XChange - The NBR Blog

Who Owns Our Debt Matters and Here's Why.

Published by: Darren Gersh, Washington Bureau Chief — Tue, 09 Feb 2010 13:49:04 -0500

Looking through the CBO budget numbers, I was surprised to find the largest category of ownership of our public debt fell under the category of "Other." As in, "Other" foreign countries hold 18.9% of our outstanding debt, well over the 10.6% held by China.

Here's another interesting factoid: Individuals in the United States hold 10.6% of our outstanding public debt. Add in pension funds, state governments and others and you find that people and institutions in the U.S. hold just over half of the public debt outstanding.

Why is this important?

When the U.S. government pays interest on its debt, it is less burdensome if that money goes back into our economy. This year, the U.S. government will pay roughly $200 billion in interest on its debt. $100 billion will go to people like you and me -- through our mutual funds and pension funds. The other half will go to foreign governments and foreign investors.

ETFs vs. Funds -- the Competition Heats Up

Published by: Jeff Brown, Personal Finance Blogger — Tue, 09 Feb 2010 09:15:06 -0500

Back in November I had a post on the pros and cons of exchange-traded funds versus mutual funds. The news hook: Charles Schwab, the brokerage, had eliminated commissions for customers who bought or sold its house-brand ETFs. Now Fidelity Investments has followed suit, with commission-free trades on 25 ETFs. On top of that, discount brokers have begun a commission price war. Schwab now charges 8.95, Fidelity $7.95 and E*Trade $9.99. That would make it more economical to invest in any of the other 900 or so ETFs that still require a commission.

How does all this change the ETF-vs.-mutual fund landscape? Commission-free trading certainly can make ETFs more competitive for ordinary investors who like to put aside small sums frequently. But even rock-bottom commissions can do damage. If you invest, say, $100 a week, a $9.99 commission is nearly 10 percent - big enough to wipe out investment gains for a year or two. And, remember, you'd have to pay a commission to take money out, too.

Fiscally Fit: Graduates Get Creative with Their Futures

Published by: The Intern — Mon, 08 Feb 2010 15:34:34 -0500

Authored by Stephanie May, NBR Summer 2009 Intern

As the months tick by, I have to admit that I am less and less excited to leave my collegiate bliss and be thrust out into the real world. But although I am slightly fearful for my own future, I can't help but seriously feel bad for friends of mine who have graduated recently. Talk about poor timing! I know people who graduated with great grades, internship experience and tons of promise, who are still searching for jobs two years later! I have friends who were laid off at the ripe old age of 22, and I even have a friend who was laid off, and she hasn't graduated yet! YIKES!!

As someone who is about to walk the plank (graduate...gulp), I have heard advice from all kinds of people. They've generously given me their secrets to success. I am extremely grateful for these kind words of wisdom, but there is one common thread making their advice less useful to me. They're all adults! I've decided that to be able to really see what I'm actually getting myself into, I need to get some advice from someone who didn't wear scrunchies in college. (Just kidding!!)

As a part of Fiscally Fit 2010, I've decided to find out what these recent college grads are up to and what it takes to succeed in this job market, in this economy, today.

The Super Bowl, the Stock Market and the Economy

Published by: Terri Cullen, Economy and Markets Blogger — Mon, 08 Feb 2010 14:41:50 -0500

The Super Bowl has long been famous for predicting the direction of the U.S. stock market in any given year. If an "original" NFL team wins the game, the market will rise for the year. If a team from the former AFL wins, the market will fall.

As frivolous forecasters go, the Super Bowl Predictor is surprisingly accurate. A new study by Washington and Lee University finance professor George Kester found the game winner has correctly predicted the direction of the stock market 77 percent of the time. That said, the Super Bowl Predictor appears to be a little off its game these days -- a 1990 study by two researchers found the game winner correct in predicting the stock market 91 percent of the time.

Christina Romer Explains the Employment Numbers

Published by: Darren Gersh, Washington Bureau Chief — Fri, 05 Feb 2010 16:37:35 -0500

The January employment report surprised me. There was the revision that showed almost one million more people than we thought are unemployed. And why did the unemployment rate go down when the number of people who are employed barely budged?

I talked about all this with Christina Romer, Chair of the President's Council of Economic Advisers.

You can watch the interview below. (It may take a moment to load.)

Private-Sector Job Picture Brightens

Published by: Terri Cullen, Economy and Markets Blogger — Thu, 04 Feb 2010 13:31:10 -0500

More encouraging news on the labor front -- this time from the private sector. On Wednesday, a new survey showed private-sector job losses slowed dramatically in January, and a separate report indicated payrolls in the service sector were up slightly in the month.

Economists keep an eye on private-sector employment because it is the largest source of jobs in the U.S. Though the data show the private-sector economy continues to leak jobs, the report offers some evidence the labor market is finally beginning to stabilize. (The ADP report tracks private-sector jobs, whereas the Department of Labor's monthly report covers government and non-government payroll

Homeownership Slips, But Renting Can Be Better

Published by: Jeff Brown, Personal Finance Blogger — Thu, 04 Feb 2010 12:34:53 -0500

The portion of households that own their homes rather than rent has been slipping. Thanks to the Great Recession, about 67.2 percent of households own, down from 69.2 percent in 2004.

These Census Bureau figures are worrisome to the extent that people have been driven out of their homes, or that first-time buyers have been kept out. But I've long felt the value of home ownership has been exaggerated. Over a lifetime, on balance, owning makes financial sense, but renting is a better option for many -- for part of our lives, anyway.

Paychecks and Savings Accounts Are Increasing

Published by: Terri Cullen, Economy and Markets Blogger — Wed, 03 Feb 2010 13:32:56 -0500

Personal income, and the personal savings rate, both rose in December, according to the latest government reports. While fatter paychecks are welcome sign for many American households, their continued pattern of spending less and saving more is keeping a lid on the economic recovery.

Personal income, which fell sharply last year amid an onslaught of layoffs, continued to recover in the last quarter of 2009. Disposable personal income rose a revised $45.9 billion, or 0.4%, in December, the fifth-straight monthly increase, according to monthly Bureau of Economic Analysis personal income and outlays report.

NBR's Big Changes in 2010

Published by: Rodney Ward, Executive Editor — Tue, 02 Feb 2010 19:46:39 -0500

Originally published on January 7, 2010.

If you are a loyal NBR viewer, then you've surely noticed the big changes we've made to the look and the format of the program (and of the website). Since you've had the better part of the week to absorb the changes and formulate your opinions, we thought it was about time to post a blog entry. (The delay in blog writing was due in part to our taxing schedule these past few weeks and a concerted effort to get constructive -- rather than reactionary -- criticism here in the blog.)

As you'd expect, we've already gotten a lot of feedback about the changes via email and social media. Some of the opinions are negative, some are positive, and some NBR fans even took the time to point out which changes they like and which they don't like. (The latter messages are the most useful.)

In this blog entry, I don't want to get into the specific changes we made. After all, you see them every day. Plus, our new co-anchor, Tom Hudson, talked about some of them in our January 4, 2010 program. (If you missed the segment, you can watch it here. It takes a moment to load.)

I'm One Car Owner Who's Watching Toyota Closely

Published by: Diane Eastabrook, Chicago Bureau Chief — Tue, 02 Feb 2010 17:54:00 -0500

I am one of those consumers Toyota is worried about. I have a 2003 Avalon. My car is not part of the recall, however, I'll probably be in the market for a new car next year. Will I buy another Toyota? That depends on a lot of things, including the current recall.

Like many Toyota owners, I've been very happy with my Avalon. I have nearly 140,000 miles on it and have never had any major problems. I wish I could say the same for some of the other brands I've driven over the years. Still, I continue to watch the recall and wonder if my car will be included at some point down the road.

I've been covering the auto industry for nearly 17 years. Over the past few years, I've been impressed with many of the products coming out of Detroit. I'm especially fond of the Buick Lacrosse and the Regal which will arrive on dealer lots this spring. The industry experts I talk to all agree the quality gap between American brands and the Japanese brands has narrowed dramatically. And, Buick currently ranks at the top of J.D. Power & Associates Vehicle Dependability Study.

A Defense Industry Priority

Published by: Stephanie Dhue, Correspondent — Tue, 02 Feb 2010 17:18:25 -0500

Along with its 2011 budget request, the Defense Department unveiled the Quadrennial Defense Review -- a document that helps shape military priorities for the long term. One of those priorities is "Strengthening the Industrial Base." Defense Secretary Robert Gates wants to give the industry some certainty in the budget process. Defense Department officials are meeting regularly with industry executives to understand their issues and communicate the military's goals. I spoke the DOD's Director of Industrial Policy Brett Lambert about what strengthening the industrial base means for defense industry. Watch the interview below.

You Can't Count What You Can't See

Published by: Steven Horwitz, Guest Blogger — Tue, 02 Feb 2010 16:10:37 -0500

Over the weekend, the White House released a report indicating that the stimulus program had directly funded about 600,000 jobs and indirectly "created or saved" a total of 1.5 to 2 million jobs. Later investigation will likely reveal that a good number of these created jobs are non-existent or otherwise shouldn't have been counted. Politicians, both national and local, have every reason to exaggerate numbers like this, and expecting accounting accuracy from the people who pay hundreds of dollars for a hammer has long been an exercise in faith over reason.

Moreover, one can raise all kinds of questions about whether "creating jobs" should be the goal of economic policy. There's a story about Milton Friedman in China that may be apocryphal but illustrates this point. In observing hundreds of Chinese workers clearing land for a new building using shovels, Friedman asked his hosts "Why are they using shovels? Why not use heavy equipment like an earth-mover?" The Chinese official said "If we did that, we'd lose all of those jobs!" Supposedly Friedman said "Oh, you're trying to create jobs! I thought you were trying to build a building. If you want to create jobs, why not take away their shovels and give them spoons?" I'm sure the Chinese host didn't find that funny, but it perfectly illustrates the point that "creating jobs" is easy (another example: we could destroy all farm machinery); the tougher thing is creating value by saving labor in one place to use it where it is more urgently needed elsewhere. The benefits associated with the disappearance of jobs in making candles or horse-drawn carriages should make us skeptical of the rhetoric of "saving jobs."

The Last Tax Decision for 2009: Whether to Fund an IRA

Published by: Jeff Brown, Personal Finance Blogger — Tue, 02 Feb 2010 12:45:13 -0500

The tax season is just starting, but the tax year ended Dec. 31, and there's not much you can do now to affect your 2009 tax bill - other than put money into an IRA. For that, we have until April 15. But is an IRA really a good way to save for retirement? If it is, what's best - a traditional IRA or Roth?

Individual retirement accounts are big business, no doubt about it. They have about $3.7 trillion in assets, according to the Investment Company Institute, the trade group for the mutual fund industry. About four in 10 U.S. households have at least one IRA.

But the ICI says only 15 percent of U.S. households put fresh money into an IRA in 2008, the latest for which full-year figures are available. So, are they popular or not?

How will Toyota Dealers Handle Recall?

Published by: Tom Hudson, Anchor — Mon, 01 Feb 2010 18:31:14 -0500

AutoNation's 21 Toyota dealerships makes it the country's single biggest seller of Toyotas. It pledges to have its service departments open as thousands of Toyota's come in to get their recalled gas pedals fixed. I spoke with AutoNation's Chairman and CEO Mike Jackson about the extra cost of keeping those service bays open and his relationship with Toyota. You can watch this interview, which didn't air in the NBR program, by pushing play below.

GDP & Jobs. What's it All Mean?

Published by: Darren Gersh, Washington Bureau Chief — Fri, 29 Jan 2010 17:44:47 -0500

Today's GDP report showed strong growth.

I asked Christina Romer, the President's Economic Adviser, what the numbers really mean. We also talked about the need for job growth.

You can watch the interview below.