The Fed will likely leave interest rates right where they are when they make their announcement later this morning. A move otherwise would send a jolt through the markets. The key is whether the Fed takes a more optimistic tone on the economy due to improving manufacturing, industrial production and retail sales numbers. Its hard to imagine that would be enough to overtake the colossally bad numbers on unemployment and housing. The housing market has only been showing life because its been hooked up to an artificial respirator. Without the first-time home buyer tax credit, without the Fed's 1.25-trillion dollar program buying mortgage-backed securities, the market would likely have plummeted further.
With inflation remaining low, the housing market will need help for some time...and the Fed will likely let its mortgage program expire at the end of this month which will likely send mortgage rates higher. The trick is raising rates at the right time....if the Fed waits too long and the economy is already showing serious strength, then inflation could come screaming at us faster than you'd expect. But it does't appear that'll be the case for at least another several months.
Google's yet to confirm it, but a number of reports say talks between the company and China have broken down, and Google will shut down its Chinese search engine. This will be a painful move. Sure, Google only has an estimated 30-percent of the Chinese market as most users there flock to homegrown Baidu.com, but that's 30-percent of 400-million Internet users, growing by 250-thousand per day. And Google's site has only been running in China for three years. Google will still have a presence with its offshore applications like Gmail, and it can continue to use that in with its display advertising business. Google's best hope is for an eventual government shift in China reflecting changing attitudes and demands for greater freedom by the public. Certainly, Chinese citizens are accumulating wealth and higher standards of living than ever before, and that carries the possibility of a populace that wants more say in how its governed. But by then, Yahoo and Microsoft, who did not cross the line drawn in the sand by Google, will have had a chance to grow their sites, leaving Google staring at a long ways back.
Despite a number of surveys during Toyota's sprawling recall indicating a lot of drivers are abandoning the carmaker...the numbers that count indicate otherwise.
Edmunds.com says a look at Toyota sales so far this month show a surprising rebound, thanks mainly to a series of incentives like zero-percent financing that were once reserved for U-S automakers struggling to get people on their lots.
What does this mean? First off, I think many people realize that Toyota has made mistakes and will bend over backwards to improve not only its safety regimen, but its customer service. Secondly, people love a good deal. Buyers have leverage over Toyota for the first time in decades, and they're going to take advantage. I wouldn't expect Toyota to end its incentives anytime soon either, as it realizes its going to take a lot of goodwill and hard work to re-establish the carmaker as one of the premier brands in the U-S.
Mortgage rates slipped this week.....Freddie Mac says the average 30-year fixed loan is going for 4.95-percent....down slightly from the week before.
We may not see rates this low for much longer....the Federal Reserve's 1.2-trillion dollar program buying mortgage-backed securities expires at the end of this month...that means private investors will have to pick up the slack, and they'll want better returns on their money considering home loans are still a risky market. Experts believe that'll drive up rates anywhere from a half point to a full point. Most buyers are focused on the first-time tax credit expiring at the end of April, but they'll want to get pre-approval now and lock in a rate before the Fed ends its program.
Google CEO Eric Schmidt today at the Abu Dhabi Media Summit said that the company is in discussions with the Chinese government about their censorship dispute, and he expects a resolution soon. This after a Chinese government official over the weekend said there were no talks underway. Its doubtful that Schmidt would just make that up, clearly China's under little pressure to affirm anything, and the chances of the country yielding to Google on censorship are about as likely as Bernie Madoff being released from prison to head up the FDIC. The onus is on Google to stay or leave, and there's increasing speculation that Google isn't going anywhere. China's an incredibly lucrative market, and Google would pay a high price for its noble cause if it leaves, but perhaps it can take solace in that its effort could be at the vanguard of influencing China's youth in regards to free speech. Only time will tell.
I'm not sure what people expected when Cisco said it was going to reveal a product that would forever change the Internet. Sure, that's a pretty strong statement, but I think there are some who figured Cisco would develop a cyber-chef which would deliver cooked, gourment meals to a set-top box in your home. Neat idea, but we're not quite there.
Instead, the CRS-3 is what Cisco does best, developing the architecture that allows the Internet to be delivered to our homes and businesses. Delivering 322 TB per second is blazing fast...and network carriers are going to be more than happy to partner up with Cisco, and dig in before Google gets going on its own high-speed network. Google, unlike Cisco, is much more interested in the consumer side of the Internet, and thus poses a greater threat to the AT&T's of the world.
As of this writing, Cisco shares are dropping, but perhaps investors don't fully grasp how important this technology is to satiating the growing addiction to Internet video.
The February jobs report from the Labor Department came in a little better than expected, with a net loss of 36-thousand jobs. With a little, no a LOT of luck, March could possibly turn into a winner....and at this point, a net gain of one job would be worth holding a parade over, although its going to have to be an all-volunteer effort given nearly every municipal government is having its own Greece-like moment.
But there is hope, the Conference Board's Employment Trends Index is showing growth for the sixth straight month. The biggest moves are coming from manufacturing, the piece of the U-S economy that's been kicked around for several with years with companies shipping the work to cheaper supplies overseas. Continued growth will have to come from those manufacturers because construction will remain depressed for some time to come. A big key for the factories will be Europe getting its affairs in order and preventing countries like Greece from defaulting, potentially taking out the knees from the Euro. U-S goods are selling well in Europe because of the lower dollar...but if the Greenback continues its move against the Euro, those goods won't be such an alluring bargain.
I'll admit the headline is jumping well ahead to conclusions, but the way everyone's talking about the company....there's greater hope in Greece solving its budget crisis on its own rather than Palm finding a way to survive it own crossroads. Palm's shares have plunged by nearly a third since it announced last week that poor sales of its latest Pre smart phone would cause a drop in anticipated revenue for year ahead....and Palm shares have already been in an extended freefall.
Its come to this, either the company come up with a new and improved phone quickly, or find someone with deep pockets, looking to get into the smart phone market. There's no shortage of companies rumored to be interested in snapping up Palm and its webOS operating system...Dell, H-P, Nokia, Microsoft and Motorola are the most-mentioned suspects. The Wall Street Journal points out that the most intriguing piece of Palm for any other company is its 600-million in R&D spending over the past three years.
Each afternoon as I wait for BART to pick me up at the Embarcadero station, I'm faced with multiple posters of Palm's latest phone running down how life will be much easier if you're one its owners. Unfortunately, the light at the end of the tunnel to my right, is indeed a train.
News this morning that the big retail chains are seeing stronger than expected sales for February is certainly encouraging, especially in light of snow storms that crippled the East Coast much of the month. San Francisco-based The Gap saw sales across its three chains rise three-percent, more than a percent better than analyst estimates. While Old Navy continues to be a big winner given its more bargain-oriented selection, Banana Republic is a nice surprise with a six-percent gain, coming off a 16-percent loss the year before, and since its the top shelf chain in The Gap, its very encouraging that it would see such a big rebound in sales.
If you browse through Banana Republic...its discount section is no larger than it used to be, but where B-R is scoring is with online coupons. My email in-box is flooded with B-R coupons, offering 20-percent off over three days, or 25-percent off day-of events. Unless you're a top bank exec rolling in a fat bonus, you've got to be smart with your money, and shoppers that never considered coupons or discount hunting are putting their focus where they can trim prices. The Gap has certainly gotten the message and is turning around Banana Republic by giving shoppers what they want....affordable style.
Public companies deal with stock downgrades from ratings companies all the time, but usually, those companies are struggling to keep up with sales and revenue. Occasionally successful companies will get winged as well, with an analyst thinking they've maxed out. But when you've got three ratings agencies jumping on a business the same day, it raises eyebrows.
Such is the case with Netflix today, its been downgraded by Bank of America, Merrill Lynch Susquehanna and Kaufman Brothers. That's an ignominous hat trick if there ever was one. There's been nothing but sunbeams and rainbows coming from Netflix of late. It added more than one million subscribers in the fourth quarter, its biggest-ever jump. And even better, its forecasting better times ahead, with revenue guidance above what Wall Street's expecting. But the analysts must feel that Netflix has peaked, and that rising competition will chew into future subscriber growth. This sentiment could influence Netflix's decision on a possible iPhone App. If there's one thing investors like, its a new product that can fuel further growth, and it only seems like a no-brainer that Netflix pair of with Apple.
in California's jobs market last year was so deafening, that it masked just how bad it was. State economists now say many more jobs were lost in 2009 than they first estimated. 879-thousand jobs. Think about that for a moment. That's the equivalent of the entire city of San Francisco being unemployed, and for good measure with enough left over to make up half of South San Francisco's population.
We keep hearing that unemployment is at its bottom, that we'll start to see some job creation over the last half of this year. But if you listen closely to what businesses are saying, and pay any attention at all to the Mount Shasta-sized financial crisis in the state government and local school districts, its hard to imagine that there'll be more hiring than firing for the foreseeable future. Businesses are starting to see revenue growth, but most aren't in a hurry to give away their buffer, and instead of brining new employees on board to grow, they're ramping of technology spending to make their workplaces more productive.
The school districts are a nightmare right now. Budget deficits are running in the millions in many districts, and programs are being sacrificed, which of course means more teachers out of work. Teaching was once considered to be a bullet-proof profession. Looks like the recession found a way to make that a fallacy.
Buckle up, the bumpy ride isn't close to being over, and you'll need to crank the tunes a bit louder to drown out that grating sucking sound.
