ECONOMY & MARKET
Dodd-Frank Act Simplified Guide
January 19, 2012
The
Wall Street Reform and Consumer Protection Act of 2010, also known as
Dodd-Frank Act (after its sponsors Rep. Barney Frank and Christopher
Dodd) is only beginning to take effect. Big portions of the financial
reform law are set to go into effect this year 2012.
Passed as a
response to the 2007-2000s great recessions, the Dodd-Frank act is a
United States federal law that places regulation of the financial
industry in the hands of the government. The legislation, enacted in
July 2010, aims to prevent another significant financial crisis by
creating new financial regulatory processes that enforce transparency
and accountability while implementing rules for consumer protection.
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S&P cuts credit ratings for 9 Euro Zone Nations
Ratings
agency Standard & Poor (S&P) downgraded the government debt
of France, Austria, Italy and Spain on Friday, while keeping Germany's
at the coveted AAA level. The downgrades deal a blow to the euro zone’s
ability to fight off a worsening debt crisis.
The action may have more symbolic than fundamental financial impact but
served as a reminder that Europe’s economic woes were far from over. But
the downgrades may also be a blow to the euro zone’s ability to fight
off a worsening debt crisis.
S&P ended France and Austria's AAA status by lowering their
long-term rating by one notch, while downgrading Italy's and Spain's
credit rating by two notches, Italy to BBB+ and Spain to A. The rating
agency also cut ratings on Malta, Slovakia and Slovenia by one notch
and Portugal and Cyprus by two notches.
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S&P 500 Practically Unchanged for the YearDecember 30, 2011
The
U.S. stock market just ended the year almost precisely unchanged. Wall
Street closed its last trading day of the year pretty much where it
started, while stock markets in Europe and Asia finished steeply lower.
Concern over Europe’s debt crisis overshadowed optimism that the U.S.
economy will expand in 2012.
On the final trading day, Friday, Dec. 30, 2011, the Standard &
Poor’s 500-stock index closed at 1,257.60 with a 0.4 percent loss for
the day. The S&P 500, a benchmark index for the U.S. broad equity
market, statistically unchanged for the year, from 1,257.64 on Dec. 31,
2010 to 1,257.60 on Dec. 30, 2011, which is just 4 ticks difference or a
decline of 0.003% for the year.
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Market Sectors review:
Defensive sectors outperform cyclical sectors
June 24, 2011
As
U.S. economic growth weakens, the benchmark Standard & Poor’s
500-stock index has been down about 7% since April 29. The Economic
Cycle Research Institute’s Weekly Leading Index showed that U.S.
economic growth is at a 25-week low as it continues to weaken since
peaking in mid-April as of June 17.
There’s been a
clear shift in sentiment over the past two months, with concern about
global growth steering buyers from riskier areas of the market toward
traditional defensive. Since the end of April, the four
defensive sectors of the stock market, namely Health Care, Consumer
Staples, Utilities and Telecommunications, have outperformed the four cyclical sectors – Consumer Discretionary, Industrials, Technology, Materials and Energy – that led the market in 2009 and 2010.
When
the market was in rally mode, the cyclical sectors outperformed. But
when the market was in correction mode, the defensive sectors
outperformed. The traditionally defensive sectors are places to put your
money when the market's direction is unclear and investor sentiment is
more conservative.
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Stocks Surged to 2-Year High After Fed Decision
November 04, 2010
Stocks surged in the United States Thursday, Nov. 4, a day after the
Federal Reserve’s decision
to buy more government securities to stimulate the economy. the Dow was
up 1.96 percent, at 11,437.84, while the Standard & Poor’s
500-stock index rose 1.93 percent, to 1,221.06.
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Fed decision to pump money is criticized
November 4, 2010
Emerging
markets criticized the Federal Reserve for its decision to pump more
money into the U.S. economy, a measure that they fear could escalate
the worrisome flood of cash into fast-growing economies. Officials from
countries like Brazil and Thailand threatened more measures to curb the
flood of money that has pushed up currency values and fueled concerns
that asset price bubbles might be in the making.
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Recession Officially Ended in June 2009
September 1, 2010
The recession officially ended in June 2009, according to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a group charged with determining when recessions officially begin and end.
This official end date makes the most recent downturn the longest since World War II. This recent recession, having begun in December 2007, lasted 18 months. Until now the longest postwar recessions were those of 1973-5 and 1981-2, which each lasted 16 months.
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Senate passes landmark financial oversight legislation
July 15, 2010
The Senate passed landmark financial overhaul bill 60-39 Thursday, following House passage last month. The bill is to be signed into law by President Barack Obama soon. The passage of the sweeping bill ends more than a year of wrangling over the shape of the new rules.
The bill marks a potential broad change for the financial-services industry. The legislation creates a council of federal regulators to monitor economic risks; establishes a new agency to police consumer financial products; and sets new standards for the way derivatives are traded. It leaves a vast number of details for regulators to work out, inevitably setting off another round of battles that could last for years.
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Major economic indicators for investors
July 10, 2010
Government agencies, industry groups, and non-profit organizations generate a nonstop flow of statistics on the U.S. economy. Economic indicators provide real-time information on the direction of the economy as it relates to economic growth, inflation, jobs, and the health of the financial markets, according to economists.
Do you ever wonder what those reports really mean or why they're important to you as an investor?
Investors use the economic data to interpret current or future investment possibilities and judge the overall health of an economy. The key information to extract from these indicators is how far they differ from what was expected. Financial markets are forward-looking, and securities prices incorporate economists' consensus forecasts for economic growth, inflation, jobs, etc. Markets react to an indicator only when the actual release of that indicator comes above or below what was originally expected.
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S&P 500 topped 1,200, first time in a year and a half
April 14, 2010
Good news and improving economy lifted spirits on Wall Street Wednesday. The Standard & Poor's 500 index broke through a key milestone 1,200 mark for the first since September 2008, after rising 13.35 points to 1,210.65. The Dow Jones industrial average rose 104 points to end at 11123.03, after on Apr. 12, 2010
the Dow broke the 11,000 point for the first time since Sept. 26, 2008.
The positive news came from all directions. Corporate earnings numbers show strong results. Shoppers and businesses are feeling better about the improving economy. Retail spending rose sharply in March, while consumer inflation remained all but invisible. Businesses boosted their stockpiles for the second straight month in February in anticipation of higher shopper demand.
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Dow finishes above 11,000, first time since Sept 2008
April 12, 2010
U.S. stocks closed slightly higher on Monday, with the Dow Jones Industrial Average finished above 11,000 points for the first time since Sept. 26, 2008. The move was the latest milestone in a rally that has brought Wall Street back from the verge of economic
collapse.
It came amid signs that U.S. companies were poised to report strong first-quarter profit with earnings season beginning this week, as well as investors welcomed a rescue plan for Greece. On Sunday, European Union officials delivered details of a $40 billion rescue package.
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Lessons From Financial-Debacle History
The recent history of the
financial crisis reveals that an unchecked zeal to deregulate combined with too-good-to-be-true financial stratagems have led to not only Wall Street debacle but also the worst global stock market turmoil.
There actually had been plenty of experience and lessons with dumb ideas and reckless choices that financial wizards didn’t learned. Looking back, we revisit the obvious lessons during the past three decades.
1982: Savings and loan deregulation, rationalized by Milton Friedman-influenced Chicago School free-market theory, allows thrifts to gamble on more speculative lending.
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Worst Financial Crises since Great Depression in Review
2007 to 2009 Episodes
December 1, 2009
After more than two-year financial malaise, signs of recovery finally emerged in 2009 as the economy expanded for the first time in a year in October and stock markets surged above 50% from their the bottom in March. A major challenge to a full recovery is the struggling labor market with a 10.2% unemployment rate.
Housing bubble burst and subprime mortgage disaster in 2006 led to a series of stunning financial closures. They changed the face of Wall Street forever, turned the United States economic to the most serious crisis since the Great Depression, and eventually sent the global financial system into turmoil in the fourth quarter 2008.
Continue readingA kaleidoscope of the critical events in 2008 & 2009:
2009: A Recovery Year of American Economy2008: A Dark Year of American and World Economy
U.S. Insurance Fund is In Red
November 24, 2009
The U.S. government-administered insurance fund that protects depositors slipped into the red after fifty banks collapsed during the third quarter. The fund that protects more than $4.5 trillion of U.S. bank deposits fell into the red for the first time since the fallout from the savings-and-loan crisis of the early 1990s as the pace of bank failures accelerated.
The fund had a negative balance of $8.2 billion at the end of September after the fund dropped by $18.6 billion during the third quarter of 2009, federal regulators said Tuesday, Nov. 24. This report confirms what officials of the Federal Insurance Deposit Corporation (F.D.I.C.) said in October that the deposit insurance fund had been depleted. Continue reading
Dollar faces alarming pressure
November 12, 2009
Investors around the world see the U.S. dollar as weaker than other currencies because of U.S. interest rates near zero and huge budget deficits. That prompts them to trade out of the dollar for riskier, high-yielding assets in equity markets and other countries.
The expectation that interest rates are set to remain low in the U.S. has been a key factor behind the weak dollar and buoyant commodity and stock markets. Investors are betting that policy makers will do little to undermine the strong support for stimulus policies that have done much to fuel global markets and restore risk appetite. They sold the American currency off earlier in the week by expectations that U.S. interest rates will be left low for some time. While the dollar may be gaining strength recently, concerns about the currency persist.
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Confidence returned, Dow reclaimed 10,000 mark
October 14, 2009
U.S. stocks soared higher sparked by earnings news on Wednesday, Oct. 14, pushing the Dow Jones Industrial Average to close above 10,000 for the first time in more than year. The sharp rally signaled investors'
confidence that the economy is recovering from the financial crisis and recession.
The Dow finished up 144.90 points, or 1.5%, to close at 10,015.86, its highest level since
global markets plunge on Oct. 6, 2008, when the Dow fell below 10,000 amid the outbreak of financial crisis on Wall Street. The Dow first closed above 10,000 in May 1999 but retreated in the years after the dot-com bubble deflated. It then regained the 10,000 mark in late 2003 before peaking at 14,000 in October 2007.
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