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