Dow Collapses in Post Election shock
Fears that Obama’s re-election will send the economy over the fiscal cliff drove the Dow to drop over 300 points on Wednesday, ending at 12,932. CNBC reports that both Fitch and Moody’s indicated that they are ready to cut the US triple A credit rating if responsible fiscal actions are not taken. The sell off was the second worst post election sell- off since the 1940s. The first was when Obama was elected in 2008. That day the Dow declined 5 percent rather than 3 percent. The market on Wednesday was seeking a feeling of compromise and John Boehner, Speaker of the House, was quick to respond. No comment from Obama.
Greek vote likely to calm markets
Early Thursday morning, the Greek Parliament voted to back another round of austerity measures. This should settle the markets, at least momentarily, according to experts. The Associated Press indicates that the vote came just prior to the monthly press conference to be held today by Mario Draghi, the President of the European Central Bank. Asian markets were down on Thursday while European markets show a slight positive gain.
EU Cuts Growth Forecasts
The Wall Street Journal reports that the European Commission has cut its growth outlook for the region and is predicting deeper recessions in austerity challenged nations, such as Italy and Spain, and lower growth in France and Germany. Growth for Germany was slashed from 1.7 percent to 0.7 percent. The overall growth rate for the combined EU is 0.4 percent, down from 1.4 percent. Generally, however, the EU’s forecasts have been too optimistic.
More student loans increase consumer credit to $11.4 billion
Americans took out more student loans and auto loans in September to boost consumer borrowing to a record level. According to the Associated Press, total consumer debt outstanding, excluding mortgages and other housing related borrowing, went to $2.74 trillion, the highest level on record. The increase was primarily in student and auto loans. Experts indicate that Americans are becoming more confident about the economy and therefore they are borrowing more.
Apple slides to five month low
Shares of Apple, Inc fell 4 percent on Wednesday to a 5 month low as investors grew nervous about its ability to fend off competition and fix the iPhone 5 supply chain. Reuters reports that Apple’s fall outpaced the S&P’s 2.4 percent drop for the day. Samsung and Amazon.com are both seen as rivals to Apple. Apple is also having trouble meeting the demand for its new iPhone 5. Experts expect its margins to shrink in the future since Apple’s newer products are more expensive to build.
Boeing announces big layoffs
Boeing announced a major restructuring of its defense division on Wednesday that will cut 30 percent of management jobs, close facilities in California and consolidate business units, according to CNBC. The defense division represents 40 percent of the company’s revenues and Boeing indicates that the layoffs are merely due to cost containment rather than in response to the potential threat of the fiscal cliff, which would reduce government contracts with Boeing.
East Coast continues to suffer from gas pains
CNBC reports that despite shorter gas lines in New York, the distribution and supply network for gasoline is still far from normal more than a week after Hurricane Sandy decimated the Northeast. Key terminals in the Woodbridge, NJ to Newark area remain damaged and are impacting the supply chain. The Phillips 66 Bayway refinery was hit by the storm surge and is not expected to open for two to three weeks. While gas stations now have power, they are not receiving sufficient deliveries to meet the needs of their customers.
Lacoste to leave France
The majority owners of Lacoste SA, the apparel company known for its tennis shirts and accessories adorned with a crocodile, are selling to Swiss investors. The Wall Street Journal indicates that a family feud has caused the sale of the two groups of the family’s ownership. One family group owns a 28 percent stake in the firm which it will sell to Groupe Maus Freres SA. The other family group owns 30.3 percent of the shares which will be sold separately to the Swiss company. The deal values the Lacoste at about $1.28 billion to $1.6 billion.
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.