Investors yank $4.5 billion from stocks

Investors yank $4.5 billion from stocks

By Ben Rooney August 30, 2012: 12:28 PM ET
Mutual fund investors continue to pull money out of stocks and put it into bonds, according to the latest data from the Investment Companies Institute.
In the week ended Aug. 22, mutual funds that focus on U.S. stocks had an outflow of $4.48 billion. Investors also pulled $1.4 billion out of funds that invest in global stocks.
Related: Fear & Greed Index stuck in greed
Since the beginning of the year, investors have pulled just over $70 billion from U.S. stock mutual funds. By comparison, those same funds lost roughly $40 billion during the first seven months of 2010 and 2011. The last time investors were willing to put money into stocks was during the last week of May.
While August is usually a quiet month, trading volume hasn't been this low in August in 5 years.
As has been the case for awhile, the outflows from equity mutual funds coincided with inflows into mutual funds that buy bonds.
Related: Fidelity Investment's heir apparent
Bond funds had an inflow of $6.83 billion last week as investors remain enamored with the safety of fixed-income assets.
In another well-established trend, money continued to flow into hybrid funds, which invest in a combination of stocks and bonds. These funds had inflows of $2.41 billion for the week, up from $953 million in the previous week.

Investors and economists agree: No QE3

Investors and economists agree: No QE3

By Annalyn Censky and Hibah Yousuf @CNNMoney August 26, 2012: 8:23 PM ET

To QE3 or not to QE3? That is the question.

NEW YORK (CNNMoney) -- More stimulus from the Federal Reserve would probably boost the stock market, but regardless, both investors and economists agree: They don't want QE3.
In a CNNMoney survey of investment strategists, 93% said they don't think the Federal Reserve should announce more stimulus at its next meeting. And 77% of economists surveyed agreed.

The majority of both groups said further stimulus would boost the stock market, but would have little to no impact on the broader economy.
"Nobody likes it when the punch bowl is taken away, but the party has gone on too long," said Doug Cote, chief market strategist at ING Investment Management. "It's time to get back to a normal economic recovery."
Plus, with each additional shot of stimulus, experts say the impact lessens.
"They're just not getting as big a bang for their buck as they have in the past," said Wells Fargo Senior Economist Sam Bullard.
The Federal Reserve has already kept interest rates at record lows since late 2008 and launched two rounds of large bond purchases -- known as quantitative easing -- as a way to lower rates further.
Related: Bernanke says Fed still has room to run
But just because credit is cheap, that doesn't mean it's more available.
Mortgage rates are near record lows, but anyone without perfect credit will find it difficult to qualify for a loan. Likewise, small businesses are still having a tough time accessing credit. Banks are sitting on $1.5 trillion in excess reserves that they're not lending out.
Given those are the chief problems facing the economy, experts question how exactly lowering interest rates further could make much difference.
"Rates are already low, and that's a policy that's been in place and will continue to be so," said Cote. "I question why the Fed would inject extraordinary stimulus on top of that. An enormous cash infusion would certainly drive up asset prices and maybe improve market and consumer sentiment, but with the S&P 500 up 11% this year, why do we need more help?"
What's more, Main Street is once again starting to feel the pressures of inflation, said Peter Boockvar, equity strategist at Miller Tabak, highlighting that oil prices are nearing $100 a barrel, gas prices are at the highest levels since May and food prices are also rising.
The Fed, however, only considers inflation data that strips out energy and food.
"I would love for Ben Bernanke to walk into a Wal-Mart and tell a person living paycheck to paycheck that high inflation will be good for them," Boockvar said.
Related: Bernanke's Jackson Hole speech may be a letdown
Should the Fed choose to act, those surveyed by CNNMoney said it's more likely to extend its guidance for interest rates out to 2015, rather than launch a third round of quantitative easing, or QE3.
That move is viewed as less controversial, and could have an impact on future inflation expectations if Fed officials decide to give more clarity on the types of economic conditions that would eventually cause them to alter course.
But the proponents of further easing feel strongly that the Fed should do more to boost the economy as a preventative measure. They see many potential shocks ahead, including Europe's debt crisis flaring up and the "fiscal cliff" pushing the U.S. into another recession in 2013.
"I happen to be an advocate for more quantitative easing, and in fact, I would have done it at the last meeting. It looks like there are a lot of risks to the U.S. economy spinning around," said Allen Sinai, chief economist at Decision Economics.
Bernanke will have a chance to hint of the Fed's next move at a high-profile speech in Jackson Hole, Wyo. later this week. The Fed will announce any decisions at their next meeting that concludes on September 13.

First Published: August 26, 2012: 8:23 PM ET

Republicans eye a return to gold standard

 

Republicans eye a return to gold standard

By Annalyn Censky @CNNMoney August 24, 2012: 12:59 PM ET

NEW YORK (CNNMoney) -- Is gold money? Some Republicans think it should be.
The Republican Party is considering setting up a commission to examine the pros and cons of going back to the gold standard, according to draft documents of the party platform.

The official party platform won't be decided until Monday, but a Republican National Committee spokeswoman confirmed the draft language to CNNMoney.
The commission harkens back to the early 1980s, when President Ronald Reagan set up a Gold Commission with the same intention. Only two members of the 17-member commission endorsed a return to the gold standard. One of them was Rep. Ron Paul, who remains an avid gold supporter.
"Now, three decades later, as we face the task of cleaning up the wreckage of the current Administration's policies, we propose a similar commission to investigate possible ways to set a fixed value for the dollar," the new proposal says.
It's highly unlikely the United States would actually return to the gold standard. The country first moved away from the gold standard in 1933, and dropped it altogether in 1971. Despite support for its return by some on the political right, few mainstream economists support its reinstatement.
Related: Professor Bernanke rails against gold standard
Federal Reserve Chairman Ben Bernanke has repeatedly expressed concerns about the idea, sometimes even sparring with Paul in Congressional hearings. Research has shown the rigid constraints of the gold standard worsened the Great Depression, he said. Gold prices can also be volatile.
Plus, there's not enough gold in the world to support such a system, as Bernanke noted in a lecture earlier this year.
"To have a gold standard, you have to go to South Africa or someplace and dig up tons of gold and move it to New York and put it in the basement of the Federal Reserve Bank of New York and that's a lot of effort and work," he said.
It's an "awful big waste of resources," he added.
Check today's gold prices
But just in case the idea does gain more traction, here are some rough calculations of what would happen to gold prices, courtesy of Julian Jessop, chief global economist for Capital Economics.
The U.S. monetary base, which includes paper bills, coins and some deposits at the Fed, is currently around $2.6 trillion. Meanwhile, the U.S. Treasury and Federal Reserve hold about 260 million ounces in gold.
That means, if the government wanted every single dollar to be swapped with gold, the price of gold would have to be $10,000 per ounce.
Of course, that's an "extreme assumption," Jessop notes. He points out that under another scenario, the government could simply opt to have just 15% of the money supply redeemable for gold at any given time. If that was the case, the price could be set at around $1,500 an ounce -- not far from its current market value of around $1,670.
-- CNNMoney's Charles Riley contributed to this report.

First Published: August 24, 2012: 12:26 PM ET

Bernanke: Fed still has room to run

Bernanke: Fed still has room to run

By Annalyn Censky @CNNMoney August 24, 2012: 12:59 PM ET

NEW YORK (CNNMoney) -- The Federal Reserve still has room to boost the economy if needed, Ben Bernanke said in a written reply to Rep. Darrell Issa, released Friday.
"There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery," Bernanke said in a letter dated August 22. Stocks moved higher Friday after the letter was first reported in the Wall Street Journal.

Issa, a Republican from California, sent a letter to Bernanke earlier this month, with 22 questions about monetary policy and financial regulation.
Bernanke's reply defends the Fed's actions, claiming that the central bank's two large bond-buying sprees -- known as quantitative easing -- "have helped to promote a stronger recovery than otherwise would have occurred, and to forestall the possibility of a slide into deflation."
Related: Bernanke's Jackson Hole speech may be a letdown
Although the letter gave stock prices a boost, the message from Bernanke didn't offer any new hints about the Fed's future plan of action. The Fed has long said that it has more room to act, should the economy need it.
In minutes from its August meeting, released earlier this week, Federal Reserve policymakers debated two key measures to boost the economy: launching a third round of quantitative easing, and extending forecasts for low interest rates out to 2015.
The Fed next meets in September.
Bernanke is also scheduled to give a high-profile speech in Jackson Hole, Wyo. next week, during which he could give more clues about the Fed's plans.

First Published: August 24, 2012: 12:59 PM ET

Stocks rally on growing hope of Fed action

 

Stocks rally on growing hope of Fed action

By Emily Jane Fox @CNNMoneyInvest August 24, 2012: 4:42 PM ET

Click the chart for more stock markets data

NEW YORK (CNNMoney) -- U.S. stocks ended the week on a high note, as investors hope that the central bank will step in with stimulus measures to fuel growth.
The Dow Industrial Average added 0.8%, the S&P 500 gained 0.7% and the Nasdaq rose 0.5% on Friday.

Analysts said investors were reacting to a letter sent by Federal Reserve Chairman Ben Bernanke to the chairman of the House oversight committee, Rep. Darrell Issa, that said the central bank has more room to support the economy.
"There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery," Bernanke wrote.
"On a slow Friday that's enough to give markets a boost," said Paul Zemsky, chief investment officer at ING Investment Management.
Few expect Bernanke to reveal specific new intervention measures at the central bank's annual symposium next week in Jackson Hole, Wyo,. but minutes from the Fed's last meeting released earlier this week suggested the central bank was leaning more toward launching a third round of quantitative easing, or QE3.
Fear & Greed Index
Zemsky also said that investors are hopeful some resolve will come out of Europe as talks among eurozone leaders took place.
Greek Prime Minister Antonis Samaras wrapped up a meeting with German Chancellor Angela Merkel on Friday in Berlin.
She reiterated her support for Greece to stay in the eurozone, but said that the debt-strapped country needs to meet its reform targets, and that she will wait for the report by the European Union, International Monetary Fund and ECB, known as the troika, which is due next month. Samaras will meet with French President Francois Hollande Saturday.
"Europe is the bigger lever here for the next few weeks, because there's not much different for Bernanke can say," Zemsky said.
In the United States, trading volume has been light for weeks, which is typical in August. Most expect that trend to continue through Labor Day. U.S. stocks ended the week slightly lower, with the Dow ticking down 0.9%, the S&P losing 0.5% and the Nasdaq shedding 0.2%.
World Markets: European stocks pared earlier losses Friday. Britain's FTSE 100 ended the day flat, while the DAX in Germany rose 0.3%, and France's CAC 40 gained 0.2%.
Asian markets ended in the red. The Shanghai Composite lost 1%, the Hang Seng in Hong Kong dropped 1.3%, and Japan's Nikkei fell 1.2%.
Economy: Durable goods orders rose 4.2% in July, more than the 2.5% increases analysts were expecting. But excluding transportation goods, orders unexpectedly fell 0.4% last month, according to the Census Bureau.
Companies: In a ruling that will not affect the U.S. patent infringement trial now in the hands of a California jury but addresses many of the same issues, a South Korean court has delivered a split decision that slightly favors Samsung over Apple (AAPL, Fortune 500).
Related: Apple vs. Samsung: Three possible outcomes
Shares of software designer Autodesk (ADSK) slid 16% after the company reported disappointing earnings late Thursday.
Shares of Eli Lilly (LLY, Fortune 500) jumped after the drugmaker said that although its experimental Alzheimer's drug didn't meet its main goals, it did show significant improvement in some patients.
Currencies and commodities: The dollar rose against the euro, the British pound and the Japanese yen.
Oil for October delivery fell 11 cents to $96.15 a barrel.
Gold futures for December delivery dropped $1.80 to $1,671. an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury held at 1.68%.

First Published: August 24, 2012: 9:37 AM ET

What a week by Stephanie Cutter

"Rape is rape." The fact that President Obama needed to
explain this to the Republican Party earlier this week says
so much about how extreme the other side has become.

It's only Wednesday, and we already have a lot to report
this week.

Take a look at the items below, and share them with your
friends and family:

#1 President Obama speaks on women's health decisions.
President Obama on Monday spoke out about the outrageous
comments of Rep. Todd Akin, the Republican nominee for U.S.
Senate in Missouri, who said that victims of "legitimate
rape" don't get pregnant because "the female body has ways
to try to shut that whole thing down." The President said
that Rep. Akin's comments show "why we shouldn't have a
bunch of politicians, a majority of whom are men, making
health care decisions on behalf of women." Watch the
President's entire response here, and share it with others:

http://my.barackobama.com/Tipsheet-August22b

#2 What the Romney-Ryan ticket would mean for women's health.
Akin's views aren't an aberration in Mitt Romney and Paul
Ryan's Republican Party, which is extreme on women's health
issues. Their official party platform -- written "at the direction
of the Romney campaign," according to the Los Angeles Times
-- supports outlawing all abortion, even in cases of rape and incest.
They want to defund Planned Parenthood. Ryan even
cosponsored a bill with Akin to change the definition of
rape. Take a look at our blog post about what a Romney-Ryan
administration would mean for women, and share it with
people you think need to see it:

http://my.barackobama.com/Tipsheet-August22c

And, check out this graphic that looks at just how extreme
the new GOP platform is, and share it with others:

http://my.barackobama.com/Tipsheet-August22d

#3 The choice on college affordability.
President Obama believes a skilled workforce is critical to
keeping America competitive and creating an economy built
to last -- and in order to make that happen, he's helping
millions of students pay for college. In contrast, Romney's
advice to parents and students trying to pay for college is
to "shop around" if they're worried about higher college
costs. Take a look at our new calculator that lets you
easily compute how each candidate's plan for student loan
reform could affect you, and share it with others so they can
do the same:

http://my.barackobama.com/Tipsheet-August22e

#4 The choice on education.
Romney and Ryan's terrible education plans aren't just
limited to student loans -- their proposals for K-12
education would roll back much of the progress we've made
under President Obama to improve our nation's education
system. We put together a blog post that looks at the
President's record on education compared to Romney's, and
what their proposals could mean for students and educators.
Take a look, and share with the parents and teachers in
your life:

http://my.barackobama.com/Tipsheet-August22f

#5 Fixing Romney's Medicare whiteboard.
Romney gave a speech last week where he used his factually
inaccurate talking points about the President's record on
Medicare -- and he even used a whiteboard to emphasize his
distortions. No matter what Romney draws on a whiteboard,
it won't change the facts: President Obama has already
extended the life of Medicare by nearly a decade and is
helping seniors save money. I recorded a video to respond
to Romney's attacks and fix some problems with his
whiteboard illustration. Take a look, and share with others:

http://my.barackobama.com/Tipsheet-August22g

Fed turns AIG bailout into $18 billion profit

Fed turns AIG bailout into $18 billion profit

By Annalyn Censky @CNNMoney August 23, 2012: 3:18 PM ET

NEW YORK (CNNMoney) -- The Federal Reserve finally has wiped its hands clean of AIG and turned a nearly $18 billion profit for taxpayers in the process.
Now it's up to the Treasury Department to sell the rest of the U.S. government's stake in the insurance giant.

The Federal Reserve Bank of New York announced Thursday that it had sold the last of its securities related to the AIG (AIG, Fortune 500) bailout. The portfolio, known as Maiden Lane III, consisted of collateralized debt obligations, or CDOs -- highly complex financial instruments that bundle various kinds of debt. The Maiden Lane III sales earned $6.6 billion.
Months earlier, the New York Fed sold off Maiden Lane II assets for $2.8 billion. That portfolio contained mortgage-backed securities insured by AIG. The NY Fed also made $8.2 billion in interest and fees from a credit line extended to AIG that was terminated last year.
AIG's bad bets crippled the insurer in 2008. The company played a major role in the financial crisis that ensued. In an unprecedented move, the government swooped in, buying many of the toxic assets.
Related: Treasury to sell more AIG shares
"The completion of the sale of the Maiden Lane III portfolio marks the end of an important chapter -- our assistance to AIG -- that was undertaken to stabilize the financial system in the midst of the financial crisis," William Dudley, president of the New York Fed, said in a press release.
That said, the U.S. government is not entirely free of AIG. The Treasury Department still owns $29 billion, or roughly 53% of AIG's common stock.
The Treasury Department has said it too expects to make a profit on that investment, as it sells the shares over time.

First Published: August 23, 2012: 2:39 PM ET

Oil near $100. Thanks a lot, Fed!

Oil near $100. Thanks a lot, Fed!

By Paul R. La Monica August 23, 2012: 12:36 PM ET

Crude oil is near $100 a barrel again, and a combination of more easing from the Fed and Iran supply fears could drive prices even higher.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Federal Reserve chairman Ben Bernanke may or may not give the market more hints about a possible third round of bond purchases at his speech in Jackson Hole next week. But investors are clearly betting on more quantitative easing or other forms of stimulus. Just look at what's going on in the commodity and currency markets.
The price of crude oil is getting dangerously close to $100 a barrel again. It hasn't been above that level since May. The euro has strengthened against the dollar as of late, partly due to hopes that the European Central Bank will step in and buy more Spanish bonds and also because of rising expectations for QE3. If the Fed turns on the printing presses so that Bernanke can take yet another helicopter ride, that could further weaken the dollar and push the prices of oil and other commodities higher.

Needless to say, that would not be good news for the U.S. economy. Many consumers are already growing increasingly nervous about the fact that gas prices are once again nearing $4 a gallon nationwide.
Rising energy prices are likely to be a hot topic of debate during the presidential campaign as well. Republican challenger Mitt Romney issued an energy plan Thursday that calls for more offshore drilling. Meanwhile, rumors that President Obama may tap the Strategic Petroleum Reserve in order to boost supplies and alleviate some gas price pressures just won't die.
But oil prices may keep climbing even if the White House steps in. That's because releasing oil from the SPR won't be enough to counteract the likely moves from the Fed.
Analysts for KilduffReport.com, an independent energy research firm, noted in a report Thursday morning that "the monetary easing from the Federal Reserve is coming" and that "regardless of your view on the effectiveness or necessity of further easing, the markets are highly reactive to the prospects for it." The upshot is that "inflation sensitive commodities" like oil and gold, which has also been on the rise lately, should continue to head higher.
That may make some traders happy. But it would be terrible news for consumers. Despite some encouraging signs of life in the housing market, consumer spending is still relatively sluggish and economic growth is expected to be modest at best for the rest of the year.
Throw in worries that Congress is going to close its eyes and take a flying leap off the fiscal cliff following the elections in November and you have yet one more reason why higher gas and oil prices are the last things consumers need right now.
Of course, we can't blame the spike in oil entirely on Bernanke and the Fed. There are legitimate worries about global oil supply due to the turmoil in Syria and Iran. Increased chatter of a possible Iranian-Israeli military conflict could lead to higher prices in the near-term.
Related: Investors can't ignore Iran. Next Black Swan?
Still, the Fed clearly seems to think that the economy needs more stimulus in the form of low long-term interest rates. And it's true that real inflation in the classic textbook sense is not a problem yet. But the Fed can't keep easing indefinitely. QE ∞ will eventually lead to inflation.
What's more, if the Fed really wants to try and solve the chronic problem of high unemployment, it may be shooting itself in the foot with more bond purchases. If companies are wary of hiring now, how are they going to feel if their energy costs keep climbing?
Make no mistake. A painful side effect of easing could very well be a return to $100 oil and $4 gas ... and that's just going to make the Fed's job even more difficult.

Take It From Me By Debbie Wasserman Schultz

As a member of the House Budget Committee, I've seen firsthand just how extreme Paul Ryan is, so I'm not going to mince words: Paul Ryan in the White House would be a nightmare.

Over the last two years, we've seen an unprecedented number of attacks on a woman's right to make her own health care decisions -- and Congressman Ryan has been at the forefront of all of them.

He wants to end Medicare as we know it. He co-sponsored a radical "personhood" bill that could have banned the birth control pill, in vitro fertilization, and all abortions -- even in cases of rape or incest. What's more? He wants to allow states to criminally prosecute women who choose to have abortions and the doctors who perform them.

We cannot afford to let this man be a heartbeat away from the presidency. It's up to us to do everything we can to give Democrats the resources to defeat the Romney-Ryan campaign and Republicans across the board in November.

Donate $3 or whatever you can today to stand up for the right of women to make their own decisions -- and to keep Paul Ryan and other Republicans from taking that right away:

https://my.democrats.org/Paul-Ryan

Video: Get to know Paul Ryan By David Axelrod

This morning, Mitt Romney and Paul Ryan stood on a platform in
Norfolk, Virginia, and introduced themselves to the country
as "America's Comeback Team."

"Go Back Team" would be more appropriate -- because a
Romney-Ryan administration is the definition of a fast
track back to the failed, top-down economic policies of the
past.

In Ryan, Romney has selected a running mate best known for
designing the extreme GOP budget that would end Medicare as
we know it, and -- just like Romney's plan -- actually
raise taxes on middle-class Americans to pay for an
additional $250,000 tax break for millionaires and
billionaires. As a leader of the House Republicans and a
Tea Party favorite, Congressman Ryan has led the
relentless, intensely ideological battle for these kinds of
budget-busting policies that punish seniors and the middle
class.

Today, Romney doubled down on those policies.

But most Americans don't know Paul Ryan. In the coming
days, the other side will spend a lot of time trying to
define Romney's choice and what it says about his candidacy
-- so we put together a brand-new website on Romney-Ryan
with everything you need to know.

Check it out, watch the video, and then show your support
for President Obama and Vice President Biden by sharing it
with friends and family:

http://my.barackobama.com/Go-Back-Team8

If their records are any indication of how they'd govern,
it's not looking good (unless you're a right-wing
conservative in the top 5 percent of income-earners and NOT
a woman or a worker counting on Medicare in your future).

This isn't a matter of opinion:

-- As an architect of the extreme GOP budget, Ryan will be
Romney's biggest advocate for his plan to give more tax
breaks to millionaires, paid for by $2,000 in higher
taxes on middle-class families with kids.

-- The Ryan plan, which Romney said is "an excellent piece
of work, and very much needed," calls for deep cuts in
education -- from college scholarships to Head Start --
critical scientific research, and clean energy investments,
all to help pay for those tax cuts.

-- Ryan authored the original plan to convert Medicare into a
voucher program, costing seniors an additional $6,000 or more
each year.

-- Ryan talks tough on balancing the budget, but his own
plan would fail to do that for a generation. The burden of
balancing any Ryan budget falls squarely on the backs of
seniors and middle-class families -- while no one at the
top is asked to pay even a dollar more.

-- Both Romney and Ryan are severely conservative,
threatening to take us backward on women's issues and civil
rights. Ryan cosponsored a bill that would ban common forms
of birth control, in vitro fertilization, and abortions
even in cases of rape or incest. He voted against the Lilly
Ledbetter Fair Pay Act, voted against the repeal of "Don't
Ask, Don't Tell," and sponsored a constitutional amendment
to ban marriage equality.

On so many issues, Paul Ryan, like Mitt Romney, has taken
extreme positions that are out of touch with the values
most Americans share.

It's our job, especially in these first few days and weeks,
to make sure voters get the facts on his record, and a
clear picture as to what a Romney-Ryan administration would
look like for regular people, when the slogans fade away
and the real policy decisions they'd face as president and
vice president are on the table.

Check out the new video and site on Romney-Ryan:

http://my.barackobama.com/Go-Back-Team8

Thanks for everything.

Paul Ryan, Romney’s earnest opposite By

In 1996, bedeviled by conservative doubts about his tax-cutting credentials, Bob Dole named Jack Kemp -- the fervent champion of free-market economics – as his running mate. Sixteen years later, confronting lingering right-wing skepticism about his conservative pedigree, Mitt Romney picked Paul Ryan – a former Kemp speechwriter – as his vice-presidential nominee.

Romney played against type in his surprise selection of the youthful seven-term Wisconsin congressman, who was considered a long-shot until the last few days. Rather than choosing a make-no-waves running mate like Ohio Senator Rob Portman or former Minnesota Governor Tim Pawlenty, Romney opted for a free-market ideologue over a political man for all seasons.

The veep choice is probably the best pre-election preview of how Romney would govern from the Oval Office. By going with Ryan -- whose well-publicized budget proposals put both traditional Medicare and Social Security in the cross-hairs – Romney is signaling that he can change direction with stunning speed. Instead of a predictable recite-America-the-Beautiful campaign designed to make Barack Obama the issue, Romney has added policy heft and controversy to his I-can-create-jobs bromides.Introducing Ryan in Norfolk on Saturday morning, Romney called him “the next president of the United States.” (Obama made an analogous slip-up in 2008). While it would take a Freudian to unpack what Romney meant sub-consciously, it is safe to say that Ryan would provide the domestic agenda for Romney as the next president of the United States. To Democrats, Paul Ryan is both literally and metaphorically two four-letter words. The Ryan budget, which passed the House in 2011 with only four dissenting Republican votes, would gradually turn Medicare into a voucher program and slash state funding for Medicaid. Although it is not in the House-passed plan, Ryan has also been a passionate advocate of private accounts for Social Security. The Romney-Ryan ticket is now on record as advocating the largest downsizing of popular federal programs since the ill-fated 1964 Barry Goldwater crusade. What we still don’t have is an entirely reliable account of how and when Romney arrived at Ryan. Was he always the stealth favorite or was there a last-minute shift within the Mitt inner sanctum? The inside story will have to wait until the full how-a-great-man-makes-a-decision deliberate leaks from inside the Romney camp and, maybe, until the books published after the campaign. The timing matters because there could be another less charitable interpretation of the route to Ryan – Romney can be rolled. In the last few days, both the Wall Journal editorial page and the Weekly Standard enthusiastically endorsed Ryan for vice president. The New York Times captured the conservative mood with a Thursday headline: “Romney Faces Pressure from Right to Put Ryan on Ticket.” Since early indications are that Romney decided on Ryan in the last 10 days, that pressure may have arrived as a seismic shock in Romney headquarters. If Romney actually abandoned Portman or Pawlenty to placate the GOP base, it suggests that he would govern by always nervously looking over his right shoulder. Critics have sniffed that Ryan lacks the foreign-policy pedigree that Romney as a former governor needs. But, with the exception of Portman’s short stint as George W. Bush’s trade czar, the same can be said of all the apparent GOP finalists. At least Ryan offers nearly 14 years of congressional experience, which is more than you can say about current and former governors like Pawlenty, Bobby Jindal and Chris Christie. And, by the way, the last ticket totally devoid of Washington credentials was the one nominated by the Republicans in 1948. And somehow, I suspect, Romney does not want to emulate Tom Dewey in grabbing defeat out of the jaws of victory. Ryan is, in many ways, the antithesis of Romney. The 42-year-old congressman from Janesville has spent virtually his entire career in the public sector or in the think tank arena. Ryan has been a consistent true believer while Romney has -- to put it charitably -- followed a zigzag course.  Back in 1998, during the Bill Clinton impeachment election, I came to Janesville to cover a hotly contested House race for an open seat featuring a 28-year-old wunderkind Republican named (what a coincidence) Paul Ryan. I recall the fledging candidate walking me around downtown Janesville to show the houses and the historical markers that trace his family’s influence on this small industrial city since the late nineteenth century.

But what stays with me was the earnestness and policy-oriented seriousness of Ryan, even then. When I asked him about Clinton’s conduct, he avoided the fire-breathing rhetoric that was a GOP staple that year and instead said softly, "I think the wrong way to go is to go down a partisan, bitter route." What he wanted to talk about was tax cutting and Jack Kemp with a dollop of Ayn Rand thrown in. When I suggested that his election over Democrat Lydia Spottswood would be interpreted as an endorsement of the Republican impeachment strategy, he replied, "I hope it isn't written that way. I hope it's interpreted that my ideas are better than hers.”

Despite the nearly three decades that separate them in age, Joe Biden and Paul Ryan embody the political principle that it is far better in career terms to reach Congress as a young man than someone more seasoned. (Biden was not yet 30 when he was elected to the Senate in 1972). For all their conflicting styles and ideologies, both vice-presidential candidates exude an enthusiasm for politics, the press and policy debates that Obama and Romney somehow lack.

In a recent interview with Ryan Lizza for a New Yorker profile, Ryan expressed his scorn for presidential candidates who “run on vague platitudes and generalities.” With his bold vice-presidential pick, Romney has embraced the a-choice-not-an-echo theory of presidential politics.

If nothing else, putting Paul Ryan on the ticket guarantees that the October 11 vice-presidential debate will be destination television viewing. And however the politics sort themselves out, the 2012 presidential election has suddenly become interesting as well as merely important. 

Paul Ryan? By Colm O'Comartun

Mitt Romney just announced Tea Party Congressman Paul Ryan as his vice presidential pick.

Yes, that Paul Ryan. The one who tried to end Medicare as we know it by turning it into a voucher system that would cost seniors thousands in out-of-pocket costs -- just so he could give billionaires a tax break.

Romney and Ryan need to know that giving tax breaks to their billionaire friends on the backs of our seniors is just plain wrong.
They need to know just how wrong they are.

Click here to send Romney and Ryan a message: Stop trying to kill Medicare to protect billionaires.

We didn't know how far Romney was willing to go to satisfy his billionaire friends and the Tea Party extremists. But with the Ryan pick it's clear: he's going all in.

We've got to stand up to them.

BREAKING NEWS: Romney just named Paul Ryan as his Vice Presidential nominee By Robby Mook

Yeah -- THAT Paul Ryan. The architect of the Republican plan to kill Medicare.

But here's the thing: in a poll this week, only 46% of Americans even had an opinion of Ryan (38% had never heard of him). These next hours are critical. We need to contact key voters immediately and make sure they know about the Romney-Ryan plan to put millionaire tax cuts over Medicare for seniors.

Donate $3 or whatever you can right now >>

We might not be able to out-spend Romney and the Koch Brothers but we have to reach every last voter we can. Chip in $3 or more to help us back up President Obama with a Democratic majority:

http://dccc.org/Back-Up-Barack

Paul Ryan By Jim Messina

Paul Ryan will be Mitt Romney's running mate.

What you need to know right now: This election is about values, and today Romney doubled down on his commitment to take our country back to the failed policies of the past.

Congressman Paul Ryan is best known as the author of a budget so radical The New York Times called it "the most extreme budget plan passed by a House of Congress in modern times." With Mitt Romney's support, Ryan would end Medicare as we know it and slash the investments we need to keep our economy growing -- all while cutting taxes for those at the very top.

Over the next few days, Romney's campaign and its allies will tell a very different story about Paul Ryan.

Our job is to make sure Americans know the truth about what Romney's choice says about him as a candidate and leader, and to stand with President Obama and Vice President Biden at another major moment in this campaign.

Say you're with them:

http://my.barackobama.com/Obama-Biden

Thanks for all you're doing. More to come.

Right Choice Obama's welfare-to-work firestorm

Obama's welfare-to-work firestorm

By Tami Luhby August 8, 2012: 8:34 AM ET Mitt Romney is accusing President Obama of turning the clock back on welfare reform.
The Republican challenger Tuesday launched a new ad charging Obama with gutting the landmark 1996 welfare reform law that requires recipients to work to receive benefits. It's another step in Romney's strategy to paint Obama as the entitlement president.
"You wouldn't have to work and wouldn't have to train for a job," says the ad, which begins with another Democratic president, Bill Clinton, signing the legislation into law. "They just send you your welfare check."

The ad is the most public attack on a change the administration made last month to the Temporary Assistance for Needy Families (TANF), which is what welfare became after 1996.
The controversy is centered on the work requirements at the heart of TANF's cash assistance program.
The law currently lists the work activities that meet the requirement, including participating in subsidized or unsubsidized employment, undergoing on-the-job-training, attending a high school or GED program and searching for a job. It also requires the states to track the hours recipients spend in these activities -- 50% of recipients are required to participate, though states can have that target reduced if they lower their caseloads.
But last month, the Department of Health and Human Services added an option that allows for more flexibility for states that want to test alternate ways of putting families on the path back to employment.
Recipients would still have to get jobs or prepare for work, but states can now apply for waivers of the original requirements.
The purpose is to better help people get back to gainful employment and off government assistance. The administration said it met with state officials, who said that more flexibility could put more recipients to work.
"We also heard concerns that some TANF rules stifle innovation and focus attention on paperwork rather than helping parents find jobs," wrote George Sheldon, acting assistant secretary for the department's Administration for Children and Families.
The waivers might allow other activities -- such as spending more time in vocational training or enrolling in substance abuse program -- to count toward the work requirement, according to Elizabeth Lower-Basch, senior policy analyst at CLASP, a low-income advocacy group. Also, it could allow states to track success based on the number of recipients landing work, rather than by hours alone.
States must guarantee that the proposals will move at least 20% more people from welfare to work, according to Health and Human Services Secretary Kathleen Sebelius.
Republican lawmakers and conservative policy advocates, however, immediately jumped on the change, saying that it eliminates the work requirement.
"This is a brazen and unwarranted unraveling of welfare reform," said House Ways and Means Chairman Dave Camp, a Michigan Republican, who co-authored the 1996 law.
The TANF work requirements are not onerous, said Robert Rector, a senior research fellow at the conservative Heritage Foundation who helped author them. After the law was passed, welfare caseloads dropped by half and employment of single mothers rose.
Rector argues that the law already has a lot of flexibility built into it. Instead, the administration "took the law and threw it in the trash can."

Graphic: Breaking down the numbers

OPPOSITION TO SEQUESTRATION

08/06/2012

The Honorable US Senators and US Congressmen

The Honorable US Senators and US Congressmen

United States Senate / House of Representatives

Washington, D.C. 20510 / 20515

RE: OPPOSITION TO SEQUESTRATION

Dear US Senators and Congressmen,

As your constituent, I am writing to let you know of my strong opposition to the federal budget sequestration which is slated to occur on January 2, 2013;if allowed to take effect, the results would be devastating, and disproportionately on the most vulnerable among us. I am counting on you, as my elected representative, to fight for a fair and balanced approach to ending the potential fiscal crisis.

Specifically, I urge you to work with your colleagues to develop a fair federal budget which puts people back to work, rebuilds the economy, invests in infrastructure, research and innovation, worker productivity, training and education, eliminates wasteful and unnecessary tax giveaways for the wealthiest Americans and multinational corporations, while closing unfair tax loopholes, and does not undermine basic safety nets for low-and middle-income people including seniors, children, the ill and disabled. We must work harder than ever to ensure that the budget encourages growth, does not increase poverty and ensures a viable safety net for the most vulnerable Americans among us.

A nation’s budget is, in its aggregate, a reflection of the values and priorities of its people. I therefore strongly support developing a budget that encourages growth among all sectors, protects the civil rights and civil liberties of all citizens, and provides for those in need.

Thank you for your attention; I look forward to working with you in the upcoming months and years to ensure that the federal budget is fair, just and that the federal government is able to meet the basic needs of its people while promoting growth and stability.

Sincerely,

 Douglas K Winston

NAACP CALLS ON CONGRESS TO HALT CRIPPLING BUDGET CUTS UNDER “SEQUESTRATION”
URGES DEVELOPMENT OF A FAIR AND BALANCED FEDERAL BUDGET
THE ISSUE:
The “Budget Control Act of 2011,” which was enacted in August, 2011, increased our Nation’s borrowing ceiling (also known as the “debt limit”); set caps on “discretionary spending” (funding for programs which is limited by the amount of money made available, rather than by demand; “non-discretionary” federal programs include Social Security, Medicare and Medicaid and Veterans’ benefits ) for 2011 and 2012; and established a budget super-committee, which was charged with developing a plan to reduce our national deficit over the next ten years. Under the terms of the Budget Control Act of 2011, if the budget super-committee did not come up with a plan to balance the budget automatic, across-the-board spending cuts would take place on January 2, 2013. These cuts are known as “sequestration” and they would result in federal spending being cut by $1.2 trillion over 10 years.
Because the budget super-committee officially dissolved in November, 2011 without a plan, the federal government is currently facing automatic, across-the-board cuts of about $109 billion per year as of January 2, 2013. This means that almost every federal discretionary program will be facing a reduction in its budget of approximately 8.6%. Currently, this funding cut will affect both defense and non-defense programs; it is estimated that as many as 2 million Americans, including police officers, teachers, air traffic controllers, and civilian defense workers may lose their jobs as a result. Essential services would also be drastically cut, disproportionately affecting the most vulnerable among us, including childhood vaccinations (it is estimated that almost 212,000 children will not be vaccinated if sequestration takes effect) and Head Start (almost 100,000 fewer low-income children would be served) to screenings for breast and cervical cancer (as many as 34,000 fewer women would be screened) and Meals-On-Wheels for seniors who are not able to get out (17 million fewer meals would be served). Furthermore, with the national unemployment rate still hovering above 8% (and the rate among African Americans nationally at 14.4%), sequestration would result in 1.6 million fewer adults, dislocated workers and at-risk youth receiving job training, education or employment services. More specific information about the potential impact of these cuts is expected in early September, when the Administration is expected to release a report detailing how federal agencies would implement the sequestration cuts at the program, project and activity level.
Due to the potential devastation of sequestration on almost every American, and the disproportionate impact it would have on the most vulnerable among us, the NAACP has consistently called on Congress and the Administration to put aside their partisan bickering and develop a balanced budget which makes the tax code more fair and does not do additional harm to the programs which serve us all, especially the most vulnerable among us. Furthermore, the NAACP is fundamentally opposed to changing the rules so that sequestration only affects non-defense spending (as some in Congress have suggested). Non-defense discretionary spending has already absorbed significant reductions in spending despite the fact that these programs support and sustain the growth of our nation in areas including scientific and technological innovations, housing, civil rights enforcement, education, health care, small business development, public safety and infrastructure development and maintenance.

Maria Lloyd: Gabby Douglas Calls Hair Critics’ Thoughts “Stupid” and “Crazy”

Maria Lloyd: Gabby Douglas Calls Hair Critics’ Thoughts “Stupid” and “Crazy”

August 6, 2012 | Filed underNews | Posted by Maria Lloyd

Olympic Gold Medalist Gabby Douglas Responds to Her ‘Hair’ Critics

by Maria Lloyd

Yesterday record-breaking Olympic Gold Medalist, Gabby Douglas, addressed the swarms of ‘hair’ critics who took to their Twitter accounts and blasted the teen for not wearing her hair neatly. The champion said she was a little confused when she Googled herself hours after making history and saw people debating about her pulled-back hairstyle.
“I don’t know where this is coming from. What’s wrong with my hair?” said Douglas, the first U.S. gymnast to win gold in team and all-around competition. “I’m like, ‘I just made history and people are focused on my hair?’ It can be bald or short, it doesn’t matter about (my) hair.”
Douglas wears her hair gelled, with hair clips, and in a ponytail. It’s a style she has been wearing for years and she’s not going to change it. ”Nothing is going to change,” she said. “I’m going to wear my hair like this during beam and bar finals. You might as well just stop talking about it. I don’t think people should be worried about that,” she said. “We’re all champions and we’re all winners. I just say that it’s kind of, a stupid and crazy thought to think about my hair.”
I’m ecstatic to know this young lady has high self-esteem. What is it in our community that causes us to hate images of ourselves so passionately? Would ‘straight’ hair have made her perform even better than her performances that made history? I find it hard to understand why adults felt compelled to critique a child on her hairstyle during a pivotal moment in African American history. If you are one of her many hair critics, I strongly encourage you to embrace every coiled strand of hair on your scalp. Free yourself of the years of mental conditioning that have taught you that everything about yourself is unattractive. You are black. You are brilliant. You are beautiful.

Treasury to sell more AIG shares

Treasury to sell more AIG shares

By Maureen Farrell August 3, 2012: 4:21 PM ET
American International Group (AIG) said it will buy back up to $3 billion of its stock from the U.S. Treasury Friday as part of the government's offering of $4.5 billion of the insurer's shares on the open market.
The stock sale will move the U.S. government closer to a point where it would own just half of the insurer's shares outstanding. The Treasury Department currently holds a 61% stake in the company. AIG said that Citigroup (C), Deutsche Bank (DB), Goldman Sachs (GS), and JPMorgan Chase (JPM) are the banks working on the stock offering.
Shortly after Lehman Brothers filed for bankruptcy protection in September 2008, AIG was also teetering on the edge. The U.S. government offered AIG an $85 billion lifeline that eventually ballooned to $182 billion.
AIG's stock was halted mid-day Friday following the Treasury news, but shares moved higher once they resumed trading. The stock finished the day up 1.6%. It has been a good year so far for AIG. Shares have gained 35% in 2012. On Thursday, AIG reported a second-quarter profit of $2.33 billion, ahead of analysts' expectations.
The rebound for AIG has been good for the government and taxpayers as well. The stock closed Friday at $31.34. That's nearly 10% higher than the Treasury Department's break-even price of $28.72 a share for its investment.
-- CNNMoney's Ben Rooney contributed to this article.

Why this month's good jobs news won't last

Why this month's good jobs news won't last

By Stephen Gandel, senior editor August 3, 2012: 11:23 AM ET

A rising unemployment rate and the fiscal cliff signal slower job growth in the months ahead.

FORTUNE -- Investors and economists cheered July's jobs number, which indicated that employers added nearly double the number of positions than had been predicted. Former Obama economic adviser Austan Goolsbee said that if the economy were to add 150,000 jobs a month for rest of the year the unemployment rate would come down significantly. Mark Zandi of Economy.com said the economy was back on track.
But there's reason to believe that this month's good jobs number, coming after a string of monthly disappointments, is a one-off and not the start of a recharged recovery. Here's why:
First of all, the unemployment rate rose, up to 8.3%. Economists have actually been looking for this and said it would be a good sign. As more people come back into the workforce optimistic they will find work, the number of people counted as unemployed would rise.
MORE: Slowing corporate profits could cloud the job picture
But that's not why the unemployment rate rose. The labor force participation rate fell in July, meaning there are more people who have stopped looking for work, not less. And the more people who think their job prospects are nil, the more people who will keep their wallets shut.
Second, while the jobs number, which comes from a survey of employers, rose, the survey of households found the opposite. According to that survey, which does a better job of capturing new businesses and the self-employed, the number of people with jobs dropped 195,000. It's not that unusual for the two surveys to diverge. And the survey of employers is generally considered the more reliable one. But still the fact that the surveys produced numbers that were almost mirror opposites should give reason for pause.
MORE: The silent jobs killer: Our unemployment system
Third, the monthly jobs report is widely watched, but it's just one read of the economy. Corporate profits appear to be slowing. Earlier this week, the Institute for Supply Management said that manufacturing activity in the U.S. fell for the second straight month. Also, this week, the government said that the GDP grew just 1.5% in the second quarter. That's well below the 3% growth most economists believe we need to bring down the unemployment rate.
And there is some indication that the economy could continue to slow. Washington has done nothing to stem the mix of spending cuts and tax increases - the so-called fiscal cliff - that are supposed to kick in at the beginning of next year. Many think President Obama and lawmakers will strike some deal before the worst of the spending cuts and tax hikes start, but until they do the threat of the fiscal cliff is likely to weigh on the economy.
Bank of America Merrill Lynch economist Ethan Harris believes the uncertainty surrounding the fiscal cliff will begin to clip jobs from the employment numbers, with employers pausing or at least slowing hires, starting in September. For the rest of the year, Harris thinks GDP growth with stay stuck at 1.5%, which indicates jobs growth of less than 100,000 a month.
MORE: Calling BS on Reid's Romney Tax Claims
But perhaps the worst news is that the current jobs report will probably put the Federal Reserve, which looked more and more likely to launch a new round of stimulus this fall, back on hold. Fed Chairman Ben Bernanke, likely worried about the political ramifications of doing something so close to the presidential election, has indicated that he won't launch any new programs unless there is overwhelming evidence that the economy is slowing. July's employment numbers raise some doubts about that.
So while it's nice on this summer Friday to let the stronger than expected jobs numbers make us all feel better, it's important to remember this is probably just a vacation from the dour economic news, and not a signal that the more than 12 million unemployed Americas will be headed back to work anytime soon.

Upbeat jobs report to boost stocks

Upbeat jobs report to boost stocks

By CNNMoney staff @CNNMoneyInvest August 3, 2012: 9:00 AM ET

Click the chart for more premarket data.

NEW YORK (CNNMoney) -- Stocks were headed for a higher open Friday as investors welcomed a stronger-than-expected July jobs report.
Dow Jones industrial average, S&P 500 and Nasdaq futures rose between 0.9% and 1.2%.
After two disappointing central bank meetings, investors will close out the week with the July jobs report.
The U.S. economy added 163,000 jobs in July, an improvement from an increase of just 64,000 in June, according to a government report. Economists surveyed by CNNMoney were predicting 95,000 jobs were added last month.
The jobs report surprise is a sign that hiring hasn't completely stalled -- a positive step for the struggling U.S. economy.
The unemployment rate, however, rose for the first time in over a year. The jobless rate ticked up to to 8.3%, compared to forecasts for it to hold steady at 8.2%.

Related: Obama and jobs - a timeline

The latest labor market data supports the Federal Reserve's decision to refrain from injecting more stimulus into the economy. Earlier this week, the Fed decided to stick to its current policies, but indicated the U.S. economy is slowing and that more action could be in the cards soon.
Meanwhile, worries about the global economy persist, even more so after central bankers in the United States and Europe failed to take any stimulative action this week.

Related: Why Knight lost $440 million in 45 minutes

In the corporate world, shares of Knight Capital Group (KCG) continued their free-fall Friday, dropping nearly 10% in premarket trading. That's after the stock ended Thursday's trading day down 63%, and sank 13% after hours.
The company said Thursday that it would report a $440 million pre-tax loss, due to a trading glitch that led to a series of bizarre moves in the market.

Fear & Greed Index

U.S. stocks ended in the red Thursday, after European Central Bank president Mario Draghi stopped short of announcing immediate action to contain Europe's debt crisis at the conclusion of an ECB meeting.
World markets: European stocks rose in afternoon trading. Britain's FTSE 100 added 1.5%, the DAX in Germany and France's CAC 40 gained more than 2%.
Asian markets ended mixed. The Shanghai Composite rose 1.0%, while the Hang Seng in Hong Kong slipped 0.1% and Japan's Nikkei lost 1.1%.
Economy: At 10 a.m. ET, the Institute for Supply Management will release the July edition of its services index. The index is expected to come in at 52.3, up from 52.1 in the month prior, according to a survey of analysts by Briefing.com.
Companies: Shares of Procter & Gamble (PG, Fortune 500) rose in early trading after the consumer products company topped earnings expectations. Revenues were in line with expectations.
NYSE Euronext (NYX)'s quarterly results beat Wall Street's earnings and revenue forecasts.
LinkedIn (LNKD) shares jumped 9% after the business networking site reported sales that nearly doubled from a year ago, led by a huge increase in revenue for its job posting services.

Related: Facebook has no friends

Facebook (FB) jumped on the tech bandwagon. Shares gained in early trading, following six straight days of losses.
Currencies and commodities: The dollar fell against the euro and British pound, but rose slightly versus the Japanese yen.
Oil for September delivery rose $1.09 to $88.22 a barrel.
Gold futures for August delivery rose $8.00 to $1,595.40 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.56% from 1.48% late Thursday.  

First Published: August 3, 2012: 6:07 AM ET

Why Knight lost $440 million in 45 minutes

Why Knight lost $440 million in 45 minutes

By Stephen Gandel, senior editor August 2, 2012: 4:32 PM ET

The high frequency trading battle between exchanges and market makers is resulting in big losses not just for Wall Street, but, likely, for us too.

Update 11:00 pm
FORTUNE -- In life there are few coincidences, and this one probably isn't either: The day Knight Capital Group's computers nearly blew up the market and lost the firm $440 million in 45 minutes is the same day that the New York Stock Exchange (NYX) launched a new trading system that was, in part, meant to take business away from Knight (KCG).
For the past half decade or so, there has been a tug of war over who completes the buy and sell orders for stocks that average investors like you and I make. It used to happen in the pits of the NYSE. These days, almost none of the trades that folks like you and I make ever get to the exchange. Instead, they get cut off, diverted into the computer systems of Knight or its main competitors Citadel, Citigroup and UBS, which match those with the millions of other orders they collect.
MORE: Should we listen to a bond king trying to time stocks?
And the pace at which these firms have been able to divert traffic from the NYSE has been accelerating. In 2009, about 15% of all trades took place away from the NYSE. Now about a third of all the trades in NYSE-listed shares happen elsewhere.
It's not clear why this battle over individual stock trades is so pitched. Knight pays brokers for its so-called order flow. And it guarantees that individuals get a slightly better price than what they would get at the exchange. Those stock trades get fed into Knight's computers, which use lightning fast trading algorithms to figure out how to make money off the orders the firm has just paid up for. This is, in part, the high frequency trading that you have heard about.
Some say that market makers provide a service. Others say Knight and others seek out the orders of individual investors because they view those orders as so-called dumb flow and easier to trade against. What is clear is that Knight and others have figured out how to make money off the stock trades of you and me in ways that we can't detect but we probably pay for somehow. Eric Scott Hunsader, who runs trading research firm Nanex, estimates market makers have been able to generate $5 billion in profits rapidly trading the orders of individual investors and others in the past seven years.
MORE: Wall Street's hottest investment idea: Your house
On Wednesday, the same day that Knight lost $440 million, the NYSE launched its own computer driven trading system, called the Retail Liquidity Program, that the exchange hopes will reclaim some of the trading volume it has lost to market makers. NYSE hopes RLP will create more competition among traders and brokers and market makers so that more of those orders get filled at better prices on the exchange. The new system also offers financial incentives for brokers to complete their orders on the exchange, similar to the payments long made by Knight and others that lured trades away from NYSE.
Knight says the computer problems it ran into had to do with NYSE's new trading system, but it didn't say what. Tellingly, all of the stocks that Knight's computers did bogus trades in were listed on the NYSE. It's likely that Knight tried to upgrade its own algorithm to allow its computers to do an end around the NYSE's new system. But it messed up somehow. Instead, Knight's computer system, launched on the same day as the NYSE's, went on a trading frenzy, buying and selling millions of shares on its own shortly after both systems were switched on when the market opened at 9:30 Wednesday morning.
Normally that shouldn't have produced any real losses. These weren't actual orders, so Knight's system should have just been buying and selling to itself. But that's not how the world of high frequency trading works. When other traders, i.e. computer systems, saw the spike in activity, they jumped in too.
MORE: NYSE: Hey stock picking on us
Knight disabled the faulty algorithm by 10:15. But by then the damage was done. Knight was out $440 million. Dozens of stocks, including Warren Buffett's Berkshire Hathaway (BRKB), had gyrated up and down, and our faith in the market was shaken once again.
In theory, we should all benefit from this competition, being able to trade at cheaper and cheaper prices. But in practice the "price improvements" that Knight and now NYSE offer are fractions of a fraction of a penny. At best, what we are getting in return is a market that is less stable. At worst, we are getting a system that is picking our pockets.
If this isn't a clear case where we need regulators to step in, I don't know what is.
Update: The original version of this story said the NYSE's computers provide price improvements. In fact the NYSE's new platform hopes to provide better pricing through increased competition.

Stocks soar on jobs report

Stocks soar on jobs report

By Ben Rooney @CNNMoneyInvest August 3, 2012: 4:14 PM ET

Click the chart for more market data.

NEW YORK (CNNMoney) -- Stocks rallied Friday as a stronger-than-expected July jobs report helped lift markets for the week.
The Dow Jones industrial average surged 217 points, or 1.7%. The S&P 500 and the Nasdaq both rose about 2%.
All three indexes had been headed for a losing week before Friday's jobs report.
The U.S. economy added 163,000 jobs in July, an improvement from an increase of just 64,000 in June, according to a government report. Economists surveyed by CNNMoney were predicting 95,000 jobs were added last month.
"It was the perfect number for the market," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
The improvement in hiring was enough to "demonstrate the positive, albeit lackluster, underpinnings of the economy," said Luschini. At the same time, he added, it was not strong enough "for the Fed to put its gun back in its holster."

Related: Obama and jobs - a timeline

The Federal Reserve disappointed some investors Wednesday, when it left its economic policies unchanged. However, the Fed indicated the U.S. economy is slowing and that more action could be in the cards soon.
Many investors expect Fed chairman Ben Bernanke to hint at the possibility of more stimulus at the central bank's annual symposium later this month in Jackson Hole, Wyo. The Fed could then follow up by announcing a third round of asset purchases in September.
Meanwhile, worries about the global economy persist, even more so after central bankers in the United States and Europe failed to take any simulative action this week.
"This is clearly a short-term ricochet based on the jobs news," said Frank Davis, director of deals and trading at LEK Securities. "The concern is what happens in Europe over the weekend."

Related: Why Knight lost $440 million in 45 minutes

In the corporate world, shares of Knight Capital Group (KCG) rebounded 20%, after plummeting to near $2 a day earlier.
After a costly high-frequency trading mishap Wednesday, Knight is now the subject of takeover talks. The Wall Street Journal reported that Knight told its clients it had secured a line of credit to keep operating through Friday.

Fear & Greed Index

U.S. stocks ended in the red Thursday, after European Central Bank president Mario Draghi stopped short of announcing immediate action to contain Europe's debt crisis at the conclusion of an ECB meeting.
World markets: European stocks closed higher. Britain's FTSE 100 added 2.2%, the DAX in Germany gained 3.9% and France's CAC 40 gained 4.4%.
Asian markets ended mixed. The Shanghai Composite rose 1.0%, while the Hang Seng in Hong Kong slipped 0.1% and Japan's Nikkei lost 1.1%.
Economy: The Institute for Supply Management said its index of activity in the services sector increased to 52.6 in July from 52.1 in June.
The index was expected to come in at 52.3, according to a survey of analysts by Briefing.com.
Companies: Shares of AIG were halted just before the insurance company announced that it would buy $3 billion worth of its own stock from the U.S. Treasury Department. The Treasury said it will offer a total of $4.5 billion worth of AIG common stock.
AIG (AIG, Fortune 500), once the world's largest insurance company, was bailed out by the government during the 2008-2009 credit crisis.
LinkedIn (LNKD) shares jumped after the business networking site reported sales that nearly doubled from a year ago, led by a huge increase in revenue for its job posting services.
Facebook (FB) jumped on the tech bandwagon. Shares gained in early trading, following six straight days of losses.

Related: Facebook has no friends

Shares of Procter & Gamble (PG, Fortune 500) rose in early trading after the consumer products company topped earnings expectations. Revenues were in line with expectations.
Kraft (KFT, Fortune 500) said late Thursday that profits rose in the second quarter, adding that it expects continued growth in the remainder of the year.
NYSE Euronext (NYX)'s quarterly results beat Wall Street's earnings and revenue forecasts.
Currencies and commodities: The dollar fell against the euro and British pound, but rose slightly versus the Japanese yen.
Oil for September delivery rose $4.12 to $91.25 a barrel.
Gold futures for August delivery rose $15.10 to $1,605.80 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.57% from 1.48% late Thursday.  

First Published: August 3, 2012: 9:38 AM ET