Sunday, January 17, 2010

WSJ News Jan. 16-17

Fed Stays the Course Despite Worries
Although Federal Reserve officials expect the economy to grow too slowly this year to bring the jobless rate down substantially, they are likely to conclude at their Jan. 26-27 meeting that there isn't much more they can do about it.

That means sticking to their stated plan to end purchases of mortgages at the end of March, roll back emergency lending programs in February and maintain the vow to keep interest rates exceptionally low for at least several more months.
http://online.wsj.com/article/SB10001424052748703657604575004961390797800.html?mod=WSJ_WSJ_US_News_5&mg=com-wsj

Paperwork Woes Plague Mortgage Plan
Thousands of homeowners participating in the Obama administration's foreclosure-prevention plan could miss a government deadline for completing necessary paperwork, putting them at risk of disqualification.
http://online.wsj.com/article/SB10001424052748703657604575005112496393670.html?mod=WSJ_hps_LEFTWhatsNew

Democrats plan tax to punish banks
WASHINGTON—Democrats' last-minute scramble to salvage the special U.S. Senate election in Massachusetts is offering the first test of a populist pitch that party strategists hope to take to other campaigns this year.

Central to the strategy is the new White House plan to tax big banks as punishment for their role in the financial crisis. President Barack Obama announced the proposal Thursday amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks' role in the economic crisis.
According to data released by the Treasury Department Friday, more than 900,000 borrowers have begun trial modifications under the program, but just 7% of them have received permanent changes so far.
http://online.wsj.com/article/SB10001424052748704381604575005361644727140.html?mod=WSJ_hps_LEFTWhatsNews s

MediaNews Group to seek bankruptcy protection
The holding company of MediaNews Group Inc., the publisher of dozens of newspapers including the Denver Post and San Jose Mercury News, said Friday that it plans to seek bankruptcy protection, the latest in a string of troubled newspaper companies to seek refuge from creditors amid unsustainable debt loads.
The holding company, Affiliated Media Inc., said it reached an agreement with its lenders for a streamlined bankruptcy that will hand a majority of new stock to creditors, a group led by Bank of America Corp. The company's existing equity will be canceled, the holding company said.
MediaNews Chairman and Chief Executive William Dean Singleton and company president Joseph Lodovic IV will control the restructured company through a special class of stock.
http://online.wsj.com/article/SB10001424052748703657604575005813195786280.html?mod=WSJ_hps_sections_business

Why Investors Keep Fooling Themselves
A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years.
Robert Veres, editor of the Inside Information financial-planning newsletter, recently asked his subscribers to estimate long-term future stock returns after inflation, expenses and taxes, what I call a "net-net-net" return. Several dozen leading financial advisers responded. Although some didn't subtract taxes, the average answer was 6%. A few went as high as 9%.
We all should be so lucky. Historically, inflation has eaten away three percentage points of return a year. Investment expenses and taxes each have cut returns by roughly one to two percentage points a year. All told, those costs reduce annual returns by five to seven points.
So, in order to earn 6% for clients after inflation, fees and taxes, these financial planners will somehow have to pick investments that generate 11% or 13% a year before costs. Where will they find such huge gains? Since 1926, according to Ibbotson Associates, U.S. stocks have earned an annual average of 9.8%. Their long-term, net-net-net return is under 4%.
http://online.wsj.com/article/SB10001424052748704381604575005291706758502.html?mod=WSJ_hps_sections_markets

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