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| Weekly Wrap Up |
Equity markets had a choppy, uneven week and even though some major indices saw intra-week rallies, they all ended the week firmly in the red with the blue chip Dow Jones Industrial Average losing 0.93% and the broader S&P 500 off 1.66%. The broad factors driving the market down include signs of a slowdown in consumer spending, uncomfortable levels of inflation and continued nervousness about the state of the mortgage market and its impact on the balance sheets of financial firms. Stocks got off to a positive start last week driven by good news in the bond insurance sector on Monday as S&P took MBIA (MBI: Charts, News, Offers) off its rating watch list. Tuesday, the markets were enthused by a Big Blue stock buyback program as IBM (IBM: Charts, News, Offers) announced that it will purchase $15 billion in outstanding stock. Retail numbers were a letdown as Target (TGT: Charts, News, Offers), Sears (SHLD: Charts, News, Offers) and Sprint (S: Charts, News, Offers) all reported lukewarm to disappointing numbers. Stock prices were uneven Wednesday before undertaking a decisively negative turn during the rest of the week. Headwinds included a report of a snag in the Ambac (ABK: Charts, News, Offers) bailout plan, disappointing unemployment claim numbers and a report showing a surge in inflation in January. More Market News
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InvestorGuide Weekly Editor's Note:
Berkshire Hathaway released its annual earnings report on Friday disclosing an 11% rise in per-share book value, helped by a benign insurance environment. As always, Chairman Warren Buffett's annual letter to shareholders contained unique insights into the Berkshire business, the state of the overall economy and its direction, Buffett's succession plan and more. Here is the full text of the letter. |
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| Economic News |
Consumer spending is threatening to stall out while consumer confidence, battered by soaring energy costs and falling home prices, has taken a steep nosedive.
Analysts said the two new reports Friday were just the latest danger signals that the country was edging perilously close to a recession. (Source: Washington Post) Full Story
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The United States is facing a toxic economic mix it hasn't seen in three decades: Prices are speeding upward at the fastest pace in a quarter century, even as the economy loses steam. Economists call the blend stagflation, and they're worried it might be coming back.
Paychecks aren't stretching as far and jobs are harder to find, threatening to set off a vicious cycle that could make things worse. (Source: Detroit Free Press) Full Story
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Federal regulators said Wednesday they had begun loosening restrictions on the giant mortgage buyers Fannie Mae and Freddie Mac, a move that could bolster the ailing housing market.
Despite huge losses at the government-sponsored companies, regulators lifted a $1.5-trillion limit on mortgages they hold on their books in total. The U.S. Office of Federal Housing Enterprise Oversight also said it would begin talks with Fannie Mae and Freddie Mac about phasing out a 4-year-old rule that requires them to maintain 30% more capital in reserve than is legally required under their charters. (Source: Los Angeles Times) Full Story
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| Business News |
Billionaire Wilbur Ross has agreed to invest up to $1 billion in Assured Guaranty Ltd (AGO: Charts, News, Offers), bypassing big bond insurers such as Ambac Financial Group Inc (ABK: Charts, News, Offers) in favor of a rival that has largely avoided the credit problems plaguing the industry.
Ross agreed to buy $250 million of common shares of Assured Guaranty and committed to purchase up to $750 million in additional stock at the company's option. Shares of Assured Guaranty, the fifth-largest bond insurer, rose 12.6 percent to close at $25.65 on the New York Stock Exchange. (Source: Reuters) Full Story
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American International Group (AIG: Charts, News, Offers), the world’s largest insurer, confirmed yesterday that Joe Cassano, the head of its financial products division, will retire at the end of the month after the company reported the biggest loss in its 89-year history.
Mr Cassano, 52, will relinquish his role heading the financial products group on March 31 after the division wrote off $11.1 billion on credit default swaps, which guarantee the payment of interest and principal in the event of a default.
The writedown pushed the insurer into the red in the fourth quarter, when losses reached $5.29 billion. (Source: The Times Online) Full Story
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As a devout video game player for the majority of his 28 years, Mario Perri says he does not feel completely comfortable with Electronic Arts Inc.'s (ERTS: Charts, News, Offers) US$2-billion hostile takeover offer for Take-Two Interactive Software Inc. (TTWO: Charts, News, Offers).
"I don't think it's going to create better games," said Mr. Perri, owner of Xtreme Games Interactive, an independent video game retail store in Toronto. "Usually [it's better] with a little competition between developing companies, but they often get lazy once they merge." (Source: Financial Post) Full Story
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| Technology Focus |
Google's "(GOOG: Charts, News, Offers) comScore headache continues to resonate through Wall Street but a growing chorus of analysts are beginning to wonder whether this is really much ado about nothing. And when I say "much ado," I mean it, considering how much this report throttled Google.
ComScore reported a dramatic decrease in Google's paid clicks, the company's main source of revenue, leading some to believe this was the hardest evidence yet that Google has become the victim of recession and that business is slowing significantly. (Source: CNBC) Full Story
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Presidential hopeful Hillary Rodham Clinton called it "change you can Xerox." Barack Obama, her opponent for the Democratic nomination, said it was much ado about nothing (although not in those exact words).
But the resulting brouhaha over whether Obama really committed plagiarism when he borrowed a passage from Massachusetts Gov. Deval Patrick for a recent speech is overshadowing a larger question that has plagued scientists for years. Without YouTube or blogs or talking heads to guide them, how can researchers uncover the flagrant copycat studies that have infiltrated the scientific world? (Source: MSNBC) Full Story
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If you want to understand Microsoft's (MSFT: Charts, News, Offers) motivation for buying Yahoo (YHOO: Charts, News, Offers), look at the price cuts announced today for Windows Vista. (Stay with me on this.)
The price cuts for boxed copies of Vista are especially big in developing countries, where users will be able to buy full versions of the operating system for the price they would have paid for an upgrade. (The better to prevent piracy, Microsoft says.)
In the United States, the main difference will be with the Premium edition (now $129 instead of $159) and the Ultimate ($219, down from $299).
Microsoft says the cuts are meant to lift sales in retail stores, a small segment of the Windows market. The vast majority of operating systems, of course, are sold bundled with computers. (Source: New York Times) Full Story
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| Your Money |
The restaurant industry has fallen, and it can't get up. To add insult: The worst may be yet to come.
Same-store sales are sliding. Commodity prices are climbing. Units are closing. Customers are dwindling. Some of the top names in all ends of dining are in pain, from Starbucks (SBUX: Charts, News, Offers) to Applebee's to The Cheesecake Factory (CAKE: Charts, News, Offers).
"Whether or not the rest of the economy is in a recession, the restaurant industry certainly is," says Ron Paul, president of restaurant researcher Technomic. (Source: USA Today) Full Story
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Question: My 63-year-old mother earns about $1,200 a month, has $90,000 in savings and, as a result of a recent refinancing, has a $90,000 30-year mortgage. In three years she will begin collecting an estimated $1,300 a month from Social Security. A financial adviser suggests she put $60,000 into a variable annuity that is guaranteed to double in value in 10 years. Is this a good idea?
Answer: Whenever someone tells me they’re considering an investment that purports to deliver lofty guaranteed returns, my antennae automatically go up. Doubling your money in 10 years amounts to an annualized 7.2% gain, a guarantee that borders on too-good-to-be-true in almost any market, especially today's. (Source: CNN Money) Full Story
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| Trivia Question |
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What were the three oldest stock exchanges in the US?
(answer below) |
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| Market Overview |
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| DJIA |
12,266.39 |
-114.63 |
| S&P |
1,330.63 |
-22.48 |
| NYSE |
8,962.46 |
-102.37 |
| NASDAQ |
2,271.48 |
-31.87 |
| 10Yr |
3.534% |
-0.256 |
| Dollar |
73.75 |
-1.82 |
| More market statistics |
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| February 29, 2008 |
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| Trivia Answer |
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| Philadelphia Stock Exchange 1790, New York Stock Exchange 1792, Boston Stock Exchange 1834 |
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