Articles from 12/02/07 to 12/08/07

We start our annual holiday "Gifts and Gadgets" review on Monday, December 10th with a look at computers, big sellers this year because of pent-up demand. It seems lots of us put off replacing old machines last year, waiting for Microsoft's Windows Vista and Apple's Leopard operating systems.

For basic models, you can't go wrong with any of the major brands. Everyone, even Apple, is now using Intel processors or Intel-compatible processors from AMD.

And there is exciting news at the high end. If you are interested in gaming or state of the art video processing, both Dell and HP now have models at semi-reasonable prices that have high powered features only the special niche market makers included at premium prices in past years. Check out the Dell XPS line and at HP, look at the Voodoo and Blackbird models.

Here's one more suggestion, if you're not faint hearted. How about building your own computer?

The markets remain flat today despite November's employment report that is not expected to keep the Federal Reserve from cutting interest rates as expected next week. Suzanne Pratt finds out how much today's report is expected to impact the decision on interest rates. For the third straight month, consumer sentiment is down, according to the most recent Reuters/University of Michigan index. That can't be a surprise with higher gas prices, lower housing prices and other problems in the economy.

Also in tonight's program, Darren Gersh looks at what's left on the Congressional agenda. With the holiday recess looming, lawmakers only have a short amount of time to tackle some important issues. And, our Market Monitor guest says now is a good time to be an investor - if you like value. He's John Hughes, President of Quantum Capital Management.

Mortgage lenders and servicers say it’s in no one’s interest to foreclose. Yet, the number of loans that have been worked out is painfully small. The Bush Administration coordinated plan now gives lenders the change to put their words into action.

While the plan itself is modest (troubled loans will still be handled on a case by case basis), there is now some accountability built into the system. Treasury Secretary Paulson says the industry will give monthly updates on its progress to modify loans. Investors will also get reports about the financial impact of the loans that are worked out.

If lenders continue to work out less than one percent of loans, there will be even greater pressure for more than a voluntary approach.

Over the course of this campaign, I will have the privilege of speaking with hundreds of thoughtful people about their hopes for this country. Unfortunately, only a small portion of that conversation will make it into the regular broadcast. I've always thought that is a shame. Some stories are so focused, they leave little room for an offbeat, but fascinating thought.

The Voters Voices section of our election website gives us a chance to share with you more insights from the people we speak with over the next year. If you visit the site, you'll find short video clips of your fellow voters talking about issues as wide-ranging as immigration, leadership, and health care. I hope you enjoy Voters Voices, and I hope you will add your voice to the conversation by posting your comments here.

We're going to focus today on subprime mortgages. President Bush is scheduled to announce a freeze on some subprime mortgages in an effort to stop a wave of foreclosures. The radical plan would apply to home owners who got adjustable-rate subprime mortgages between January 1, 2005, and July 31 of this year and are facing a sharp jump in rates in the next two years. Stephanie Dhue will have the details.

We'll also examine how subprime investments are hurting small towns and municipalities. A subprime-stricken $14 billion investment pool for local governments in Florida will allow withdrawals for the first time in a week starting today. Last week, Florida froze its local government fund after holdings recently plunged $10 billion. Panicked local officials had pulled large sums on fears of subprime losses. Jeff Yastine sits down with Lauderhill, Florida Mayor Richard Kaplan to talk about the subprime impact on the town.

I bought an American made SUV ten years ago. At the time, I had a newborn baby and felt a larger vehicle was safer. I thought the SUV trend had to be on the wane, that gas prices wouldn’t stay at 99 cents a gallon for long, and that automakers would soon develop more fuel efficient vehicles to accommodate the needs of a family. I was right about gas prices, but oh-so-wrong about SUVs and the auto industry. Not only did the SUV trend not wane, the vehicles got bigger and even more gas guzzling.

Now I’m ready to purchase a new car, but I’m still not crazy about what’s out there. I’d like to find something that’s more environmentally friendly, yet still meets my needs. Mine is the family vehicle, so something small is out. I also take public transportation on a daily basis, so financially it doesn’t seem to make sense to spend a lot of money on a hybrid.

I’m open to recommendations.

Oil prices fall despite word of a huge drop in oil inventories and news OPEC will hold production levels steady. Erika Miller gets some analysis on why the sudden disconnect between crude prices and supply. From Merrill Lynch to Bear Stearns and others, some of the biggest banks on Wall Street are in the sights of the New York State Attorney General. He wants to know more about their dealings in subprime debt.

Susie Gharib talks about the issues surrounding the investigation with Columbia University Securities Law Professor John Coffee. Bristol Myers Squibb issues its prescription for growth, including massive job cuts and factory closings. We'll have Wall Street's reaction in tonight's Stocks in the News. And... tonight's Street Critique guest says there are still stocks to buy even with the credit debacle. He's Kevin Depew, Executive Editor at Minyanville.com.

President Harry Truman is the guy who made that expression famous. “The Buck Stops Here” was on a sign, sent to him by a friend from Missouri, which sat on his desk in the Oval Office. The idea was that somebody had to take responsibility when things went wrong, and in government, that would be him.

I’ve been reading that the major reason it is taking so long for Citigroup to find a new CEO is that no one wants to take the responsibility for running the financial services giant. The argument goes that managing Citi, considering its huge size and massive diversification, is really impossible, and that the board was wrong to blame Chuck Prince for its failures.

Nonsense. When a company’s stock price falls 40% in a year, and it reports its first quarterly loss in 17 years, something has to give. The CEO and/or the board of directors seem logical candidates. When you make a bad bet you have to face the consequences. Citi’s exposure to bad subprime loans was a buck which had to stop somewhere.

Frankly, the thing that upsets me most about Washington is how real people often get caught in the crossfire when powerful people fight. Often, the damage is unintentional, but that's no excuse.

So it may be with the AMT -- the Alternative Minimum Tax. Quick history: the AMT was designed to make it harder for a handful of rich people to avoid paying any taxes. (For more information, check out this report by the Tax Policy Center: The Individual Alternative Minimum Tax.) Problem is, it was never indexed for inflation, so over the years the AMT has pulled in more and more upper-middle class folks. If nothing is done, it could -- "could" being the important word here -- become a tax on the middle class. But Congress patches the AMT every year by indexing the exemption to inflation.

So, we come to the present. The Democrats want to patch the AMT. Republicans want to patch it too. The only difference is, Democrats want to pay for the fix by raising other taxes on Wall Street private equity shops. It's that whole fiscal discipline thing that worked for Bill Clinton. Republicans argue that it doesn't make sense to pay for a tax fix that was never intended to reach millions of people.

A recession is defined to be a period of two quarters of negative GDP growth. But it’s hard to tell if your in one until well after the fact. That’s why economists are always looking for reliable harbingers of recession.

They say one bellwether is sales of RVs -- recreational vehicles. Winnebagao and other manufacturers are forecasting a drop in shipments this year and next. RVs are considered an economic bellwether because they’re the extreme embodiment of discretionary spending. RV industry sales declines lasting two years or longer preceded most recent recessions, including those in the early 80s, 90s, and in 2001.

Some people also use Starbucks as a forecasting tool. The belief is people are more willing to indulge in designer beverages when they’re optimistic about their economic prospects For the first time, Starbucks recently reported a year over year decline in customer traffic in its stores.

From Wall Street to main street Americans are concerned about the economy and whether the housing slump could push the U.S. into recession. Erika Miller talks with economists about the chances of a prolonged downturn in the economy. Susie Gharib talks with the head of the Business Roundtable about how some of the nation's most influential CEO's see the economy shaping up in 2008. Her guest: Terry McGraw, Chairman of the Business Roundtable and Chairman & CEO of the McGraw hill Companies.

President Bush came out swinging today, blaming inaction by Congress for delays in fixing the alternative minimum tax. As Darren Gersh reports.. the President says those delays could cost millions of Americans millions of dollars. Fannie Mae is following its sibling's lead. Late today, the government sponsored mortgage giant cut its dividend sending its stock lower by 3 percent in after hours trading. We'll have the details in tonight's Stocks in the News.

Countrywide CEO Angelo Mozilo wants the government to “step up to plate and take action and try to create liquidity in the market.” But liquidity is a symptom of problems in the housing and lending industry, not the cause. Homebuilder Robert Toll points out that the problem of slowing sales and softening prices were well underway before the credit crunch.

At that time, Countrywide was still making 100% financed low document loans, while battling against efforts by regulators to tighten subprime lending standards. Now Countrywide wants regulators to loosen the restrictions on Fannie Mae and Freddie Mac to purchase more non-conforming loans. Those companies are under regulatory scrutiny as a result of past accounting issues. Their regulator, OFHEO, wants the tighter controls to ensure that Fannie and Freddie are safe and sound and won’t put taxpayers at risk of bailing them out.

What do you think, should regulators make it easier for Countrywide, the largest mortgage lender in the U.S., to get funding?

What a difference a week makes. Last week when I started researching today's auto outlook story, I spoke to several analysts about their forecasts for 2008. Global Insight's George Magliano estimated U.S. vehicle sales at 15.7 million units. When I interviewed him today, he had revised that number down to 15.5 million units. The change is an indication of how volatile the U.S. economy is and how crippling the nation's housing crisis has become to many other sectors.

Magliano thinks the buyers who will most likely be side-lined next year are the people who probably need a new vehicle the most. Those may be some of the same buyers who took advantage of rebates and zero percent financing a few years ago.

So, who will be buying most of those 15.5 million vehicles? Many of the analysts I spoke to think they will be medium to higher income consumers with a lot of discretionary income. What will they be buying? Most of the experts I interviewed think luxury vehicles will most likely perform best next year.