American Morning
Stocks kick off the month with a rally
Let's step back and assess your stock market investments...
Anything tied to the major stock market averages are clawing BACK from the Crash of '08. Stocks have now finished the best five months since 1938.
Let's look at the S&P 500 – it represents the stocks of 500 different companies and is the benchmark – it is up 11 percent this year.
Back to levels not seen since last November...you can see on this chart, a collapse all the way to 12 year lows in March...and then a sharp rebound...the S&P 500 as of yesterday's close, is up 48 percent from that March low.
So what does that mean for you? It means if you are still invested in the market, the stock portion of your portfolio is recovering. Why? Because the stock market is anticipating the economy will turn around.
The economy is still very weak but auto sales, housing, manufacturing, construction and earnings show signs of stabilizing. As one economist put it...the freefall of the skydive is over, the chute has been pulled and the economy is STILL falling, but now floating down.
Skeptics see caution ahead: The jobless rate is expected to rise to 10 percent, perhaps higher. Foreclosures continue. American consumers are spending less and paying down their debt – good for their personal finances, but it's behavior that could slow a recovery.
And there are serious concerns about how weak the recovery could be when it comes. Will it be a jobless recovery, with slow jobs growth and weak wage growth?
No doubt this spring/summer rally has been powerful, but you haven't made all your money back. The S&P 500 price is still down 19% versus a year ago. It's got a long way to go.
Last chance for GM and Chrysler?
[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/03/16/minding_your_busi_art.jpg caption="CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX"]
This may be the LAST last chance for GM and Chrysler.
You remember the huge outcry last year over taxpayer millions going in low-interest loans to two of the Big Three. (Ford is also struggling with a crushing decline in consumer car demand, but has not taken any taxpayer loans.) They were given until this month to prove "viability." The President's auto task force says they failed that test.
GM's CEO is out. GM gets 60 days of financing to figure out how to speed up its transformation from the old GM into a lean, mean, competitive machine.
Bring on the budget!
We survived the TARP debate. Then the stimulus fight. Bring on the budget!
The political wrangling over the president's $3.6 trillion budget is set to explode this week on the Hill. The president is pitching the budget as an investment initiative, not a bunch of typical big government spending. He says investments in energy, healthcare, and education will seed a recovery and grow a more efficient economy. All the while, he promises, with an eye firmly on fiscal responsibility. He pledges to cut the budget deficit in half by 2013.
It'll be tough. His growth assumptions are slightly more optimistic than some economists. I asked noted economist (and AM regular) Jeff Sachs this morning about the president's statement in his press conference, that his budget's assumptions are "consistent with what blue-chip forecasters are saying."
"That's just wrong," Sachs said. Sachs and many others worry that a recovery when it comes will be weak. A UCLA Anderson School of Management survey released this morning is more pessimistic than the White House assumptions on unemployment (UCLA forecasts unemployment will hit 10.5% in the middle of 2010 and will still be above 9% in 2011, even as a recovery takes hold.)
The president's cautious optimism
[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/03/16/minding_your_busi_art.jpg caption=" CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX"]
President Barack Obama was poised, confident, even laughing at times during his 60 Minutes interview Sunday night. He expressed confidence in his Treasury Secretary, and even had cautious optimism for the economy. Mortgage rates are historically low, credit-worthy Americans are rushing to refinance their home loans to lower their monthly payments, (if you have not yet, check it out) and finally, look how the President responded to this question by CBS' Steve Kroft:
“Were you surprised at the depth of this recession when you got here? Did you know it was this bad?”
President Obama: “Now–there's a potential silver– silver lining, which may be that things are so accelerated now, the modern economy is so intertwined and– and wired, that things happen really fast– for ill, but things may recover faster than they have in the past”.
Minding Your Business
[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/03/16/minding_your_busi_art.jpg caption=" CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX"]
The sound and fury from the AIG bonus story doesn’t cease. The underwater volcano eruption from Tonga overnight was matched only by the smoke and ash spewing from a House chamber yesterday as members pounded AIG CEO Edward Liddy. It didn’t seem to matter that Liddy came on board only last fall and has a one dollar a year salary.
A few members thanked him for his service, but most blamed him for the bonus controversy. In the midst of all of it, murky timelines of who knew what about the bonuses, when. And a mystery surrounding who finagled language at the last minute during the crafting of the stimulus bill, language that essentially paved the way for AIG to pay the bonuses. (Thanks to CNN’s Dana Bash, we now know Sen. Chris Dodd was responsible for that. At the urging, he says, of the Obama Treasury department.)
Minding Your Business
[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/03/16/minding_your_busi_art.jpg caption=" CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX"]
Outrage:
Thousands of you are seeing red over the green bestowed on AIG traders and executives. Incredible and overwhelming response to AM this morning about the taxpayer dollars going to pay hundreds of millions in bonuses to AIG.
Three undeniable facts you keep hammering: the taxpayer owns 80 percent of this company. The company's performance was horrendous and almost brought down the world financial system. No one would be getting a bonus if it weren't for the government rescue. Almost every caller and emailer is demanding these legal contracts be renegotiated.
A Treasury department official says the government's legal analysis shows the bonuses must be legally paid. The President says he wants to try to block them. Millions have already gone out the door. It's all just another ugly example of the mess we are in.
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