News Analysis for the Investor on April 9, 2012

Inflation growing in China

Inflation in China came in at a higher than expected rate of 3.6 percent in March, after hitting 3.3 percent in February, according to CNBC.  While the government has been trying to limit growth of the economy to 7.5 percent, experts are predicting that China could grow at 9 percent this year. Inflation generally lags the economy. The food inflation in China, however, which is key to the Chinese government, should not exceed the current level of 8 to 9 percent. The market was closed on Friday due to the Easter and Passover holidays. The Dow closed down 14 points on Thursday, ending at 13,060. Asian markets are down dramatically on Monday due to the Chinese CPI and the US jobs data. The Nikkei fell more than 5 percent. Last week the Dow recorded it biggest weekly loss of the year.

US Labor Market slows

US employers hired at a much slower rate in March than in February or January, thus undermining the belief that the recovery was going full speed.  The Wall Street Journal reports that employers added 120,000 new jobs, half the number added in February. Wages inched up and government cuts were lower. The unemployment rate did drop to 8.2 percent, its lowest point in three years. That decline, however, was due less to new hiring than people abandoning job searches. 

Tax anticipation loans soon to be a relic of the past

The high-cost, short-term loans designed to take advantage of the inefficiency of the Internal Revenue Service are soon to be a relic of the past.  According to the Washington Post, in the mid-2000s more than 12 million taxpayers took out a tax anticipation loan and paid more than $1 billion in fees. The market has shrunk by two thirds, with JP Morgan Chase and H&R Block exiting the market. Only Republic Bank is offering the loans this year and it will be its last.  Increased efficiency by the IRS, combined with a new plethora of regulations to protect consumers, has led to the end of this market.

Long term care insurance rates increase 6 to 17 percent

Average premiums on long term care insurance policies have increased 6 to 17 percent in the past year alone, according to the American Association for Long Term Care Insurance and as reported in the Wall Street Journal.  Some insurers have doubled premiums on existing policies.  Low interest rates and policyholders that live longer are impacting the industry.  In fact, big companies such as Prudential and MetLife have stopped selling individual policies.  Ten of the top 20 individual coverage writers have announced they are exiting the business.  Making the proper selection of the features included in this type of policy is critical. If you believe this is an option you should consider, do so before prices increase even more dramatically but be sure to discuss the various policy options with an expert.

US beef producers stand up to negative social media reports

While recent cattle prices were at an all time high, negative stories about beef trimmings that ran the social media gamut and the fact that Americans eat 22 percent less beef than 40 years age are raising the concerns of beef producers.  According to USA Today, the recent uproar regarding beef scraps, which have been the same for two decades, caused the closing of Beef Products, Inc. and the layoffs of 660 people.  Animal rights activists, as well as health concerns regarding red meat, have also impacted the industry.  Beef producers feel they often treat their cattle better than their pets and that media stories are misleading.  Additionally, red meat has recently been deemed to be part of a healthy diet by many experts. The inventory level for cattle is at the lowest point since 1952. The good news is that foreign countries are buying more US beef than ever before with an increase of 30 percent in 2011.

Wine merchants predict bad year for Bordeaux

According to the Financial Times, wine merchants indicate that the Bordeaux produced for 2011 is not comparative to the “superlative” 2009 and 2010 vintages and therefore should sell for less.  Apparently Asians have begun purchasing wine as investment and market makers are unsure how to price the less robust vintage.  Experts indicate, however, that sometimes the less pricey wines ultimately have a better long term return.  If wine is your thing, beware the new Bordeaux!