Book Winner & Financial News Roundup

Last week I posted a book review on Smart Tips for Estate Planning by Marvin Toy and Jim Yih. Jim was kind enough to offer a free copy to one reader. I included anyone who commented on the review itself or the free book post that went out the next day. I numbered the comments and had my son choose a number from 1 to 13. (There were 13 comments.) The winner was Gail. I hope you enjoy the book!

Financial News Roundup: Too Big for Your Britches Edition

This past week was pretty eventful in the world of finance and economics, so I thought I might try to sum up the relevant information for you here. As I went through some of the key events for the week, a sort of too big for your britches theme seemed to emerge:

• The economic data took a decided turn for the worse, giving the double dippers more fuel for their fears. I guess the rebound rally in the stock market was, at least for now, too big for its britches. This week alone, we had disappointing data on U.S. retail sales, consumer sentiment, the New York Empire Manufacturing Index, the Philly Fed, and Canadian home sales. The Baltic Dry Index, a measure of commodity shipping rates, fell for 35 days straight, the longest sequential decline in 15 years, before finally registering a gain on Friday. Even the U.S. Federal Reserve downgraded its economic forecast. This is just a sampling. The past couple of weeks have also seen a deterioration in U.S. housing and employment data. The one gleaming bright spot of late was the release of the Canadian employment numbers last week.
  
• Corporate earnings started rolling in and looked pretty good at first glance. But the southerly trend in economic data seemed to have investors wondering if those results could be replicated in coming quarters. Markets seemed disappointed with revenue growth even though most companies beat on the bottom line. They were also concerned with the fact that banks in the U.S. reported a contraction in the amount of loans they’re granting. If you haven’t heard enough of the word “deleveraging” yet, get ready. It seems being buried in debt isn’t as fashionable as it used to be. As a result, banks will make less money on loans in the future.
  
• Goldman Sachs, the Wall Street golden child, received an ostentatious slap on the wrist from the SEC to the tune of $550 million dollars. I’m pretty sure they can easily make that up with a fractional increase in fees charged to their flock, allowing them to continue God’s work. After all, $550 million is only 3.4% of their 2009 bonus pool. When the fraud charges against GS were initially announced back in April a lot of people wondered: Is the Stock Market Rigged? I feel a whole lot better now, don’t you? (The Reformed Broker pretty much called this outcome back in April.)
  
• Apparently, Apple is not perfect - at least not according to Steve Jobs. (I guess that whole getting a life-saving liver transplant on the sly and telling investors about it later thing didn’t count.) I’m always amazed at the brouhaha surrounding every peep (or lack thereof) surrounding this company. Either way, words like “arrogant” were floating around again this week as Steve Jobs himself held a press conference to outline Apple’s response to Antenna Gate. If you Google that term, you already get 24 million responses. If that doesn’t scream too big for your britches, I don’t know what does. Either way, the markets took no heart from Mr. Jobs’ presentation. After all, what is this world coming to if Apple can’t even get it together?
• BP (for now) stopped the flow of oil  gushing into the Gulf as of Thursday. Here’s another example of a corporation that’s large enough to have more influence on its regulators than any company should have a right to. It has actually tried to bill itself as “green”, claiming that BP should really stand for Beyond Petroleum. I’m pretty sure the Gulf coast residents – human and otherwise – wish it wouldn’t take decades for them to get beyond BP’s petroleum.
  
• The U.S. Senate passed the financial regulatory reform bill. It sounds like this bill is also too big for its britches: It’s very long-winded, but does nothing to actually solve any of the problems that lead to the ongoing financial crisis. There is no fix for Fannie Mae and Freddie Mac, nor is there anything to prevent the 600 trillion dollar derivatives market from torpedoing the global financial system.

With the exception of the economic data, most of the news for the week looked positive on the surface. And yet the S&P 500 fell 2.88% and the TSX, 1.55% on Friday. Could it be that even the most optimistic observers are finally ready to look below the surface? Could be. But I still wouldn’t be surprised to see Goldman and BP announce record bonuses and I would be even less surprised if Apple still attracted long lines of people willing to sleep out in the cold to be the first to buy their next gadget – whether they can afford it or not.

What’s your take on this week’s news?