Twenty months ahead of the 2012 election, President Barack Obama is traveling the nation, vying for the public’s attention one state at a time, while international crises and budget fights compete with his plans for economic revival.
On Tuesday, Obama curried favor with small businesses in politically important Ohio, pushing his plans to boost American competitiveness by increasing spending on sectors like education and infrastructure. That agenda, however, is running up against opposition from some Republican governors in cash-strapped states, and GOP lawmakers on Capitol Hill, whose demands for deep spending cuts raise the prospect of a federal government shutdown.
The president’s domestic initiatives have also been overshadowed by the turmoil in the Middle East. Tuesday’s trip came amid an escalation of violence in Libya, where government-backed security forces clashed with protesters, and news that four Americans were killed at the hands of pirates off the coast of Africa.
Since his State of the Union address last month, Obama has traveled away from Washington at least once a week, mostly stopping in political battleground states that will be crucial to his re-election bid, including Wisconsin, Michigan and Pennsylvania. He plans a trip to Florida next week.
As was the case during the 2008 campaign, Obama aides are willing to forego national media headlines in favor of mostly positive coverage in local media outlets in regions the president visits. They’re also courting the press in swing states even when Obama is not on the road, inviting reporters from local television stations in Virginia, Wisconsin and Ohio to the White House for interviews last week.
Keeping with his pledge to focus more on jobs following his party’s sweeping defeats in the midterm elections, Obama’s message to swing state voters is strictly economic. He’s touting cuts to some domestic programs in his proposed budget as a way to bring down the deficit, while also citing the need for increased spending on education, infrastructure and research as a way to boost job growth and help the country compete in the global economy.
“By cutting back on what we don’t need, we can invest in the future. We can invest in the things that are critical to our long-term success,” Obama said Tuesday to more than 100 small business leaders gathered at Cleveland State University.
However, Obama’s calls for increased spending run counter to the deep budget cutting steps being taken by governors in Wisconsin, New Jersey, Indiana and Ohio, where Gov. John Kasich is backing state legislation that would end collective bargaining for public employees. Kasich greeted Obama at the airport Tuesday upon his arrival in Cleveland.
Supporters of the Ohio bill, as well as a similar measure backed by Wisconsin Gov. Scott Walker, say the measures would help control spending and provide cash-strapped states greater flexibility.
Opponents of the bill were expected to protest in Ohio’s capital Tuesday. Similar protests in Wisconsin have attracted national attention, and Obama himself waded into the dispute last week by arguing that limiting bargaining rights “seems like more of an assault on unions.”
Obama also faces budget battles back in Washington, where the lawmakers are debating a bill to fund the government through Sept. 30. The Republican-led House passed a bill early Saturday that cuts $61 billion for hundreds of federal program. Though the bill faces longer odds in the Senate, Obama has threatened a veto should the measure land on his desk.
If no compromise over the budget is reached by March 4, parts of the government could shut down.
Obama has said the drastic cuts could cause the still fragile economic recovery to stale, and make it harder for small business owners, like the ones he spoke to in Cleveland, to access capital and hire new workers.
“It’s small businesses like your that help drive America’s economic growth,” Obama said Tuesday. “When our small businesses do well, then America does well.”
Administration officials also plan to hold additional forums with small business owners across the country. Sessions are planned for Atlanta, Boston, Pittsburgh, Minneapolis and Silicon Valley as well as Austin, Texas; Durham, N.C., and Boulder, Colo.
It’s a stock picker’s market.
For 1 1/2 years, individual stocks moved with the broad market with little regard for the prospects of the companies behind them. Would they make big profits? Were they in industries that were shrinking or growing? Was the CEO a bumbling idiot? It didn’t seem to matter.
But now some stocks are zigging while others are sagging, and knowing something about the companies, themselves, is important if you don’t want to lose money.
“You can’t shove all your chips on the roulette table anymore and expect to win,” says Nicholas Colas, chief market strategist at BNY ConvergEx Group, a stock brokerage. “You have to watch your portfolio carefully.”
Until a month ago, for instance, you could have bought all manner of consumer-products companies and made money. Stocks of companies that make soap and cereal and other staples rose in lockstep with stocks of makers of discretionary goods like jewelry and perfume and cigars. So far this year, though, stocks of the staple makers have barely budged while those of discretionary companies have risen 2.1 percent.
To some on Wall Street, the new disarray is welcome.
“When everything is up, it’s frustrating,” says Charles Blood, senior equity strategist at Brown Brothers Harriman. “You do all the work, you figure out what’s better and worse, and there’s no reward.”
The folks who run stock funds pore over financial statements for hours, parse CEO comments like Kremlinologists, project profits down to the penny _ and get paid a lot to do so.
But why pay them if the stocks they pick do no better than the broad market? The typical mutual fund that’s actively managed by a pro charges $1 or so annually for every $100 invested. That might not seem like much until you consider that $100 stocks have gained $8 or $9 in value annually on average over the long run. Index or exchange-traded funds that passively mimic the market often cost 50 cents or less so you get to keep more of your money, and allow it to compound those returns each year.
It’s no wonder that fund managers were already under fire by studies showing they don’t earn their keep. A University of Maryland study of 2,076 funds over 32 years through 2006 found that actively managed funds lagged passive index funds by a risk-adjusted 0.97 percentage point a year, after accounting for those steep fees.
Then the stock market crashed and investors pulled money out of U payday loans guaranteed no fax.S. equity funds. What’s more, the money that stayed in went more and more into indexes and ETFs. One sign of the times: A book touting passive investing that was co-written by a reformed Wall Streeter _ “The Investment Answer” _ just hit No. 2 in the “advice” category of the New York Times’ best-sellers.
Now Wall Street is abuzz with news of falling “correlations.” The term refers to how tightly prices and other financial measures move together. A recent report by ConvergEx’s Colas shows a correlation between consumer staple stocks and the Standard & Poor’s 500 index of 41 percent, which means they move together 41 percent of the time, down by half in one month. Other stocks that are moving to their own rhythm now: utilities, telecoms and energy.
Gold is going its own way, too. When investors buy gold, a sort of Armageddon currency, they usually sell stocks, and vice versa. But they’ve been buying and selling the two in tandem __ until recently. The correlation was 57 percent three months ago but has since plunged past zero. That means the two more often move in opposite directions now.
Some Wall Streeters are skeptical the synchronized dance is over. Most stocks still track the market nearly three-quarters of the time versus a two-third average since 1990. Mark Bronzo, a money manager at Security Global Investors, says correlations will remain high this year, too. “It’s not just about fundamentals,” he says.
Blood of Brown Brothers is more optimistic. He notes that it was only natural that stocks should move together given the “historical mindbenders” of late _ the biggest downturn since the 1930s, a seizing up credit markets, a sovereign debt crisis and then a historic stock rally.
“A lot of weird things have been going on,” Blood says. “But if extreme events diminish, then individual stories get more important.”
As he spoke, TV screens were showing Egypt’s Tahrir Square swarming with protesters above a news ticker flashing that an estimated 5,000 had been wounded.
“If we get a big oil shock or the Saudis have a revolution, correlations will go up,” Colas says. And if that happens and you’re a stock picker? “You throw up hands and walk away,” he says.
Ford Motor posted its highest annual income in more than a decade Friday, although fourth-quarter earnings disappointed investors.
The problem for Ford was more one of expectations than execution, as Ford’s results included a lot of good news, but also some increased costs, such as the price of raw materials as well as spending on engineering and marketing, that caught Wall Street analysts by surprise.
As a result of its first earnings miss in two years, Ford (F, Fortune 500) shares fell more than 12% in midday trading. Still, even with that sell-off, shares are up more than 40% over the course of the past 12 months.
Despite the earnings miss, full-year profits for 2010 climbed to $6.6 billion from $2.7 billion in 2009, the best since 1999.
But the company, which recaptured its position as the No. 2 automaker in terms of U.S. sales in 2010, posted a fourth-quarter operating profit of $1.2 billion, or 30 cents a share, excluding special items. That was down from 43 cents a share on that basis a year earlier.
Analysts surveyed by Thomson Reuters forecast earnings of 48 cents a share excluding special items. The result was below even the most conservative forecast of a 36 cents a share profit.
At least part of the fourth-quarter disappointment came from a small loss in its European unit, compared with a profit there a year earlier. Ford had previously said it expected to be profitable in Europe in the quarter.
But Lewis Booth, Ford’s chief financial officer, said a bigger part of the problem was that the company failed to sufficiently communicate to Wall Street the impact of higher expenses.
"We recognized we missed," he said during the conference call to discuss results with analysts and reporters. "We’ll have to continue to do a better job communicating what the outlook is."
CEO Alan Mulally said the company was pleased with full-year results.
"Our 2010 results exceeded our expectations, accelerating our transition from fixing the business fundamentals to delivering profitable growth for all," he said in the company’s statement.
Mulally and Booth both said they expect the company will report better results in 2011 than it did in 2010, but they wouldn’t give any details about how much better. Mulally declined to say whether current forecasts — for a 29% improvement in first quarter earnings and a 15% increase in full-year earnings, were realistic.
For the most part, analysts continued to see more positives than problems at Ford.
"I don’t think anyone doubts your ability to make more money in 2011," said Adam Jonas, auto analyst with Morgan Stanley, to Booth during the conference call.
In a note Friday, Jonas reiterated that he expects Ford’s earnings to jump by more than 50% in 2011 — well above consensus estimates.
Efraim Levy, auto equity analyst with Standard & Poor’s, said it is a significant milestone that Ford’s cash flow and debt repayments during the quarter left it with more cash on hand than total debt for the first time since early 2008.
"It’s a good sign when you have cash available to deploy on product development and overseas expansion, rather than having to scramble for cash," he told CNNMoney. He also wasn’t too worried about Ford missing earnings targets.
"Sometimes after a long string of success, the analysts get a little too enthusiastic," he said. "The fundamental story I see remains positive. Forget the earnings — look at the trend."
Rank-and-file auto workers will benefit from Ford’s strong results as well, as the company announced it would pay profit-sharing bonuses averaging about $5,000 to 40,600 members of the United Auto Workers at its U.S. plants. That’s well above the $450 average they received a year ago.
Despite the disappointing bottom line, Ford’s quarterly sales of $32.5 billion topped forecasts of $30.4 billion, even though they fell from the $34.8 billion in sales a year earlier.
For the year revenue rose to $120.9 billion, up $4.6 billion from 2009, even though the company sold off its Volvo brand during the course of the year. Excluding Volvo sales, revenue rose $17 billion, or 15%.
Ford (F, Fortune 500) was the only U.S. automaker that did not need a federal bailout or a trip through bankruptcy court in 2009. Its rivals — General Motors (GM) and Chrysler Group, have also enjoyed a turnaround, but neither are making the gains with U.S. buyers that Ford has.
Ford also benefited from the recall troubles at Toyota Motor (TM) in 2010, which caused the Japanese automaker to lose market share for the first time since 1999, and drop out of the No. 2 sales position in U.S. sales.
President Barack Obama wants to cast some light on economic success stories in the shadows of a slow recovery. And he is looking to find some more.
On Friday, the president travels to Schenectady, N.Y., birthplace of the General Electric Co., to showcase a new GE deal with India and announce a restructured presidential advisory board to focus on increasing employment and competitiveness.
Obama is naming GE CEO Jeffrey Immelt as the head of a Council on Jobs and Competitiveness. The panel replaces Obama’s Economic Recovery Advisory Board, which had been chaired by former Federal Reserve Chairman Paul Volcker. Obama announced late Thursday that Volcker, as expected, was ending his tenure on the panel.
Obama, in a statement after midnight, said the council’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
“We still have a long way to go, and my number one priority is to ensure we are doing everything we can to get the American people back to work,” the president said.
For Obama, the visit to upstate New York is also an opportunity to claim credit for tax, trade and energy policies pursued by his administration as the nation attempts to recover from the worst recession since the 1930s. It’s the first of many treks during the second half of his term that the president is expected to take to put a more hopeful countenance on the economy amid stubbornly high unemployment.
The GE plant is benefitting from a power turbine contract with India announced during Obama’s Southeast Asia trip in November. Immelt also has been an advocate of alternative forms of energy, and the GE facility, the company’s largest energy plant, is the future site of GE’s advanced battery manufacturing program. New battery technology has become something of an Obama pet project as a symbol of innovation, clean energy and job creation.
“This is a company that has brought jobs from overseas back into the United States,” Obama spokesman Robert Gibbs said.
Obama also plans to take note of GE employees as examples of middle class Americans who are benefiting from the payroll tax cut he negotiated with Republicans in a December economics package that retained Bush-era tax rates for all taxpayers.
In Immelt, Obama has a useful corporate ally. As chief executive of a multinational company, Immelt was one of 20 CEOs who met with the president during a daylong summit at Blair House last month. He was one of 14 U.S. business leaders invited to meet with Chinese President Hu Jintao this week at the White House and was among the guests for the lavish state dinner that followed.
In an opinion piece Friday in the Washington Post, Immelt said the restructured council under his leadership would focus on manufacturing and exports, trade and innovation.
“The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world,” he wrote.
His appointment adds another corporate insider to the White House orbit, underscoring the administration’s efforts to build stronger ties to the business community. Earlier this month, Obama named former Commerce secretary and JPMorgan Chase executive William Daley as chief of staff.
The change also signals Obama’s intention to shift from policies that were designed to stabilize the economy after the 2008 financial meltdown to a renewed focus on increasing employment, a vexing task that could affect his re-election efforts. The White House says the board’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
The advisory board has included past government officials and representatives from labor and the corporate community. Volcker has been a regular White House adviser, though the board itself has met infrequently with the president.
Immelt has been supportive of Obama since the start of his presidency, though his political contributions tend to be bipartisan and he financially supported Hillary Rodham Clinton and Republicans John McCain, Rudy Giuliani and Mitt Romney during the 2008 presidential campaign.
General Electric employees and their spouses, however, supported Obama over any other presidential candidate.
GE is a conglomerate with interests in diversified technology, media and financial services.
WASHINGTON
U.K. consumer confidence fell to a 20-month low in November as the looming government budget squeeze dented Britons’ outlook for 2011, Nationwide Building Society said.
The index of sentiment slipped 7 points from October to 45, the lowest since March 2009, the customer-owned lender said in an e-mailed report today. The gauge has now fallen for three consecutive months. The measure of consumers’ future expectations fell 9 points to 61, also a 20-month low.
Prime Minister David Cameron’s drive to tackle the record budget deficit with the deepest spending cuts since World War II threatens to slow economic growth. The squeeze will eliminate 330,000 public-sector jobs and increase sales tax to 20 percent next year from its current level of 17.5 percent.
“The strong rally in sentiment that took place from the middle of 2009 into the first quarter of this year has now been almost completely reversed,” Martin Gahbauer, chief economist at Swindon, England-based Nationwide, said in a statement. “The fall in confidence can largely be attributed to consumers growing increasingly cautious over the outlook.”
An index of people’s current perception of the economy dropped 5 points to 21, while a gauge of whether now is a good time to spend slumped 13 points to 79, the report showed. TNS-RI questioned 1,000 people for Nationwide between Oct. 18 and Nov. 21. GfK NOP Ltd.’s consumer-confidence index fell in November to a four-month low, according to a Nov no fax cash loans. 30 report.
Sentiment Lag
Weakening sentiment is “not uncommon in the early stages of a recovery” as improvements in the labor market often lag turnarounds in the wider economy, Gahbauer said.
While jobless claims fell in November, unemployment measured by International Labour Organization methods rose by 35,000 to 2.5 million people in the quarter through October.
The Chartered Institute of Personnel and Development said in a separate report that fewer British employees expect a pay raise next year as government workers grow more pessimistic about the future. Fifty-eight percent of the 3,000 respondents in a survey said they anticipate a wage increase in 2011, compared with a result of 67 percent last year, CIPD said.
Meanwhile, a gauge of U.K. residential rents was little changed in November as increases in London offset declines in other areas of England. The average monthly rent for a home in England and Wales was 692 pounds ($1,079) last month, compared with 691 pounds in October, the Newcastle, England-based company said today. While London posted a 1.8 percent gain, rents fell by 3.1 percent in eastern England and 2.4 percent in the East Midlands.
RBC Economics is predicting the pace of Canada
The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.
Applications for jobless benefits decreased to 421,000, less than the median forecast of economists surveyed by Bloomberg News, from a revised 438,000 the prior week, Labor Department figures showed today. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.
Companies are holding on to more workers as sales improve and expectations for growth brighten. A faster pace of growth is needed for firms to add enough jobs to bring down the November unemployment rate of 9.8 percent, the highest since April, and alleviate concerns of policy makers including Federal Reserve Chairman Ben S. Bernanke.
“The labor market is moving in the right direction, slowly but surely,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Things look a little better than they first appeared, but we’re still not creating enough jobs to lower the unemployment rate.”
Futures on the Standard & Poor’s 500 Index expiring this month rose 0.5 percent to 1,234.30 at 8:32 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, fell to 3.22 percent from 3.27 percent late yesterday.
Economists forecast claims would fall to 425,000, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from 394,000 to 445,000.
No Special Factors
A Labor Department official said there were no special factors that had an impact on the figures released today. The four-week moving average fell to 427,500, the lowest since August 2008, from 431,500.
The number of people continuing to collect jobless benefits fell by 191,000 in the week ended Nov. 27 to 4.09 million. They were forecast to fall to 4.24 million.
The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 393,200 to 4.51 million in the week ended Nov. 20.
The Obama administration on Dec. 6 announced an agreement with congressional Republicans to extend Bush-era tax cuts, reduce the payroll tax and fund unemployment insurance for the long-term jobless for 13 months credit report. Under current legislation, the extension in emergency benefits expired Nov. 30, which the Labor Department has estimated would interrupt aid to 1.36 million before the last week of 2010.
Unemployment Rate
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.2 percent in the week ended Nov. 27, the lowest in two years, today’s report showed. Sixteen states and territories reported an increase in claims, while 37 had a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates. That relationship has broken down in recent months as some companies cut staff and others expand — pointing to an uneven recovery.
The U.S. added 39,000 jobs in November, fewer than forecast, the Labor Department reported Dec. 3.
Federal Reserve Chairman Ben S. Bernanke has been among those saying the recovery has been too slow, keeping unemployment too high.
“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said in an interview broadcast Dec. 5 by CBS Corp.’s “60 Minutes” program.
The economy hasn’t grown to the point where demand can’t be met with current staff at Illinois Tool Works Inc., chief executive officer David Speer said in an interview on Dec. 3.
Next year “there will be some modest level of improvement in employment in industrial manufacturing in the U.S.,” Speer said. “I don’t think anything significant for us, because I still see us with enough capacity in terms of labor right now to not have to make any significant additions.”
ITW, the maker of Hobart food mixers and Duo-Fast nail guns, may do more hiring in 2012 if “we progress as I suspect we will,” Speer said. The company last week forecast business revenue, which doesn’t include sales from acquired companies, will increase 5 percent to 7 percent in 2011 over this year.
Republican Senator Bob Corker called for Congress to consider narrowing the Federal Reserve’s mandate to stabilizing prices and said Congress should consider setting a target for inflation.
Corker, who met yesterday with Fed Chairman Ben Bernanke, said today in an interview the Fed’s dual role of fighting inflation and maintaining full employment “can create sort of a bipolar mentality as it relates to the Fed” that’s “confusing to the market.”
The Tennessee senator, a member of the Senate Banking Committee, said his proposal would not prevent the Fed from addressing any threat of deflation or its program to buy $600 billion in Treasuries. The Fed cited low inflation for its decision to buy government debt securities to inject money into the lagging U.S. economy.
Congress should consider voting to set inflation targets because the Fed’s actions can cause “a lot of confusion for all concerned” he said. “The next question, do we actually vote on the Senate floor” on “an actual target for inflation?” Corker said.
“My sense is that might be a very good idea,” he said. “I am going to be talking to colleagues” about it, he said. “But minimally changing the mandate to price stability is a step in the right direction.”
Ford Motor company said it will create up to 1,200 jobs in the distressed state of Michigan as it ramps up its engineering and manufacturing operations to produce more fuel-efficient cars.
Lured by state tax incentives, the automotive company announced Monday it plans to invest $850 million in new fuel-saving technologies between 2011 and 2013.
Ford’s (F, Fortune 500) stock closed 1.4% higher.
The funds would generate hundreds of new full-time positions in manufacturing and engineering operations in Michigan by 2013, according to a statement released by the company.
Approximately 900 of those jobs would be hourly positions in Ford’s Michigan manufacturing facilities, and the rest would be salaried positions in the engineering and manufacturing operations, the company said.
The unemployment rate in Michigan was 13% in September, the second highest in the nation, according to the Labor Department.
"We are pleased to work with state and local government leaders to find new ways to … invest in our people as well as Ford facilities, further improve our competitiveness and secure jobs in Michigan," Mark Fields, Ford’s president of The Americas, said in a statement.
"Promoting investments in technologies, facilities and our workforce ultimately will help revitalize manufacturing in Michigan and help Ford compete with the best in the business worldwide," Fields said.
The plan is awaiting approval by The Michigan Economic Development Council. Once approved, the funds will be allocated across a variety of plants including Van Dyke Transmission, Sterling Axle, Livonia Transmission and Dearborn Truck Plant.
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