The Conservative Papers

March 9, 2010

Riot’s in Greece Coming Soon to a State Near You!

Filed under: Financial, Freedoms — Tags: , , , , — alpineski @ 10:14 am


Greece this past weekend saw the worst rioting since the debt crisis began. After Athens had announced new tax hikes and budget cuts to reduce a deficit of 13 percent of gross domestic product, mobs drove guards from Greece’s Tomb of the Unknown Soldier and attacked police.

In our own country, students, teachers and administrators at UC-Berkeley held a “Strike and Day of Action to Defend Education” to demand more money from taxpayers — for themselves.

How badly are they suffering?

According to Peter Robinson of Hoover Institution, California spends $13,000 per student in the state system, compared to $6,000 in New York.

Yet riots in Greece and demonstrators in California do portend a time of troubles. For the budget cuts and tax hikes needed to keep the welfare states of Europe operating as populations age and fewer children are born will be staggering and endless.

And, in the U.S., California is where we all are headed.

Nevada, Arizona and New Jersey are staring at budget gaps of 25 percent. New York and Illinois are not far behind. Michigan has an unemployment rate of 14 percent. Detroit is the quintessential sick city.

Republicans may get by this fall surfing an anti-government wave. But they will soon have to reveal where exactly they propose to cut.

Fortunately, good politics and good policy give the same answer. USA Today’s lead story on Friday — “It Pays to Work for Uncle Sam” — contrasted the wages and benefits of federal workers with those of employees in the private sector.

Using federal figures from 2008, reporter Dennis Cauchon found:

U.S. government workers earned an average salary of $67,691 for occupations that exist in both government and the private sector, which was $7,600 a year more than workers in the private sector doing the same jobs. Health and pension benefits for U.S. government workers average $40,795 per year, but $9,882 per worker in the private sector.

Nurses employed by Veterans Affairs hospitals earn an average of $74,460 a year, which is $10,689 more than private-sector nurses.

Chris Edwards of Cato Institute has compared the pay and benefits of local and state government employees with private-sector workers.

He found the average hourly compensation, wages and benefits of state and local government employees in 2009 was $39.66 per hour, 45 percent higher than the $27.42 per hour package of private-sector workers

Where 80 percent to 90 percent of state and local government employees get paid sick leave, health insurance and life insurance, and 90 percent receive pensions, that is true of only 59 percent to 71 percent of workers in the private sector.

These disparities suggest that government work is becoming a sweet deal for those who can get it, which may explain why government has begun to crush the private sector that has to carry the government on its back.

Consider. Between 2000 and 2010, U.S. manufacturing, backbone of the nation, lost 5.7 million jobs, one-third of all the manufacturing jobs America had. But government employment rose that same decade by 1.9 million jobs to 22 million, with three-fourths of the new workers being added to local government payrolls.

States like California, whose public employees are among the best paid in the nation, are the states closest to chapter 11. Their last, best hope to close their deficits is a U.S. taxpayer rescue a la Fannie, Freddy, GM and AIG. But do the states merit a taxpayer bailout if their crises come out of their own continuing profligate ways?

Writes Edwards:

“Public sector workers … can typically retire at age 55 after 30 years of service, as in California’s CalPERS system. In CalPERS, workers receive an annual pension equal to 60 percent of final salary after 30 years. Public safety workers in CalPERS can retire at age 50 after 30 years of work with benefits equal to 90 percent of their final salary.

“In California, there are 6,144 retired public employees in the CalPERS plan and 3,090 retired teachers in the state teachers’ plan receiving annual pension benefits of more than $100,000.”

And folks wonder why California is bankrupt. Should middle-class Americans be forced to subsidize $100,000-a-year pensions for middle-aged California retirees?

Yet, Barack Obama, Nancy Pelosi and Harry Reid, in that $787 billion stimulus bill, shoveled billions of federal tax dollars into California to pay salaries, pensions and health benefits of Californians who have been paid more than private-sector workers all of their lives. Where is the fairness here?

Not another federal dime should go out to any state government whose employees receive more in pay and pensions than the average worker in that state or the other 49.

As for the U.S. government, Republicans should call for a one-year freeze on federal salaries and a two-year freeze on congressional salaries. If sacrifices are to be made, the people who had a fat decade at taxpayers’ expense should make them sacrifice, not a ravaged private sector that has contributed almost all of the conscripts to today’s 15-million-man army of the unemployed.

February 28, 2010

California is a greater risk than Greece, warns JP Morgan chief

Filed under: Financial — Tags: , , , — alpineski @ 10:07 am

Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece’s current debt woes.

Mr Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments. “Greece itself would not be an issue for this company, nor would any other country,” said Mr Dimon. “We don’t really foresee the European Union coming apart.” The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.

Last summer, California issued $3bn of IOU’s to creditors including residents owed tax refunds as a way of staving off a cash crisis.

“I can’t write checks without money; that’s against the law. My main goal is to keep the state afloat, but I won’t be able to do it without the help of new legislation,” said Mr Chiang.

City of Angels on brink of abyss

Filed under: Financial — Tags: , , — alpineski @ 9:50 am

Los Angeles, the second-largest US city, is facing a crisis of funding not seen since the darkest days of the Great Depression

Two and a half years after the official start of the worst economic downturn and fiscal crisis in nearly 80 years, America’s economy is supposedly growing again, the stock market is halfway recovered from the lows of 2008 and early 2009, and the unemployment plunge seems to have been halted.

Yet, built-in time lags in how revenues are raised and budgets calculated mean that many states and cities around the country are only now starting to feel the worst of the pain. This year has been, quite simply, abysmal for local and state governments, and next year promises to be even worse. With easy cuts long-ago made, these days basic services are increasingly seen as luxuries, and public sector employees are increasingly vulnerable to wage cuts, benefits rollbacks, and unemployment.

While the federal government has considerable wiggle room to borrow or simply increase the supply of money to help fight its way out of financial collapse, smaller government units in America don’t have those options; increasingly cities, counties and states are facing the sorts of austerity measures we’ve come to associate with third world countries in crisis, or, in recent years, with vulnerable European nations such as Greece or Latvia.

In Arizona, a cash-pinched legislature put the Capitol building up for sale, proposing to lease it back for state use. In the small Colorado town of Colorado Springs, officials shut off half the street lamps and one-third of the traffic lights, told residents who wanted short grass in public parks to bring their own lawnmowers, and auctioned off a police helicopter on eBay. Around the country, libraries have been shuttered, after-school programmes have been curtailed, mental health services have been decimated.

In Los Angeles, the nation’s second largest metropolis, the Democratic mayor, Antonio Villaraigosa, addressed a full session of the city council on 9 February to detail just how grim the city’s finances had become. Miguel Santana, the city administrative officer (the CAO is the mayor and council’s chief financial adviser) had recently informed the mayor’s office that LA was facing a $200m shortfall through the end of this financial year and another half billion dollar-plus shortfall in the years to come if it didn’t radically, and rapidly, restructure its budget. Santana didn’t mince words. His nearly 300-page report (pdf) opened with this stark warning:

“The city is facing a budget crisis unlike any it has ever experienced … The enormity of our current fiscal crisis forces the City to take swift action now and lay out a financial plan for the future.”

Wall Street was growing increasingly worried by the city’s financial fragility, and the city’s ability to raise revenues through bond sales was at risk.

Why the crunch? According to city council president Eric Garcetti’s office, for the past four quarters, the city has seen double-digit revenue declines, a scenario not experienced since the darkest days of the Great Depression. Quite simply, the downturn was so steep it had made government-as-normal impossible to maintain in the City of Angels. As a result, says Garcetti, the city will face a crisis of funding for the next several years as well as an increasingly bitter battle of ideas as to the role of government in modern-day America; for conservatives, he warns it will likely be seen as an opportunity to starve the public sector, to “downsize government so much it can never come back.”

Los Angeles’ budget, currently around $7bn per year, will, all parties agree, shrink for years to come. And, since much of that $7bn is committed to untouchable items – making sure pensions are paid, keeping the LAPD afloat – the hundreds of millions of dollars in cuts will fall overwhelmingly on employees and on discretionary services. And these are services that disproportionately are used by lower income residents – the very people who have already been hit the hardest by the broader economic meltdown.

The city has already negotiated with public sector unions to ease 2,400 employees (out of a city workforce of about 40,000) into early retirement, is working to immediately reduce the city’s payrolls by another one thousand, and is exploring how to make more cuts down the road that could lead to a couple of thousand additional job losses – or, if the mayor and Garcetti’s vision of “shared sacrifice” is implemented, to fewer job cuts but across-the-board pay reductions instead. “For me, government matters,” says Garcetti. “Workers matter. Services matter.” Inevitably, however, the crisis will in some ways shrink the role of city government.

At the same time as the city is negotiating concessions from unions, it is also exploring “private-public partnerships” that would hand the city’s zoo, convention centre, parking garages and even parking meters to private operators. And it has already eliminated two city departments – environmental affairs and human services – with more likely to follow, hoping to seamlessly amalgamate their functions into other departments.

Yet in reality, there is very little that is seamless about these budget readjustments. The job losses are adding to LA’s already great economic pain – the city has a more than 11% unemployment rate; even with progressives occupying key positions in the city’s political leadership, the evisceration of core public services will, over the years to come, impact the quality of life of most Angelenos; and the privatisation of venues such as the zoo and the convention centre will harm the city’s long-term ability to raise sufficient revenue to meet its growing needs.

The broader economy may be starting to show some signs of healing, but for those at the bottom of the economy, for those most reliant on government services in Los Angeles and the countless other cities teetering over financial abysses, 2010 looks more like a bona fide Depression year than one made beautiful by the myriad green shoots of recovery.

February 23, 2010

Why the jobs aren’t coming back

Filed under: Barack Obama, Financial — Tags: , , , , , , , , , , — kalel @ 11:15 am

Posted by Erick Erickson

The Politico has an interesting story about Toyota up. It seems the company does not much care for this administration.

Internal Toyota documents derided the Obama administration and Democratic Congress as “activist” and “not industry friendly,” a revelation that comes days before the giant automaker’s top executives testify on Capitol Hill amid a giant recall.

It is not, however, just Toyota. Lots of businesses and industries are feeling the same way. In large part, this is why the jobs are not coming back. Businesses are deeply, deeply worried about the activist bent of the Obama administration and the anti-free market stance it has repeatedly taken on issues. The uncertainty and antagonism are causing businesses to keep money on the sidelines.

Last night I talked to a friend of mine. He said a business in his state has put a major new business development on hold because of the Obama Administration’s stance on carbon emissions. The company could move everything to another country and be perfectly happy with less environmental restraints, or it could keep everything in the U.S., comply with existing environmental laws, and create American jobs. But because Obama and the EPA are headed in the direction of even more regulation and expense, the jobs might go overseas.

Right now the Obama administration is excelling at two types of job creation programs: government jobs and jobs overseas away from the American regulatory regime.

Until the White House and its minion signal a willingness to work with businesses and not hurt businesses, the jobs will not come back. Toyota is not alone.

February 21, 2010

Man bulldozes home to avoid foreclosure

Filed under: Financial — Tags: , — alpineski @ 8:58 am

Terry Hoskins said he would do ‘what it takes’

Like many people, Terry Hoskins has had troubles with his bank. But his solution to foreclosure might be unique.

Hoskins said he’s been in a struggle with RiverHills Bank over his Clermont County home for nearly a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $350,000 home.

“When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it – no, I wasn’t going to stand for that, so I took it down,” Hoskins said.

Hoskins said the Internal Revenue Service placed liens on his carpet store and commercial property on state Route 125 after his brother, a one-time business partner, sued him.

The bank claimed his home as collateral, Hoskins said, and went after both his residential and commercial properties.
Hoskins said he’d gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure.

Hoskins told News 5’s Courtis Fuller that he issued the bank an ultimatum.

“I’ll tear it down before I let you take it,” Hoskins told them.
And that’s exactly what Hoskins did.

Man Says Actions Intended To Send Message To Banks
The Moscow man used a bulldozer two weeks ago to level the home he’d built, and the sprawling country home is now rubble, buried under a coating of snow.

“As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was,” Hoskins said. “I brought it out of the ground and I plan on putting it back in the ground.”
Hoskins’ business in Amelia is scheduled to go up for auction on March 2, and he told Fuller he’s considering leveling that building, too.
RiverHills Bank declined to comment on the situation, but Hoskins said his actions were intended to send a message.

“Well, to probably make banks think twice before they try to take someone’s home, and if they are going to take it wrongly, the end result will be them tearing their house down like I did mine,” Hoskins said.”

February 8, 2010

World’s tallest tower closed a month after opening

Filed under: Financial — Tags: , , , , , — kalel @ 5:13 pm
By ADAM SCHRECK, AP Business Writer

DUBAI, United Arab Emirates – The world’s tallest skyscraper has unexpectedly closed to the public a month after its lavish opening, disappointing tourists headed for the observation deck and casting doubt over plans to welcome its first permanent occupants in the coming weeks.

Electrical problems are at least partly to blame for the closure of the Burj Khalifa’s viewing platform — the only part of the half-mile high tower open yet. But a lack of information from the spire’s owner left it unclear whether the rest of the largely empty building — including dozens of elevators meant to whisk visitors to the tower’s more than 160 floors — was affected by the shutdown.

The indefinite closure, which began Sunday, comes as Dubai struggles to revive its international image as a cutting-edge Arab metropolis amid nagging questions about its financial health.

The Persian Gulf city-state had hoped the 2,717-foot (828-meter) Burj Khalifa would be a major tourist draw. Dubai has promoted itself by wowing visitors with over-the-top attractions such as the Burj, which juts like a silvery needle out of the desert and can be seen from miles around.

In recent weeks, thousands of tourists have lined up for the chance to buy tickets for viewing times often days in advance that cost more than $27 apiece. Now many of those would-be visitors, such as Wayne Boyes, a tourist from near Manchester, England, must get back in line for refunds.

“It’s just very disappointing,” said Boyes, 40, who showed up at the Burj’s entrance Monday with a ticket for an afternoon time slot only to be told the viewing platform was closed. “The tower was one of my main reasons for coming here,” he said.

The precise cause of the $1.5 billion Dubai skyscraper’s temporary shutdown remained unclear.

In a brief statement responding to questions, building owner Emaar Properties blamed the closure on “unexpected high traffic,” but then suggested that electrical problems were also at fault.

“Technical issues with the power supply are being worked on by the main and subcontractors and the public will be informed upon completion,” the company said, adding that it is “committed to the highest quality standards at Burj Khalifa.”

Despite repeated requests, a spokeswoman for Emaar was unable to provide further details or rule out the possibility of foul play. Greg Sang, Emaar’s director of projects and the man charged with coordinating the tower’s construction, could not be reached. Construction workers at the base of the tower said they were unaware of any problems.

Power was reaching some parts of the building. Strobe lights warning aircraft flashed and a handful of floors were illuminated after nightfall.

Emaar did not say when the observation deck would reopen. Ticket sales agents were accepting bookings starting on Valentine’s Day this Sunday, though one reached by The Associated Press could not confirm the building would reopen then.

Tourists affected by the closure are being offered the chance to rebook or receive refunds.

The shutdown comes at a sensitive time for Dubai. The city-state is facing a slump in tourism — which accounts for nearly a fifth of the local economy — while fending off negative publicity caused by more than $80 billion in debt it is struggling to repay.

Ervin Hladnik-Milharcic, 55, a Slovenian writer planning to visit the city for the first time this month, said he hoped the Burj would reopen soon.

“It was the one thing I really wanted to see,” he said. “The tower was projected as a metaphor for Dubai. So the metaphor should work. There are no excuses.”

Dubai opened the skyscraper on Jan. 4 in a blaze of fireworks televised around the world. The building had been known as the Burj Dubai during more than half a decade of construction, but the name was suddenly changed on opening night to honor the ruler of neighboring Abu Dhabi.

Dubai and Abu Dhabi are two of seven small sheikdoms that comprise the United Arab Emirates. Abu Dhabi hosts the federation’s capital and holds most of the country’s vast oil reserves. It has provided Dubai with $20 billion in emergency cash to help cover its debts.

Questions were raised about the building’s readiness in the months leading up to the January opening.

The opening date had originally been expected in September, but was then pushed back until sometime before the end of 2009. The eventual opening date just after New Year’s was meant to coincide with the anniversary of the Dubai ruler’s ascent to power.

There were signs even that target was ambitious. The final metal and glass panels cladding the building’s exterior were installed only in late September. Early visitors to the observation deck had to peer through floor-to-ceiling windows caked with dust — a sign that cleaning crews had not yet had a chance to scrub them clean.

Work is still ongoing on many of the building’s other floors, including those that will house the first hotel designed by Giorgio Armani that is due to open in March. The building’s base remains largely a construction zone, with entrance restricted to the viewing platform lobby in an adjacent shopping mall.

The first of some 12,000 residential tenants and office workers are supposed to move in to the building this month.

The Burj Khalifa boasts more than 160 stories. The exact number is not known.

The observation deck, which is mostly enclosed but includes an outdoor terrace bordered by guard rails, is located about two-thirds of the way up on the 124th floor. Adult tickets bought in advance cost 100 dirhams, or about $27. Visitors wanting to enter immediately can jump to the front of the line by paying 400 dirhams — about $110 apiece.

___

On the Net: http://www.burjdubai.com

Second Wave Of Mortgage Defaults

Filed under: Freedoms — Tags: , — alpineski @ 12:47 pm

February 7, 2010

More Government Equals Fewer Jobs

Filed under: Barack Obama, Financial — Tags: , — alpineski @ 9:21 am


by Peter Schiff- With today’s unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.

Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.

The minimum wage law, which is really just a very visible workplace regulation, actually makes it illegal for employers to hire certain individuals and destroys entire categories of jobs. For instance, faced with high labor costs, some restaurants will avoid hiring dishwashers by switching to plastic utensils and paper plates. On a larger scale, factories may decide to switch to robotic assembly lines if human labor gets too expensive.

Other types of regulations, such as those that prohibit discrimination, create incentives for employers not to hire individuals that fall within the protected class. This is the result of potential litigation costs that may result from wrongful termination lawsuits. In other words, the more expensive government makes it to fire workers, the less likely they are to hire them in the first place.

Subsidies produce the opposite effect of regulation, but sometimes the results can be just as harmful. Government subsidies divert resources towards politically favored activities, resulting in more jobs in areas such as health care and education, but fewer jobs in other sectors such as manufacturing. The net effect of this transfer is to diminish the productive capacity and efficiency of the economy, which lowers real economic growth and diminishes employment opportunities.

Although not as visible as regulations and subsidies, government spending also plays a large role in job destruction. The more money government spends, the more resources it drains from the private sector. The fiscal 2011 budget proposed by President Obama contains $3.8 trillion in federal spending. Think of government as a cancer feeding off the private sector. The larger it grows, the more jobs it kills. Unfortunately, most politicians follow the misguided advice of economist John Maynard Keynes, who advocated government spending as a means of job creation. In reality, government spending merely results in government jobs replacing more efficient private sector jobs.

Some economists point to taxes as the primary job killer, and argue that lower taxes will boost employment. While I have sympathy for this view, it misses the larger issue that the burden of government is not what it taxes but what it spends. The proposed fiscal 2011 federal budget contains “only” 2.4 trillion of taxes. The remaining 1.4 trillion of spending is borrowed (incredibly, for every dollar the government collects in taxes, it now spends almost $1.60). I would argue that a dollar borrowed kills more jobs than a dollar taxed. Therefore, cutting taxes and borrowing the shortfall kills more jobs then it creates. This is true because jobs require capital and government borrowing more directly crowds out private capital investment than taxes do.

In the end, I fully expect the government to directly provide make-work jobs to the armies of the unemployed. This will accelerate the pace of private sector job destruction and make our economy even less productive than it is today. This means that while the government may be able to provide people with jobs, the wages they pay will provide little in the way of purchasing power. In the end, we will become a nation of government employees, with plenty of work but little to show for it.

February 6, 2010

Sovereign Risk Meets Sovereign Reality

Filed under: Financial — Tags: , , — alpineski @ 11:48 am

Santorini, Greece


The Wall Street Journal- After months of shrugging off debt problems in Dubai, Greece and other smaller economies, markets yesterday seemed suddenly aware of the risks of sovereign default.

Back in November, when the question of Dubai’s solvency came to a head, it was ultimately bailed out by its rich older brother, Abu Dhabi. Now, the European Union is doing its best to avoid promising a similar bailout to Greece, though in the end few believe Brussels will allow Athens to go under.

The current crisis in Greece is only the worst example inside the EU. The PIGS—Portugal, Italy, Greece and Spain—all boast public debt above or headed for 100% of GDP. Though the PIGS acronym was apparently coined by British bankers, Britain, Ireland and Iceland also smell distinctly of bacon.

The problem isn’t confined to Europe. Japan and the United States, by most reckonings the world’s largest economies, also face pressing questions about their sovereign debt levels. To be sure, the U.S. and Japan can sustain such deficits more comfortably than small countries like Greece or Portugal where the government’s ability to curb public-sector spending is rightly suspect. Yet even in economic giants, bad policy could cause investors to move out of debt they have long considered a safe haven. The moment is approaching when the artificial line separating the wealthy from emerging markets will lose much of its relevance.

Countries like Germany, whose fiscal balances have deteriorated largely due to the economic downturn, might have a greater capacity to stabilize their debt ratio. The U.S. and Japan will also be among the last countries to face investor aversion. This is because the dollar is the global reserve currency, and the U.S. has the deepest and most liquid debt markets. Japan is a net creditor and largely finances its debt domestically. But over the next few years, investors will become increasingly cautious about even the U.S. and Japan if the necessary fiscal reforms are delayed.

Investor perceptions about how Brussels handles the current crisis will be a key factor going forward. European countries such as Spain and Greece have delayed reforms and face a severe competitiveness problem. Japan’s aging population and economic stagnation is reducing domestic savings. The U.S. is a net debtor with an aging population and slower growth.

For the U.S., the implications are clear. The annual fiscal deficit in the U.S. will remain close to $1 trillion over the next decade. Ultimately, concerns among foreign investors about a weak dollar will force Washington to put its house in order. The U.S. will have to raise taxes on most income groups and investors, close tax exemptions and loopholes, and reduce entitlement benefits.

Foreign creditors won’t suddenly move away from U.S. Treasurys—the trend will play out gradually. The same holds true for domestic investors who consider U.S. Treasurys a safe haven and remain confident about the country’s debt-servicing ability relative to other developed economies.

But as the Federal Reserve begins to raise interest rates to head off inflation—something likely to begin only in 2011—foreign investors and central banks will be willing to finance the U.S. only at higher yields. Rising interest costs will be one of the factors constraining U.S. policy. That’s where sovereign risk meets sovereign reality.

Mr. Bremmer, president of Eurasia Group, is author of the forthcoming book “The End of the Free Market: Who Wins the War Between States and Corporations?” (Portfolio). Mr. Roubini is a professor of economics at New York University’s Stern School of Business and chairman of Roubini Global Economics.

February 3, 2010

Stocks Could Fall to 8,800

Filed under: Financial — Tags: , — alpineski @ 10:21 am

Ellen Chang- The market could see a huge correction in a few months, says Dan Cook, senior market analyst at IG Markets.

Investors are not buoyed by positive earnings reports, he says.

“There’s still a lot of confusion in the market. We’re looking at a pretty positive earnings season overall, but as we saw (recently) it was basically ignored due to political conflicts and we’re likely to see more of that,” Cook said.

Cook predicts there to be a 20 percent to 25 percent correction in the markets by April or May.

“It wouldn’t surprise me to see a range of 8,800 to 9,000 on the Dow. There are a few individual stocks I like, but sector-by-sector, I’m definitely more bearish than what I am bullish,” he told CNBC.

The market has also benefited from not being affected by inflation, the New York Times reported.

“The Fed’s job is easy today, because we’re not even back into positive territory on payroll and employment numbers. We’re a long ways away from significant inflationary pressures in the labor market,” said Peter Hooper, chief economist for Deutsche Bank Securities.

The economy remains weak and can not improve with higher interest rates, Bloomberg reported.

“The economy is just too fragile to start raising rates at this point,” said Terry Morris, a money manager at National Penn Investors Trust Co. in Wyomissing, Pa., which manages $2 billion.

The euro dipped to a six-month low compared to the dollar on news from the European Commission stating that Greece has failed to fix its budget deficit.

“It’s basically a fear of the unknown that people have,” said Michael O’Rourke, chief market strategist at BTIG LLC in Yardley, Pa., which provides trading services for large investors.

“The euro is a relatively new currency and it hasn’t been crisis-tested the way it’s being now.”

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