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News Analysis for the Investor on Nov. 22, 2011

European markets surprise investors with a positive day

| BY Catherine McBreen

European markets surprisingly open higher

Despite a dramatic drop in the Dow on Monday after the US Super Committee announced that it had failed, the European markets opened up.  This was due to positive comments from the ratings agencies that they did not intend to immediately downgrade US debt, according to the Wall Street Journal.  Standard and Poor’s and Moody’s both indicated that failure of the Super Committee would not automatically lead to a downgrade while Fitch’s rating service said it could lead the firm to revise its outlook to negative.  The Dow dropped 248 points on Monday to close at 11,547.  Both Asian and European markets are mostly up on Tuesday.

Saudi Arabia halts oil expansion program

Despite the estimate for tight short term oil supplies due to unrest in Libya, Syria and Yemen, Saudi Arabia has stopped a $100 billion expansion project.  According to the Financial Times, this is because the Saudis are anticipated to have smaller demand for their oil long term. The International Energy Agency has cut its projection for Saudi Arabian oil production from 18 million barrels per day in 2030 to 12.6 million barrels per day by 2030.  This is because the IEA believes that Iraq will become the biggest oil producer between 2010 and 2035.

Existing home sales up 1.4 percent but still depressed

On Monday the National Association of Realtors indicated that sales of existing homes increased 1.4 percent in October, selling 4.97 million homes, but that number remains below the 6 million that economists say represents a healthy housing market.  USA Today reports that many experts predict that home prices will fall another 5 percent before the end of the year and will not begin to recover until 2013.

Sales at discount chains expected to drive holiday season

The National Retail Federation expects overall sales to rise this year 2.8 percent to $465.6 billion in November and December combined, after a 5.2 rise in 2010.  Eighty one percent of consumers say the economy will have an effect on their spending, up from 79 percent in 2010 and 78 percent in 2009, according to Reuters.  Because of this caution, department stores such as Walmart, ToysRUs and Target are expected to do the best this season, although overall margins are expected to fall 0.4 percent due to an increase in product, labor and transportation costs.  Those stores with the product, price and promotion are expected to succeed.  152 million shoppers are will hit the stores on Friday.

World Bank predicts Chinese economy will grow at 9.1 percent

While the Chinese economy will face some risk from the European debt crisis, it is unlikely to have a dramatic impact. According to the World Bank, the Chinese economy will grow at 9.1 percent in 2011 but will slow to 8.4 percent in 2012, as reported by Reuters.  China is expected to begin to steer its economy to rely less upon investment and manufacturing.  After a slight slowdown due to decreased demand from developed countries, growth is anticipated to remain between 9 and 10 percent for the foreseeable future.

Turkeyprices at record high

Wholesale prices of turkey are up 26 percent on the East Coast this year to $1.18 per pound. Turkey growers have been reluctant to increase their flocks since the recession began in 2008 due to fear of over supply.  Therefore, according to the Wall Street Journal, production is 8 percent below its peak in 2008, despite strong demand.  The chicken industry has had the opposite challenge with production ramping up, demand falling, along with prices.  In contrast, the conservative turkey industry has remained stable and strong.  The American Farm Bureau Federation said that the retail cost for items needed to prepare traditional Thanksgiving dinner will cost Americans 13 percent more this year.

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.