Spain’s bailout slams world markets
In a move that was meant to calm volatile markets, the European aid package of $125 billion offered to bail out Spain’s banking system, had the opposite impact. While markets had a short-lived positive burst on Monday morning, Spanish bond yields reversed course and began a sharp increase. According to the Wall Street Journal, credit default swaps, an insurance like contract that pays off if Spain defaults, zoomed into record territory on Monday. Experts indicate that the Spain “bail-out lite” was seen as only a temporary measure and not one that will solve the underlying problems. The Dow rose 100 points at the outset, but ultimately closed 142 points down at 12, 411. Asian shares were mixed on Tuesday while European markets are mostly positive.
Fed survey shows significant drop in US wealth
According to a report in the Federal Reserve’s Survey of Consumer Finance, the median net worth of US households fell from $126,400 in 207 to $77,300 in 2010. This is the same as the 1992 household median net worth. Much of the drop is due to the drop in home values, according to the Associated Press. Median incomes fell from $49,600 in 2007 to $45,800 in 2010. In a separate survey, net worth of US households did rise 4.7 percent in the past year. That increase was not included in the numbers released.
Saudi Arabia set to clash with Opec over output
The Financial Times is reporting that Saudi Arabia has called for a higher oil output target, despite falling oil prices. This opinion is not predicted to be popular with other Opec members who will be meeting this week. Oil prices have fallen sharply in recent months after a four year high of $128 per barrel in March. Iran has blamed Saudi Arabia, Kuwait and United Arab Emirates for the glut. Opec supplies 40 percent of the world’s crude oil and generally responds to price cuts by curbing production. Saudi Arabia indicates that it would like to keep production strong to assist in the global economic recovery. Iran insists this attitude is merely aimed at hurting Iran due to its nuclear program sanctions.
North Dakota considers eliminating property tax
With state coffers overflowing due to a new oil surge, residents in North Dakota are proposing the end of property taxes. According to CNBC, the state currently receives about $812 million in property tax annually. The state, which generally leans Republican and dislikes big government, will vote on the ban today. Opponents argue that mechanisms have not yet been set up to allocate oil funds to schools and roads and that the property taxes will protect state institutions. California shrank its property taxes three decades ago with Proposition 13.
Bond investors turn to charter schools
Charter schools, publicly financed alternatives to traditional schools, are drawing an increasing number of students and investors. According to the Wall Street Journal, bond sales for charter schools have increased, generally with higher rates than most municipal bonds, which is fundamentally how the bonds supportng the schools are defined. On average, charter school bond yields average 3.41 percentage points more than top rated general obligation bonds. The bonds, however, are riskier than general obligation bonds. Last year 6.2 percent of charter schools closed, however that was less than the 12 percent that failed two years ago.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.