Bernanke comments that job market is still weak despite gains and other top news stories of the day.
Bernanke comments that job market is still weak despite gains
In a speech this morning before the National Association for Business Economics, Federal Reserve Chairman Ben Bernanke commented that despite the recent employment gains the job market remains weak. The Associated Press indicates that Bernanke stated that current policies, such as keeping interest rates low, will continue to help the economy build. Bernanke said that more robust consumer and business demand is needed. CNBC reports that market futures are up based on these comments. European markets are up while Asian markets were mixed, mostly down. The Dow closed up 34 points on Friday closing at 13,080.
Germany to increase support of European bailout fund
German Chancellor Angela Merkel announced on Monday that the Germans will increase their funding of the European Financial Stability Fund by 700 billion euros, or $930 billion. According to the Associated Press, the current mechanism is only for 500 billion euros and more the 200 billion euros have been pledged to Greece, Ireland and Spain for loans. German agreement to support the new funding has been identified as a key ingredient for future success.
Small Chinese companies to report poor earnings
The Financial Times is reporting that the Bloomberg China Reverse Merger Index, which tracks 82 small Chinese companies that are traded on the US market, has tumbled 67 percent since its 2010 high. The PE ratios for these firms is 4.6 compared to the Standard and Poor's Index in which companies have an average PE ratio of 14.4. The change has been due to increased auditing and higher reporting standards that have been put in place surrounding these companies. In the past, auditors did not check cash reserves or were given paper statements that had been falsified. At the same time, many auditors have resigned from these firms indicating that poor practices may still be in place.
Computerized stock exchange forced to pull its IPO
On Friday BATS Global Markets, Inc. was forced to stop its IPO mid-day due to the fact that the computerized stock exchange suffered a glitch in trading its own stock, according to the Wall Street Journal. This glitch caused significant credibility issues with investors who demanded their investments be refunded. BATS stopped trading and founder, Dave Cummings, has indicated that executive bonus plans will not be funded. Stopping the IPO was deemed a proper move since the underwriter, Morgan Stanley, also had purchased shares of the IPO. Keeping the IPO in place could have caused serious litigation with investors who immediately lost the value of their investment.
Hedge funds to face higher trading costs
The Financial Times is reporting that prime brokers in the US have indicated that their hedge fund clients will be seeing increased costs by the end of 2012. The cost increase is due to the compliance requirements of BASEL III, a banking law that demands higher liquidity and capital requirements. Prime brokers such as Goldman Sachs, Morgan Stanley, JP Morgan and Deutsche will see higher costs when trying to value or trade any non-market based securities such as mortgage backed securities or other complicated instruments.
US cities made little progress in re-tooling for Baby Boomers
According to a report by the Associated Press, few cities in the US have prepared for the 72.1 million aging Baby Boomers. The number of households over age 65 will double between 2000 and 2030. Six years ago, the National Association of Area Agencies on Aging began working on improvements needed to US cities to face the challenge of an aging population. To date, few of those improvements have been made because funding has shifted from the federal government to local agencies which have little to no excess cash. Enhancements include larger print on road signs, safe driving courses, transportation services to take the elderly to medical appointments and similar services. The state of Ohio has even suggested legislation that would give tax credits to homeowners for bars on walls in homes, larger light switches and ramps. Other tax credits have been promoted to create "granny flats" in urban areas. Can't wait to live in one of those!
Billions of gallons of gas wasted due to traffic congestion
According to USA Today, a report released by the Treasury Department indicates that 1.9 billion gallons of gas, or $100 billion, are wasted annually in traffic jams. This averages $400 per household. The city with the highest traffic jam waste is San Jose, California at $756 per household. New York City and Los Angeles have average rates of $640 for traffic time. The average US household spends $7600 annually on transportation costs or an average of $1 for each $7 earned.