Category Archives: Economy

Federal Reserve to Refrain from More Bond Buying

Economy, , , , ,

Two influential officials from the Federal Reserve announced on Friday that the central bank should wait before buying more bonds. In addition to cutting overnight interest rates down to nothing in December of 2008, the Federal Reserve also purchased $2.3 trillion worth of government and mortgage-related bonds to stimulate growth in response to the worst recession in dozens of years.

Economy Improving, Bond Buying Not Needed

The president of the Federal Reserve Bank in St. Louis, James Bullard told reporters after

James Bullard

a speech he gave in this Midwestern city that as long as the economy seems to be improving, the purchasing of more bonds should be postponed.

“The data has been stronger in recent weeks and months, and so I think there’s probably a good case to stand pat for now,” Bullard said.

“If the economy did deteriorate substantially in 2012, then I think (quantitative easing) would come back on the table, but that’s not where we are right now,” added Bullard, considered a centrist when it comes to policy debated by the Federal Reserve.

Upcoming Policy Meeting

The large variety of positions when it comes to Fed policy was apparent as the officials practiced their differing arguments in preparation for their upcoming policy meeting on January 24-25.

The aftermath of the meeting is expected to result in the announcement of more information about the direction interest rates will take in the near future, as well as an explicit number for an inflation target. It is not expected, however that the Feds will announce any new round of bond purchases.

Bond Buying on Hold, For Now

Some other Federal Reserve officials, including the influential president of the New York Fed, have hinted recently that additional bond buys might need to be considered sometime in the future, but for now Bullard’s position is probably the one which will be followed for now.

Eastern States Gambling on Casinos to Bring in Revenue

Economy, , , ,

In what is part of a trend that is growing in size and respectability throughout the eastern seaboard, New York Governor Andrew Cuomo announced last week that he has plans to transform Aqueduct Racetrack into a mega tourism/gambling/casino complex.

Baby Steps

Aqueduct Racino

Last October New York took its first baby steps into the world of casino gambling when a “racino” with limited facilities opened at Aqueduct. Even with just 4,500 video slot machines and only 500 electronic table games, the racino was able to earn $13 million just last week, which translates into $676 million a year. New York State’s cut is 44%, going straight to a fund for education.

Cuomo’s new proposal, however, dwarfs what Aqueduct offers gamblers now. Working together with the Genting Group, one of the world’s largest and most profitable gambling companies and the company which built and operates Aqueduct’s racino, Cuomo plans on creating the nation’s largest convention center, hotels with 3,000 rooms, and a major expansion of the casino.

Eastern States Getting in on the Action

The plan comes fast on the heels of a law passed two months ago in Massachusetts, once known for its puritanical, anti-gambling values, which will permit the establishment of three resort casino and a slot machine parlor, at several locations around the state.

Ohio also has plans to open its first ever commercial casinos this year after voters in 2009 approved a plan to build up to four such complexes. Maryland’s first of several casinos opened this year, while Pennsylvania has been operating its own casinos since 2006, which are threatening to overtake Atlantic City’s casinos as the country’s second most popular venue for gambling.

Florida is now in the midst of a legislative debate on whether to allow up to three multi-billion dollar casinos, and whether to permit more slot machines at Florida’s dog tracks. Genting believes the Florida law will pass, spending about $450 million on waterfront property purchases in Miami, where it hopes to build a $3.8 billion complex.  The facility would include a casino, restaurants and a shopping mall.

Its All About the Money

After years of rejecting gambling due to the fears of the danger to society, states have begun to accept gambling for two main reasons: gambling is a seemingly abundant source of revenue; plus casinos have the potential of stimulating tourism.

“They are faced with tough decisions. They are in recession … And we pay taxes far over and above normal taxes,” said Frank Fahrenkopf, president of the American Gaming Association.

Compared to what Genting estimates they can make if the Miami complex comes to fruition, the total that the Aqueduct racino brings in is miniscule. Genting is guessing that they can bring in $1.4 to $2 billion each year in Miami, if they get their way.

Super Bowl Ads Heading for Touchdown

Communications, Economy, , ,

Apparently “You get what you pay for” is as true for Super Bowl advertising as it is for other purchases; at least marketing experts believe it. Take for instance the fact that despite asking record fees for ads at last year’s Super Bowl XLV, all the ad space was sold. And the same phenomenon is happening this year for Super Bowl XLVI.

Part of Super Sunday

Super Bowl XLVI

Experts are saying that next month’s Super Bowl will most likely surpass the take for last year’s, and next year will do better than this year. Companies and their marketing agents strongly believe, to the tune of millions of dollars, that it is an honor and a privilege to be a part of Super Sunday.

Profitable, Too

But it’s not just a privilege; its lucrative as well, say experts such as Brian Steinberg, the television editor for Advertising Age. “It’s a huge investments but it’s also one of the best ways to maximize their time. Fewer TV properties have that reach thanks to DVR and the Web. The Super Bowl is increasing, rather than losing, its audience.”

And as long as that audience continues to drink, snack and continue to watch TV, there is no end in sight to the money that can be made at the Super Bowl.

Sold Out

NBC is the network which will be broadcasting the game on February 5th, from Indianapolis. NBC has already announced that there is no more time left for ads during the game itself, but there are still a few spots left during the pre-game show. Despite the fact that NBC has not publicly disclosed how much each spot costs, the Associated Press estimates the charge to advertisers is somewhere between $3.5 million and $4 million for each 30 second time slot. Just 20 years before a half-minute cost advertisers only $1 million or less.

BIG Audience

That amount of money, however, buys the ad-men the largest TV audience in the United States all year. Last year’s figure was 111 million Americans who were glued to the game, many of whom watched with fascination the tens of commercials which were broadcast during the time-outs and other game breaks.

“There’s nothing to compare it to. Maybe the Oscars or some of the music (awards) shows, but not really,” said Stephen Master, head of sports for Nielsen, which tracks viewership.

“The Super Bowl works for different kinds of companies. It’s a wonderful venue for companies with a new product since it builds brand awareness so quickly. But it also allows the ability to rebuild or to recast a brand,” said Tim Calkins, professor of marketing at Northwestern University.

Feds Want to See More Fannie Mae and Freddie Mac Help in US Housing Market

Economy, , , , , ,
Fannie Mae

The Federal Reserve Board told Congress this week that Fannie Mae and Freddie Mac, both government-run mortgage finance companies, could be instrumental in helping to get the wallowing US housing market back on track.

Not All Agree

The proposal to use the government mortgage companies to improve the housing situation  threatens to run into hurdles from politicians opposed to the idea.

The Federal Reserve sent a paper to the legislators on Wednesday describing concrete steps which the government can take to help jump-start the lackadaisical housing market, including letting Fannie and Freddie provide affordable mortgages to a larger number of potential homeowners.

Freddie and Fannie Problematic

It is not so simple, however. The two mortgage companies were seized by the government over three years ago as they were about to fall apart despite the fact that they are the biggest sources of US mortgage funding. Since then they have been held together with $169 billion in taxpayer money, making them an easy target of lawmakers on the Hill.

Obama Not So Sure

Even the Obama administration has expressed a desire to reduce the role the government plays in housing finance. Such a reduction was part of a three-pronged program to reform the US finance system that Obama’s administration laid out last year.

“It comes at a time that Congress has become quite skeptical of Fannie and Freddie and their role, and seems to be looking for ways to diminish their long-run role in housing finance, not increase it,” said David Resler, chief economic adviser at Nomura Securities International.

Some Backtracking After Week of Strong Growth in Markets

Economy

There was a small reverse on Wednesday in what was seen as a healthy rise in the international stock markets at the beginning of the New Year. The upward movement was spawned by several pieces of good US economic news.

Jobs Report on Horizon

The US economy is the world’s largest, and its movement is likely to be the fulcrum this entire week, leading up to the crucial jobs report for the month of December, set to be released on Friday. Darkening a bit the overall optimistic feelings, however, is the dismal outlook for Europe and its ongoing debt crisis.Investors have focused their attention on the future of the US economy during the first week of the year, which helped stocks show reasonable gains. The DAX of Germany rose about 5% so far. The Dow Jones index reached its highest place in five months by Tuesday’s closing bell.

Wednesday showed some backward motion from the previous gains, which was not entirely surprising.

Strong Manufacturing Sector

A manufacturing survey showed strong positive results, pointing to a sector which has grown at its fastest rate in six months. This data helps to fuel hopes that will set the tone of the market for the next few weeks to come.

Job Growth Expected

Analysts are expecting that the job report will show that the US economy has created an additional 150,000 jobs during the past month; a strong, although not spectacular, figure.

“Markets have put to one side concerns about Europe so far this week,” said Michael Hewson, markets analyst at CMC Markets.