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Featured Advisor



Asset Preservation Advisors




City:Atlanta

State: GA



BIOGRAPHY:
APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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News Analysis for March 3, 2011

 

There are conflicting reports about today's upcoming jobs report. The Associated Press and USA Today report that ADP indicates that private companies added jobs in February and anticipate the unemployment rate to drop. In contrast, Bloomberg reports that based on the ongoing Challenger, Gray and Christmas surveys, February had more job cuts than the same month last year. Planned firings increased 20% and job cuts are also expected at the federal level due to budget cuts. Estimates are that unemployment will increase to 9.1% and that this will continue to be a challenge. Consumer spending is anticipated to slow with the increased price of gasoline leading to additional job cuts.

Bloomberg, along with several other media outlets, reports that world food prices have risen to their highest records with an anticipation that grain costs will continue to rise. Wheat rose 58% in February and corn rose 87% according to the Chicago Board of Trade. Rice rose only 6.5% and is credited with keeping the world out of a food crisis. Higher food costs are believed to have contributed to the unrest in the Middles East. The article states that food production needs to climb 70% between 2010 and 2050 to feed that anticipated 9 billion people. As the population and income levels increase, meat and dairy products are expected to climb. Today rice is the primary food for almost half of the world's population .

Increasing food costs may be caused somewhat by the spread of the wheat rust disease described by USA Today. This disease ruins crops and is spreading across the Middle East, Africa and Asia. The U.S. fought this disease in the 1950's when almost 60% of crops were destroyed. The belief was that improved wheat plants have been able to virtually eradicate the disease. The U.S. Department of Agriculture is closely watching the spread of this disease. There is fear that it can travel on airplanes through clothing or even via the jet stream.

The Treasury Department oversaw the sale of $6.3 billion of MetLife stock from AIG's portfolio, according to USA Today and the Wall Street Journal. This sale will be used to assist in repaying federal bailout money. The AIG bailout was approximately $18.2 billion. The Treasury Department currently owns 92% of AIG shares. It is expected to begin selling shares in March.

The SEC is reviewing the commercial loan portfolios of many regional and community banks. The concern, according to the Wall Street Journal, is regarding the "amend and pretend" or "amend and extend" policies of some of these banks. If a loan is modified it is often characterized as "performing". In those cases, the bank is not required to increase its capital reserves. Yet according to Trepp, LLC, a research firm in this arena, there are $156 billion of souring commercial loans. Two-thirds of the commercial loans to mature between now and 2015 are expected to be underwater, meaning the value of the property is less than the amount of the loan. ShoreBank in Chicago, which was closed at the end of last year, was one of the banks that had employed the "amend and extend" policies. Commercial loan delinquencies at year end 2010 were 7.8% down from 8.6% a year earlier.

North Carolina was the fastest growing state in the last decade, according to USA Today, due to job growth and a preferential climate. The state population grew 18.5% in the last ten years.

Boeing is reviewing whether to continue building larger planes or to develop a successor to the 737 before improving the 777, according to Bloomberg. An improved 737 would be faster to develop. It requires Boeing to effectively predict the travel needs of 2030 when most of these planes will be in use.