5 Reasons to Still Like Gold By Dave Kansas, Smart Money Here are some excellent points for why gold belongs in your diversified portfolio. As an aside, the author's second point should say that President Obama complains about China's low currency, not high currency. "Precious metals have become hugely popular with investors over the last couple of years and nothing attracts passion like gold. Whether it’s Glenn Beck talking up the importance of owning the metal on his Fox show or the cash-for-gold shops popping up at retail centers like the Mall of America -- gold seems to be everywhere." … [Read more...]
In Illinois, a Giant Deficit Leads to Talk of a Giant Tax Increase
In Illinois, a Giant Deficit Leads to Talk of a Giant Tax Increase By Monica Davey, The New York Times "SPRINGFIELD, Ill. — With Illinois’s budget crisis reaching dizzying, desperate levels, lawmakers here over the weekend were seriously pondering something that would have been unimaginable even a few months ago: a 75 percent increase in the state’s income tax." "In a moment when states around the country are wrestling with withered revenues, Illinois faces a deficit of at least $13 billion; more than $6 billion in unpaid bills to social service agencies, schools and funeral homes; the most … [Read more...]
Bondholders Are Rattled by Prepayment Covenants
Bondholders Are Rattled by Prepayment Covenants By Carrick Mollenkamp and Matt Wirz, The Wall Street Journal "Bond markets remain so frothy that corporate-bond buyers aren't worried they won't get paid; they are worried about getting paid too soon. High-yield, or "junk," bonds typically include a stipulation, known as call protection, that forces borrowers to pay steep "make whole" penalties if they buy back the debt early, compensating investors for the interest payments they will miss. But as inflows flooded high-yield funds in 2010, managers became less picky about the protections … [Read more...]
Beijing city to raise minimum wage 21%
Beijing city to raise minimum wage 21% By Jamil Anderlini in Beijing and Rahul Jacob in Hong Kong, Financial Times "Beijing city is to raise its minimum wage 21 per cent next year, the second such rise in barely six months, amid rising inflationary pressure and growing concern over China’s widening wealth gap... The government is worried about the disproportionate burden of rising food costs on low-income households, which spend a larger share of their income on basic necessities. It also fears that persistent price rises could stoke social unrest, as they often have in the past...“In just … [Read more...]
IMF Completes Gold Sale Programme
IMF completes gold sale programme - Javier Blas, Financial Times “The International Monetary Fund has said that it has completed its large programme of gold sales, removing one of the few bearish elements restraining the bullion market…In a statement released on Tuesday night, the Washington-based IMF said that it had already sold the expected 403.3 tonnes of gold – equal to around 10 per cent of annual demand for bullion – partly through direct sales to central banks, including one large disposal to the central bank of India, and partly on the open market…The conclusion also means that in … [Read more...]
Muni Bonds Continue to Tumble
Muni Bonds Continue to Tumble by Romy Varghese and Kelly Nolan, Wall Street Journal Prices of municipal bonds fell sharply for the second day Tuesday, driving yields on long-term bonds to the highest points in more than 18 months, as investors worried about the impact of the end of a federally subsidized borrowing program…"We are hitting the market as quickly as we can because it's only going to get worse," said Harold Downs, treasurer of the Metropolitan Water Reclamation District of Greater Chicago. … [Read more...]
Pimco Total Return Among Biggest Losers as Bond Rally Fizzles
Pimco Total Return Among Biggest Losers as Bond Rally Fizzles By Sree Vidya Bhaktavatsalam and Charles Stein, Bloomberg "Bill Gross’s Pimco Total Return Fund, the world’s largest mutual fund, was the second-biggest decliner among the largest U.S. bond managers in the past month as clients pulled money for the first time in two years amid a selloff in Treasuries. The $250 billion Pimco Total Return fell 3 percent in the 30 days through Dec. 8, trailing all but one of the 10 largest bond mutual funds, which lost an average of 2 percent, according to data compiled by Bloomberg. Only the $33 … [Read more...]
Firms, Funds Feel Squeeze of Low Rates
Firms, Funds Feel Squeeze of Low Rates By Liz Rappaport, Michael Corkery and Leslie Scism, Wall Street Journal More evidence that the Fed’s ultra-loose monetary policy is distorting the economy. Historically low interest rates are starting to take a toll throughout the financial industry, presenting a potential downside to the Federal Reserve's aggressive efforts to reignite growth in the sluggish economy. Rock-bottom rates are squeezing profit margins at banks that rely on the gap between what they charge borrowers and pay depositors. They also are hurting returns at pension funds … [Read more...]
Tax-Cut Deal Results in Turmoil for Bonds
Tax-Cut Deal Results in Turmoil for Bonds By Mark Gongloff and Tom Lauricella Wall Street Journal “The tax deal in Washington led investors to dump government bonds on Tuesday, with yields on Treasurys hitting their highest level in six months... "The tax compromise will keep the economy on track, but there's the question of how we're going to pay for this," said George Goncalves, head of U.S. rates strategy at Nomura Securities International, who has been bearish on Treasurys since mid-October. "It will require more Treasury borrowing."... One fear among bond investors is that foreign … [Read more...]
Mounting Debts by States Stoke Fears of Crisis
Mounting Debts by States Stoke Fears of Crisis By Michael Cooper and Mary Williams Walsh The New York Times “Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt - several trillion dollars' worth, with much of it off the books and largely hidden from view - that it could overwhelm them in the next few years…But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations … [Read more...]
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