Joseph Lazzaro
New York - http://
Joseph Lazzaro is a veteran financial editor with more than 10 years in financial news and financial publishing. Lazzaro served as Managing Editor of New York-based financial news web site WallStreetItalia.com / WallStreetEurope.com for four years. Lazzaro, who holds an ABD/Ph.D. in American Government and International Economics from the University of Connecticut, also served as a News Editor for the Pulitzer Prize-winning Hartford [Connecticut] Courant, prior to graduate school. He is based in New York.
Posted Aug 28th 2008 9:55AM by Joseph Lazzaro
Filed under: Forecasts, Economic data, Federal Reserve, Recession
A sluggish U.S. economy that grows at 3.3% in Q2? What's going on here?
The U.S. Commerce Department Thursday revised
its Q2 GDP growth estimate to 3.3% from the previously-estimated 1.9%, but economist David H. Wang remains a skeptic regarding the appearance of an economic recovery.
"Don't write home or e-mail home that we have 'blue skies' ahead regarding the U.S economy because the skies remain uncertain and stormy looking. If you take away the export gains, the economy is still pretty weak," Wang said. "Also, one quarter does not a recovery make, and we'll get final data on Q2 GDP in September [September 26]."
Economists
surveyed by Bloomberg News had expected the preliminary Q2 GDP statistic to total 2.7%. The U.S. economy grew at a 0.9% annualized pace in Q1 and contracted 0.2% in Q4 2007.
Q2 GDP data fleeting?Wang said an improvement in exports and inventory accumulation strengthened GDP in Q2, but other factors suggest "it will be difficult, if not impossible to match that GDP growth rate in Q3 and Q4."
Continue reading U.S. Q2 GDP of 3.3% likely to be fleeting
Posted Aug 27th 2008 2:40PM by Joseph Lazzaro
Filed under: Other issues, Bad news
Wind and solar, two renewable energy sources with a promising future, nevertheless face a bottleneck of sorts in the United States: the electric power grid. The existing grid can not handle the new demands,
The New York Times reported Wednesday, forcing renewable wind and solar sites to shut down, even when conditions are right to generate and sell power.
An infrastructure-challenged U.S.Economist Glen Langan says there's a theme that keeps popping up in the U.S. economy in the early 21st century: inadequate infrastructure. "We're a nation of inadequate infrastructures: the power grid, air travel/air traffic control, railways, highways... pick an infrastructure and you'll see a network that can't handle present demands, let alone an expanded national economy in 2020 or 2030," Langan said.
The power grid bottleneck is particularly frustrating and damaging because both wind and solar power generation systems are mushrooming, and could, with an adequate grid, account for more than 20% of the nation's power needs, Langan said, adding that some economic models put renewable energy's potential contribution even higher, at 25% or more.
"Imagine
T. Boone Pickens building his massive, multi-billion dollar wind mill farm and having it sit idle because the grid cannot tolerate and transmit the increased power? Pretty sad," Langan said.
Continue reading Wind, solar face yet another hurdle: The power grid
Posted Aug 27th 2008 2:00PM by Joseph Lazzaro
Filed under: Forecasts, Economic data, Housing, Recession
There is an old axiom among lobbyists
inside Washington, D.C.'s Beltway that goes:
"Don't just do something, stand there!"It's a policy wonk truism arguing that when uncertainty abounds, sometimes the best action is no action. And, one could argue, today's potential home buyers and sellers would be wise to heed the Beltway axiom.
A case of the Case-Shiller jittersEconomist Peter Dawson was hoping for Case-Shiller house price statistics in July that were easier on the eye. Dawson was disappointed: the Case-Shiller Index of 20 major metropolitan areas plunged 15.9% from July 2007 (
pdf). Prices in the 10-city index plummeted a record 17.0% from July 2007.
"The July Case-Shiller data is about as bad as it gets. It shows a housing sector where prices remain in free-fall in just about every market, save a few, such as Charlotte, North Carolina and Dallas," Dawson said. "The housing bottom has not occurred and it's not near."
So given the above, what's the best stance regarding housing? For sellers, Dawson said if one has to sell for a job relocation, a sale invariably has to occur. But for those who have a three-year or longer sales horizon, postponing a sale may net a better price, providing the U.S economy recovers in 2009, he said.
For buyers, Dawson said "time is on the buyer's side" in most markets. "At this stage, lease or rent through at least June 2009," Dawson said. "In most major markets, prices are likely to be lower by next spring than they are today."
Continue reading The best housing stance for buyers, sellers? Staying put
Posted Aug 27th 2008 10:55AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Other issues, Federal Reserve, Recession
There are lines of reasoning, and then there are lines of reasoning.
European Central Bank board member Axel Weber said Wednesday there's no plan for interest rate cuts and policy makers may, in fact, have to raise rates as the economy accelerates out its slump,
Bloomberg News reported. He added that "monetary policy is where it should be" and that "discussion about declining rates in Europe is premature."
Weber's comments occur after Eurostat reported that
Europe's economy contracted 0.2% in the second quarter (pdf), amid signs of slowing in business investment and consumer spending, and sagging business confidence.
London-based economist Mark Chandler told BloggingStocks Wednesday that data he's reviewed indicate Europe's economy will continue to slow in Q3, which is why he's somewhat taken aback by Weber's comments.
"Weber's comments are a bit troubling. I mean, what data is he looking at? The comments will create a bit of a row [dispute] in the U.K. because our economy is not going to contribute to the recovery he sees, not at this stage," Chandler said.
Continue reading ECB's Weber is against rate cut, says recovery may require increase
Posted Aug 26th 2008 3:35PM by Joseph Lazzaro
Filed under: Products and services, Consumer experience, General Motors (GM)
Will the Volt provide the jolt that turns
General Motors' (NYSE:
GM) around?
In the interpretation of one critic, Chevrolet's Volt plug-in hybrid may end up being not so much a game-changer as an ice-breaker.
Stock Analyst C. Leonard Bauer, whose ownership of high-performance sports cars through the years has been exceeded only by, perhaps,
Mario Andretti, says he doesn't expect the
Volt, Chevrolet's extended-range electric vehicle, to overwhelm the public or generate rave reviews from critics, but those two conclusions still won't blot out Volt's positives.
"The key point, and one many have overlooked, is not the Volt, but the infrastructure behind the Volt," Bauer said. "The Volt as a model will most likely underwhelm, but the processes GM has put in place will pay dividends when advances occur." Bauer added that he does not own shares in or have a rating on any auto manufacturer.
Amped-up R & D
GM, Bauer says, has now committed a large amount of resources to electric and hybrid technologies, whereas previous commitments were modest. Moreover, "it would take an act of idiocy or $10 a barrel oil" for GM to dismantle its current research platform. Bauer expects neither, and as a result, he expects the 2nd, 3rd and 4th generations of Volt and its companions to achieve both battery power storage and power delivery advances not possible during GM's previous electric vehicle projects.
Continue reading GM's Volt: More ice-breaker than game-changer in electric car tech
Posted Aug 26th 2008 12:55PM by Joseph Lazzaro
Filed under: Other issues, Oil, Federal Reserve
There is an often-repeated joke in economists' circles that goes:
Inflation is low, if you exclude food and energy prices. And of course, no one buys food or energy . . .The above is a critique of the U.S. Federal Reserve's use of core inflation -- which excludes food and energy prices -- as a measure of lasting price changes in the U.S. economy.
Critics charge, "inflation is the sum of all products / services consumers use, not solely a portion." In essence, they argue that the Fed is underestimating inflation, creating a distorted picture of price conditions people face daily.
Still, a new
research report by Michael Kiley, a Federal Reserve economist, supports the Fed's continued use of the core inflation metric. In
Estimating the common trend rate of inflation for consumer prices and consumer prices excluding food and energy prices, Kiley's research reinforces the theory that total inflation historically contains more temporary changes in prices -- i.e. changes that could disappear -- than core inflation, thus supporting the continued use of core inflation.
In other words, core inflation is used by the Fed because it has been deemed a more-accurate predictor of long-term price changes or 'inflation over time' than total inflation, sometimes also referred to as 'headline inflation.'
Economist David H. Wang said he's by-and-large in agreement with Kiley's conclusions. "Core inflation is more indicative of long-term price changes. The problem occurs when you have periods of large price changes in food and energy, such as today, which pushes total inflation way up. Then the cry occurs that the Fed is not measuring inflation accurately," Wang said.
Continue reading Is the Fed underestimating inflation by using 'core' inflation metric?
Posted Aug 26th 2008 9:40AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Other issues, Federal Reserve
The dollar's rally resumed Tuesday, but for reasons that may give stock investors cause for concern, at least short-term.
The U.S. economy didn't propel the dollar higher -- the economy is in its worst condition in at least a decade. Nor did the prospect of rising interest rates strengthen the dollar -- the U.S. Federal Reserve has taken a pause in its rate-cut cycle, but may have to cut rates again this fall, if the U.S. economy weakens further.
The catalyst for the dollar's renewed rally? Concern that Europe's economy will fall into a recession, compelling the European Central Bank to cut interest rates, which would make the dollar more-attractive.
Traders increased their positions in the dollar Tuesday after Germany's most-widely followed index of business confidence, the Ifo institute's business climate index, fell to a three-year low of 94.8 in August from 97.5 in July,
Bloomberg News reported Tuesday.
On the heels of the above report, the
dollar strengthened 1.5 cents versus the
euro to $1.4593, and 1.8 cents versus the
British pound to $1.8352. The dollar also rose about one-half yen to 109.79 versus
Japan's yen.
Currency trader Andrew Resnick, a dollar skeptic due to the dollar's many false breakouts to the upside, told BloggingStocks Tuesday he'll become a dollar bull if the rally holds through the U.S. Labor Day holiday period. Resncik added that he's presently flat, or has no open currency trading positions.
Continue reading Dollar rally resumes on European recession concerns
Posted Aug 25th 2008 5:43PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Commodities, Oil
Two organizations, one projection: a forecast of 86.9 million barrels of oil per day consumed in 2009.
The
International Energy Agency and
OPEC arrived at the same projection, suggesting that, in economist Peter Dawson's interpretation that "2009 is going to be a year of a slowdown in oil consumption growth, which is significant."
Moreover, Dawson is quick to highlight what's important in the above: slowing oil consumption growth in emerging markets. Oil consumption in the United States has been falling for more than two years -- it's projected to drop 3.1% in 2008 and another 2.3% in 2009. It's oil consumption in the developing world, primarily China and India, that really moves prices, Dawson said.
Oil Monday closed up 52 cents to $115.11 per barrel.
'A small victory, that we'll take'Right now it appears, for the first time in more than five years, consumption growth (not to be confused with a consumption decline) will slow, he said.
"It's a small victory, that we'll take, regarding the oil markets," Dawson said. "For the first time in a while we'll see some demand relief internationally, and that has to help lower oil prices."
Continue reading No small feat: 2009 could be year global oil consumption growth slows
Posted Aug 25th 2008 2:54PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Federal Reserve, Recession
It's been said that old habits die hard.
And one habit likely to change is European Central Bank President Jean-Claude Trichet's penchant for delaying interest rate cuts until the last possible moment, so says economist Richard Felson.
"In this case, Trichet will be joining the Fed's rate cut party this fall," Felson told BloggingStocks. "In fact, if economic conditions continue to worsen in Europe, they may even precede the Fed with a rate cut." The ECB next meets to discuss rates on September 4; the Fed, on September 15.
The Fed, as investors / readers are aware, has paused in its rate cut cycle, after decreasing interest rates by 325 basis points, to 2% from 5.25%, in an effort to jump-start a U.S. economy dragged down by its worst housing slump in a generation. Meanwhile, the
ECB has remained in restrictive monetary policy mode - - first increasing its refinance rate by a quarter-point to 4.25%, in mid-2008, then taking a stand-pat stance, citing inflation pressures.
Continue reading Will slowdown prompt ECB to cut interest rates before the Fed?
Posted Aug 25th 2008 1:42PM by Joseph Lazzaro
Filed under: Forecasts, Consumer experience
There's a downside and an upside to the new air travel reality in the United States.
The downside: look for more, packed flights as airlines reduce fleets to cut costs by eliminating unprofitable flights, and with it the (remaining) empty seats on planes,
The New York Times reported. The upside: airlines are required to offer a greater payout, if you're bumped from a flight.
Airlines' load factor seen increasingStock analyst and frequent flier C. Leonard Bauer told BloggingStocks U.S. airlines' load factor - - the percent of seats sold per flight - - is likely to increase from its current 79% sector average. "Basic math. Considerably fewer planes and roughly the same amount of travelers means more flights close to capacity."
And overcapacity. Bauer said he expects bumps - - people with a boarding pass who can't fly because the airline overbooked the plane - - to increase during the next six months. However, bumps may trend lower in 2H 2009, if passenger traffic slows on the heels of the U.S. economic slowdown, he said.
In any event, if you're bumped, your air travel-denominated compensation will be better than it was three years ago, Bauer said, due to federally-required higher payouts. [Bauer added that he does not own shares in or have a rating on any airline or airplane manufacturer. However, Bauer does have frequent flier miles/points in
American Airlines (NYSE:
AMR).]
Continue reading For U.S. travelers, more packed planes, but more free flight vouchers
Posted Aug 25th 2008 11:01AM by Joseph Lazzaro
Filed under: International markets, Other issues, Bad news, Housing
There are signs that banks and others are expecting another round of credit write-offs. Banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens,
Bloomberg News reported Monday.
For borrowing, banks are charging each other a 77-basis-point premium above what traders predict the U.S Federal Reserve's daily, effective Federal Funds rate will average over the next three months, up from 24 basis points in January,
Bloomberg News reported.
Banks concerned about potential write-offs, global slowdownEconomist Peter Dawson said Monday two factors are driving the widening short-term lending spread.
"Rightly or mistakenly, there's a suspicion that selected banks will announce another round of write-offs," Dawson said. "Second, banks are coming to grips with the reality of the global slowdown. The slowdown suggests reduced revenue for banks, which would further hurt already strained balance sheets, and make banks more-reluctant to lend."
In August 2007, banks began to hoard cash and pare-back lending after subprime mortgage defaults forced two Bear Stearns hedge funds to seek bankruptcy protection. A series of regional, mortgage asset-related write-offs followed, as the housing boom ended, first in the United States, then in the United Kingdom. Mortgage-related credit losses now total more than $500 billion worldwide, Dawson said.
Continue reading Banks becoming hesitant to lend on belief credit losses will increase
Posted Aug 23rd 2008 4:40PM by Joseph Lazzaro
Filed under: Products and services, Industry
The United States is a nation whose electric power generation system and grid is becoming increasing inadequate, even as the nation grapples with another energy problem -- the $4 per gallon gasoline era.
Moreover, an economic slowdown and a relatively mild summer have to-date reduced the typical electric load electric power generation plants would face, but that respite will end when the U.S. economy starts to expand at a healthy rate again. And when it does, electric power demand will increase.
What's one model the United States could follow to generate more electricity while the same time reducing coal-based pollution and climate change? France.
That's right: France. Nuclear power is experiencing a mild comeback in the United States, with 34 new reactor applications on file at the U.S.'s Nuclear Regulatory Agency. In France, it never left. Further, had the United States followed the French model, the U.S. would be vastly more energy self-sufficient today.
France: liberty, fraternity, equality, fission
Nuclear power never went out of style in France, and for this reason France is decades ahead of the United States -- and much of the world, for that matter -- regarding energy self-sufficiency, The New York Times reported. An astounding 77% of France's electricity comes from its 58 nuclear power plants, and it is a net-exporter of electricity to Europe. The United States has 104 nuclear power plants, which account for only 19.4% of its generated electricity, according to U.S. Department of Energy data, The Times reported.
Continue reading In France, nuclear power has never gone out of style
Posted Aug 23rd 2008 1:10PM by Joseph Lazzaro
Filed under: Forecasts, Commodities, Oil
Just a short quarter ago -- three months -- the lingua franca in economics and financial circles was "decoupling" -- the argument that the global economy could grow, despite an economic slowdown in the United States.
Then the U.S. slowdown persisted, lower growth rates and projections in Europe Asia followed, and the commodity price correction ensued, led by the most vital of all commodities, crude oil.
Oil, which for the better part of four years knew only one direction -- up -- pulled back about $30, or more than 20%. (Oil closed Friday down $6.49 to $114.59 per barrel). And unlike previous mild dips, emerging market demand -- the "rest of the world" in the oil market -- was not enough to protect the oil bulls. U.S. oil demand did matter -- it had declined on a year-over-year basis for more than three months -- and is projected to drop 3.1% in 2008, according to U.S. Energy Information Administration data.
What's more, the EIA expects U.S. oil consumption to drop another 2.3% in 2009, to 20.08 million barrels per day.
Continue reading Oil's pull-back represents a (temporary) break for U.S. motorists
Posted Aug 23rd 2008 11:10AM by Joseph Lazzaro
Filed under: Forecasts, Federal Reserve, Recession
Inflation easing? Commodity prices moderating? A recovering dollar? Global factors making the U.S. Federal Reserve's monetary policy choices less fraught with trade-offs?
Just another Wall Street analyst's dash of optimism amid the U.S. economic slump?
Not quite. The above is U.S. Federal Reserve Chairman Ben Bernanke's take on "the state of world-economic" from his speech delivered at the Federal Reserve Bank of Kansas City's Annual Summit at Jackson Hole, Wyoming.
Bernanke said the recovering dollar and declines in commodity prices "should lead inflation to moderate." The Fed "is committed to achieving medium-term price stability and will act as necessary to obtain that objective," Bernanke added.
Further, Bernanke said the Fed's benchmark interest rate is "relatively low" given current price pressures. On liquidity, Bernanke said financial turmoil has "not yet subsided" and that policy makers will continue to review the Fed's measures to ensure liquidity to determine "if they are having their intended effects."
Continue reading Bernanke sees silver lining, strikes the right tone at Jackson Hole
Posted Aug 22nd 2008 3:03PM by Joseph Lazzaro
Filed under: International markets, Politics, Commodities, Oil
Just when there are signs that emerging market demand (and institutional investor frenzy) have eased in the oil markets, up pops an old friend: geopolitical risk.
Moreover, this time the old friend, 'Middle East Tensions,' brought along his long/lost cousin, 'Enboldened Russia.'
Russia's re-appearance on the international stage takes the form of a major power, not a geopolitical power capable of projecting force globally as during the Soviet era, but the gradation is minor as it relates to the oil market, so says economist Richard Felson.
"Russia has the capacity to create a remarkable amount of distress in the oil markets. It can use oil exports and natural gas as a lever against Europe and the world, and its territorial threats to Central Asia and Eastern Europe are also cause for legitimate concern," Felson said.
Oil fell $3.03 to $118.15 per barrel Friday at mid-day after Turkey restored oil flows through the Caspian Sea pipeline,
Bloomberg News reported Friday. The
Baku-Tbilisi-Ceyhan pipeline moves oil from Azerbaijan through George to Turkey's Mediterranean coast. Oil flows were stopped earlier this month after Russia invaded Georgia.
The other, major energy commodities also fell sharply Friday at mid-day on the Baku pipeline news.
Unleaded gasoline plunged 11 cents to $2.93 per gallon,
heating oil declined about 10 cents to $3.19 per gallon, and
natural gas declined 14 cents to $8.11 per million BTUs.
Russia: a threat to the west's oil?Further, Felson said Russia's action "have caused the west to re-evaluate the global oil and energy equation" to account for the new - - and unexpected - - Russia wild card.
"Whereas before the prevailing view was incorporation of Russia into the oil and energy markets and as a net-plus for production and supplies, long-term, the new view is guarded," Felson said. "Not only are supplies from Russia now viewed as liabilities, but the west now has to ask, 'what other oil-rich areas might Russia might try to threaten?' And what about it's natural gas relationship with Germany?" [Russia supplies about 20% of Germany's natural gas.]
Continue reading An emboldened Russia is oil market's latest concern
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