Newsletter of Economic and Market Events
Year of 2010 Best Investments in 2010
2010 complete News
Month of December 2010
Dow: 11,578
Dow 2010: 10,428.05 to 11,577.51
Dow return for 2010: 11.02%
S&P 500 2010: 1,115.10 to 1,257.64
S&P 500 return for 2010: 12.78%
NASDAQ 2010: 2,269.15 to 2,652.87
NASDAQ return for 2010: 16.91%
10 year Treasury: 3.30% yield down -13.39% prices up
World Equity Market: $51,998 trillion up 13.13%
MSCI Europe Index 858.94 down -2,25%
MSCI Asia Pacific Index 137.70 up 14.32%
S&P Latin America 40 5,245.92 up 14.05%
MSCI BRIC 356.40 up 7.26%
S&P Middle East & Africa 335.00 up 25.95%
U.S. Total stock market returned 15.6% in 2010, Stocks had above average gains, Bonds had above average gains and inflation was below average. Only January, May, June and August had large losses in all 3 major U.S. indexes.
Of the 5 largest sectors in the U.S. Economy: Real Estate 21.8%, Natural Resources 21.1%, Financials 11.6% and Technology 10.9% over-performed, while Healthcare 2.9% underperformed. By size: Mid Cap, Small Cap and Micro Cap returned 25-27% while Large Cap returned 12.8%. Both gold 28.6% and oil 15.7% rose with commodity prices (CRB) which rose a historic 122.5%.
Global markets rose 13.1% of the World's largest economic regions: Asia 14.3%, Latin America 14.1% and Emerging Markets 7.3% while Europe -2.2% underperformed. Of the World's largest Developed non-U.S. Economies: Germany 16.1%, Canada 14.5%, Britain 9.0% while Japan -3.0% and France -3.3% lost. In the Emerging markets Russia 22.7% and India 17.4% while Brazil 1.1% and China -14.3% lost. Hedge funds 8% (in 2009, 20%) and Private Equity both overperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns in commodity markets. U.S. returns in 2010 were particular good if denominated in Euros that fell 8%.
Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
2007-09 PANIC facts (click)
U.S. unemployment at 9.4% to 9.9% remained a major concern. 2010 gdp 2.9%, after shrinking -2.6% in 2009. 8.75 million jobs lost during recession, in 2010 909,000 jobs added.
Gold trade at a new all-time high of $1,432.50 (Dec 7). Silver traded $30.93 (Dec 30), highest since March 1980. Copper trade at an all-time high of $4.372 lb (Dec 30). CRB trade at a new all-time high of 630.5 (Dec 30).
Treasuries returned 5.9% in 2010, up from -3.72% in 2009 and 14% in 2008 - treasuries have averaged a 8.15% return since 1978. Corporate bonds yields fell to 3.36% (Oct. 11) down from 7.41% (March 17, 2009), returning 7.12% compared with 16.3% in 2009.
Federal Reserve continues to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities: $250-300 billion plus $600 billion of new purchases of longer-term Treasury securities through the end of the 2nd quarter of 2011 (about $110 billion per month with an average duration of between 5 and 6 years).
- Fed extends U.S. Dollar Liquidity Swaps extended (12/17/10) following troubles in Ireland (through August 1, 2011).
- Fed extends GSE Mortgage-Backed Securities and GSE Debt Purchases (8/10/08). System Open Market Account (debt purchases) concentrating new purchases in 2-10 year Treasuries, up to $10-25 billion/ month.
- Fed extends U.S. Dollar Liquidity Swaps extended (5/9/10) following the May 6, 2010 DJIA interday 998 pt fall (through January 2011).
- FOMC increases the Discount rate 25 bps to 0.75% (February 19) its first increase (since Jun 29, 2006) when the Fed raised from 5.00% to 5.25%. Then the Emergency FOMC inter-meeting cut (August 17, 2007) to 5.75% from 6.25% (at outset of credit crisis) and the Fed Funds rate cut to 4.75% from 5.25% (discount rate to 5.25% from 5.75%, September 18).
Dec 17 - Middle Class Tax Relief Act of 2010 ($858 billion bill for 2011-12). Extended Income tax rates, Extended Alternative Minimum Tax,Social Security tax reduction, Expanded Child tax credit, Estate tax, Unemployed, Extended Capital Gains rates, Marriage penalty relief, Expanded College credit and Individual tax break extensions.
July 21 - Dodd-Frank Wall Street Reform and Consumer Protection Act signed. Requiring 243 new rules to be writen by 11 different federal agencies. Creates a Financial Stability Oversight Council, a Consumer Financial Protection Bureau, a Federal Insurance Office, OTC derivatives clearing, stricter Bank Capital standards (including restricted Propriety trading), Credit-rating business oversight, new authorities for the SEC and required registration for Hedge funds and Private Equity funds - phasing in through 2022.
Obama signs Small Business Jobs and Credit Act of 2010 ($30 billion) $18 billion of federal funds for small bank small businesses loans and $12 billion in business tax breaks.
- $26.1 billion Education Jobs and Medicaid Assistance Act of 2010 providing $10 billion for state teacher's payrolls and $16.1 for state Medicaid funding.
- $34 billion Unemployment Compensation Extension Act of 2010 extending unemployment benefits.
- $18.2 billion Continuing Extension Act of 2010 extending unemployment benefits.
- $940 billion (over 10 years) Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act of 2010 extending health care coverage to 32 million. Subsidized coverage for uninsured Americans and phasing out pre-existing conditions by 2014 - financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and higher-earning Americans. Student loan reform - ending government subsidies to private lenders. Healthcare.gov
- $17.6 billion Hiring Incentives to Restore Employment (HIRE) Act.
DJIA falls 998.5 points (May 6, a 1010.14 point swing, markets lose $862 billion in 20 minutes), the 9.2% plunge its biggest since the 1987 crash.
SEC, June 11 - Exchanges mandated uniform "circuit breakers" across NYSE, Nasdaq, BATS Global Markets, Direct Edge, International Securities Exchange, Chicago Board Options Exchange, CME Group Inc. and Intercontinental Exchange (following the May 6, 2010).
- SEC restricts short sales (February 24) once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.
EU leaders (16 euro nations) agree to a €750 billion ($940 billion) stabilization facility fund for the Euro.
Basel III, 27 nations agree to raising bank Tier 1 capital ratio to 6% (core to 4.5%, up from 4% and core of 2%) and a capital conservation buffer up to 2.5% - phased in 2013-18.
China surpasses Japan to become the world's second largest economy. Japan was second since 1968, when it surpassed West Germany. Chinese RMB (renminbi) fixed-rate ends on June 21 (band, low 6.78 8/26/08 to high 6.885 12/1/08) and re-floats against the U.S. dollar after nearly 2 years.
Prime Minister Brian Cowen negotiates Ireland's rescue as government budget deficit reaches 32% of gdp, a bailout from the European Union and the International Monetary Fund.
Greece receives a €110 billion ($146 billion) rescue package, EU nations (led by Germany and France) €80 billion and the IMF €30 billion. Greek government receives EU-IMF aid backstop (€30 billion EU and up to €15 billion IMF, total $61 billion) at below-market interest rates.
GM goes public with an IPO with both overallotments the deal raises a total of $23.1 billion. General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.
Goldman Sachs settles $550 million SEC fraud (July 15), largest SEC penalty in Wall Street history.
British Petroleum's Deepwater Horizon oil rig explodes (April 20), 50 miles southeast of Louisiana in the Gulf of Mexico, 11 crewmen dead. British Petroleum stops leaking Macondo well July 15 (4-5 million barrels).
Haiti Earthquake 7.0 (Jan 14) 16 mi from Port-au-Prince, 200,000 people may have died. U.N. suffers its greatest loss of life (101) in single event - G7 to cancel all Haiti bilateral debt.
Chilean earthquake 8.8 (Feb. 28) 70 miles north-east of Concepcion and 200 miles south-west of Santiago, 500 people may have died about 1.5 million homes damaged. Chile's 1960 Valdivia earthquake 9.5 (May 22, 1960) is to date the most powerful earthquake ever recorded, killing 1,700-6,000 people.
Vancouver 2010 Olympics - U.S. wins most medals 37 (9 golds) while Canada wins the most golds 14 (26 total), Germany wins 30 medals and Norway 23. Apolo Anton Ohno wins 3 medals (1 Silver and 2 Bronzes) for a total of 8 Olympic medals the most-decorated American male Winter Olympian.
Dow month: 5.19%, 6 mo: 18.46%, ytd: 11.02%
S&P 500: 1,258
S&P 500 month: 6.58%, 6 mo: 22.10%, ytd: 12.78%
NASDAQ: 2,653
NASDAQ month: 6.20%, 6 mo: 25.79%, ytd: 16.91%
FOMC neutral stance (Dec 14) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. Federal Reserve (Dec 21) extends through Aug. 1, 2011 of its temporary dollar liquidity swap arrangements with the European Central Bank and the central banks of Japan, Canada, Switzerland and the United Kingdom
U.S. unemployment falls to 9.4%, adding 152,000 jobs.
Dec 17 - Middle Class Tax Relief Act of 2010 ($858 billion bill for 2011-12). Extended Income tax rates ($288 billion): 10%, 15%, 25%, 28%, 33% and 35%. Extended Alternative Minimum Tax ($137 billion): up to $47,450 for individuals and $72,450 for couples (2010), $48,450 and $74,450 (2011) and nonrefundable credits applied to one's tax liability. Social Security tax reduction ($112 billion): a 2% reduction on payroll taxes to 4.2% (2011) on wages up to $106,800. Expanded Child tax credit ($90 billion): retains $1,000 child tax credit. Estate tax ($68 billion): exemption raised to $5 million and tax lowered to 35% while reinstating the "step up in basis" for beneficiaries of those who die in 2010-12. Unemployed ($57 billion): 13-month extension, as high as 99 weeks in states hit hardest by job loss. Extended Capital Gains rates ($53 billion): unchanged for 2011-12. Marriage penalty relief ($27 billion): twice the standard deduction and an expanded 15% tax bracket for couples. Expanded College credit ($18 billion): retains American Opportunity tax credit (a HOPE tax credit). Individual tax break extensions ($8 billion): extends many tax breaks.
Gold trades at a new all-time high of $1,432.50 (Dec 7). Silver trades $30.93 (Dec 30), highest since March 1980). Copper trades an all-time high of $4.372 lb (Dec 30). Official U.S. government Gold price $19.39 (from 1792-1833), $20.67 (1833-1934), $35 (1934-1971, $31.69 low in 1949 and $41.28 high in 1969). In 1968 the U.S. established a two-tiered gold market. On August 15, 1971 the U.S. stopped the direct conversion of U.S. dollars to gold. Gold price set at $38 (1972) and $42.22 (1973) ending the existing Bretton Woods system of international financial exchange. Gold set an all-time high of $850 on January 21, 1980 then fell to $251.70 Aug. 18, 1999. The Washington Agreement (September, 26 1999) limited central banks gold sales following Britain's controversial plan to reduce its gold holdings by 58% to 300 tons from 715 tons, July 1999.
Toronto-Dominion Bank purchases (December 21, 2010) Chrysler Financial for $6.3 billion from Cerberus Capital Management LP. U.S. Treasury Department sold its stake for $1.9 billion on May 17, 2010 settling its $4 billion loan.
Month of November 2010
Dow: 11,006
Dow month: -1.01%, 6 mo: 8.57%, ytd: 5.54%
S&P 500: 1,180
S&P 500 month: -0.25%, 6 mo: 8.36%, ytd: 5.82%
NASDAQ: 2,498
NASDAQ month: -0.36%, 6 mo: 10.68%, ytd: 10.09%
FOMC neutral stance (Nov 3) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. FOMC will continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities: $250-300 billion plus $600 billion of new purchases of longer-term Treasury securities through the end of the 2nd quarter of 2011 (about $110 billion per month with an average duration of between 5 and 6 years) 1.5-2.5 year Treasuries: 5%, 2.5-4 years: 20%, 4-5.5 years: 20%, 5.5-7 years: 23%, 7-10 years: 23%, 10-17 years: 2%, 17-30 years: 4% and TIPS 1.5-30 years: 3%.
U.S. unemployment rises to 9.8%, adding 93,000 jobs.
2 yr U.S. Treasury rallies to 0.3118% (Nov 4), an all-time low regular sales began in 1975.
GM goes public with an IPO with both overallotments the deal raises a total of $23.1 billion.
Prime Minister Brian Cowen negotiates Ireland's rescue as government budget deficit reaches 32% of gdp, €35 billion for banks and €50 billion the Irish government ($113 billion) - €67.5 billion in loans from the EU, the IMF and U.K., Denmark and Sweden and €17.5 billion from Ireland's own reserves and pensions average interest of 5.8%.
Japanese yen trades 80.22 (11/1) the Bank of Japan intervenes and sells yen and raised their ¥20 to 30 trillion ($360 billion) credit program (Aug 30).
Month of October 2010
Dow: 11,118
Dow month: 3.06%, 6 mo: 1.00%, ytd: 6.62%
S&P 500: 1,183
S&P 500 month: 3.68%, 6 mo: -0.25%, ytd: 6.09%
NASDAQ: 2,507
NASDAQ month: 5.87%, 6 mo: 1.87%, ytd: 10.48%
10 yr U.S. Treasury rallies to 2.3302% (Oct 8) from 4% (April 5, in 6 months).
U.S. unemployment remains to 9.6%, adding 172,000 jobs.
30-year fixed mortgage at historic record low of 4.19%, October 13 (4.61%, 3/2009).
Earnings season for 3Q10 for the S&P 500 index was positive 31%.
Month of September 2010
Dow: 10,788
Dow month: 7.72%, 6 mo: -0.63%, ytd: 3.45%
S&P 500: 1,141
S&P 500 month: 8.77%, 6 mo: -2.40%, ytd: 2.32%
NASDAQ: 2,368
NASDAQ month: 12.02%, 6 mo: -1.21%, ytd: 4.36%
U.S. unemployment remains to 9.6%, -41,000 jobs lost - fourth month of payroll loses.
FOMC neutral stance (Sep 21) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Obama signs Small Business Jobs and Credit Act of 2010 $30 billion federal fund for small bank small businesses loans and $12 billion in business tax breaks.
Basel III, 27 nations agree to raising bank Tier 1 capital ratio to 6% (core to 4.5%, up from 4% and core of 2%) and a capital conservation buffer up to 2.5% - phased in 2013-18.
Month of August 2010
Dow: 10,015
Dow month: -4.31%, 6 mo: -3.00%, ytd: -3.96%
S&P 500: 1,049
S&P 500 month: -4.81%, 6 mo: -4.98%, ytd: -5.93%
NASDAQ: 2,114
NASDAQ month: -6.25%, 6 mo: -5.54%, ytd: -6.84%
Federal Reserve extends GSE Mortgage-Backed Securities and GSE Debt Purchases (8/10/08). System Open Market Account (debt purchases) concentrating new purchases in 2-10 year Treasuries, up to $10-25 billion/ month.
U.S. unemployment rises to 9.6%, -1,000 jobs lost.
FOMC neutral stance (Aug 10) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
30 yr U.S. Treasury rallies to 3.4616% (Aug 25) from 4.85% (April 6, in 4+ months).
Obama signs $26.1 billion Education Jobs and Medicaid Assistance Act of 2010 providing $10 billion for state teacher's payrolls and $16.1 for state Medicaid funding.
Iraqi Freedom ends (Aug 31) as U.S. combat operations end and Operation New Dawn begins - 4,419 U.S. troops have died in Iraq.
Month of July 2010
Dow: 10,466
Dow month: 7.09%, 6 mo: 3.96%, ytd: 0.36%
S&P 500: 1,102
S&P 500 month: 6.99%, 6 mo: 2.70%, ytd: -1.17%
NASDAQ: 2,255
NASDAQ month: 6.92%, 6 mo: 5.03%, ytd: -0.62%
July 21 - Dodd-Frank Wall Street Reform and Consumer Protection Act signed: Financial Stability Oversight Council (10 members, Treasury Secretary enforces) monitors and addresses national system-wide risks with the power to seize and break up large, complex financial firms - stricter capital, leverage and new rules (with veto power over proposals by the Consumer Financial Protection Bureau). The liquidation process run by the FDIC while the Treasury would supply funds (to cover the costs) until a "repayment plan" created by assessing fees on financial firms (more than $50 billion in assets) is established.
Consumer Financial Protection Bureau (under the Federal Reserve) with rule-making (examine and enforce regulations) authority for all mortgage-related, credit cards, pay day lenders, check cashers and loan businesses (more than $10 billion in assets) that offer consumer financial products or services. Auto dealers, mobile-home sellers, real estate brokers, accountants and insurers exempt from the Bureau (state and federal regulations). Consumers get an actual credit score along with an annual report. States can impose stricter consumer protection laws on national banks though the banks can appeal (if a state's law "prevents or significantly interferes" with the bank's ability to do business) to federal regulators. State's attorneys-generals have the power to enforce certain rules issued by the Consumer Financial Protection Bureau.
Federal Insurance Office (under the Treasury) monitors the insurance industry's laws and regulations, reports to the Financial Stability Oversight Council and reports to Congress. Fixed-equity annuities escape SEC regulation (currently regulated by state insurance commissioners).
The Fed will supervise large, complex financial companies that threaten the broader economy and retains oversight over community banks while eliminating the Office of Thrift Supervision. The Fed's emergency lending authority would require the Treasury Secretary's approval and prohibits insolvent firm's participation. The Fed will disclose (2-year lag) details of its discount window loans and open-market transactions. Bankers will no longer pick the presidents of the Fed's regional banks. GAO to conduct one-time audit of all of the Fed's emergency lending programs from the financial crisis of 2007-08.
OTC derivatives (standard interest rate, foreign exchange, commodity and CDO) required to be traded on exchanges and routed through clearinghouses. Customized swaps could be traded, but they would have to be reported with new capital, margin, record-keeping and business conduct rules. Spin-off riskiest OTC derivatives trading operations into affiliates - trading in agriculture, uncleared commodities, most metals, CMOs and energy swaps.
Bank Capital standards (size and risk-based) established including a prohibition on large bank holding companies treating trust-preferred securities as Tier 1 capital (though grandfathers securities for banks with less than $15 billion in assets). Larger banks would have 5 years to phase-out their trust-preferred securities as Tier 1 capital. A special assessment would be mandated by the Financial Stability Oversight Council on the premiums big banks pay for FDIC insurance (on commercial deposits) and ends TARP. The Fed can cap Interchange fees on "debit" card swipes which retailers pay to banks making them more reasonable and proportional. Propriety trading limited to 3% (or less, Volcker Rule) of a bank's Tier 1 capital in hedge and private-equity funds. Financial firms and banks would be prohibited from bailing out funds in which they are invested. Home mortgages must adhere to new national minimum underwriting standards while lenders would be required to ensure that borrowers are able to repay home loans by verifying the borrower's income, credit history and job status. Bans payments to brokers for steering borrowers into high-priced loans. Unemployed homeowners (with good credit) would be eligible for low-interest loans ($1 billion from TARP). Banks that securitize mortgage-backed loans must keep 5% of the credit risk on their balance sheets (though a class of low-risk mortgages that meets certain minimum standards would be exempt). Regulators could permit alternative risk-retention arrangements for the commercial mortgage-backed securities market. FDIC insurance coverage permanently increased for banks, thrifts and credit unions to $250,000.
Credit-rating business overseen by a new quasi-government entity designed to address conflicts of interest. Allows investors to sue credit-rating firms for a "knowing or reckless" failure to conduct a reasonable investigation (agencies must disclose their methodologies). SEC (new oversight office) has the ability to fine and/or deregister ratings agencies and must find an independent way to match credit rating agencies with financial firms seeking ratings.
SEC can hold broker dealers who give investment advice to a fiduciary duty similar to registered investment advisers. SEC can grant shareholders proxy access (to nominate directors) and require industry regulators with oversight of pay practices (within the financial industry). Shareholders of publicly-traded companies have a non-binding vote on executive pay and "golden parachutes". Hedge funds and private equity funds required to register with the SEC as investment advisers and to provide information on trades.
243 new rules required writing by 11 different federal agencies - phasing in through 2022.
U.S. unemployment remains 9.5%, though -66,000 jobs lost.
British Petroleum stops leaking Macondo well July 15 (4-5 million barrels). BP sells $7 billion of assets in North America and Egypt to Apache, takes a 2Q10 pretax charge of $32.2 billion and change CEOs. 1991 Iraqi-Kuwaiti war oil spill in Persian Gulf (5-10 million barrels, biggest in history) when retreating Iraqi troops set fire and opened valves on oil rigs and pipelines.
Obama signs $34 billion Unemployment Compensation Extension Act of 2010 extending unemployment benefits.
European Union stress tests on 91 banks, accounting for 65% of the EU's banking industry. 7 banks fail, need to raise more than €3.5 billion ($4.5 billion) of additional capital: Germany's Hypo Real Estate, Greece's ATEBank and five Spanish banks - Unnim, Diada, Espiga, Banca Civica and CajaSur.
Agricultural Bank of China - becomes largest IPO (July 15) at $22.1 billion surpassing the $22 billion raised by Industrial and Commercial Bank of China (ICBC) in 2006. Bank of China (BOC) and China Construction Bank (CCB) make up the big 4.
Goldman Sachs settles $550 million SEC fraud (July 15), largest SEC penalty in Wall Street history. 10 Wall Street firms (April 28 2003, Citigroup's Salomon Smith Barney, Credit Suisse, Morgan Stanley, Goldman Sachs, Lehman Brothers, Bear Stearns, UBS Warburg, J.P. Morgan Chase, US Bancorp's Piper Jaffray, and Merrill Lynch) agreed to a $1.4 billion settlement over conflicts of interest between stock research and investment banking.
AIG settles $725 billion (July 16) "fraud from October 1999 to April 2005 involving anti-competitive market division, accounting violations and stock price manipulation, and brings total expected recovery for AIG shareholders to over $1 billion." In 2006 (Feb 9) AIG settled $1.64 billion for insurance and securities fraud.
Dell settles $100 million SEC (Michael Dell pays $4 million, July 22) fraudulent accounting.
Earnings season for 2Q10 for the S&P 500 index was 38%.
Month of June 2010
Dow: 9,773
Dow month: -3.59%, ytd: -6.28%, 6 mo: -6.28%
S&P 500: 1,030
S&P 500 month: -5.42%, ytd: -7.63%, 6 mo: -7.63%
NASDAQ: 2,109
NASDAQ month: -6.56%, ytd: -7.06%, 6 mo: -7.06%
FOMC neutral stance (June 23) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
U.S. unemployment falls to 9.5%, though -175,000 jobs lost.
Euro depreciates to $1.1874 (June 7) falling from $1.5100 (12/1/09, over 21% in 6 months). During the crisis $1.2326 (10/27/08, and $1.2547 2/18/09), previously an all-time high of $1.6038 (7/15/08), an all-time low of $0.8228 (10/26/00) and a launching high of $1.1837 (1/5/99). Europe's lenders deposited a record €369 billion in the ECB's overnight deposit facility on June 9.
ECB (European Central Bank) will lend EU banks €131.9 billion ($161.5 billion) for 3 months (less than estimated). ECB lends €111.2 billion euros ($136.5 billion) for 6 days (to 78 banks) bridging the landmark 12-month loans (1%) the banks need to repay €442 billion.
Exchanges (June 11) begin SEC mandated uniform "circuit breakers" across NYSE, Nasdaq, BATS Global Markets, Direct Edge, International Securities Exchange, Chicago Board Options Exchange, CME Group Inc. and Intercontinental Exchange (following the May 6, 2010) DJIA interday 998.5 point fall. 6-month pilot period, S&P 500 stocks change of 10% in 5 minutes triggers a halt in trading for 5 minutes.
Federal Reserve starts Term Deposit Facility first auction June 14 ($1.15 billion of 14-day term deposits), June 28 ($2.12 billion of 28-day) and July 12 ($2.11 billion of 84-day) paying 0.27%, 0.27%, and 0.31% - tightening credit by draining cash from the banking system.
Bank of Canada (June 1) raises rates to 0.50% from 0.25%, first G7 central bank to raise interest rates since credit crisis began.
Chinese RMB (renminbi) fixed-rate ends on June 21 (band, low 6.78 8/26/08 to high 6.885 12/1/08) and re-floats against the U.S. dollar after nearly 2 years.
China surpasses Japan to become the world's second largest economy. Japan was second since 1968, when it surpassed West Germany.
Fannie Mae and Freddie Mac to delist their common and preferred stock from the NYSE, over $145 billion taxpayer aid to date.
SEC and federal prosecutors indicted Lee Bentley Farkas (found guilty on April 19, 2011) - Taylor, Bean & Whitaker Mortgage Corp. and failure of Colonial BancGroup Inc a $3 billion scheme involving fake mortgage assets that duped financial institutions that started as early as 2002.
Jerome Kerviel, French Societe Generale trader, trial begins charged in €5 billion ($7 billion) loss - bank closed out positions beginning January 21, 2008.
Month of May 2010
Dow: 10,137
Dow month: -7.91%, ytd: -2.79%, 6 mo: -2.00%
S&P 500: 1,089
S&P 500 month: -8.18%, ytd: -2.34%, 6 mo: -0.55%
NASDAQ: 2,257
NASDAQ month: -8.29%, ytd: -0.53%, 6 mo: 5.27%
DJIA falls 998.5 points (May 6, a 1010.14 point swing, markets lose $862 billion in 20 minutes), the 9.2% plunge its biggest since the 1987 crash. The 10 yr U.S. Treasury rallied to 3.26% from 4% (April 5, in 24 trading days). The fall was precipitated by the Greek crisis, then P&G and 3M stocks fell to their NYSE "circuit breakers" (limiting losses) and Waddell & Reed sold 75,000 e-mini S&P 500 index futures contracts. NYSE orders "rolled over" to other "electronic exchanges" and were filled at prices below NYSE "circuit breaker" prices. The "gap" in trading effected other issues, then the NYSE resumed regular trading in issues that had traded limit down - Exchanges subsequently canceled over 20,761 trades in 296 issues (160 ETFs of 1,003 ETFs temporarily lost almost all their value).
Federal Reserve extends U.S. Dollar Liquidity Swaps extended (5/9/10) following the May 6, 2010 DJIA interday 998 pt fall.
10 yr U.S. Treasury rallies to 3.06% (May 25) from 4% (April 5, in 7 weeks). VIX rise to 48.2 (May 21) from below 20 on May 3 (15.23 on April 12, up 216%).
U.S. unemployment falls to 9.7%, 432,000 jobs created - fifth month of payroll gain since October.
Greece receives a €110 billion ($146 billion) rescue package, EU nations (led by Germany and France) €80 billion and the IMF €30 billion. Greece must cut its budget deficit by 11% (of GDP) by 2013, €30 billion cut this year. Greek loan rate around 5% for three years. ECB (European Central Bank) announced it would indefinitely accept Greece's debt as collateral regardless of its credit rating.
EU leaders (16 euro nations) agree to a €750 billion ($940 billion) stabilization facility fund for the Euro. U.S. Federal Reserve reopens foreign bank swaps (through January 2011). The EU Commission will provide €60 billion, the 16-nation eurozone promises €440 billion and the IMF will contribute €250 billion. ECB will buy government and private bonds. Starting May 19 (through March 31, 2011) German regulators temporarily ban naked short-selling on 10 banks and insurers and naked credit-default swaps on euro-area government bonds. ECB expects Europe's banks to writedown €195 billion of bad debt through 2011 (€444 billion already recognized, a total of $770 billion). The 16-country Euro zone had $1.57 trillion of exposure (as of March 31) to Spain ($727 billion), Ireland ($402 billion), Portugal ($244 billion), and Greece ($206).
Month of April 2010
Dow: 11,008
Dow month: 1.40%, ytd: 5.56%, 6 mo: 13.34%
S&P 500: 1,186
S&P 500 month: 1.45%, ytd: 6.36%, 6 mo: 14.48%
NASDAQ: 2,461
NASDAQ month: 2.67%, ytd: 8.46%, 6 mo: 20.34%
FOMC neutral stance (April 28) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
U.S. unemployment rises to 9.9%, 313,000 jobs created.
Obama signs $18.2 billion Continuing Extension Act of 2010 extending unemployment benefits.
Greek government receives EU-IMF aid backstop (€30 billion EU and up to €15 billion IMF, total $61 billion) at below-market interest rates. Greece spent €50 billion ($62 billion) on defense (since 2000), €9 billion ($11 billion) on 2004 Olympics while 40% are government employed, full pension as early as 50 yrs old and 30% avoid taxes. The Euro (founded 1999) facing pressures, the 16-nations worked around the Maastricht Treaty barring the bailout of debt-stricken countries.
April 20 - British Petroleum's Deepwater Horizon oil rig explodes, 50 miles southeast of Louisiana in the Gulf of Mexico, 11 crewmen dead.
SEC alleges that Goldman Sachs fraudulently structured and marketed CDOs in April 2007.
Earnings season for 1Q10 for the S&P 500 index was 57%.
Month of March 2010
Dow: 10,856
Dow month: 5.14%, ytd: 4.10%, 6 mo: 11.78%
S&P 500: 1,169
S&P 500 month: 5.89%, ytd: 4.83%, 6 mo: 10.60%
NASDAQ: 2,397
NASDAQ month: 7.10%, ytd: 5.64%, 6 mo: 14.58%
FOMC neutral stance (March 16) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
U.S. unemployment 9.7%, 208,000 jobs created.
Obama signs $940 billion (over 10 years) Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act of 2010 extending health care coverage to 32 million. Subsidized coverage for uninsured Americans and phasing out pre-existing conditions by 2014 - financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and higher-earning Americans. Student loan reform - ending government subsidies to private lenders. Healthcare.gov
Obama signs $17.6 billion Hiring Incentives to Restore Employment (HIRE) Act.
Month of February 2010
Dow: 10,325
Dow month: 2.56%, ytd: -0.99%, 6 mo: 8.73%
S&P 500: 1,104
S&P 500 month: 2.89%, ytd: -1.00%, 6 mo: 8.24%
NASDAQ: 2,238
NASDAQ month: 4.24%, ytd: -1.37%, 6 mo: 11.40%
Federal Reserve increases the Discount rate 25 bps to 0.75% (February 19) its first increase (since Jun 29, 2006) when the Fed raised from 5.00% to 5.25%. Then the Emergency FOMC inter-meeting cut (August 17, 2007) to 5.75% from 6.25% (at outset of credit crisis) and the Fed Funds rate cut to 4.75% from 5.25% (discount rate to 5.25% from 5.75%, September 18).
U.S. unemployment 9.7%, 39,000 jobs created.
SEC restricts short sales (February 24) once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.
Chilean earthquake 8.8 (Feb. 28) 70 miles north-east of Concepcion and 200 miles south-west of Santiago, 500 people may have died about 1.5 million homes damaged. Chile's 1960 Valdivia earthquake 9.5 (May 22, 1960) is to date the most powerful earthquake ever recorded, killing 1,700-6,000 people.
Vancouver 2010 Olympics - U.S. wins most medals 37 (9 golds) while Canada wins the most golds 14 (26 total), Germany wins 30 medals and Norway 23. Apolo Anton Ohno wins 3 medals (1 Silver and 2 Bronzes) for a total of 8 Olympic medals the most-decorated American male Winter Olympian.
Month of January 2010
Dow: 10,067
Dow month: -3.46%, ytd: -3.46%, 6 mo: 9.77%
S&P 500: 1,073
S&P 500 month: -3.77%, ytd: -3.77%, 6 mo: 8.71%
NASDAQ: 2,147
NASDAQ month: -5.38%, ytd: -5.38%, 6 mo: 8.54%
FOMC neutral stance (January 27) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
U.S. unemployment 9.7%, 14,000 jobs created.
General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.
Haiti Earthquake 7.0 (Jan 14) 16 mi from Port-au-Prince, 200,000 people may have died. U.N. suffers its greatest loss of life (101) in single event - G7 to cancel all Haiti bilateral debt.
Earnings season for 4Q09 for the S&P 500 index was positive 207%, ex-financials positive 16% - ending 9 quarter of negative growth, a record.
10 year Treasury: 3.81% yield up 72.40%
World Equity Market: $45.958 trillion up 43.03%
MSCI Europe Index 878.70 up 22.40%
MSCI Asia Pacific Index 156.26 up 34.64%
S&P Latin America 40 4,599.67 up 94.66%
MSCI BRIC 332.29 up 89.25%
S&P Middle East & Africa 265.35 up 50.62%
From panic lows to year-end:
Global Markets rises from $25.5 [Mar 9 '09] to $45.958 trillion
gaining $20.5 trillion or 80.2%:
DJIA rises 61.2% from 6,469.95 [Mar 6 '09] to 10,428.05
S&P 500 rises 67.2% from 666.79 [Mar 6 '09] to 1,115.10
NASDAQ rises 79.3% from 1,265.52 [Mar 9 '09] to 2,269.15.
MSCI Europe Index rises 66.1% from 529 [Mar 9 '09] to 878.70
MSCI Pacific Index rises 71.8% from 70.13 [Mar 10 '09] to 120.45
S&P Latin America 40 rises 146.9% from 1,862.84 [Nov 20, 2008] to 4,599.67
S&P Emerging Middle East & Africa rises 81.4% from 146.30 [Mar 9, 2009] to 265.35
S&P BRIC rises 145.7% from 135.25 [Oct 27, 2008] to 332.29.
Japan's NIKKEI Index 6,994.90 [Oct 28, 2008] to 10,546.44 - up 50.8%
Germany's DAX Index 3,588.89 [Mar 9 '09] to 5,957.43 - up 66.0%
Britain's FTSE Index 3,460.71 [Mar 9 '09] to 5,412.88 - up 56.4%
France's CAC Index 2,465.46 [Mar 9 '09] to 3,936.33 - up 59.7%
Canada's TSX Index 7,479.96 [Mar 6 '09] to 11,746.11 - up 57.0%.
Brazil's BOVESPA Index 29,435 [Oct 27, 2008] to 68,588.41 - up 133.0%
Russia's RTS Index 492.59 [Jan 23 '09] to 1,444.61 - up 193.3%
India's Bombay SENSEX Index 7,697.39 [Oct 27, 2008] to 17,464.81 - up 126.9%
China's Shanghai Composite 1,664 [Oct 28, 2008] to 3,277.14 - up 96.9%.
Best Investments in 2009
U.S. Total stock market returned 26% in 2009, Stocks had historic gains, Bonds had historic losses of -3.5% and inflation was -0.3% ( lowest since 1954). Only January and February had losses in all 3 major U.S. Indexes.
Of the 5 largest sectors in the U.S. Economy: Technology 50.8%, Natural Resources 21.5%, Healthcare 19.2%, Real Estate 19% and Financials 17%. By size: Mid Cap 35% while Small Cap, Large Cap and Micro Cap returned 23-25%. Both gold 27.8% and oil 88% rose with commodity prices (CRB) which rose 23.5%.
Global markets rose 43.1% of the World's largest economic regions: Latin America 94.7% and Emerging Markets 89.3% (recovered from terrible selloffs), Asia 34.6% and Europe 22.4%. Of the World's largest Developed non-U.S. Economies: Canada 30.7%, Germany, Britain and France 22-24% and Japan 19%. In the Emerging markets Russia 128.6%, Brazil, India and China 80-83%. Hedge funds 20% (in 2008, -19%; bettering 2003, 19.5%; 31.3% in 1999) and Private Equity both underperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. U.S. returns in 2009 recovered from oversold panic levels in March - assets that fell the furthest generally recovered the most.
Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
2009 complete News
2007-09 PANIC facts (click)
Markets lost 13 years of value:
DJIA trades 6,469.95 (Mar 6) lowest since November 1996 - 54.6% lower than 14,279 (10/11/07).
S&P 500 trades 666.79 (Mar 6) lowest since May 1996 - 57.7% lower than 1,576 (10/11/07).
NASDAQ trades 1,265.52 (Mar 9) lowest since October 1996 - 55.7% lower than 2,861 (10/11/07).
MSCI Europe Index trades 529 (Mar 9) lowest since December 1996 - 61.8% lower than 1,388 (7/13/07).
MSCI Pacific Index trades 70 (Mar 10) lowest since June 2003 - 59.5% lower than 173 (11/1/07).
U.S. unemployment rate rose to 10.1%, 17.4% U-6 (Oct). 8.4 million jobs lost since December 2007.
US economy contracts -2.4% (worst since 1946) though gdp grows by 2.2% in the 3Q09 and 5.6% in the 4Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp).
Federal Reserve left interest rates at 0%-0.25% and the Discount rate to 0.50%, historic lows - for all of 2009.
Government and Central banks provide over $11 trillion of support for Financial institutions: $1.56 trillion in capital injections, $5.21 trillion for asset purchases and guarantees and $4.64 trillion in debt guarantees.
10yr Treasury ends the year at 3.81%. Treasuries fell -3.5% this year, the worst annual performance since 1978. U.S. Treasuries posted their biggest 1 day rally (March 18, since 1962) rallying from 3.01% to 2.46% following the Fed's announcement to begin purchases of $300 billion of 2-10 year Treasuries. U.S. Treasury yield curve steepens to record as 2-10 year Treasury spread increases to 2.88%, Dec 22.
U.S. Dollar closed the year at $1.43 to the Euro - depreciating from $1.2326 (Oct 27 '08) to 1.5135 (Nov 25). U.S. dollar's share of global currency reserves rises to 65% the euro's share 25.9%, flight to quality.
Gold traded at a new all-time high $1226, Dec 2 - rising from $681 (Oct 23 '08) to $1,096 (Dec 31 '09) a 60.9% gain. Silver $9.09 (Oct 24 '08) to $16.84 a 85.3% gain. Platinum $752.10 (Oct 27 '08) to $1460 a 94.1% gain. Copper $1.25 (Dec 26 '08) to $3.32 a 165.6% gain. Oil $32.40 (Dec 19 '08) to $79.36 a 144.9% gain. CRB 327.50 (Dec 5 '08) to 485.75 a 48.3% gain. Wheat $4.71 (Dec 5 '08) to $5.41 a 14.9% gain. Corn $3.05 (Dec 5 '08) to $4.14 a 35.7% gain. Rice $11.19 (Mar 16 '09) to $14.56 a 30.1% gain. Soybeans $7.76 (Dec 5 '08) to $10.39 a 33.9% gain.
LIBOR trades below 0.25% (Dec 21) falling from 3.64% (Oct 10 '08). VIX trades below 20 (Dec 22) falling from 89.53 (Oct 24 '08). TED spread trades below 0.16% (Sep 10) falling from 4.64% (Oct 10 '08) and 3-Month LIBOR-OIS Spread trades below 0.07% (Dec 28) falling from 3.64% (Oct 10 '08).
Federal Reserve requires 10 of the 19 major U.S. banks to raise a total of $74.6 billion in capital.
- Fed returns $47.4 billion (total net income $53.4 billion, 2009) to the Treasury up from $27.5 billion (total net income $35.5 billion, 2008).
- Treasury Secretary Timothy Geithner announced the Public-Private Investment Program using $75 to $100 billion from TARP.
- Federal Reserve began Term Asset-Backed Securities Loan Facility (TALF), up to $1 trillion.
- EESA/TARP invests second $350 billion (with new programs) in other financial institutions - more than 700 institutions participating.
U.S. Banks and securities firms (Citigroup, B of A, Wells Fargo, etc.) write off losses of $1.1 trillion. Worldwide reported losses over $1.7 trillion of mortgage-related writedowns from asset-backed securities while Banks have raised over $1.5 trillion of new capital.
S&P 500 earnings for 4Q09 is positive 65% - ending a record 9 quarters of negative growth.
140 banks fail at a cost of over $30 billion (2008, 25 banks failed, $17.6 billion) and 31 Credit Unions (2008, 15 failed).
Mergers and acquisitions fell to $1.75 trillion from $2.5 trillion 2008 and 2007's record $4.04 trillion.
Real estate prices fell - S&P/Case-Shiller 20 cities high of 206.52 (July 2006) falls to 139.21 (April 2009) - down 37.4%.
Swedish Riksbank, August 7, 2009 (world's oldest central bank, 1668) is the first central bank to post a negative interest rates (their repo rate was cut to 0.25% and their deposit rate 50 bps lower at to -0.25%).
- European Central Bank cut interest rates to 1.00%, a record low.
- Bank of England (founded in 1694) cut interest rates 0.50%, lowest ever, founded in 1694.
- Reserve Bank of Australia (Oct 6) becomes first major central bank to raise its policy rate 25 bps. to 3.25% rate, following a 49-year low.
President Obama signs the American Recovery and Reinvestment Act of 2009, a $787.2 billion Stimulus bill.
- Obama announces a housing plan that may help 3-4 million homeowners, the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac).
- Obama signs $24 billion Worker, Homeownership, and Business Assistance Act of 2009.
- President Barack Obama wins the 2009 Nobel Prize for Peace.
SEC rules 'Naked' Short-Selling ends requiring that brokers must promptly buy or borrow securities to deliver on a short sale.
FASB (Financial Accounting Standards Board) requires off-balance-sheet loans (qualifying special purpose entities) to be reported.
- FASB loosens fair value rules from mark-to-market to cash flows and other factors for distressed assets.
China's foreign-exchange reserves exceed $2.4 trillion.
- China purchase more cars 13.6 million (up 46%, 2008) then the U.S. 10.4 million (down -21%, 2008) first time since 1908.
- China passes Germany as largest exporter $1.2 trillion compared to $1.17 trillion.
- China sells an inaugural 6 billion yuan ($878.7 million) of sovereign bonds in Hong Kong (issued Oct. 27) representing 0.013% of $7 trillion of total foreign exchange reserves.
- ChiNext opens (Oct 31) China's newest exchange for small cap companies. All 28 ChiNext IPOs worth $10 billion (68.6 billion yuan) double on the first day to $20.5 billion (140 billion yuan).
- China approaches second largest economy, Japan's total GDP $5.085 trillion while China's was $4.909 trillion
Group of 20 nations to replace G-8 (G-7 from 1975 until 1997) as primary organization coordinating global economic policy. IMF offers $250 billion of SDRs (Special Drawing Rights) on Aug. 28. and an additional $33 billion on September 9.
- Japan, China, South Korea, Thailand, Indonesia, Malaysia, Singapore, Philippines and 5 Southeast Asian nations agree to form a $120 billion pool of foreign-exchange reserves to defend their currencies.
- G20 agrees to provide the IMF with $1 trillion of lending power by selling 403 tons of gold.
- European Union pledges $100 billion (€75bn) to the IMF and doubles funds for non-Eurozone countries to $68 billion (€50bn).
BlackRock buys Barclays Global Investors for $13.5 billion and retains a 19.9% stake, the world's largest money manager, with over $2.7 trillion (State Street $1.44 trillion and Fidelity Investments, $1.25 trillion) in assets under management.
- AIG receives up to $30 billion of new loans from TARP funds after reporting a $61.7 billion loss in 4Q08 (largest in corporate history), total authorized assistance of $182.3 billion.
- Citigroup converts $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 33.6% of outstanding shares.
- FDIC sells IndyMac Bank to IMB Management Holdings LP for $13.9 billion - FDIC's bank insurance fund losses are expected to be approximately $9 billion.
- Morgan Stanley agrees to buy 51% of Citigroup's Smith Barney for $2.7 billion.
$27 trillion (notional value/gross exposure) of credit-default swaps, ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts (March 9, 2009) before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited.
- $458 trillion (notional value/gross exposure) of interest rate derivatives, International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008.
General Motors exits bankruptcy ($91 billion, 4th largest in U.S. history) in 40 days, closing 2,400 dealerships with $30 billion in exit financing from the US government. General Motors Co. is 60.8% owned by U.S. taxpayers.
- Chrysler Group exits bankruptcy ($39 billion, 7th largest bankruptcy in U.S. history) in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government. Chrysler is 23% owned by U.S. taxpayers.
CIT Group files Chapter 11 bankruptcy, $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders - the fifth-largest bankruptcy in U.S. history.
- Capmark Financial Group (formerly commercial lending at GMAC) filed for bankruptcy (Oct 25) debt of $21 billion and consolidated assets of $20.1 billion, a top servicer of U.S. commercial real estate loans and the largest servicer of loans in the rest of the world.
- Colonial BancGroup fails with assets of $25 billion, biggest U.S. bank failure in 2009, taken over by BB&T Corp.
- NCUA (National Credit Union Administration Board) placed U.S. Central Federal Credit Union ($34 billion) and Western Corporate unions ($23 billion) into conservatorship.
British government (Nov 3) bails out: RBS £25.5 billion (total £45.5 billion, U.K.'s government stake increases to 84.4% from 70%), the world's most expensive bank bailout. Lloyds Banking Group (acquired HBOS Plc on Jan 16) to receive £5.6 billion pounds (government's rights to buy stock, in addition to earlier £17 billion) and plans to raise £21 billion (£13.5 billion pounds in a rights offering and £7.5 billion in a bond exchange) denying the government majority control which owns 43.5%.
UBS paid (Feb. 18) $780 million to avoid prosecution for helping wealthy Americans evade taxes, disclosing information on more than 250 secret accounts, the U.S. continues to seek the identities of 52,000 American account holders suspected of tax evasion on $20 billion in assets.
- UBS AG agrees to disclose details on 4,450 accounts to the Internal Revenue Service. Switzerland, Liechtenstein, Andorra and Monaco banking authorities all pledged to comply with OECD (Organization for Economic Cooperation and Development) standards for banking transparency and information exchange.
SIPC releases $534.25 million to 1,558 Madoff's vicitms. Exceeding the $520 million (from all 321 prior SIPC liquidations) since the program began in 1970.
SEC charges Robert A. Stanford for a fraudulent $7 billion CD / Ponzi scheme.