U.S. stock index futures were pointing to a lower opening
on Thursday. The dollar is rallying. It's also a big stake showdown for
health care today.
- Durable Goods Orders 8:30 AM ET
- Jobless Claims 8:30 AM ET
- FHFA House Price Index 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 3-Month Bill Announcement 11:00 AM ET
- 6-Month Bill Announcement 11:00 AM ET
- 7-Yr Note Auction 1:00 PM ET
- Fed Balance Sheet 4:30 PM ET
- Money Supply 4:30 PM ET
News For Thought
Colombia: Key rebel leader killed. According to Stratfor.com: "The
commander of the 48th Front of the Revolutionary Armed Forces of Colombia
(FARC) — identified as Angel Gabriel Lozada Garcia (alias Edgar Tovar)
— was killed by security forces in Putumayo department, El Espectador reported
Feb. 24. Tovar had been in charge of the FARC drug trafficking network
in the southern regions of Colombia, and was the former security chief
of FARC’s second-in-command, Raul Reyes, until Reyes’ death in 2008."
Hummer ends with a whimper. According to Wall Street Journal: "General
Motors said it will begin an orderly wind down of Hummer operations after a Chinese
bidder's $150 million offer was not accepted by Chinese regulators."
Madoff family members want a new name. According to The Wall Street Journal: "One
of Bernard Madoff's daughters-in-law says she and her children shouldn't have
to bear the name of the convicted Ponzi-schemer and has filed papers to change
her last name to Morgan."
Poll: government is scarier than private health insurers. This should
send a message to Washington but probably won't. According to Rasmussen Reports.com: "President
Obama and congressional Democrats are citing a jump in rates by a California
health insurer as grounds for getting their national health care plan back on
track, but voters are still more fearful of the federal government than private
insurance companies when it comes to health care decisions." Here's the kicker: "A
new Rasmussen Reports national telephone survey finds that 51% fear the federal
government most when it comes to such decisions. Thirty-nine percent (39%) fear
private insurance companies more." According to the report, these views are unchanged
since August 2009.
Overall, it looks as if the White House and the Democrats are pushing on a string
as "Forty-one percent (41% ) of voters favor the proposed health care plan, while
56% oppose it. Just 23% Strongly Favor the plan while 45% are Strongly opposed.
Support for and opposition to the plan are at the same levels they’ve been at
since just after Thanksgiving."
There is a certain finality and a sense of closure in the air, albeit temporary.
Still, it sort of feels as if we are on the verge of the next chapter of something.
Whether it's going to be good or otherwise remains to be seen.
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While there are riots and strikes in the streets of Athens, a
more urgent problem for the European Union is about to make it to prime time,
the fate of Spain's economy and its effect on whether the European Union can
actually survive.
According to The Wall Street Journal: "The euro zone's No. 4 economy, Spain has
an unemployment rate of 19%, a deflating housing bubble, big debts and a gaping
budget deficit. Its gross domestic product contracted 3.6% in 2009 and is expected
to shrink again this year, leaving Spain in its deepest and longest recession
in a half-century." Job losses have been mitigated somewhat by a generous social
safety net, especially unemployment benefits, but for many those are about to
run out while the prospects for regaining jobs are dimming.
The question of what's next "haunts Spain and the entire euro zone as the Continent
faces its biggest economic crisis since the common currency launched in 1999.
Worries over Greece's ability to finance its huge debts have spread to other,
weaker members of the euro zone, but these same fears are now nipping at Spain's
heels. The problem is that, thanks largely to its membership in the euro, Spain
lacks tried-and-true means to heal its economy," according to The Journal.
And the implications of that savvy observation are crucial if Spain is going
to remain close to the "A List" in the global economy. In fact, Spain is hamstrung
by its membership in the EU as the country "can't devalue its currency to make
its exports more attractive and its sunny beach resorts cheaper because the euro's
value is driven by Germany's bigger, competitive industrial economy. Madrid can't
slash interest rates or print money to spur borrowing and spending, because those
decisions are now made in Frankfurt by the European Central Bank." In essence
by joining the EU, Spain has lost its independence and has put itself in a position
where it can't maneuver itself into a more favorable position. This, of course,
raises questions about what decisions it may have to make in the not too distant
future.
What Spain can do is to lower taxes and raise stimulus, but it's already way
out on a limb as it "mounted enormous stimulus spending that swelled its budget
deficit to 11.4% of GDP last year, and it would need to sell more bonds to raise
fresh cash." And because of the fear in the bond market, Spain would face higher
interest rates from potential bond buyers.
Spain argues that its economy is fundamentally "sound" and that "was running
budget surpluses until the financial crisis struck, and its government debt has
grown from a very low base." But there are few takers, if any, in the EU for
floating a bailout for the country, as the size of its economy, $1.6 trillion, "is
nearly double those of troubled euro-zone partners Greece, Portugal and Ireland
combined," according to The Journal.
The projected costs of an initial bailout for Spain is estimated by BNP Paribas
to be somewhere near $270 billion.
Among Spain's options would be to leave the European Union and the Euro. But
some believe that would lead to an even bigger crisis, and a run on the banks,
leading to nearly complete financial disorder. Yet, it's a plausible, even if
an unlikely option, which is why the Euro is continuing to slide against the
dollar.
Among the country's potential problems yet to unravel are a real estate bubble
that is centered within the regional banking system. The formula for the "bubble" is
familiar. Low interest rates for an extended period of time, starting in 1999,
combined with higher wages led to a real estate buying binge which is about to
unravel, making things even worse.
Even more daunting is the country's labor setup. According to The Journal: "Wages
are set through a complicated system of bargaining with trade unions that imposes
wage increases on firms even if their business can't afford it. Because wages
are inflexible, Spanish companies can cut labor costs only by firing workers.
Yet some workers, hired on so-called indefinite contracts, are deeply entrenched,
not least because they are entitled to 45 days' severance pay per year of service."
Conclusion
Spain looks as if it's going to be a tougher nut to crack than Greece. That's
because it's a bigger and more complex situation involving regional banks that
don't want to unload unsold houses that they have repossessed, and inflexibility
from both the government as well as labor unions.
There is no feeling of panic in the air, though, at least not yet. So while Greece
is boiling, Spain is simmering. That explains the slow decline in the Euro.
Still, whether it crashes or its slowly sinks, the outcome is likely to be the
same, lots of pain for Spain, where there is apparently lots of rain, falling
on the plain.
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