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News Analysis for the Investor on March 6,2012

Stocks decline despite positive news

| BY Catherine McBreen


Stocks decline despite positive US economic news

In a reminder that the economy is global not just domestic, stockson the Dow fell on Monday, down 14 points to close at 12, 962.  This is despite the fact that the US service sector expanded at a faster pace than expected in February and  factory orders declined less than expected, according to the Wall Street Journal.  The global news that kept markets down was China’s announcement that it would hold its growth rate to 7.5 percent, as well as a decrease in European business activity in February combined with ongoing doubts regarding Greece’s ability to get private bondholders to accept the new deal. 

Greek bond deal teetering

Greek private bondholders have until Thursday night to agree to a bond swap that is part of the 130 billion euro bailout deal.  Documents describing what could happen if Greece defaults may have been leaked to scare investors into accepting the deal, as reported by CNBC.  The report by the Institute of International Finance, marked “Confidential” describes a scenario that includes not only chaos in Greece but significant losses by the European Central Bank and bailouts of Ireland and Portugal.  Italy and Spain would also need substantial  support. Experts predict that Greece will get the 75 percent of bondholders needed and then pass laws to force compliance by the others.

Chinese increase investment in US oil ventures

In 2009, China surpassed the US as the biggest user of energy in the world, and with its growing middle class buying cars at a record rate, its demand for oil and gasoline will not dampen in the short term.  According to Dealogic, since 2010 Chinese companies have invested more than $17 billion into oil and gas deals in the US.  North America, as reported by the Wall Street Journal, has become China’s top region for oil and gas deals primarily through the Chinese company known as Sinopec.  Sinopec is one of the world’s largest oil companies.  Its approach is to take on minority partners and to keep away from the US technologists in order for the US to approve its involvement. China is anticipated to continue its influence in the oil and gas development in North America because of the need for capital for oil sands drilling.

Wall Street bonuses fell 25 percent in 2011

Reuters reports that Wall Street bonuses fell about 25 percent in 2011, less than the 30 to 40 percent predicted. The decline, however, was twice the amount predicted by the New York state comptroller who had predicted a 13 percent shrinkage, and now faces a tax revenue shortage for the state. Wall Street’s profits and losses drive job creation and a host of other industries in the state of New York.  The predictions of the state government and the New York City government also vary drastically.  The Independent Budget Office of the state indicates that Wall Street will shed 4,300 jobs in 2012 and wages will fall 7.5 percent.  In contrast, the City Council Finance Committee said the wages will rise 1.6 percent this year.

Airlines installing bigger bins to accommodate more carry ons

The airlines are meeting the changing demands of customers by increasing the overhead bin size  to accommodate more carry ons, according to the Associated Press. In recent  years about 87 percent of passengers carry on their luggage.  This is due to the charges by the airlines as well as the convenience and timing factors of the passengers when traveling.  United is increasing the bin size in 152 planes, all A320s, that have been criticized for having smaller bins.  American’s 737s will hold 48 more bags on their newer versions. Both Delta and US Airways have also increased bin size.  Now that there will be more space for baggage, what other impediment will passengers create to slow the boarding process?

About the Author

Catherine McBreen

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.