German business optimism drops for fifth month
The Associated Press is reporting that business optimism in Germany fell for the fifth month in a row. The lfo index dipped to 101.4 in September, down from 102.3 in August. While the German government remains in good economic condition, businesses are feeling the pinch because their European partners are in recession and therefore not purchasing German goods. While the European debt crisis seems to be easing, the Germans remain skeptical. European shares fell today after the release of the report. Asian markets were mostly down. The Dow fell 17 points on Friday to close at 13,579. Dow futures are lower this morning.
Eurozone to Increase its Bailout Fund to 2 Trillion Euros
CNBC reports that the Euro zone states are preparing to allow the bloc’s permanent bailout fund to leverage its capital in the same way as its predecessor. This will allow the fund to reach a capacity of 2 trillion euros and be large enough to bail out a large European country if necessary. The European Stability Mechanism or ESM will come into force on October 8 with a capacity of 500 billion euros but will have the same leverage ability as the existing fund and will have a lending power of 2 trillion euros without countries having to contribute any more capital to the fund. Not all countries have approved these options, and Finland appears to be a hold out.
Despite Cuts to Public Pensions, Shortfall still looms
Almost every state in the US has made cuts to its public employee pensions but a $1 trillion funding gap still remains, according to the Wall Street Journal. Since 2009, 45 states have rolled back benefits for teachers, police, firefighters and other public workers. But the new laws have trimmed just $100 billion between what the states and the workers put into the plans and what is ultimately owed. Only a few states have switched to a 401(k) like retirement plan. Most of the savings that have been incorporated won’t make an impact for decades, thus the funding crisis will require reduced benefits or increased taxes sooner rather than later.
iPhone 5 will change wireless industry
With 15 million consumers expected to own an iPhone 5 in the short term, the changes required to meet the data requirements will put a strain on existing providers such as AT & T, Sprint, and Verizon, according to CNBC. The video chat component of these phones will require much higher data usage, and while the existing providers will be able to handle the increased volume in the short term, as video chat becomes common place, the strain will increase. Companies like American Tower and Crown Castle, which own wireless towers and other infrastructure, are expected to benefit.
France says to give Greece more time
France is the first of the large Euro zone countries to say that Greece should be given more time to meet the stringent requirements of its bailout, according to the Financial Times. France has informally said that Greece should be given an extra two years to meet its bailout commitments, as long as it is sincere in its implementation efforts. The head of the International Monetary Fund, Christine Lagarde, indicated last week that an extension was an option but met stiff opposition from Germany and Finland. Greece represents only 2 percent of the GDP of the Euro zone.
Riots break out at Chinese factory that manufactures parts of iPhone 5
Reports from China suggest that a mass disturbance or riot may have broken out at a Foxconn factory in the Chinese city of Taiyuan. Foxconn is the company responsible for manufacturing the back piece of the new iPhone, according to CNBC. The reason for the disturbance has not been made clear. Prior riots at Foxconn factories have been for failures to increase wages after they had been promised. Foxconn shares are down.
Tax Breaks for Electric Cars will cost $7.5 Billion
Federal budget analysts expect the tax beaks encouraging the purchase and manufacture of electric cars will cost about $7.5 billion over the next 7 years. USA Today reports that the tax credits for consumers range up to $7500 for the average plug-in hybrid. Costs of owning an electric vehicle are between $16,000 to $19,000 more than owning a comparable gas engine vehicle. The Congressional Budget Office indicates that electric car ownership will do little to nothing to impact overall gasoline consumption in the U.S.
Chinese Flock to GMAT
Almost one in five people who took the GMAT last year was from China, according to a new report from the Graduate Management Admission Council. The number of tests taken by the Chinese, as reported by the Wall Street Journal, rose 45 percent from last year to 58,196. It may seem surprising since applications to full time 2 year MBA programs dropped by 22 percent last year. Some graduate schools have been opening up gateway programs for students from China. Experts expect this trend to continue.
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.