The TRUTH About How Housing Has Destroyed This Recovery

Why has this "recovery" been so mediocre, and perhaps even verging on ending?

In a speech given late last month in Sweden, Eric S. Rosengren of the Boston Fed took a deep look at the impact of housing weakness on the US economy.

Although everyone knows that housing has been a problem, the impact may be more stark than you realize.

For example, this chart shows: Growth in Real GDP Components: Current and Three Previous Recoveries

Note that outside of residential fixed investment (and also government, though to a much lesser degree) the recovery looks like a pretty normal one. Business Fixed Investment is actually a larger share of the recovery than previous ones have been.

Rosengren's presentation also looks at the impact of housing on wealth, including some breakdowns by ethnicity that we hadn't seen before.

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Two Big Reasons You Should Still Worry About This Market

With stocks bouncing back, and the economy showing signs of not dying, you may be tempted to finally relax a little bit, and get some sleep, feeling confident that 2011 is more likely to be a replay of 2010 than 2008.

Maybe.

But even amidst the positive energy of the past two weeks there were red flags popping up.

The first is extreme correlation: Even on the good days, EVERYTHING that's not the dollar is going up. We keep pointing this out, that gold, for example, has been doing the exact same thing as stocks day in and day out. But it's not just that. Gold, Swiss Franc, the euro, equities, copper, silver, etc. all moving the same in lockstep. One day the dollar is down and they're all up, and one day the dollar is up and they're all done.

The general belief is that extreme correlation is a sign of market pressure -- of an unhealthy market that wants to snap.

And in fact there are others signs of this as well.

Various measures of funding strain, like LIBOR rates, continue to shoot up, with no slowdown, basically ever since the beginning of August.

Of course, a little perspective is needed on this front. We're still nowhere near as bad as where things were the great financial crisis.

Bottom line though: There ARE signs of worsening strain on the system, persisting even as things have gotten better over the last few days. Until you see correlations fade and some of these bank funding measures improve, better not turn your back.

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Here Are The Four Charts That Explain What The Protesters Are Angry About...

Earlier this week, we published a chart-essay that illustrates the extreme inequality that has developed in the US economy over the past 30 years.

The charts explain what the Wall Street protesters are angry about. They also explain why the protesters' message is resonating with the country at large.

Here are the four key points:

1. Unemployment is at the highest level since the Great Depression (with the exception of a brief blip in the early 1980s).

2. At the same time, corporate profits are at an all-time high, both in absolute dollars and as a share of the economy.

3. Wages as a percent of the economy are at an all-time low. In other words, corporate profits are at an all-time high, in part, because corporations are paying less of their revenue to employees than they ever have. There are lots of reasons for this, many of which are not the fault of the corporations. (It's a global economy now, and 2-3 billion new low-cost employees in China, India, et al, have recently entered the global workforce. This is putting pressure on wages the world over.)

4. Income and wealth inequality in the US economy is near an all-time high: The owners of the country's assets (capital) are winning, everyone else (labor) is losing.

Three charts illustrate this:

The top earners are capturing a higher share of the national income than they have anytime since the 1920s:

CEO pay and corporate profits have skyrocketed in the past 20 years, "production worker" pay has risen 4%.

After adjusting for inflation, average earnings haven't increased in 50 years.

It's worth noting that the US has been in a similar situation before: At the end of the "Roaring '20s," just before the start of the Great Depression. (See some of the charts above).

It took the country 15-20 years to pull out of that slump and fix the imbalances. But by the mid-1950s, employment, corporate profits, wages, and inequality had all returned to more normal levels. And the country enjoyed a couple of decades of relatively well-balanced prosperity. But now, everything's out of whack again.

Importantly, the inequality that has developed in the economy over the past couple of decades is not just a moral issue. It's a practical one. It is, as sociologists might say, "de-stabilizing." It leads directly to the sort of social unrest that we're seeing right now.

SEE ALSO: CHARTS: Here's What The Protesters Are So Angry About...

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12 Awesome Things You Never Knew About Herman Cain

After months of languishing on the sidelines of the GOP presidential race, Herman Cain has skyrocketed to the top of the national polls and now looks like he might actually be a real contender for the Republican nomination in 2012.

Until Cain and his "9-9-9" tax plan dominated Tuesday's presidential debate and vaulted into the national spotlight, few outside of the Tea Party know much about Cain, other than that he is black and likes pizza.

That is largely because, until this week, Cain's presidential campaign was virtually non-existent. Eschewing the fundraisers and early voting state visits typical of most campaigns, Cain and his staff have spent the last few weeks promoting his book, This Is Herman Cain! My Journey to the White House.

Released last week, the book is now No. 4 of the New York Times bestsellers list. But assuming you haven't picked it up yet, we read it so you don't have to.

The book offers some interesting insight into the candidate's background and what he plans to do if he gets elected to the Oval Office.

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Here's Why Analysts Are Dead Wrong About Holiday Sales

Here's Why Analysts Are Dead Wrong About Holiday Sales Login With Facebook | Login With Twitter | Login | Register Money Game Contributors Home Tech Entertainment Wall Street Markets Strategy Sports Lifestyle Politics EuropeData Misc. Your Money Video Latest Your News Money Game Home Economy Markets Investing ETFs HiveTapePRContributors Follow us on Facebook and get updates from Money Game Contributors posted directly to your news feed 

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Email Zip Here's Why Analysts Are Dead Wrong About Holiday Sales Mike "Mish" Shedlock, Global Economic Trend Analysis | Oct. 13, 2011, 3:08 AM | 331 | 2 A A A   xEmail Article From To Email Sent!You have successfully emailed the post. Mike "Mish" Shedlock URL Mike "Mish" Shedlock Mish is an investment advisor at Sitka Pacific Capital. He writes the widely read Mish's Global Economic Trend Analysis.

Recent PostsThe Real Reasons For Last Week's Rally EmergeHow Bernanke Screwed The Banks And Fixed Income Savers At The Same...The Latest Income Report Screams Deflation Arrogance of "One-Trick Pony" Hedge Fund Billionaire Paulson; Is the Wall Street Protest Misguided? Unprecedented Drop in Port Traffic: A Sobering Omen for Holiday Sales or Should we Listen to Analysts? France will Not Use EFSF to Recapitalize Banks; Slovak Government Falls, EFSF to be Approved Anyway; Greek Haircuts of 30-50% Coming; EU Seeks Magic

Port traffic on the West coast is down significantly. Expected traffic for September is also way lower. Yet analysts have been busy raising expectations for the holiday season. One thing for sure, one group is wrong.

Please consider the New York Times article A Contradiction in the Cargo

When retailers expect that Americans will be crowding into their stores, their orders pile into the nation’s ports in August and September for delivery to stores by late October. But logistics companies say that is not happening this year.

“We’re concerned, because usually at this time, you see this peak,” said Richard D. Steinke, the executive director of the Port of Long Beach in California. “We haven’t seen it.”

In fact, the five busiest container ports in the United States said that imports in August 2011 were lower than or even with 2010 volumes.

In Long Beach, the second-busiest container port by volume, August imports fell by 14.2 percent from August 2010. While the port has not yet released September volumes, a spokesman, Art Wong, said it expected about a 15 percent drop from September 2010.

The reports from the remaining container ports in the top five were equally gloomy. In New York-New Jersey, the number of incoming containers in August was about flat with last year. In Savannah, Ga., imports in August fell by 4 percent. Oakland reported that August imports were down 0.9 percent from a year earlier. And Los Angeles, the nation’s highest-volume container port, counted 5.75 percent fewer containers in August than a year earlier.

“I expect over all the peak season will be muted,” said Kathryn McDermott, deputy executive director of business development for the Port of Los Angeles.

Last Thursday, the National Retail Federation said it expected holiday sales to rise 2.8 percent over last year. And late last month, the federation said it expected port volumes to rise by at least 4.5 percent a month for the final four months of the year.

At the same time, some analysts revised their holiday forecasts upward after the retailers tracked by Thomson Reuters beat estimates and reported an average 5.1 percent increase in same-store sales for September last Thursday.

“For the holidays,” Craig R. Johnson, president of Customer Growth Partners, wrote in a note to clients last week, “a 5 to 6 percent increase is clearly in reach.”

On Monday, a Citigroup retail analyst, Deborah Weinswig, revised her holiday forecast up by a percentage point, saying she expected 4 percent to 5 percent gains in same-store sales at department stores, up from 3 percent to 4 percent. There is traditionally a strong correlation between the back-to-school and holiday seasons, Ms. Weinswig said. Some retailers are raising their prices because raw-material costs have gone up, she wrote, which would help sales. And the “surprisingly resilient” back-to-school season, she wrote, had led to “our more upbeat outlook.”

While Mr. Steinke said that retailers occasionally delayed shipping for as long as possible to see how the economy progressed, he said they usually gave transportation companies a heads-up if they were planning a lot of last-minute orders. This year, he said, the retailers do not seem to be expecting that.

“We talk to the railroads, we talk to our ocean carriers, and they’re not seeing this big peak, or bracing themselves for a big late peak,” Mr. Steinke said.

It's not just port traffic that is down. Spokesmen for Burlington Northern Santa Fe Railway and Federal Express said the same thing.

Unprecedented Drop in Port Traffic

The Wall Street Journal tells a similar story in At Ports, a Sobering Omen for Holiday Sales

Dick Steinke, executive director of the Port of Long Beach, says shipping volumes have posted two consecutive months of declines, and he's anticipating a double-digit drop for September. The last time the port experienced no peak was during the height of the recession in 2009, he says. Before that, the phenomenon was unprecedented.

After a strong holiday season last year—with sales up 4.1%—forecasts are pointing to more moderate gains as the bumpy economic recovery, sustained high unemployment and higher living expenses keep consumers cautious with their gift spending. A recent survey of more than 3,500 consumers by market research firm NPD Group found that 27% of respondents plan to spend less this holiday season.

Stage Stores Inc. is leaner on inventory this year, says CEO Andy Hall. The department store chain has over 800 stores in the U.S. operating under the names Bealls, Goody's, Peebles, Palais Royal and its namesake. Mr. Hall says his customers are affected by high unemployment and gas prices. "We can't afford to be over-inventoried in our stores," he says.

Rail companies are also noting a shift. Burlington Northern Santa Fe Corp., which moves more containers between ships, rail and trucks than any other U.S. railroad, didn't experience a traditional holiday peak in volumes this year, says John Lanigan, executive vice president and chief marketing officer. Some retail clients have outlined plans to stay lean and chase items closer to the holiday, he says. Depending on their timing, BNSF could be cut out of the equation if retailers have to the rush product deliveries by air, says Mr. Lanigan.

"We do not expect to see a traditional fall peak this year," says Robin Chapman, a spokesman with Norfolk Southern Corp. In a September interview with The Wall Street Journal, Union Pacific Corp. CEO Jim Young said the rail company's peak had moved from July until mid-September.

So what are analysts thinking? Or are they thinking at all?

Shippers don't see it, the labor market does not see it, and consumer sentiment does not reflect more willingness to spend. Are analysts giddy over this 1-week rally in the stock market or are they simply cheerleading "rah rah sis-boom bah" as they do 99% of the time?

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Receive email updates on new comments!cvszEmail2 Comments 2 0 Flag as Offensive Fire up a J on Oct 13, 3:35 AM said: You nailed it. They're cheerleading the "rah-hah-sis-boom-bah" as you so elequently put it. In other words, they AREN'T thinking at all. Good work, Mish.

That said, have a GREAT holiday season! And be safe on the roads.
-- Fire Reply 0 1 Flag as Offensive Freedom 4 all on Oct 13, 4:53 AM said: As a tribute to our Wall street brothers and sisters - we will be occupying the London stock exchange on Saturday.

All free men and women welcome. 12 Midday meet

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What Wall Street Analysts Are Buzzing About Today (AA, CVX, GOOG, NCR, NYT)

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Good morning, here's your daily equity research roundup from the Street:

Gaming: Las Vegas August visits increased 2.8% and revenue per available room is up 14.0%. Atlantic City, not so lucky. There, revenue fell 0.6% during September. Both Trump Plaza and Trump Taj Mahal post double-digit declines.American Airlines (NYSE: AMR): Cutting expected loss after the company announced it was grounding a dozen planes this winter to lower capacity. Analysts update loss to $3.62 for 2011 vs. - $3.66. Full year 2012 guidance raised from -$1.80/share to -$1.20/share.Chevron Corp. (NYSE: CVX): Company update yesterday slightly negative on 5.4% lower international gas and oil production. Foreign exchange rates and asset gains will provide a boost, and analysts believe there will be a number of upward revisions to take that into account. Barclays is increasing EPS/earnings forecasts for the third quarter to $3.64/$1.34B from $3.35/$954M.Google (NASDAQ: GOOG): The search giant reports earnings tomorrow after the market closes. Barclays estimates revenue growth of 34% to $7.3 billion and EPS to $8.74 a share - slightly below consensus estimates.Footwear and Apparel: With the NBA lockout canceling the first two weeks of games. Citi remains bullish on Finish Line as the company shifts product mix to running categories.Alcoa (NYSE: AA): Citi is lowering estimates for the aluminum producer to $0.86 from $0.99 on lower profits out of Flat-Rolled Product division. Maintaining $10 target. Yesterday Alcoa missed consensus third quarter estimates by seven cents.Owens Corning (NYSE: OC): Lowering estimates on poor revenue growth in Composites, particularly from Europe, and weakness in Roofing following hurricane season. Analysts now forecast 2011 EPS of $2.01 from $2.22.TE Connectivity (NYSE: TEL): S&P announces the inclusion of the company on the S&P 500 which will boost share purchases by nearly 45 million by funds. The company also looks to gain as Japanese auto production ramps faster than originally anticipated.Motorola Solutions (NYSE: MSI): Lowering full year 2011/2012 EPS on macro weakness to $2.46/$2.78 a share, from $2.50/$2.81 a share, respectively. Analysts expect sales of $2.08 billion for the quarter, up 7%.NetApp Inc. (NASDAQ: NTAP): Lowering 2012 estimates by 4% to $2.42 but maintaining outperform rating. Slow revenue growth may become less an issue as firm rolls out new product ONTAP 8.1.Deutsche Bank:Earnings Preview: Goldman expects a 2% upside to current bottom-up consensus for third quarter, built mainly from surprises in Information Technology. Analysts see total EPS growth of 16% compared to 2010.Price Changes: Increase: IAC/InterActiveCorp (new $46.00 v. old $42.00), Live Nation Entertainment (new $11.50 v. old $11.00); Decreases: AOL (new $13.50 v. old $14.00), Lazard Ltd. (new $28.00 v. old $32.00), Monster Worldwide (new $7.00 v. old $13.00), Netflix (new $200.00 v. old $270.00), WebMD (new $33.00 v. $46.00).Newspapers: Further soft advertising trends likely to hurt The New York Times and Gannett Co., both of which report next week. The Times will see some upside as analysts say the "pay wall has gone very well so far and the recent launch of the Boston Globe pay wall appears to be off to a good start."Lexmark International (NYSE: LXK): Downgrading to underweight and lowering EPS estimates by 23% to $3.79 a share. Analysts believe ink jet sales could tumble as Hewlett-Packard makes a further push into the business and a cyclical downturn pressures the industry.Earnings Preview: UBS analyzed early earnings reporters and see 3% upside potential to current bottom-up estimates, but that remains below the 6% upside seen in the past six quarters.ADTRAN Inc. (NASDAQ: ADTN): Third quarter sales hit $192 million, above consensus of $189 million. EPS in line at $0.59, but investors remain worried about product assortment and price pressures.Two global bellwethers have already reported this week as earnings kick off: Alcoa and Pepsico. Please follow Money Game on Twitter and Facebook.
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Now, Wall Street's In A Full-On Food-Fight About Whether Apple Cut iPad Orders

Not surprisingly, yesterday's JP Morgan report that Apple had suddenly cut Q4 iPad orders by 25% has prompted other Wall Street analysts to frantically respond.

Bloomberg has a good round-up.

JP Morgan's own Apple analyst, for example, Mark Moskowitz, who says "Apple is fine."

(The report was published by JP Morgan's Asia analyst, who based the conclusion on research done on Apple's supply-chain partners.)

Gene Munster thinks Apple is just moving some production to Brazil.

Barclays also rejected the report, suggesting that the cuts might be for components, not iPads:

“We disagree with any talk of a shipment slowdown,” analysts at Barclays Capital wrote in a report. “The numbers being circulated Monday might be related to components and not to actual iPad 2 shipments, in our view. Components checks (are) not a good proxy for actual iPad product shipments.”

Susquehanna analyst Chris Caso dismissed the call as "misleading," and said the orders had been "pulled-in," not cancelled--meaning that Apple actually moved the production into the third quarter to be sure to be able to keep up with holiday demand. (This is perhaps the most bullish interpretation of all).

But FBR's Craig Berger came rushing to JP Morgan's defense, saying he's hearing exactly the same thing:

Craig Berger, with FBR Capital Markets in New York, wrote a report saying his view was “largely consistent” with the research from JPMorgan’s Asia team on cuts to orders from Apple to iPad suppliers. The cut to fourth-quarter iPad production may reflect Apple being more cautious on overall global demand given recent market turbulence, and discounting some iPad growth in China, he wrote.

“For the iPad, 3Q11 builds were cut by 5%, while 4Q11 production estimates were cut by 24%, an incremental negative for Apple related supply chain participants,” Berger wrote.

IPad builds were cut by 24 percent in the fourth quarter from 17 million to 13 million, as iPad 2 WiFi builds were revised lower, and as ‘iPad 2 Plus’ production was removed from the forecast due to “display manufacturing challenges,” Berger wrote.

So there you have it.

For what it's worth, barring further startling stories out of Asia, I suspect the world's attention will now focus almost exclusively on the iPhone 5 launch next month.

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14 Facts About Decision Making And Willpower

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In a recent study of one million people around the world, researchers found that most viewed self-control as their biggest weakness and character failure. 

"In the last 15 years we've discovered that [willpower] really is a form of energy in the brain. It's like a muscle that can be strengthened with use, but it also gets fatigued with use," says New York Times author John Tierney. "You only have a finite amount [of willpower] as you go through the day, so you should be careful to conserve it and try to save it for the emergencies."

Tierney and social psychologist Roy Baumeister recently co-authored a book titled "Willpower: The Greatest Human Strength," which looks at how willpower and decision-making are interconnected. 

We pulled out some of the best takeaways, which Tierney covered in two excellent pieces for the Times ("Do You Suffer From Decision Fatigue?" and "Why You Need To Sleep On It"). 

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Here's What You Need To Know About Oktoberfest 2011

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To the outside world, it's a time when German's (and a fair few overseas visitors) drink a lot of beer in a two week period. To those in the know, it's a festival steeped in tradition with some still present religious and historical aspects.

But, mostly, it's still about beer.

Yes, the last two weeks of September can only mean one thing, Oktoberfest.

Heartbroken that we can't be in Munich for the event, we've compiled a little fact-file just in case you were curious or wanted to host your own Oktoberfest style parties in the coming days.

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RICHARD KOO: Even Talking About Long-Term Deficit Reduction Is Indecent And Irresponsible

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In his latest note, Nomura economist Richard Koo gives decent marks to Obama's jobs plan, but says it's ultimately kind of small, and that when the Tea Party is done hacking it up, it will only be left with fairly ineffective tax cuts.

Given that Koo is such an advocate of fiscal stimulus during a balance sheet recession, this is hardly surprising.

More interesting is where he takes issue with the faction of the pro-stimulus camp, who still ultimately argue that over the long-term we need deficit reduction.

Says Koo:

Arguing need for longer-term fiscal consolidation is irresponsible
The insistence that fiscal consolidation is necessary in the longer term is like the doctor who, faced with a patient who has just been admitted to the intensive care ward, repeatedly questions the patient about his ability to afford the treatment. This is both lacking in decency and irresponsible.

If the patient loses heart after learning the cost of the treatment, he may end up spending even longer in the hospital, leading to a larger final bill. Completely ignoring the policy duration effect of fiscal policy and constantly insisting on longer-term fiscal consolidation was what prolonged Japan’s recession.
For instance, it was because Japan’s policymakers refused to give up the medium-term fiscal consolidation target of achieving a primary fiscal balance by 2011 that the government stumbled from fiscal stimulus to fiscal retrenchment and back again and, ultimately, was unable to meet its fiscal targets even once in the last 20 years.

That is why Japan’s recession lasted as long as it did and why the nation’s debt has risen to some 200% of GDP.

Awesome, fresh analysis.

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The FAA Is About To Run Out Of Money AGAIN Due To Senate Stalemate

For the second time in as many months, the Federal Aviation Administration may temporarily furlough some 80,000 employees if Congress  can't reach a deal to extend the agency's funding by Friday night.

Sen. Tom Coburn (R-OK) has held up passage of the funding extension bill, which would appropriate additional money for the FAA and federal highway transit projects, citing an objection to one component of the transit side of the legislation. The House unanimously passed that bill Tuesday, and the Senate has until midnight on Friday to also pass it before funding for the FAA runs out.

Complicating matters, Majority Leader Harry Reid (D-NV) accused Coburn of putting a hold on a $7 million FEMA emergency funding bill that, due to procedural rules, must be voted on before the Senate can move on to the FAA bill. Since the Senate passed a cloture motion on Tuesday to move ahead on the FEMA bill, they must tackle that bill first unless Reid punts on it, something he has so far refused to do.

Coburn wants to amend the FAA bill to remove a provision requiring states to spend 10% of their highway budgets on "transportation enhancement" projects, such as bike paths and green space improvements. On Wednesday, Coburn acknowledged on the Senate floor that his position would likely be unpopular, but insisted that it was, in his mind, the right thing to do.

“If the Senate wants to solve the problem with these two bills, we can split them up or we can keep them together but we need to end the enhancements right now until we get the highway trust fund healthy again,” he said, according to The Hill.

In August, the FAA shut down for 13 days when Congress failed to reach a deal on a temporary funding extension. The latest funding extension would prop up the FAA until January.

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Twitter Is About To Get Very Serious About Advertising

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Twitter needs to start pulling in serious revenue.

John Battelle believes they are close.

The Federated Media founder says that promoted tweets are going to start being a much bigger part of the business model.

Advertisers will be able to target people based on their interests targeting, their location, and their demographic.

Advertisers should be able to purchase ads on a cost-per-engagement model and a "real-time second-price bidded auction."

Long story short: more metrics=more advertisers=more revenue. Everyone wins.

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The Census Department Just Released Some Shameful New Data About Poverty In America

  x You have successfully emailed the post. The Census Bureau data is out on 2010, and it confirmed the recession's deep impact on Americans.

From the report: Household income dropped under $50,000 since 2009 to $49,44546.2 million people were under poverty in 2010, up from 43.6 million in 2009That's the largest number of people under poverty since 1959The nation's official poverty rate in 2010 jumped to 15.1 percent, up from 14.3 percent in 2009

The numbers go much further, telling a difficult story for many black and Hispanic Americans, who were some of the hardest impacted in 2010.

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HOUSE OF THE DAY: A $40 Million Château In The Chicago Suburbs Is About To Hit The Auction Block

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Le Grand Rêve, a mansion in the  Chicago is about to hit the auction block.

This  27,000-square-foot palace sits on two acres and reportedly cost $40 million to build (via Curbed). 

The lake-front property was previously listed at $32 million, but was on the market for two years and the owners chopped the price to $23 million. With no prospective buyers in sight, the house is now up for auction.

The decadent estate has six bedrooms, five full bathrooms and three half baths.

Concierge Auctions is putting the house on the auction block Oct. 29.

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FORGET FUNDAMENTALS: Here's What Investors Really Care About Right Now

  x You have successfully emailed the post. From BTIG's Dan Greenhaus, an insightful look at the anxietites of investors:

In recent meetings with clients, we have debated several topics including the apparently depressed forward PE ratio for the S&P 500 (we take issue with the word “depressed”) as well as relative value models that compare equity v. bonds through dividend and nominal bond yields. Unfortunately though, one topic continues to dominate our meetings much to the chagrin of clients; the importance of policy makers in the current environment. At the end of most meetings, we point out to clients that while we would like to spend most of the time debating the academic issues outlined above, the fact remains that our meetings are dominated by discussion of Angela Merkel, Zhou Xiaochuan, Barack Obama and George Papandreou.

That was obviously in play today:

On the one hand and in a secular sense, environments in which policy makers dominate headlines are not environments in which investors feel comfortable bidding up stocks. Simply put, PE ratios do not expand in this type of environment leaving organic earnings growth to drive price appreciation (more on 2012 earnings expectations another time). Secondarily, and today’s action is a perfect illustration, policy makers ultimately and unfortunately drive price action and while this helped at the end of the day -- news that China was interested in Italian bonds or Italy was interested in China buying its debt drove a significant end of day rally -- the fact remains that investing is made all that more difficult when returns come at the whim of those without a profit motive.

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Talking To Your Teenage Girl About Finance

If you have a teen girl in your life, you're already all too familiar with how much she thinks about the future.

She’s probably spending a lot of time looking at colleges and career choices.

Has she given any thought to her financial future?

If that seems like too much responsibility too fast, it shouldn’t. Kids should start learning about smart money management in elementary school, and it’s not as complicated as it sounds.

Running a lemonade stand?

Sorting Monopoly money?

It all counts.

However, the high school years are an especially important time to review money management skills with your teen, because she’s close to the age when she can open her own bank account or apply for her first credit card.

Women lag behind men in financial literacy. If your teen girl's age is not enough of a reason for her to learn more about money, consider the unsettling financial literacy statistics for women. Regardless of race and socioeconomic status, women still lag behind men in their knowledge of personal finance and make less money than they do. The good news? They also make better financial choices when they learn money management skills from their families. That’s where you come in. And even if your teen doesn't dream of trading on Wall Street, she’s probably more interested in money than you might think. The recession has caused many more teens (both boys and girls) to become more interested in smart money management strategies.

She knows more than you think...but not enough. Charles Schwab conducts an annual Teens and Money Survey. In 2011, they polled more than 1,000 teens 16 to 18 years old. The results surprised many people, especially when they compared them to the 2007 survey. Many more teens reported interest in saving money and learning about it. Seventy-three percent said they learned about the importance of emergency savings from the recession, and 77 percent now consider themselves "big savers" instead of "big spenders." However, the surveys also show notable declines in financial literacy, especially for 18-year-olds. In 2011, only 32 percent said they knew how credit card interest rates and fees work, down from 43 percent, and 39 percent knew how to balance a checkbook or check the accuracy of a bank statement, down from 64 percent.

Carrie Schwab-Pomerantz, senior vice president of Schwab Community Services, believes that the recession has made more young people realize they don't know as much about finance as they thought. If you’re wondering why they aren’t teaching this stuff in school, it’s time to check and see if your teen’s high school even offers an economics class. According to the National Council for Economic Education, as of 2007, only 17 states require high school students to take an economics class to graduate, and only 7 require a class in personal finance.

Get her a bank account (if you haven’t already). Approximately half of teens already have a bank account or student credit card. With proper guidance, a debit card is an excellent way for your teen girl to practice managing her finances. If she doesn’t have a bank account, get her one. Many banks, including Wells Fargo and Union Bank, offer checking accounts for teens 13 and older; you’ll just have to co-sign. Check with your local bank or credit union to see if they offer similar programs. Try to choose a “teen account” to get the flexibility your teen is likely to need. These are less likely to require a minimum balance of $1,500 (thank goodness), and may even automatically convert to a regular savings account when your teen turns 18. Use the same discretion as you would when opening a bank account for yourself. You both will learn more by doing research together.

Encourage her to get involved. Your teen girl will learn so much more about money management by working on projects of her own. If she’s so inclined, encourage her to get involved in a larger organization, whether it’s through school, church, a local club, or a national club. Below are two of many national organizations that promote financial literacy for girls.

Girls Inc. Economic Literacy Program. Girls Inc. provides girl-centered programing for girls ages 6 to 18, and one of their core components is their economic literacy program. The Equal Earners, Savvy Spenders program is for girls ages 12 to 14, and the Futures and Options program is for girls ages 15 to 18.

Girls Scouts USA. Those yummy Girl Scout cookies are more than just a fundraising tool; they’re also a key part of the Girl Scout financial literacy curriculum. During cookie season, the girls are actively involved in all the business aspects of the cookie business, including marketing strategies, budgeting, and bookkeeping.

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Google-Zagat Is About Content, Local And Travel (GOOG)

Google's acquisition of Zagat is very smart. 

The biggest thing is that it gives Google the best local content in one fell swoop, as well as relationships with thousands of local advertisers. 

Google tried to buy Yelp but failed because Yelp wants to stay independent.

Now Google can plug the best local content into its many products and have the best local search product. 

This is important because local is the next big online advertising opportunity. Daily deals are just the tip of the iceberg.

Local businesses are spending billions on ofline advertising and for over 10 years we have been waiting for an event to tip the scales and get them to start spending online. Daily deals are that trigger event: now thousands of merchants have tried advertising online and have found it to be successful, and they will be much more open to spending on other kinds of online advertising, whether it's search or social media or something else.

By buying Zagat, Google establishes a crucial presence in that burgeoning market, both on the consumer side (excellent content distributed through Google's universe) and on the business side (most local merchants know Zagat and are open to working with them).  

Imagine pulling out your Android phone, looking up local restaurants on Google Maps, seeing Zagat reviews for restaurants around you, and perhaps a coupon for some of them. This is potentially huge. 

Other aspects to the deal:

It's a content play, which Google previously shied from. Now Google is officially in the business of content written by humans. It's a very "Larry Page" deal: ambitious, out of left field, and very clever. It's also a travel deal: Google is very serious about travel, as shown by its ITA deal, and Zagat doesn't just do restaurants but hotels. In the travel industry, the money isn't in flights bookings, but in hotel bookings. This is exactly the kind of deal that, if they were smart, Yahoo or AOL should have done. AOL especially has been trying to get into local without success and has had a strategy of acquiring premium media brands. 

This post was published as part of BI Research, a new industry intelligence service from Business Insider. BI Research provides real-time research and analysis on the technology industry. The service is currently in beta and is free. To learn more and sign up, please click here.

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Citi's Willem Buiter: There's A Big Third Option For Europe That Nobody Is Thinking About

The debate about the Europe is basically a debate between two starkly opposing ideas: Breakup or full fiscal union.

In a new report, Citi's Willem Buiter argues that there's a big 3rd outcome that hardly anyone is talking about.

Says Buiter: "We suggest a third alternative as the most likely eventual outcome: ‘You Break it, You Own it Europe’."

Basically, politics will make the fully federal Europe an impossible dream.

And the cost of breaking up the EU (or leaving the EU, in the case of a single country) is just too high.

So as for this 'You Break It, You Own It Europe,' the idea is to allow a European system that allows for sovereign defaults and restructuring in a way that doesn't necessitate contagion risk.

YBIYOIE consists of the minimum institutional, fiscal and regulatory set-up to ensure
survival of the EA, including:

– i) Large enough liquidity facilities to prevent illiquid but solvent EA sovereigns and
banks from being forced into default by a loss of market access.  
– ii) A debt restructuring mechanism for insolvent EA sovereigns.  
– iii) A special resolution regime for EU banks and a Euro-Tarp for cross-border
sibanks and other sifis.

So what does this mean specifically? Buiter identifies 4 key things:

A sovereign debt restructuring mechanism that actually has some teeth to make solutions happen: "To minimise the risk of contagion and the cost of protracted negotiations between private creditors and sovereign debtors, the SDRM will also have to have a statutory component, including the ability of the body in charge of the SDRM (which will presumably
consist of representatives from the Eurogroup of finance ministers of the EA member states, from the European Commission and from the ECB (and possibly from the IMF as well) to impose a solution on all parties involved in a sovereign debt restructuring should a stalemate threaten."A special resolution mechanism for banks, and a EUROTARP for systematically important institutions.Removing the ECB has the supplier of fiscal resources as last resort.Creating a liquidity pool of last resort for sovereigns that are illiquid but remain solvent.

Finally, Buiter proposes three additional mechanisms, which are turning the EFSF into its own official counterparty to the ECB, raiding the resources of the European Investment Bank (an existing institution with lending capacity that doesn't ever get discussed).

And finally, something called Enhanced Cooperation, to deal with recalcitrant nations like Finland.

Here's his full comment on that:

As pointed out in Buiter (2011), even if not all 17 Euro Area member states ratify the
enhanced and enlarged EFSF later this year, an enhanced and enlarged EFSF can
still be created, if necessary, by the ‘coalition of the willing’ through Enhanced
Cooperation. Enhanced Cooperation is an EU procedure where a minimum of nine
EU member states are allowed to establish advanced integration or cooperation in
an area within EU structures but without the other members being involved. The
arrangements cannot violate the Treaty, of course, and they must be open to any
EU member wishing to join. Although as of March 2011, Enhanced Cooperation had
only been used in the fields of divorce law and patents, but it seems purpose-made
for overcoming the problem of a small Euro area member state vetoing EFSF
enhancement or enlargement.
This case could soon apply to Finland for the second Greek bail-out package which
will be carried out under the umbrella of the EFSF.

The recent decision by Finland to request cash collateral for its share of the
guarantees needed to fund the second Greek bailout is clearly a non-starter,
because it would undermine the ability of the Euro area member states to provide
effective financial support to any other member state. If the Greek sovereign had
cash collateral to post against the guarantees provided by the 14 Euro area
member states that are supposed contribute to the second Greek bail-out, it
probably wouldn’t have needed the second bail out in the first place. In addition, the
Netherlands, Austria, Slovakia and Slovenia have made it clear that if Finland
succeeds in getting cash collateral for its contribution to the second Greek bailout,
they too will demand such cash collateral. So either Finland will give in and provide
its guarantee without cash collateral (but perhaps with a face-saving offer as
collateral of something illiquid, impossible to value and of dubious perfectibility as
security), or Finland insists on receiving cash collateral, in which case it should be
excluded from the club of contributors to the second Greek bailout. This bailout can
then proceed without Finland (responsible for about 1.8 percent of the total
guarantee) under Enhanced Cooperation.

Buiter concludes:

Progress towards YBIYOIE will not be fast. Agreement needs to be found domestically in EA member countries and between the member states. Laws have to be written or rewritten and institutions will have to be built. Resolution of the current crisis will take up much of the EA political and institutional capacity in the near-term. Policymakers will not take the most direct route to YBIYOIE. The periodic
crises that we expect until a full resolution of the EA sovereign and banking crisis will trigger responses according to what is most opportune at that time, rather than in the long-term interest of the EA. But even resolution of the current crisis will involve substantial further private sector burden sharing which we expect to be a major element of YBIYOIE.

Europe blunders and Europe stumbles, but it never stays down. This unique hybrid between a federation of nation states and an intergovernmental alliance will likely use the current crises the way it has used all past crises: to emerge stronger and more capable of dealing with future challenges and crises.

It's almost enough to make not make you want to jump off a bridge.

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The Truth About Yahoo After Carol Bartz (YHOO, NWS)

After Yahoo CEO Carol Bartz was fired last night, cofounder Jerry Yang told employees today that the company is not for sale.

In an all hands meeting, Yang said:  "You don't ask your CEO to leave and then start a sales process."

But a source familiar with Yahoo's board proceedings tells us that Yahoo is very much for sale.

In fact, says this source, the board is planning to form two committees, staffed by independent directors: one to explore strategic options – such as a sale – and another to find a CEO replacement for Bartz.

So far, the "strategic options" committee has made a lot more progress. It's already in touch with Allen & Co, the boutique M&A powerhouse that would help Yahoo talk to interested buyers.

Meanwhile, the board's CEO search committee has yet to hire a search firm.

So is Jerry lying? Maybe not. Jerry Yang, still a huge Yahoo shareholder, infamously resisted a Yahoo sale to Microsoft.

Perhaps he's still doing his best to prevent change.

The truth is, Yahoo's future will likely follow one of three paths.

A top flight technology or media figure like former News Corp boss Peter Chernin or Marc Andreessen could join with a private equity firm like KKR and buy Yahoo and run it or hire someone else to.Yahoo could stay with its current "premier digital media company" strategy and let interim CEO Tim Morse run the thing until it is sold – perhaps to News Corporation. (Yes we're hearing that one again).The board could decide the current strategy won't work, and that Yahoo needs another "turnaround" CEO and it hire someone like Facebook COO Sheryl Sandberg, ex-OpenTable CEO Jeff Jordan, or News Corp digital boss Jon Miller.  The is the least attractive option for Yahoo's current employees and executives, who do not want a new boss to come in and hit the reset button.

Private equity or a sale into News Corp seem like the most likely options at the moment.

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The 3 Worst Things To Lie About On Your Car Insurance

  x You have successfully emailed the post. A recent study by eCar found that lying is absolutely rampant on car insurance applications -- and that women lie even more than men.

Women (68%) out-fibbed men (32%) on their license length and had their policy subsequently revoked, while 53% of women versus men (47%) lied about their "no claims" bonus, reported eCar.

We talked to Amy Danise of Insure.com to find out what else drivers are lying about and why these lies can be expensive.

Annual mileage and the use of the car. Not driving a lot is a good thing because that lowers your risk of an accident or claim. But while it seems pretty easy to toss out a raw number and assume the agent won't find out, if you live in a state where you have to do a smog test or there's a record of your odometer reading, that will record your mileage and you might have to pay out more in claims, she says.Who uses the car. It's imperative your agent knows who is getting behind the wheel, though it's not always easy to catch if a sister or elderly mother moves in, for example. So depending on the driver's record and age, if there were any accident you could suffer one of two consequences, says Danise. "The insurance company could agree to cover it, but charge for back premiums, saying you owe them money for the coverage you should have had all along, or they could say they won't cover the claim because they didn't know about it. You could have thousands of dollars that you're responsible for."Where you park your car. "Part of your price is based on your zip code, so if it happens to be a spot with a lot of car theft, you're going to get charged a higher rate," Danise says. But let's say a tree falls on your car while it's parked outside your home overnight. In that instance, you would probably get charged back premiums for the actual location of the car.

With car insurers using sophisticated analytical technology to track how you use the car and mileage-based insurance programs like State Farm's installing devices inside the car to track driver's habits, it has become "infinitely harder" to tell a lie and get away with it. And now that you know the consequences, why would you want to?

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