Page Perry's Market Monitor - March 27, 2009
There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:
• The Dow Jones Industrial Average opened the week at 7278 and, on Monday, soared 497 points.
• On Tuesday, the Dow Jones Industrial Average fell 116 points.
• On Wednesday, the Dow Jones Industrial Average rose 90 points.
• On Thursday, the Dow Jones Industrial Average jumped 175 points.
• On Friday, the Dow Jones Industrial Average fell 148 points and closed the week at 7776.
• On Monday, the Obama administration announced its “Toxic-Asset” Plan for cleaning up bank’s balance sheets and freeing the flow of credit. One potential problem confronting the plan is the proposed suspension or elimination of the mark-to-market accounting rule (discussed below). Observers believe if that rule is suspended or eliminated, many banks would not unload their “toxic assets” because of the losses they would be forced to report.
• More and more U.S. companies are furloughing workers in an effort to cut costs while saving jobs. Furloughs occur when employers force workers to take a short-term, unpaid leaves.
• Approximately 7,500 workers have accepted a buyout package offered by General Motors.
• Agilent Technologies announced that it was laying off 2,700 employees.
• Shaw Industries is closing two plants in Georgia and laying off 600 employees.
• IBM announced plans to slash 5,000 jobs in the U.S.
• Unemployment is up in 49 states. Nebraska is the only state where unemployment has dropped. Michigan has the nation’s highest unemployment rate at 12%. South Carolina, Oregon, North Carolina, California, Rhode Island and Nevada report unemployment rates of over 10%.
• Charter Communications, the nation’s fourth largest cable operator, filed for bankruptcy.
• Many banks are raising credit card fees to offset rising defaults. Later this year new federal regulations will limit the ability of issuers to raise rates on existing credit card debt.
• Caribbean-based Millennium Bank has been accused of being a Ponzi scheme by the Securities and Exchange Commission.
• Moody’s Investor Services has cut the senior debt credit rating of Bank of America to “A2.” At the same time, Moody’s cut the senior debt credit rating of Wells Fargo to “A1.”
• The Treasury Department has proposed a plan to overhaul the financial system. Among other things, the plan calls for increased regulation of hedge funds and private equity funds.
• Federal regulators closed the Omni National Bank in Atlanta, the twenty-first bank to fail this year. Nine of the twenty-one banks have been in Georgia.
• Planners of conventions, trade-shows and other large meetings are pessimistic about the industry’s future. Over 80% of the planners expect conditions to worsen over the next 18 months. This bad news for hotels, restaurants and other members of the hospitality industry.
• Mark-to-market accounting, which requires increased financial transparency, is under attack by the banking industry. The banks are urging Congress to suspend or eliminate mark-to-market accounting rules so that they can assign some fictitious value to assets rather than reporting the assets at their market values. They can’t seem to understand that their previous lack of candor is what has created much of the mess we face today. It’s hard to demand transparency and full disclosure when the rules disregard these principles.
Page Perry’s Market Monitor is published periodically to give investors an overview of certain recent developments impacting the economy and/or the investment markets.
