All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Here it comes...2300 pages of financial regulatory reform. New England senators Scott Brown, Olympia Snowe and Susan Collins joined all but one democrat in a 60 to 39 vote. (Democrat Russ Feingold voted against the bill, maintaining that it isn't strong enough.) The bill now goes to the President, who will sign it into law. Here's what's in it for you:

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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1 million households are on track to lose their homes this year as the nation continues to dig out of the decade's real estate boom and bust. RealtyTrac reported that while month-over-month and year-over-year foreclosure fillings are decreasing, the nation is on pace to set a record in foreclosure filings (including default notices, auction sales and bank repossessions) this year at 3.2 million. Last year, lenders foreclosed on more than 900,000 homes and the historic average is 100,000 annually.

In the first half of the year, lenders repossessed nearly 528,000 homes and about 1.7 million homeowners got a foreclosure-related warning -- that represents one in 78 American homes. The numbers are startling, but this process is necessary after the massive housing and credit booms. As is the case with manias, the aftermath is messy and painful.

Unfortunately, due to the lengthy process involved in unwinding a bad home investment (versus, say a bad internet stock that takes 5 seconds to sell) the hangover period will persist for some time. RealtyTrac CEO James J. Saccacio said that while the foreclosure problem appears to be improving, we shouldn't be too confident, because "a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market."

Housing experts believe that it will take three more years to clear out the overhang of housing. There's a certain symmetry to that notion. From the years between 2000-2006, housing prices nationally doubled and it will likely take the seven years between 2007-2013 to rectify that aberration. Now who said that home prices never drop?

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Unlike the Sports Illustrated Cover Jinx, when athletes and their teams who grace the cover of the magazine subsequently encounter bad luck or disappointing performance, the appearance of JP Morgan Chase CEO Jamie Dimon on the cover of The New York Times Business Day section had no ill effects on the nation's second largest bank, as measured by assets.

JP Morgan Chase reported earnings of $4.8 billion or $1.09 per share, from $2.7 billion during the comparable period a year earlier. Analysts expected 70 cents a share. Revenue was of $25.6 billion in the second quarter, in line with expectations.

Still, all was not rosy--the company's investment-banking division reported a 6.1 percent decline in profit on a 13 percent drop in revenue and CEO Dimon noted that the results included "the benefit from a $1.5 billion reduction of loan loss reserves -- which we do not believe represents normal ongoing earnings -- partially offset by a charge of $550 million for the U.K. bonus tax."

Profits increased in the retail financial services division, primarily due to a reduction in charge-offs and delinquencies in the consumer business. JP Morgan reiterated that consumer lending remains weak.

Prior to the release, Asian stocks fell (markets there were already closed before the JP Morgan news) and European markets were trading lower. Stocks reversed course after the report and US stock futures are now trading higher.

Things were looking up before the Commerce Department released its report on June retail sales report. Sales in June dropped 0.5 percent from May, though they were up 4.8 percent from June 2009. Retail sales are up 7.3 percent from the bottom, but still down 5.2 percent from the pre-recession peak. Consumers have been telling us that they feel insecure about the economy--this report proves it.

Too bad, because coming into the session, investors were seeking to add to the continuation of the stock market's six-day winning streak, which left the S&P 500 down less than one percent for the year. Funny how losing less is starting to feel like a win.

After the close, Intel delivered better-than-expected results. The world's number one chipmaker saw a 34 percent increase in revenue, leading to a quarterly profit of $2.89 billion, or 51 cents a share, compared to a 7 cent loss a year ago. Intel shares rose 5 percent to over $22 a share after hours.

News from Asia helped those markets advance. City-state Singapore said second quarter GDP increased 26 percent from the previous quarter and upped its 2010 GDP growth forecast to 13 percent to 15 percent.

That's all history now--U.S. stock futures have turned lower, so prepare for a negative opening.

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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George Steinbrenner died today at age 80 -- an amazing bit of timing for his heirs. Like Texas billionaire Dan L. Duncan, death comes in the one year when no estate taxes are are due.

You see, the 2001 Bush tax cuts included a peculiar twist:in tax year 2010, there would NO estate tax at all. That means Steinbrenner's $1.1 billion estate and Duncan's $9 billion estate could pass to their heirs without any federal tax. I'm sure that Red Sox fans are seething at this very notion (at least Big Papi won the home run derby!)

Considering that lawmakers have been aware of this issue since 2001, it's deplorable that they have done nothing to address it and have left families stuck in the fog for planning purposes.

I spoke with an estate attorney this morning who said that for the past couple of years, there was talk of setting the estate tax hurdle at $7 million for couples and $3.5 million for individuals, which was the 2009 level. But without legislative action, the estate tax repeal will "sunset", effective January 1, 2011 at which time the exemption amount for estates and gifts is $1 million and the the maximum rate for estate tax returns to 55%.

There's been talk about making any fix retroactive to the beginning of 2010, but the lawyer said that may be unconstitutional and more importantly, given how much money would be at stake (approximately $5 billion in taxes for Duncan and $500 million for Steinbrenner) the lawyers will fight this one for a long time. Then again, Uncle Sam has a lot to gain...and he sure could use the money, especially this year.

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On the heels of a fifth straight winning session for U.S. stocks, European stocks are trading higher, despite Moody's downgrade of Portugal's sovereign debt rating by two notches. Investors likely factored in the cut weeks ago. Separately, Continue »

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Yesterday, the Wall Street Journal reported that Americans are losing faith in stocks. I discussed this trend with CBS3 this morning.

The Journal cited investor disillusionment with financial institutions and flat-out fear as the main drivers of the trend that has contributed to a major shift in allocations. From 2007-2009, investors withdrew more money from stock funds than they put in. It was the first three-year period of withdrawals since 1979-1981, according to the Investment Company Institute.

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Last week, investors returned from the Fourth of July with a new consensus: we're nervous about a double-dip, but odds are that the economy will slow, not collapse. On the back of that shift, U.S. stocks had their biggest weekly point and percent gain in nearly a year, since week that ended July 17, 2009.

DJIA: 10,198, up 5.3% on week; down 2.2% YTD

S&P 500: 1077, up 5.4% on week; down 3.3% YTD

NASDAQ: 2196, up 5% on week; down 3.2% YTD

August Crude Oil: $76.09, up 5.5% on week (biggest weekly percentage gain since week ending May 28)

Asian and European markets are mixed this morning, while U.S. stock futures are down, indicating that markets could snap a four-day winning streak.

Total bank failures for 2010 rose to 90 after four new failures over the weekend.

Factoids of the week:

• The rich really aren't different. More than one in seven homeowners with loans in excess of $1 million are seriously delinquent, according to The New York Times/CoreLogic
• The NBER finds that working hard can make you unhealthy - DUH!

In the Week ahead:

Q2 earnings season kicks off this week, with profits expected to rise 27 percent from a year ago. Investors will be paying close attention to companies' abilities to generate more growth and comments about projections for the second-half of the year.

On the economic calendar, inflation readings (PPI and CPI) are likely to show that prices remain muted, while overall retail sales are expected to drop slightly from May--without autos, sales should be flat.

The financial reform bill could actually come to the Senate floor as soon as this week, when the Senate returns from a one-week recess. Democrats and White House officials likely need the support of at least two Republicans to secure the 60 votes necessary to block a potential filibuster. The House has passed the bill, and Senate approval is necessary for it to become law.

Thomas Hoenig, president of the Kansas City Federal Reserve, called for a gradual hike in interest rates and the rate at which the Fed lends money to private banks in an interview with CBS News Correspondent Rebecca Jarvis. (Watch at left)

Hoenig is the only voting member of the Fed to call for increasing interest rates, Jarvis reports.

According to Bankrate.com, the average rate for money market and savings account last week is down to 0.83 percent, hurting people depending on the interest earned on this safest of investments, especially seniors, Jarvis reports. Three years ago, when interest rates were at 5.55 percent, $100,000 in a certificate of deposit could earn $5,550 a year. Today, the same CD earns only 1.55 percent, or $1,550, annually.

"It's important to realize that zero percent was a rate that was necessary during the crisis, and I think it served its purpose," said Hoenig. "But now we have to think beyond that to a little longer term, and there are adverse effects, I think, from zero being carried."

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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It's now official: there will be no double dip. I know that because as I was on my way to appear with CBS3 this morning, the cab driver told me that he had pulled all of his money out of the stock market because "you know, the double dip thing..." Here's a little more on the "double dip thing":

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