motors (GM), Politics, Recession
The
Government Accountability Office, Congress' investigative arm and watchdog, said the U.S. Federal Reserve and the U.S. Treasury have the authority to bail-out the Big Three automakers,
marketwatch.com reported Thursday. Gene Dodaro, acting head of the GAO, said the Fed and Treasury could provide loans to the struggling U.S. automakers under an emergency loan designation.
The above ruling conflicts with the view of U.S. Treasury Secretary Henry Paulson, who has said that the $700 billion in TARP funds administered by the Treasury Department can only be used for financial companies.
However, Dodaro said the TARP legislation "is worded broadly enough" to allow Treasury to lend money to General Motors, Ford, and Chrysler, marketwatch.com reported.
Shares of
GM (NYSE:
GM) fell 33 cents to $4.57 while
Ford (NYSE:
F) fell 4 cents to $2.81 on Thursday at mid-day.
Continue reading GAO says Fed, Treasury have authority to rescue Big 3
Posted Dec 4th 2008 1:46PM by Joseph Lazzaro
Filed under: International markets, Commodities, Oil, Recession
If economist David H. Wang had predicted earlier this year that oil would fall to $40 per barrel in 2009, "I would have lost my reputation as an economist in standing," he said.
Or, "they would have probably said I was in need of 24-hour observation," he added.
Well, $40-per-barrel oil in 2009 doesn't appear to be that outlandish now. In fact, in the view of one research operation, it looks downright high.
Merrill Lynch said oil may fall below $25 per barrel in 2009 as a global recession takes hold,
Bloomberg News reported Thursday, reducing demand for the world's most important commodity.
The dreaded China slowdownEqually significant, the global recession may further slow China's economy, creating an even larger surplus in key commodities. Further, even though Merrill reiterated its November forecast that oil futures will average $50 per barrel in 2009, Wang said if China's GDP growth, currently in the 6-8% slows to 5% or below, all bets are off regarding commodity prices.
"Today's oil prices assume continued, solid, if not double-digit growth in China," Wang said. "If China's economy slows further, and we start see real year-over-year declines in oil consumption in China, not just cuts in the level of oil consumption growth, oil prices will fall well below $40 and that $25 forecast will come into view."
Oil dipped 44 cents to $46.35 per barrel in Thursday morning trading. Oil has fallen a stunning $100 since hitting a record high of $147.27 per barrel last summer.
Continue reading Merrill says oil may fall below $25 next year amid global recession
Posted Dec 4th 2008 9:48AM by Joseph Lazzaro
Filed under: Bad news, Employees, AT and T (T), Stocks to Buy, Recession
Telecommunications giant AT&T will cut 12,000 jobs to reduce expenses amid slowing business conditions, due to the U.S. recession,
the company announced Thursday.
The cuts amount to a 4% workforce reduction, and the company also said it will take a company-record $600 million charge in Q4 for severance expenses.
Shares of
AT&T (NYSE:
T) Wednesday closed up $1.04 to $29.08.
AT&T added that it also plans to cut spending in 2009, and will announce details of those cuts in January 2009, when it releases Q4 earnings results.
However, AT&T said it will continue to add jobs in its wireless, video, and broadband units.
Economist Richard Felson said the U.S. recession will hurt household formation, resulting in a likely decrease in AT&T's landline phone subscribers. Cell phone revenue will be affected as well, he said, but the revenue losses in this category will likely be limited to subscribers choosing cheaper mobile phone service packages and mobile phones.
Continue reading AT&T cuts 12,000 jobs, takes charge, but all in all doing pretty well
Posted Dec 4th 2008 9:33AM by Joseph Lazzaro
Filed under: Forecasts, Employees, Politics, Recession
Job layoffs are occurring across the economic spectrum. Home mortgage foreclosures are still at near-record highs. Consumers are paring-back spending. State government budgets are running increasingly in the red, even as they experience difficulties floating bonds. Business investment is at a tepid level. Concern about the dreaded 'deflationary scenario' are taking hold.
Amid the above, calls are growing for a $1 trillion fiscal stimulus that many economists say will be needed to reverse a negative cycle and get the U.S. economy on the sustainable growth track.
Prior to this month, the conventional wisdom in and around Washington was that the Obama Administration would pursue a $300-$500 billion fiscal stimulus package at the outset of the new administration.
But with payrolls plunging and housing and manufacturing showing little signs of life, the specter of large, ongoing rises in unemployment and a recession extending well into 2010 have changed the calculations.
Harvard economist Kenneth Rogoff, an advisor to Republican presidential candidate U.S. Sen. John McCain, R-Arizona, and Nobel Prize winning economist Joseph Stiglitz, who served in the Clinton Administration, are among those pushing for a $1 trillion stimulus package,
Bloomberg New reported Thursday.
Continue reading Calls growing for $1 trillion U.S. fiscal stimulus as recession worsens
Posted Dec 3rd 2008 5:34PM by Joseph Lazzaro
Filed under: Bad news, Financial Crisis
In another sign that the credit crunch has not disappeared, the Port Authority of New York and New Jersey
received no bids from investment banks to underwrite a taxable note offering.
The Port Authority was trying to sell $300 million worth of three-year notes, backed by revenue streams, Bloomberg News reported.
The Port Authority operates airports, river crossings, and certain transit systems in the New York metropolitan area and has a strong credit rating. The agency is also rebuilding the World Trade Center site, including the new
Freedom Tower.
Economist David H. Wang was apoplectic about the failed offering. "This is unbelievable," Wang said. "It's a ridiculous situation, frankly, and something has to be done to free-up these credit markets. This is the financial equivalent of Warren Buffett not being able to get a $20 million loan."
State, cities, and other taxing districts have had trouble selling bonds through advertised bidding, after institutional investors pared-back their appetite for fixed-income securities -- and just about every other asset class -- as the financial crisis intensified in September. In tandem, investment banks have balked at bidding for certain debt, sensing insufficient client demand, Wang said.
Continue reading No bids for Port Authority of NY/NJ bond offering shows credit crisis far from over
Posted Dec 3rd 2008 12:45PM by Joseph Lazzaro
Filed under: Forecasts, Politics, Recession, Financial Crisis
What's one reason for not jumping back in the market at this juncture?
Well, one could certainly cite end-of-the-year tax loss selling, which typically weighs on the market. Or
the battle for Dow 8,000 between institutional bulls and bears. Or the fact that the Dow's path of least resistance,
from a technical standpoint, remains down. (That's a major reason why the Dow drops so quickly: all that's required is a hedge fund manager to sneeze and the Dow drops 300 points, or so it seems.)
All of the above are valid reasons to remain on the sidelines.
Is Washington planning big changes?But perhaps the best reason to not deploy new capital is the new era itself. The United States is preparing for a new presidential administration and one gets the sense that there could be a series of seismic shifts up ahead -- shifts that will affect money, markets, investing, and business trends.
It's true that after the U.S. government's allocation, via loans, loan guarantees, or investments, of
about $8.2 trillion for the financial system, it's hard to picture shifts up ahead that could be as landscape-altering as those undertaken in the past year. But that could very well be the case nevertheless.
Those hoping for small change are likely to be disappointed. On January 20, President-elect Obama becomes
President Obama and he is
big change. U.S. Senator and now Secretary of State-designate Hillary Clinton, D-New York, was
small change, and we saw how the electorate responded to her candidacy. Voters were so adamant for economic change (and other changes) after the United States' decade of descent that they not only blamed the Republican Party, they rejected anyone with even a hint of being a part of the economic policy mistakes, including Clinton.
Continue reading Is this the best time to commit new money to stocks?
Posted Dec 3rd 2008 9:58AM by Joseph Lazzaro
Filed under: Bad news, Employees, Recession
Nonfarm private employment
decreased an enormous 250,000 in November (pdf) on a seasonally adjusted basis, ADP announced Wednesday.
Meanwhile, the October estimated change in employment was revised to a decrease of 179,000 jobs from the previously-announced decrease of 157,000 jobs.
While manufacturing employment fell 118,000 in November -- its 27th consecutive monthly decline -- the service sector of the economy lost 92,000 jobs -- its second consecutive monthly job loss, and the first back-to-back monthly job loss in that sector since November 2002.
Economist Richard Felson said the November ADP private sector report shows a U.S. economy with few strengths. "It is another distressing report. The fact that the service sector is now registering large job losses is bearish for the economy. Previously, the service sector had been the only sign of strength," Felson said. "Simply, the nation, and the other regions of the world need to create engines of growth to reverse this negative spiral of decreased demand, lower revenue, job losses, decreased demand."
Most of the decline in employment during November was accounted for by job losses at medium-sized companies, which registered a 130,000-job decline. Meanwhile, large businesses cut 41,000 jobs in November. Small businesses cut 79,000 jobs during the month.
Continue reading November payroll loss points to likely lower corporate revenue, earnings
Posted Dec 3rd 2008 8:58AM by Joseph Lazzaro
Filed under: Freep't McMoRan Copper (FCX), Commodities, Recession
Just call it another data point confirming the breadth and depth of the global economic slowdown. Freeport-McMoRan Wednesday suspended its dividend and cut production by 5% in 2009 and 11% in 2010, due to a sharp decline in prices,
the company announced (pdf).
Freeport said it will reduce capital spending by $1.2 billion, a gargantuan 50% reduction from its previous estimate for 2009 capital spending. The company also suspended its $2 annual dividend.
Shares of
Freeport (NYSE:
FCX) Tuesday closed up 91 cents to $21.82 amid a broader market rally, but are declining $4.02, or over 18%, in premarket trading (8:27 am).
For the cutbacks, Freeport cited a large decrease in key commodity prices stemming from declining demand. Copper prices have declined to an average price of $1.69 per pound in November, compared to a nine-month average of $3.61 per pound as of September. Molybdenum prices have decline to $9 per pound as of December, compared to about $30 per pound in mid-October.
Continue reading Freeport suspends dividend, cuts production on lower demand, prices
Posted Dec 2nd 2008 6:00PM by Joseph Lazzaro
Filed under: International markets, Commodities, Oil, Recession, Financial Crisis
History is repeating itself, at least in the oil market.
Once again, a miscalculation by
OPEC -- probably motivated by greed or rational self interest carried to its logical (but foolish) extension -- has resulted in almost the same set of market conditions that resulted when OPEC made the same mistake in 1990-1991.
Then, following the Persian Gulf War in 1990, OPEC increased production only grudgingly, in an attempt to hang onto sky-high oil prices of about $55-60 per barrel. (Or about $120 in today's dollars.) The result? A
U.S. recession and a consequent collapse in oil demand, and in oil's price: oil first fell below $40, then $30 on its way to trading below $13 per barrel in 1998.
Thirteen dollars a barrel in nineteen ninety-eight.Those who fail to learn from history...Fast forward to 2007. OPEC has an opportunity to at least slow, if not reverse the steady rise in oil prices, which were then testing
$90. However, despite the fact that oil shocks have preceded every U.S. recession since 1972, except the post-September 11, 2001 recession, OPEC does nothing.
In fact, as the price of oil continued to spiral
to dizzier and dizzier heights, OPEC meetings served as information dissemination opportunities to blame the rising price on anything but a lack of increased OPEC production: the weak dollar, geopolitical concerns, investors who view oil as a performing asset, and so on. In fact, what OPEC was doing during this phase of the oil cycle was, yet again, testing the limits of the market: i.e., to determine the maximum price the market could bear, in order to maximize revenue for oil-producing nations. Or, in other words, OPEC members were repeating the mistakes of 1990-1991.
Continue reading Once again, OPEC has killed the goose that lays the golden egg
Posted Dec 2nd 2008 3:05PM by Joseph Lazzaro
Filed under: Delta Air Lines (DAL)
Delta may still be ready when you are, but in 2009 they're not going to be as big.
Citing the global recession,
Delta (NYSE:
DAL)
announced that it will cut an additional 6-8% of capacity in 2009. The move will result in an up to 10% reduction in domestic capacity, when one includes the impact of previously-announced operational cuts. Delta also said it will eliminate an undetermined number of jobs.
Shares of
Delta (NYSE:
DAL) rose 52 cents to $8.48 on Tuesday at mid-day amid a broader market rally.
Delta, which recently merged with Northwest to become the world's largest airline, said it will offer "voluntary programs" to decrease the size of its workforce. Delta President Ed Bastian called the cuts "dramatic" and said total seat capacity, domestic and international, over the two-year, 2008-2009 period, will be reduced by 20% -- a required step, due to the downturn in both business and leisure travel,
The Wall Street Journal reported.Continue reading Delta to cut capacity by up to 8% in 2009, plans 'voluntary' job cuts
Posted Dec 2nd 2008 1:20PM by Joseph Lazzaro
Filed under: Forecasts, Recession, Financial Crisis
A journalism professor of yours truly, Jon Sandberg, who also served in key positions for several Connecticut governors, had an interesting technique that he frequently deployed in seminars. A student would pose a question and Sandberg would say, "That's a good question. Is it acceptable and ethical to publish information that you know would show ethical and other lapses by the current president, if you know that information would also harm innocent individuals?
That's a good question."Then Sandberg would grab his cup of coffee and walk to the window side of the classroom, and stare out the window, sipping his coffee, saying nothing, for an eternity. Eventually, a student or two would begin the discussion.
What's a good question for today? Maybe this: where have all the consumers gone
in the U.S. economy? BloggingStocks had a chance to grill economist Peter Dawson on the matter, and he has a few theories.
The first concerns
structural and technological factors, he said. The U.S. is in the midst of adjusting to globalization, which, as most investors know, has resulted in the transfer of millions of good-paying U.S. jobs overseas to lower-cost centers. "The U.S. has also gained some jobs from globalization, but the net is still a major loss of good-paying jobs in the United States," Dawson said. "Some economists argue that's at the root of declining consumption. We are net-negative in the good-paying jobs category, so far, in globalization, and there simply aren't enough citizens with incomes adequate to buy the products."
Continue reading Where have all the consumers gone?
Posted Dec 2nd 2008 11:41AM by Joseph Lazzaro
Filed under: Forecasts, Recession, Financial Crisis
A good rule for a forward-thinking executive to observe is never go anywhere -- at least don't walk into any meeting -- without the latest projections or models for the U.S. economy for the year ahead.
How's the U.S. economy likely to perform in the year ahead? Well, here are the summaries of economist David H. Wang's models based on predetermined values for 20 proprietary variables.
Realignment: This forecast assumes a modest $200-400 billion fiscal stimulus, a $70-80 a barrel oil price, record / near-record home mortgage foreclosures, along with efforts to realign U.S. energy policy, and reductions in health care spending accompanying national health care legislation. In this model unemployment rises to 9.5% and the recovery does not begin until Q4 2010. (That's correct: Q4
2010.)
Elongated: This model assumes a modest $200-400 billion fiscal stimulus and a $60 a barrel average oil price, with another year of record / near-record home mortgage foreclosures. Unemployment rises to 9.0%, and the economic recovery does not begin until late Q2 / early Q3 2010.
Steady-state: This model assumes about $500 billion in fiscal stimulus and a $60 a barrel average oil price, among other factors, that limits the recession's depth slightly. Unemployment still rises to 8.0% from the current 6.5%, but the economic recovery begins in early 2010.
Continue reading Outcome for the U.S. economy depends mostly on fiscal stimulus
Posted Dec 1st 2008 3:25PM by Joseph Lazzaro
Filed under: Federal Reserve, Recession, Financial Crisis
U.S. Federal Reserve Chairman Ben Bernanke Monday provided the markets with his latest -- and strongest -- hint about new plans to counteract both the credit crunch and the U.S. recession. Now it looks like the Fed may buy Treasury notes and bonds, and/or agency bonds, in an effort to push interest rates even lower and "spur aggregate demand."
"Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve's quiver -- the provision of liquidity -- remains effective," Bernanke said in
a speech Monday in Texas. "The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand."
Fed deploying unconventional toolsBernanke's comments are the Fed's latest hint that the world's most powerful central bank will deploy a 'new tool box' and unconventional techniques that Bernanke has previously said most likely would be needed to help the nation cope with its most serious financial crisis since the
Great Depression.Moreover, although the potential actions announced Monday technically are not quantitative easing, they will have that effect, says economist David H. Wang. Quantitative easing involves increasing the reserves in the banking system after the Fed loses the ability to lower the cost of money from an interest rate standpoint.
Continue reading Fed's Bernanke: Fed may buy Treasuries, agency bonds to stimulate economy
Posted Dec 1st 2008 2:55PM by Joseph Lazzaro
Filed under: Forecasts, Other issues
"My Maserati does one eighty five,
I lost my license, now I don't drive."
-- "Life's Been Good," Joe Walsh
U.S. auto sales most likely will register yet another year-over-year decline when Big Three auto manufacturers report November sales on Tuesday.
But that's not to say that all segments of the auto market are in free-fall, revenue wise: sales of many high-end or luxury cars are doing just fine. Sales of many high-end luxury cars are flat or down just slightly this year, in contrast to double-digit declines seen in typical vehicle categories.
Ferrari's U.S. sales are down just 3%, Mazerati's sales are up 10%, and Rolls-Royce's sales have risen an eye-opening 32%, according to data collected by Autodata.
It's been a great decade . . . for the gentry
Economist David H. Wang said the luxury car statistics are consistent with a macro-consumption theme pervasive throughout the decade: for the most part, luxury brands and super-exclusive brands did well.
"One thing the decade's economic policies did accomplish was a substantial increase in wealth among upper income groups, especially the already wealthy and the super rich. Most people earning more than $300,000 a year have had their best decade ever," Wang said. "That's been very good for luxury product sales, like luxury cars, luxury homes, fine art, jewelry, and vacation homes. Unfortunately, the decade's income and wealth gains at the high end doesn't mean too much for broad-based consumer demand, and for the overall U.S. economy." Wang added that he does not have a rating on or an investment stake in any auto manufacturer.
Continue reading Auto sales slumping? Not if you're a Maserati dealer
Next Page >
Viacom cutting jobs to cope with recession, but it needs to do more
Before the bell: Futures lower ahead of jobs report
Best & Worst in Money 2008: Most shocking financial collapse
