Category

Recession

The Biggest Heist in History: U.S. Taxpayers Could Be On the Hook for Iraq's Missing Billions

For nearly a decade, U.S. military operations in the Middle East – Iraq in particular – have been criticized as a cumbersome and costly burden on the American taxpayer.

That accusation gained new credence this week when the Pentagon finally acknowledged that nearly $7 billion of Iraqi oil money might have been stolen.

And what's worse is that the U.S. taxpayer could end up paying for the mistake.

Following the March 2003 invasion of Iraq, the United States liberated, or seized, billions of dollars of assets from that country. But since Iraq had no banking system, the money – much of which came from Iraqi oil sales – was placed in an account at the Federal Reserve Bank of New York.

From there, large pallets of shrink-wrapped cash were periodically loaded into tractor-trailer trucks, driven to Andrews Air Force Base in Maryland, and airlifted to Baghdad. Some $12 billion of cash was flown to Iraq in the months following the overthrow of Saddam Hussein.

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Retail Sales No Reason for Market Party

Today's retail sales report was far from a reason for the market to party. The media are reporting that on a seasonally adjusted basis, nominal retail sales fell less than expected. An analysis of real retail sales suggests that the underlying trend is weakening, and that contrary to the market's reaction today, the outlook may be less than rosy for stocks.

In order to filter out the effect of sharply higher gas prices and their impact on sales, I looked at the data on a historical basis ex gas prices. According to a breakdown of the retail sales data provided by the Census Bureau, actual, not seasonally manipulated data for nominal retail sales ex gasoline rose by 6.2% on an annual basis. That sounds great, aided no doubt by the weak dollar drawing shoppers to the US from the rest of the world.

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Sorry Mr. Bernanke: There Will be a Double-Dip Recession

Despite what U.S. Federal Reserve Chairman Ben S. Bernanke said in his speech at the International Monetary Conference yesterday (Tuesday), it looks very much like we're headed for a double-dip recession.

Indeed, the economic reports of the last week or so demonstrate that the U.S. job machine was never really jump-started after the Great Recession of 2008-09.

The upshot: The U.S. economic recovery is stalling, and we're almost certainly looking at a double-dip downturn.

Recessions are always painful – and double-dip recessions are even more so.

And this second "dip" may be more of the same – a bloody economic downturn that leads into a feeble recovery with unemployment spiking to even higher levels than we're currently seeing.

But there's a slight chance that this double-dip recession could prove quite productive for the U.S economy.

Let me explain.

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Question of the Week: Readers See Failures in Fed's Policies During U.S. Economic Recovery

The U.S. Federal Reserve last week said it would take a small "easing" step – what Fed watchers described as a largely symbolic move designed to show the central bank is "concerned" with the nation's economic outlook. The central bank's policymaking Federal Open Market Committee (FOMC) said it would hold interest rates at record-low levels and announced it would reinvest maturing mortgage-backed securities back into the market so that its balance sheet does not shrink.

However, Analysts think the Fed will have to do more to help the economy move along, and are expecting more announcements of policy easing in coming weeks.

"I suspect that the Fed will, within time, purchase more longer-dated government securities" than is required by reinvesting the principal payments from agency debt and agency mortgage-backed securities in the Fed's portfolio, said veteran Wall Street economist Henry Kaufman to Reuters.

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What to Expect on Wall Street as Nervous Investors Navigate a Slowing Economic Recovery

Wall Street was hit hard last week with gloomy data that has kept buying interest stalled and investors spooked over a slow economic recovery.

Stocks slipped over the past week after investors learned from government reports that jobs are getting scarcer than straw hats in a wind tunnel, and it isn't always sunny in Philadelphia. 

The big-cap indexes lost around 1%, while safe haven assets like gold and the U.S. dollar were buoyant. The best investment around for the week was the U.S. long bond, up 2%.

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To read what’s in store after last week’s gloomy data, click here

Three Ways to Brace for a Double-Dip Recession: Recession-Proof Stocks

Today (Friday) we conclude our series on bracing for a double-dip recession.

In Part I of this investment series, "Three Ways to Brace for a Double-Dip Recession: Going for the Gold," we discussed ways investors could safeguard against the imminent decline of the U.S. dollar by buying gold.

In Part II, "Three Ways to Brace for a Double-Dip Recession: Going Global," we
explored potential investments in foreign countries that have more stable economies and better growth prospects.

And today, we're going to conclude by looking at "recession-proof" stocks right here in the United States.

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Three Ways to Brace for a Double-Dip Recession: Going Global

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn – the result of an economic "shock treatment" aimed at curing those ills – consisted of two recessions that were separated by a single quarter of growth.

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real.

The world's No. 1 economy lost 8.4 million jobs during the recession that got its start in December 2007, making it the worst national downturn since the Great Depression and the biggest loss of employment since the end of World War II.

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Three Ways to Brace for a Double-Dip Recession: Going for the Gold

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn – the result of an economic "shock treatment" aimed at curing those ills – consisted of two recessions that were separated by a single quarter of growth.

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real. Indeed, with each passing week, and with every new economic report that comes out, the possibility that the U.S. economy will backslide into a double-dip recession seems to become more of a probability – or even a likelihood.

"For me a 'double-dip' is another recession before we've healed from this recession [and] the probability of that kind of double-dip is more than 50%," Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters. "I actually expect it."

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Question of the Week: Investors Preparing for Double-Dip Recession

The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.

"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast last Sunday.

Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy into a new recession.

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A Tale of Two Investments: U.S. Steel Scenario Illustrates the Power of Dollar-Cost-Averaging

To understand the potential defensive-investing benefits of dollar-cost averaging, let's take a look at two scenarios involving United States Steel Corp. (NYSE: X).

Thanks to the general downtrend in the market, the May 6 "flash crash," and the rapid subsequent rebound, U.S. Steel shares fell from a 52-week high of $70.95 on April 6 to just $52.81 at the market close on Friday, May 14.

Indications of some new life in the construction sector and an uptick in autos would seem to indicate that steel demand could rise – which would be especially good for U.S. Steel, which supplies both businesses.

You've got $10,000 to work with.

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