China injects money into financial system
The People’s Bank of China has injected a record amount of money into the financial system this week to alleviate a cash crunch that has driven up borrowing costs, according to the Financial Times. The Bank poured $58 billion into money markets over the last three days through reverse repurchase agreements. This caused the seven day repurchase rate, a key gauge of interbank liquidity, to fall a full percentage point. Experts believe China injected the money now due to a week long Chinese holiday that begins Sunday, and because Chinese banks must meet strict deposit requirements at quarter end, which also occurs this weekend. Asian markets were up due to the action and European markets are also positive. The Dow closed down 44 points on Wednesday ending at 13,413.
US Corporations Fear Fiscal Cliff
CNBC reports that 35 percent of US CEOs plan to cut jobs in the US over the next 6 months, up from a quarter ago, according to a Business Roundtable survey released Wednesday. Only 30 percent plan to raise capital spending, compared to 43 percent previously. The group’s index of confidence fell to its lowest point since the third quarter of 2009. The main reason is the fiscal cliff, Washington’s self imposed deadline to shrink the budget by $600 billion or trigger automatic spending cuts. Eighty percent of CFOs believe the economy has stalled or is about to stall.
UK officials arrest Credit Suisse investment banker
Officials in the UK arrested a Credit Suisse AG investment banker today named Kareem Serageldin. According to the Wall Street Journal, Serageldin was the former global head of the Swiss bank’s Structured Credit Trading business. He was charged in the US in February but didn’t answer the charges because he is a UK resident. He is the highest level Wall Street executive to be charged relating to the 2008 financial meltdown. As housing prices collapsed, Wall Street hid losses on mortgage bond portfolios and then were forced to write down billions of dollars on those portfolios. Serageldin will be charged in the US with criminal conspiracy, filing false books and records and wire fraud after his extradition to the US.
New homes sales dip despite rising prices
Reuters reports that new home sales held near two year highs in August and prices climbed to their highest level in more than five years. Sales slipped 0.3 percent in August to a seasonally adjusted 373,000 unit annual rate, but the decrease was from a revised July pace that was the fastest since April 2010. The median price of a new home increased 11.2 percent, the highest level since March 2007. The housing market, while appearing to recover, still lacks enough strength to contribute to a US recovery.
Red states’ income growing faster than blue states
USA Today reports that income is growing faster in Republican leaning “red” states than in Democratic tilting “blue” states. Personal income in 23 red states has risen 4.3 percent since the recession began in December 2007, while income is up just 0.5 percent in 15 blue states and Washington, DC. In the “swing states”, incomes have risen 1.4 percent in almost 5 years. A 25 percent increase in government payouts is similar nationwide.
Spain to announce economic reforms
Spain will announce a series of economic reforms on Thursday in conjunction with a tight 2013 budget to avoid the political humiliation of having the European Union impose conditions on a request for an international bailout, according to Reuters. Tax breaks to companies are weeded out of the budget and wage freezes for public employees will be extended through 2013. Cuts in department budgets will range from 4 to 30 percent. Thousands of austerity demonstrators protested on Wednesday. One of Spain’s wealthiest regions, Catalonia, is threatening to secede.
Bacon to be a scarcity by next summer
Right now the US has an over supply of pork because the drought has caused farmers to bring their hogs in for slaughter early due to lack of corn for feed. But according to USA Today, this does not portend well for next summer’s BLT’s or even (gasp!) hot dogs. Consumers can expect bacon prices to be 5 to 7 percent higher by next summer, say economists. Farmers could lose $60 per head this year. Breeding will begin to increase next year, however, it will take several years for herd sizes to stabilize.
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.