Archive for March, 2010

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February 2010 Sees Consumer Spending Rise, Incomes Stay The Same

Wednesday, March 31st, 2010
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All economists and investors are looking at the data coming out of the Commerce Department related to consumer spending. As well, there is a lot of attention being paid to income levels in the United States in February. Investors want to get more confidence in the market, and with higher consumer spending that is easier to come by, but with stagnant income growth, there is still a clear problem with the economy.

Consumer Spending Keeps Rising

For the fifth straight month, consumer spending rose in February, while income levels stayed the same, consumer savings fell to their lowest levels since October 2008. Spending increased by .3 percent, which is .1 percent below the rise seen in January. This is the exact increase that most economists were theorizing. In the fourth quarter of 2009, a 1.6 increase in the annual rate was seen, which is 2.8 percent below what was seen in that quarter the previous year.

For personal income, January had seen an increase of .3 percent, but in February only had an increase of .1 percent. Payrolls of goods and services fell in February as well, by $3.5 billion, which is well below the $5.2 billion increase seen previously. Manufacturing also slipped by $1.4 billion, after gaining over $5 billion.

Disposable income was flat in February, after it fell by .4 percent in January. Since there was no income growth for most consumers, savings fell to a new annual rate of $340 billion. The rate of savings also slipped to three percent, which is puts the savings rate down to its lowest rate in over a year. One thing that rose was the personal consumption expenditures price index, which does not include food or energy. It rose by 1.3 percent in the 12 months leading up to February 2010.

Consumer Spending Chart in February 2010

Economy Is Recovering at a slow pace

This means that it the economy is recovering, but very slowly. Consumer spending is highly important to the economy and in many ways it drives the American economy. When consumer spending increases, investors will have more confidence in the stock market. As a result, it is very important that the consumer spending figures continue to rise up as time goes on. With a steady increase for the past five months, there is clearly a better economic picture coming.

February is a very important month in terms of consumer spending. It is well after Christmas and if consumer spending is still going up during the month of February, that bodes well for the economy. This is often a month where people do not spend very much, but in the past five months there has been a constant growth in consumer spending. While income levels have been flat, that may change as the year goes on since increases in income usually do not come during the first months of the year.

None the less, growth in consumer spending bodes well for the economy.

Further Reading

Future Of US Economy

LightSpeed Trading Reviews

Zecco Reviews: Free Stock Trading

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Posted in 2009 Recession, Consumer Confidence, Economy, Uncategorized | No Comments »

State of top 5 Automotive Companies in US -TM, VOW, F, HMC, General Motors

Wednesday, March 31st, 2010
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There are several automotive companies located around the world, but the biggest provide most of the cars around the world. Naturally, there are three American automotive companies located in the top five, but no American companies take the top spot. These companies all have a long and varied history that has seen good times and bad times.

There are five big companies that provide vehicles to the entire world. Through the past few years, they have seen some good times and bad, and some have had great difficulty in making profits due to changing trends in automotive sales. Here are the top five and how they have done in recent years.

  1. Toyota (TM): The largest automotive company in the world came through the automotive troubles of 2008-09 relatively untroubled. However, this past month the company has had several problems due product recalls that threaten to hurt the company’s amazing growth. The company will lose $2 billion due to product recalls, coupled with the $4.4 billion lost during the financial crisis.
  2. General Motors Company: GM was once the largest company in the world, but it suffered horribly during the financial crisis and had to enter bankruptcy protection. The United States government is now the owner of the company, which saw the loss of 2,000 dealerships and 30,000 employees.
  3. Volkswagen (VOW): The German company is the only European car manufacturer in the top five. Currently, the company sells 6.31 million vehicles, which is 11 percent of the world’s car market.
  4. Ford (F): The creator of the car as we know it, this company has been around for over 100 years but has steadily fallen in the rankings. Things have been very tough for the company these past few years. In 2007, the company lost $12.7 billion and in 2008 the company had to sell its Jaguar and Land Rover line.
  5. Honda (HMC): Honda has been selling fuel-efficient vehicles for years and was therefore not hit as hard as the Big Three automakers and Toyota. Toyota actually saw its sales increase by 20 percent. Of course, the profitability of the company did fall slightly as the economic crisis and the exports of the company have fallen by 64.1 percent.

The big five companies provide most of the vehicles for the rest of the world. These companies have been around for many decades and have seen good times and bad times. In the past three years, due to the changes in how consumers are buying vehicles and what they want, many companies saw huge losses in revenue. Consumers want to have fuel-efficient vehicles, but companies like Ford and GM kept releasing large SUV vehicles. When consumers stopped buying these brands, the companies lost billions of dollars. Look at a company like Honda, which has been ahead of game in terms of what customers want. The other big four companies are starting to catch up now and are changing their lines to be more in line with what customers want.

Further Reading:

Can GM revive its auto dominance

Chrysler: Billions Flushed into the toilet

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Posted in 2009 Recession, Automotive Sector, Economy, Stock pick | No Comments »

The State of the US Auto Industry in 2010

Monday, March 29th, 2010
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One of the darkest times for the auto industry was 2008 and 2009. During this time, three companies that used to dominate the auto industry suffered huge losses. GM and Ford needed to file for bankruptcy protection as a result, allowing the government of the United States to take control of the companies thanks to multi-billion dollar bailouts. How are they doing now? Is the auto industry recovering?

2009 was the worst year for Auto Industry

In 2009, the auto industry of the world had a very tough year. There were huge bankruptcies, bailouts and big plummets in sales. Thousands of dealerships have shut their doors and customers stopped purchasing as many cars, hurting the entire industry.

It has not all been bad for the companies. The Cash for Clunkers helped to entice people to buy some new cars that were more fuel efficient. How did companies do around the world? Here is a quick rundown of the state of some of the largest car companies in the world.

  • Chrysler: In 2009, Chrysler filed for bankruptcy, with Fiat taking control of the company as a result. Fiat continues to increase its ownership, while the United States owns eight percent, the UAW owns 55 percent and the Canadian government owns two percent.
  • Ford: It has been very tough for Ford with huge losses across the company. However, thanks to its EcoBoost engines, the company is beginning to get into the hybrid market. Ford is seen as the most stable of the auto companies in the United States.
  • GM: After getting a $50 billion bailout from the government, which allowed the government to become a 60 percent stakeholder in the company, GM began to dump various parts of the company. The Pontiac line was shut down, as was the Saturn, Saab and Hummer lines. GM is still trying to recover from some very tough years.
  • Honda: Honda continues to grow and has weathered through the difficult years quite well to become the fourth largest auto company in the world.

Is the worst over now for Automotive companies?

This was just a quick rundown on how some auto companies are fairing. One thing that should be pointed out is that Toyota is the largest auto company in the world but they have had some very bad press thanks to product recalls. This will hurt the company and the auto industry, but overall the auto industry is recovering after some tough years thanks to generous sales terms and the push by many companies to release hybrids and fuel-efficient vehicles.

The auto industry had probably the worst year it has ever had in 2009 when it began to lose a lot of money due to changing customer habits and the financial crisis. That has not stopped companies like Honda from at least improving its sales during tough times. Ford, GM and Chrysler are still recovering but at least they are doing better than they were in 2009.

Further Reading:

Can GM Revive Auto Industry Dominance

Chrysler: billions flushed into the toilet?

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Posted in Automotive Sector, Economy, Stock pick | No Comments »

Citibank Wins and Loses This Week – March 2010

Monday, March 29th, 2010
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Citibank had both a good week and a bad week thanks to a court ruling that brought some millions into the company, and a fine due to some problems with the law. Next week, hopefully the bank will be able to recover from some bad press this week.

Citibank had a good week and a bad week depending on how you look at it. First, Citibank was ordered to pay a $1.25 million fine to settle allegations from roughly 35 state governments that stated that CitiFinancial failed to report approximately 91,127 residential mortgage loans to the U.S. government. This is required by law.

According to the Conference of State Bank Supervisors, the error was probably caused by an error in the internal systems of Citigroup that were undetected until bank regulators within Massachusetts looked into the situation. In the examination, it was found that loans made between 2004 and 2007 through Citigroup were not reported and therefore violated the Federal Home Mortgage Disclosure Act.

According to Citibank, the error was accidental and the company was trying to correct reports with the Federal Reserve. Citibank also said that no customers were harmed through the error.

Of course, it was not all bad for Citibank this week. Earlier in the week, $85.7 million was won by the company in a court judgment against Sheldon H. Solow.

The New York State Supreme Court granted the request of Citibank so that Citibank could collect fees and damages from the billionaire real estate developer. The suit stated that Citibank claimed that Solow failed to make payments on $503 million on a line of credit with the bank to develop a site along the East River in New York. The property was to be six apartment towers and a 1.4 million square foot office tower on the 10 acre site.

For Citibank, it was a big win and something to dull the fine that they had to pay to the government for the mortgage reporting problem. Citibank is expecting the weeks ahead to be a bit better as the company has begun to improve its stock standing over the past few weeks. In all, the financial sector has seen big improvements over 52 weeks and is one reason why the market is doing better in 2010 over 2009.

Citibank has been able to recover greatly from some tough times earlier in the 2008 and 2009. Through the foreclosures and problems, things have improved and if this week is any example, the company will be doing even better as time goes on. With a fine from the government, the company was able to rebound by making half a billion dollars in a court judgment thanks to some problems with a developer in New York City. When you lose $1.25 million and bring in $500 million, it is a good week for any company.

Further Reading:

CIT Bankruptcy Possibilities

Citibank Future

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Posted in 2009 Recession, Finance Sector, Stock pick | 2 Comments »

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