Newsletter of Economic and Market Events
-- RECENT FACTS -
RECORDS: DJIA trades its all-time historic record 14279.96 [Oct 11 '07]. S&P 500 1,576.09 [Oct 11 '07], DJ Transportation 5,627.85, July 7, '11 [previous high 5,514.59, Jul 19 '07], DJ Utilities [May 21 '07], S&P Mid Cap 400 1,018.65, May 2, '11 [previous high 926.67, Jul 13 '07], S&P Small Cap 600 462.42, July 7, '11 [previous high 445.82, Jul 17 '07]. Global Markets hit $62.6 trillion (10/31/07): MSCI Europe Index 1,388 (Jul 13 '07), MSCI Pacific Index 173 (Nov 1 '07), S&P Latin America 40 5,862 (May 20 '08), MSCI BRIC 466 (Oct 31, 2007) and S&P Middle East & Africa 335.17, Jan 3, '11 (previous high 307, Nov 7, 2007).
Next FOMC meeting announcement 11:15 PST Tuesday March 13.
30-year fixed mortgages fall to all time low 3.87% (2/2).
Earnings season for 4Q11 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 1Q12 is expected to be 5%.
Month of January 2012
Dow: 12,633
Dow month: 3.40%, ytd: 3.40%, 6 mo: 4.03%
S&P 500: 1,312
S&P 500 month: 4.36%, ytd: 4.36%, 6 mo: 4.36%
NASDAQ: 2,814
NASDAQ month: 8.01%, ytd: 8.01%, 6 mo: 2.10%
FOMC neutral stance (Jan 25) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. FOMC "likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."
U.S. unemployment falls to 8.3%, adding 243,000 jobs.
Earnings season for 4Q11 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 4Q11 is expected to be 8%.
Year of 2011 Best Investments in 2011
2007-09 PANIC facts (click)
Month of December 2011
Dow: 12,218
Dow 2011: 11,577.51 to 12,217.56
Dow return for 2011: 5.53%
S&P 500 2011: 1,257.64 to 1,257.6
S&P 500 return for 2011: 0.0%
NASDAQ 2011: 2,652.87 to 2,605.15
NASDAQ return for 2011: -1.8%
10 year Treasury: 1.87% yield down -43.33% prices up
World Equity Market: $45,912 trillion down -11.69%
MSCI Europe Index 717.28 down -16.49%
MSCI Asia Pacific Index 112.82 down -18.07%
S&P Latin America 40 4,135.66 down -21.16%
MSCI BRIC 267.83 down -24.85%
S&P Middle East & Africa 265.14 down -20.67%
U.S. Total stock market returned 0.9% in 2011, Stocks had below average gains, Bonds had above average gains and inflation was average. August and September had large losses while October had large gains.
Of the 5 largest sectors in the U.S. Economy: Healthcare 12.3% and Real Estate 9.1% outperformed, Natural Resources 2.8%, Technology 2.6% while Financials -17.1% underperformed. By size: Large Cap returned 0%, Small Cap -0.2%, Mid Cap -3.1% while Micro Cap lost -10.9%. Both gold 10.2% and oil 7.2% rose while commodity prices (CRB) fell -10.2%.
Global markets fell by -11.7% of the World's largest economic regions: Europe -16.5%, Asia -18.1%, Latin America -21.2% and Emerging Markets -24.9% all underperformed. Of the World's largest Developed non-U.S. Economies: Britain -5.6%, Canada -11.1%, Germany -14.7%, France -16.9% while Japan lost -17.3%. In the Emerging markets Brazil -18.1%, China -21.7%, Russia -22.1% and India -24.6%. Hedge funds -5% and Private Equity both underperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns in U.S Treasuries, Healthcare, Real Estate and the commodities gold and oil.
Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
U.S. unemployment at 8.5% to 9.2% remained a major concern. 2011 gdp 1.7% with 1.64 million jobs added.
FOMC neutral stance (Dec 13) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Federal Reserve (QE2) to "purchase, by the end of June 2012, $400 billion of Treasury
securities with remaining maturities of 6 years to 30 years and to sell
an equal amount of Treasury securities with remaining maturities of 3
years or less" and "reinvest principal payments from its holdings of
agency debt and agency mortgage-backed securities in agency
mortgage-backed securities. In addition, the Committee will maintain its
existing policy of rolling over maturing Treasury securities at
auction".
- Federal Reserve "will maintain its existing policy of reinvesting principal
payments from its securities holdings" - System Open Market Account at
about $2.654 trillion, about $300 billion of purchases over the next 12
months.
- Federal Reserve (11/30) extends U.S. dollar swap lines to Feb. 1, 2013
with the European Central Bank and the central banks of Canada,
Switzerland, Japan and the U.K.
- Federal Reserve believes challenges facing the U.S. economy "are likely to
warrant exceptionally low levels for the federal funds rate at least
through mid-2013."
- Federal Reserve returns $76.9 billion to the U.S. Treasury. Fed's balance sheet rose to a record $2.928 trillion on Dec. 28.
Treasuries returned 9.6% in 2011, 5.9% in 2010, up from -3.7% in 2009 and 14% in 2008. 30-year fixed mortgages fall to all time low 3.91% (12/21).
2yr Treasuries trade 0.1431% (9/20) and 10yr trade 1.6714 (9/23). U.S. 1 month Treasuries trade at a negative yield : 6/27-30, 7/6-7,13-20, 8/4-8, 9/8-30, 10-31, 10/4-7 and 11-12 and U.S. 3 month Treasuries negative: 7/5,7,13-14, 8/4-8,19-30 9/12,14-19,22-26 and 10/3-7.
Gold trades at an all-time high of $1,923.70 (Sep 6).
- Silver trades at an all-time high of $49.82 (Apr 25), surpassing $49.45
during the silver Hunt brothers scandal, Jan 18, 1980. Copper trade at
an all-time high of $4.6495 lb (Feb 15).
Obama signs Budget Control Act of 2011 (8/2): $917 billion deficit
reduction and budget caps on spending through 2021.
- Obama signs Temporary Payroll Tax Cut Continuation Act of 2011 ($33 billion) a 2 month stopgap.
- ECB raises rates from 1% to 1.25% (May) and to 1.5% (July). ECB lowers rate (Nov 3) to 1.25% as Mario Draghi succeeds Jean-Claude Trichet (11/1) and starts 1 year bond purchase of unlimited size. ECB lowers interest rate (12/8) to 1% while Euro-area governments must rollover €1.1 trillion of long and short-term debt in 2012 while European banks have about $665 billion of debt coming due in
the first 6 months of 2012.
- European Central Bank (12/21) lends €489 billion ($638 billion)
to 523 banks under a (restarted) 3 year lending facility. ECB's balance sheet rose to a record €2.73 trillion ($3.55 trillion) 12/28.
- Greek 10-year Bond yields 36.142% 12/21/11. Portugal 10-year Bond yields 14.328% 12/1/11. Ireland 10-year Bond yields 14.219% 7/15/11. Italy 10-year Bond yields 7.483% 11/9/11. Spain 10-year Bond yields 6.729% 11/25/11.
Mergers and acquisitions rose to $2.26 trillion up from $2.19 trillion in 2010 and $1.77 trillion 2009, $2.5 trillion 2008 and 2007's record $4.04 trillion. Venture capital rises to $6.57 billion up 19%, $5.52 billion in 2010.
EU (10/27) agrees to sovereign debt crisis fixes: private holders of
Greek debt accept a 50% writedown, European Financial Stability Facility
(EFSF) leveraged to €1 trillion, 70 EU banks required to
increase core capital levels to 9% and recapitalize (by June 2012)
raising €106 billion in new reserves.
- The €440bn EFSF (European Financial Stability Facility)
bail-out fund can now help countries not currently getting bail-outs,
including precautionary lines of credit, the ability to recapitalize any
struggling bank in the Eurozone, and buy bonds on secondary markets in
"exceptional" circumstances (subject to the approval of the European
Central Bank). The ESM (2012) is expected to have €500 billion in lending capacity.
Greece (7/21) receives a €109 billion ($157 billion) second EU/ECB/IMF aid package - Greek Parliament approves budget to receive aid.
Portugal gets €78 billion bailout package (€12 billion for banks).
EU banks hold $147 billion of Greek sovereign bonds and $115 billion of
Portuguese and Irish debt - 5% of annual European Union gdp.
Swiss Central bank (Sep 6) intervenes imposing a Euro-Swiss franc "minimum rate of 1.20" .
Japanese yen rallies to all-time high of ¥75.31 on 10/31.
S&P downgrades U.S. Treasuries from AAA to AA+ also Fannie Mae,
Freddie Mac, the Federal Home Loan Banks, U.S.'s 4 Clearinghouses, 744
U.S. Federal, State and Agency bonds and about 11,500 Municipal bonds.
China's rural population falls from 81% (1979) to below 50% (2011) - the number of people living in towns and cities increased to 690.79 million. China's foreign-exchange reserves exceed $3 trillion in March 2011.
Arab spring - Overthrew governments in Tunisia. Then Egypt (Feb 11, Hosni Mubarak). Libyan revolution and civil war (Aug 23, Muammar Gaddafi). Syria suspended from the Arab League (Nov 12).
Japan Sendai 9.0 Earthquake and nuclear accident, near 27,000 deaths.
- 2011 deadliest year for tornadoes 549 deaths (157 fatalities in Joplin, Mo.), causing $28 billion of damage.
- Mississippi River exceeds some damages caused by the Great Mississippi Flood of 1927, causing $4 billion of damage.
- Hurricane Irene makes U.S. landfall (Aug 27) at Cape Lookout, N.C. and
works its way up the Eastern seaboard toward Maine taking 45 lives and
causing $8 billion of damage - over 7 million US homes and
businesses lost power across 13 states.
FHFA (Federal Housing Finance Agency, conservator for Fannie Mae and
Freddie Mac) files lawsuits against 17 financial institutions alleging
over $196 billion of violations in the sale of residential private-label mortgage-backed securities.
- Jefferson County, Alabama (11/9) files largest U.S. municipal bankruptcy
with more than $3 billion of sewer-system debt - Orange County, CA
filed $2 billion in obligations in 1994.
- MF Global Holdings files bankruptcy (10/31) with debts of $39.7 billion
and assets of $41 billion, 8 largest U.S. bankruptcy.
- UBS, Kweku Adoboli (9/16) charged with $2.3 billion fraud by abuse of position and false accounting.
- Raj Rajaratnam, founder of Galleon hedge fund (managed $7 billion), sentenced to 11 years. Perfect Hedge: 56 found guilty of insider trading.
Dow month: 1.42%, 6 mo: -1.80%, ytd: 5.53%
S&P 500: 1,258
S&P 500 month: 0.85%, 6 mo: -4.73%, ytd: 0.0%
NASDAQ: 2,605
NASDAQ month: -0.57%, 6 mo: -6.05%, ytd: -1.80%
U.S. unemployment falls to 8.5%, adding 203,000 jobs.
FOMC neutral stance (Dec 13) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
30-year fixed mortgages fall to all time low 3.91% (12/21).
Obama signs Temporary Payroll Tax Cut Continuation Act of 2011 ($33 billion) a 2 month stopgap: 160 million Americans continue their payroll tax cuts and 2 million Americans without jobs for 6 months continue their unemployment benefits. Doctors do no get a 27% cut in their Medicare payments - paid by increases on guarantee fees on new home loans backed by Fannie Mae, Freddie Mac and Ginnie Mae.
European Central Bank (12/21) lends €489 billion ($638 billion) to 523 banks under a (restarted) 3 year lending facility. ECB's balance sheet rose to a record €2.73 trillion ($3.55 trillion) 12/28.
ECB lowers interest rate (12/8) to 1% from 1.25%. Euro-area governments must rollover €1.1 trillion of long and short-term debt in 2012 while European banks have about $665 billion of debt coming due in the first 6 months of 2012.
Month of November 2011
Dow: 12,046
Dow month: 0.76%, 6 mo: -4.16%, ytd: 4.05%
S&P 500: 1,247
S&P 500 month: -0.48%, 6 mo: -7.29%, ytd: -0.85%
NASDAQ: 2,620
NASDAQ month: -2.38%, 6 mo: -7.58%, ytd: -1.24%
U.S. unemployment falls to 8.7%, adding 157,000 jobs.
FOMC neutral stance (Nov 2) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Federal Reserve (11/30) extends U.S. dollar swap lines to Feb. 1, 2013 with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.
ECB lowers rate (Nov 3) to 1.25% from 1.50% as Mario Draghi succeeds Jean-Claude Trichet on Nov. 1.
Jefferson County, Alabama (11/9) files largest U.S. municipal bankruptcy with more than $3 billion of sewer-system debt - Orange County, CA filed $2 billion in obligations in 1994.
Month of October 2011
Dow: 11,955
Dow month: 9.55%, 6 mo: -6.67%, ytd: 3.26%
S&P 500: 1,253
S&P 500 month: 10.79%, 6 mo: -8.07%, ytd: -0.37%
NASDAQ: 2,684
NASDAQ month: 11.14%, 6 mo: -6.58%, ytd: 1.17%
U.S. unemployment falls to 8.9%, adding 112,000 jobs.
EU (10/27) agrees to sovereign debt crisis fixes: private holders of Greek debt accept a 50% writedown, European Financial Stability Facility (EFSF) leveraged to €1 trillion, 70 EU banks required to increase core capital levels to 9% and recapitalize (by June 2012) raising €106 billion in new reserves.
German 10-year Bund yields 1.636% (9/23) record low, in a flight to quality, while Greek 2-year Bond yields rise to 83.48% (10/26) and Greek 10-year Bond yields 26.70% (9/15).
30yr Treasuries trade 2.6922% (10/4). 1 month Treasuries trade at a negative yield : 10/4-7, 11-12 and U.S. 3 month Treasuries negative: 10/3-7.
Obama administration expands rules on HARP (Home Affordable Refinance Program) fewer than 895,000 borrowers helped, number could double over next 2 years. Student loan forgiveness - 1.6 million student borrowers will be eligible to lower their payments 2012.
MF Global Holdings files bankruptcy (10/31) with debts of $39.7 billion and assets of $41 billion, 8 largest U.S. bankruptcy - $1.2 billion of customer money missing.
Raj Rajaratnam, founder of Galleon hedge fund (managed $7 billion), sentenced to 11 years (10/13, fined $63.8 million) for securities fraud and conspiracy through expert networks with ties to Goldman Sachs and Silicon Valley technology companies - additionally, a $93 million SEC civil settlement, 11/8. Highest profile insider trading case since Ivan Boesky (November 14, 1986, pleaded guilty to illegal stock manipulation, paying $100 million) and Michael Milken (April 24, 1990, pleaded guilty to securities and tax violations - paying $200 million in fines, $400 million to investors. Also Drexel Burnham Lambert agreed to pay $650 million (Feb 13 1990, fines and restitution half went to investor's and client's civil claims - DBL files for bankruptcy April 28 2003), also guilty Dennis Levine and Martin Siegel).
Earnings season for 3Q11 for the S&P 500 index was positive 17%.
Month of September 2011
Dow: 10,913
Dow month: -6.04%, 6 mo: -11.42%, ytd: -5.74%
S&P 500: 1,131
S&P 500 month: -7.22%, 6 mo: -14.71%, ytd: -10.07%
NASDAQ: 2,415
NASDAQ month: -6.36%, 6 mo: -13.16%, ytd: -8.97%
FOMC neutral stance (Sep 21) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. FOMC to "purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less" and "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction".
U.S. unemployment unchanged 9.1%, adding 210,000 jobs.
2yr Treasuries trade 0.1431% (9/20) and 10yr trade 1.6714 (9/23). 1 month Treasuries trade at a negative yield : 9/8-30 and U.S. 3 month Treasuries negative: 9/12, 14-19, 22-26.
FHFA (Federal Housing Finance Agency, conservator for Fannie Mae and Freddie Mac) files lawsuits against 17 financial institutions alleging over $196 billion of violations in the sale of residential private-label mortgage-backed securities: JPMorgan Chase $33 billion, Royal Bank of Scotland $30.4 billion, Countrywide $26.6 billion, Merrill Lynch (First Franklin Financial) $24.9 billion, Deutsche Bank $14.2 billion, Credit Suisse $14.1 billion, Goldman Sachs $11.1 billion, Morgan Stanley $10.6 billion, HSBC $6.2 billion, Bank of America $6 billion, Ally Financial (GMAC) $6 billion, Barclays $4.9 billion, Citigroup $3.5 billion, Nomura $2 billion, Societe Generale $1.3 billion, First Horizon National $0.88 billion and
General Electric $0.55 billion.
Gold trades at an all-time high of $1,923.70 (Sep 6).
Swiss Central bank (Sep 6) intervenes imposing a Euro-Swiss franc "minimum rate of 1.20" (first intervention since 1978, against the Deutsche mark). Record EUR/CHF 1.0075 (Aug. 9), intervention from 1.1019 to 1.2189 (Sep 6, 10.6% depreciation), EUR/CHF 1.6825 on October 11, 2007.
UBS, Kweku Adoboli (9/16) charged with $2.3 billion fraud by abuse of position and false accounting.
Month of August 2011
Dow: 11,614
Dow month: -4.36%, 6 mo: -5.01%, ytd: 0.32%
S&P 500: 1,219
S&P 500 month: -5.65%, 6 mo: -8.14%, ytd: -3.07%
NASDAQ: 2,579
NASDAQ month: -6.42%, 6 mo: -7.30%, ytd: -2.78%
FOMC neutral stance (Aug 9) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. The Fed believes challenges facing the U.S. economy "are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."
U.S. unemployment unchanged 9.1%, adding 104,000 jobs.
S&P downgrades U.S. Treasuries from AAA to AA+ also Fannie Mae, Freddie Mac, the Federal Home Loan Banks, U.S.'s 4 Clearinghouses, 744 U.S. Federal, State and Agency bonds and about 11,500 Municipal bonds. Global markets loses nearly $9 trillion from $55t (7/26) to $46t (8/10). Vix trade 48 (8/8) up from 17.15 (7/21). 460 stocks triggered the SEC short sale rule (8/4, 10% or more) when DOW falls 512. U.S. 1 month Treasuries trade at a negative yield : 8/4-8, 10-31 and U.S. 3 month Treasuries negative: 8/4-8, 19-30.
Obama signs Budget Control Act of 2011 (8/2): $917 billion deficit reduction and budget caps on spending through 2021 (excluding certain "program integrity" initiatives), requires Congress to vote on a balanced budget amendment, increases the national debt limit initially by $400 billion and future increases of $2.1-2.4 trillion. Creates a Congressional Joint Select Committee on Deficit Reduction to propose deficit reduction - $1.5 trillion in spending cuts by Nov. 23 if the committee fails establishes automatic cuts up to $1.2 trillion. Congress failings cause: U.S. 1 month Treasuries trade at a negative yield : 6/27-30, 7/6-7,13-20 and U.S. 3 month Treasuries negative: 7/5,7,13-14.
European Central Bank starts 6 month bond purchase of unlimited size (Greece, Portugal and Ireland) and Securities Markets Program (lending unlimited amounts for 1 week, 1, 3 and 6 months) through 2011. Italian 10 year bonds trade 6.40% (8/5) and Spanish 6.45% (8/2). ECB agrees to purchase Italian and Spanish Government bonds, August 5. France, Spain, Italy and Belgium impose short-selling bans, August 12.
Hurricane Irene makes U.S. landfall (Aug 27) at Cape Lookout, N.C. and works its way up the Eastern seaboard toward Maine taking 45 lives and causing over $8 billion of damage - over 7 million US homes and businesses lost power across 13 states.
Month of July 2011
Dow: 12,143
Dow month: -2.40%, 6 mo: 2.12%, ytd: 4.88%
S&P 500: 1,292
S&P 500 month: -2.12%, 6 mo: 0.47%, ytd: 2.73%
NASDAQ: 2,756
NASDAQ month: -0.61%, 6 mo: 2.07%, ytd: 3.89%
U.S. unemployment falls to 9.1%, adding 127,000 jobs.
European Central Bank (ECB, 7/7) raises rates 25bps to 1.5%.
Greece (7/21) receives a €109 billion ($157 billion) second EU/ECB/IMF aid package. Private sector bondholders (Europe's biggest banks and insurance companies) will swap and/or rollover (€54 of €135 billion) current Greek debt getting 4 options: 3 forms of debt exchange and 1 rollover plan - with different durations (up to 30yrs) and coupons (up to 6.8%). Private investors will take a 21% loss of their current bond holdings. Greek 2 yr note traded 40.46% (7/20) and 10 yr Greek bond traded 18.38% (7/19). The notionally voluntary scheme triggers a temporary Greek sovereign selective default rating. Greece, Ireland's and Portugal's interest rate is reduced to about 3.5% and their repayment schedules lengthened from 7.5 years to 15-30 years. The €440bn EFSF (European Financial Stability Facility) bail-out fund can now help countries not currently getting bail-outs, including precautionary lines of credit, the ability to recapitalize any struggling bank in the Eurozone, and buy bonds on secondary markets in "exceptional" circumstances (subject to the approval of the European Central Bank). ISDA (International Swaps & Derivatives Association) cites plan "should not trigger credit-default swaps" on the nation because it's "expressly voluntary". A credit event can be caused by a reduction in principal or interest, postponement or deferral of payments or a change in the ranking or currency of obligations.
Earnings season for 2Q11 for the S&P 500 index was positive 12%.
Month of June 2011
Dow: 12,441
Dow month: -1.02%, 6 mo: 7.46%, ytd: 7.46%
S&P 500: 1,320
S&P 500 month: -1.86%, 6 mo: 4.96%, ytd: 4.96%
NASDAQ: 2,773
NASDAQ month: -2.19%, 6 mo: 4.53%, ytd: 4.53%
FOMC neutral stance (Jun 22) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. The Fed "will maintain its existing policy of reinvesting principal payments from its securities holdings" - System Open Market Account at about $2.654 trillion, about $300 billion of purchases over the next 12 months.
U.S. unemployment rises to 9.2%, adding 20,000 jobs.
U.S. Department of Energy (6/23) and International Energy Agency (28 member nations) each will release 30 million barrels of oil from Strategic Petroleum Reserves over next 30 days. Emergency stockpiles were released after Hurricane Katrina (2005) and the 1991 Persian Gulf War, since 1974. Saudis may increase production by 1 million barrels/day after OPEC failed to increase production on June 8, oil traded $114.83 (May 2).
Greek Parliament approves budget to receive €12 billion ($17 billion) rescue tranche. Austerity program imposes a personal income tax of 1-5%, taxes on incomes starting at €8,000 (from €12,000) and a €300 tax on the self-employed with the lowest rate 10%, exempted people under 30 years old, pensioners over 65 and the disabled. Greek 2 yr note traded 30.32% (6/16) and 10 yr Greek bond traded 18.35% (6/17). EU banks hold $147 billion of Greek sovereign bonds and $115 billion of Portuguese and Irish debt - 5% of annual European Union gdp.
Fiat buys 6.6% (6/3) equity stake in Chrysler for $560 million from U.S. Treasury, raising Fiat's holding to 52%.
Bank of America will pay $8.5 billion to 22 investors (PIMCO, BlackRock, MetLife, the Federal Reserve Bank of New York, etc.) holding $56 billion (530 mortgage trusts with an original loan balance of $424 billion) in private-label mortgage-backed securities acquired through its Countrywide Financial deal.
Month of May 2011
Dow: 12,569
Dow month: -1.88, ytd: 8.56%, 6 mo: 14.20%
S&P 500: 1,345
S&P 500 month: -1.32%, ytd: 6.95%, 6 mo: 13.98%
NASDAQ: 2,835
NASDAQ month: -1.32, ytd: 6.87%, 6 mo: 13.49%
U.S. unemployment rises to 9.1%, adding 53,000 jobs.
Portugal gets €78 billion bailout package (€12 billion for banks) cutting deficit to 3% of gdp by 2013. Portugal's public debt totals €160.4 billion (93% of gdp). European Union, European Central Bank and International Monetary Fund each contribute €26 billion (average rate 5-5.25%).
AIG repays (5/24) Treasury in $8.7 billion stock offering (300 million shares at $29, above its $28.72 breakeven). AIG has sold 33 businesses and raised more than $57 billion in cash and securities since 2008 bailout. Treasury's AIG holdings fall to 77% from 92.1%.
Chrysler (operated by Fiat) repays (5/24) U.S. government $5.9 billion and Canadian and Ontario provincial government $1.7 billion - U.S. government now owns 6.6%, Canadian government 1.7% and Chrysler retiree health-care trust (UAW) 46%.
Mississippi River exceeds some damages caused by the Great Mississippi Flood of 1927 from Indiana to Louisiana. National Flood Insurance Program covers 5.6 million policies and provides $1.2 trillion in coverage, currently $18 billion in debt - because of 2005 claims caused by Hurricanes Katrina and Rita.
Joplin, Missouri (5/22) deadliest US tornado 134 deaths (116 killed in Flint, Michigan, 1953), destroying 8,000 buildings. 2011 deadliest year for tornadoes since 1950, with 523 deaths.
Month of April 2011
Dow: 12,810
Dow month: 3.98%, ytd: 10.65%, 6 mo: 15.22%
S&P 500: 1,363
S&P 500 month: 2.79%, ytd: 8.38%, 6 mo: 15.22%
NASDAQ: 2,873
NASDAQ month: 3.31%, ytd: 8.30%, 6 mo: 14.60%
FOMC neutral stance (Apr 27) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. Federal Reserve will complete $600 billion of purchases and continue to reinvest maturing securities (both Treasuries and MBS) maintaining their current balance sheet.
U.S. unemployment rises to 9.0%, adding 232,000 jobs.
ECB raises rates to 1.25% from 1% (May 2009).
Silver trades at an all-time high of $49.82 (Apr 25), surpassing $49.45 during the silver Hunt brothers scandal, Jan 18, 1980. Corrects to $32.50 (5/12, 34.3%).
Tornadoes April 25-28, 2011 - towns across Alabama, Mississippi, Tennessee, Arkansas, Georgia, Virginia and Louisiana. Some 301-426 tornadoes (3 level 5s over 200mph and up to a mile wide) 10,000 buildings destroyed killing over 350 people.
Earnings season for 1Q11 for the S&P 500 index was positive 19%.
Month of March 2011
Dow: 12,320
Dow month: 0.77%, ytd: 6.41%, 6 mo: 14.20%
S&P 500: 1,326
S&P 500 month: -0.08%, ytd: 5.44%, 6 mo: 16.21%
NASDAQ: 2,781
NASDAQ month: -0.04%, ytd: 4.83%, 6 mo: 17.44%
U.S. unemployment falls to 8.8%, adding 221,000 jobs.
FOMC neutral stance (Mar 15) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Japanese yen rallies to all-time high of ¥76.25 on 3/16 (¥79.75 in April 1995) as BOJ injects emergency funds of ¥43.6 trillion ($539 billion, rallying to ¥85.53 on April 6). G7 intervenes to sell Japanese yen (first intervention since September 2000 when G7 bought Euros). Speculator's expectations of fund repatriation by Japanese insurers, unwinding of the yen-carry trade and loss-cut sales of foreign currencies in margin trading - following Japan's earthquake.
Cotton trades at an all-time high of $2.197 (Mar 7) following global supply disruptions - up 200% from a $0.60 average. CRB trades at a new all-time high of 688.3 (Mar 7).
Libyan revolution - U.N. Security Council authorize no-fly zone (3/18), first major attack (3/19) by coalition forces "Odyssey Dawn" strikes surface-to-air missiles, early warning sites and key communication centers to stop Moammar Gadhafi's from attacks on his own people (ruled since military coup in 1969, 41 years) as Gadhafi's troops advanced on rebel pro-democracy movement in Benghazi.
Japan Sendai 9.0 Earthquake (Mar 11, 232 miles north of Tokyo), 23-50 foot tsunami and 7.0, 7.4 and 7.2 aftershocks follow within 45 minutes killing near 27,000. Crescent City waves surge 8.1 feet destroying harbor and Santa Cruz waves cause $25 million of harbor damage, in California. Oshika Peninsula shifts over 17 feet and drops by over 4 feet. Fukushima nuclear plant's 3 of 4 nuclear reactors melted down and leak radiation.
Month of February 2011
Dow: 12,226
Dow month: 2.82%, ytd: 5.60%, 6 mo: 22.08%
S&P 500: 1,327
S&P 500 month: 3.19%, ytd: 5.52%, 6 mo: 26.50%
NASDAQ: 2,782
NASDAQ month: 3.04%, ytd: 4.87%, 6 mo: 31.60%
U.S. unemployment falls to 8.9%, adding 194,000 jobs.
Copper trade at an all-time high of $4.6495 lb (Feb 15).
Deutsche Boerse (Eurex / Frankfurt Stock Exchange / International Securities Exchange) offers to buy New York Stock Exchange (NYSE / Euronext / Amex Options / NYSE Arca Options) for $9.53 billion creating the world's largest equities and derivatives market.
Egypt (Feb 11) - President Hosni Mubarak steps down as president and hands power to the military following 18 days of protests in Tahrir Square that began January 25, after Tunisia's President Zine El Abidine Ben Ali stepped down on January 14.
Month of January 2011
Dow: 11,891
Dow month: 2.71%, ytd: 2.71%, 6 mo: 13.62%
S&P 500: 1,286
S&P 500 month: 2.26%, ytd: 2.26%, 6 mo: 16.70%
NASDAQ: 2,700
NASDAQ month: 1.78%, ytd: 1.78%, 6 mo: 19.73%
U.S. unemployment falls to 9.0%, adding 63,000 jobs.
FOMC neutral stance (Jan 26) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Earnings season for 4Q10 for the S&P 500 index was positive 37%.
Year of 2010 Best Investments in 2010
2010 complete News (click)
Year of 2009 Best Investments in 2009
2009 complete News (click)
Year of 2008 Best Investments in 2008
2008 complete News (click)
Year of 2007 Best Investments in 2007
2007 complete News (click)
Year of 2006 Best Investments in 2006
2006 complete complete News (click)
Year of 2005 Best Investments in 2005
2005 complete News (click)
Year of 2004 Best Investments in 2004 News in 2004
Dow 2010: 10,428.05 to 11,577.51
Dow return for 2010: 11.02%
S&P 500 2010: 1,115.10 to 1,257.64
S&P 500 return for 2010: 12.78%
NASDAQ 2010: 2,269.15 to 2,652.87
NASDAQ return for 2010: 16.91%
10 year Treasury: 3.30% yield down -13.39% prices up
World Equity Market: $51,998 trillion up 13.13%
MSCI Europe Index 858.94 down -2,25%
MSCI Asia Pacific Index 137.70 up 14.32%
S&P Latin America 40 5,245.92 up 14.05%
MSCI BRIC 356.40 up 7.26%
S&P Middle East & Africa 334.21 up 25.95%
U.S. Total stock market returned 15.6% in 2010, Stocks had above average gains, Bonds had above average gains and inflation was below average. Only January, May, June and August had large losses in all 3 major U.S. indexes.
Of the 5 largest sectors in the U.S. Economy: Real Estate 21.8%, Natural Resources 21.1%, Financials 11.6% and Technology 10.9% over-performed, while Healthcare 2.9% underperformed. By size: Mid Cap, Small Cap and Micro Cap returned 25-27% while Large Cap returned 12.8%. Both gold 28.6% and oil 15.7% rose with commodity prices (CRB) which rose a historic 122.5%.
Global markets rose 13.1% of the World's largest economic regions: Asia 14.3%, Latin America 14.1% and Emerging Markets 7.3% while Europe -2.2% underperformed. Of the World's largest Developed non-U.S. Economies: Germany 16.1%, Canada 14.5%, Britain 9.0% while Japan -3.0% and France -3.3% lost. In the Emerging markets Russia 22.7% and India 17.4% while Brazil 1.1% and China -14.3% lost. Hedge funds 8% (in 2009, 20%) and Private Equity both overperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns in Real Estate, Mid Cap, Small Cap, Micro Cap and commodity markets.
Months 2009-12 (click)
2007-09 PANIC facts (click)
U.S. unemployment at 9.4% to 9.9% remained a major concern. 2010 gdp 3%, after shrinking -2.6% in 2009. 8.75 million jobs lost during recession, in 2010 940,000 jobs added.
Gold trade at a new all-time high of $1,432.50 (Dec 7). Silver traded $30.93 (Dec 30), highest since March 1980. Copper trade at an all-time high of $4.372 lb (Dec 30). CRB trade at a new all-time high of 630.5 (Dec 30).
Treasuries returned 5.9% in 2010, up from -3.72% in 2009 and 14% in 2008 - treasuries have averaged a 8.15% return since 1978. Corporate bonds yields fell to 3.36% (Oct. 11) down from 7.41% (March 17, 2009), returning 7.12% compared with 16.3% in 2009.
Federal Reserve continues to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities: $250-300 billion plus $600 billion of new purchases of longer-term Treasury securities through the end of the 2nd quarter of 2011 (about $110 billion per month with an average duration of between 5 and 6 years).
- Fed extends U.S. Dollar Liquidity Swaps extended (12/17/10) following troubles in Ireland (through August 1, 2011).
- Fed extends GSE Mortgage-Backed Securities and GSE Debt Purchases (8/10/08). System Open Market Account (debt purchases) concentrating new purchases in 2-10 year Treasuries, up to $10-25 billion/ month.
- Fed extends U.S. Dollar Liquidity Swaps extended (5/9/10) following the May 6, 2010 DJIA interday 998 pt fall (through January 2011).
- FOMC increases the Discount rate 25 bps to 0.75% (February 19) its first increase (since Jun 29, 2006) when the Fed raised from 5.00% to 5.25%. Then the Emergency FOMC inter-meeting cut (August 17, 2007) to 5.75% from 6.25% (at outset of credit crisis) and the Fed Funds rate cut to 4.75% from 5.25% (discount rate to 5.25% from 5.75%, September 18).
Dec 17 - Middle Class Tax Relief Act of 2010 ($858 billion bill for 2011-12). Extended Income tax rates, Extended Alternative Minimum Tax,Social Security tax reduction, Expanded Child tax credit, Estate tax, Unemployed, Extended Capital Gains rates, Marriage penalty relief, Expanded College credit and Individual tax break extensions.
July 21 - Dodd-Frank Wall Street Reform and Consumer Protection Act signed. Requiring 243 new rules to be writen by 11 different federal agencies. Creates a Financial Stability Oversight Council, a Consumer Financial Protection Bureau, a Federal Insurance Office, OTC derivatives clearing, stricter Bank Capital standards (including restricted Propriety trading), Credit-rating business oversight, new authorities for the SEC and required registration for Hedge funds and Private Equity funds - phasing in through 2022.
Obama signs Small Business Jobs and Credit Act of 2010 ($30 billion) $18 billion of federal funds for small bank small businesses loans and $12 billion in business tax breaks.
- $26.1 billion Education Jobs and Medicaid Assistance Act of 2010 providing $10 billion for state teacher's payrolls and $16.1 for state Medicaid funding.
- $34 billion Unemployment Compensation Extension Act of 2010 extending unemployment benefits.
- $18.2 billion Continuing Extension Act of 2010 extending unemployment benefits.
- $940 billion (over 10 years) Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act of 2010 extending health care coverage to 32 million. Subsidized coverage for uninsured Americans and phasing out pre-existing conditions by 2014 - financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and higher-earning Americans. Student loan reform - ending government subsidies to private lenders. Healthcare.gov
- $17.6 billion Hiring Incentives to Restore Employment (HIRE) Act.
DJIA falls 998.5 points (May 6, a 1010.14 point swing, markets lose $862 billion in 20 minutes), the 9.2% plunge its biggest since the 1987 crash.
Mergers and acquisitions rose to $2.19 trillion in 2010, up from $1.77 trillion in 2009, $2.5 trillion 2008 and 2007's record $4.04 trillion.
SEC, June 11 - Exchanges mandated uniform "circuit breakers" across NYSE, Nasdaq, BATS Global Markets, Direct Edge, International Securities Exchange, Chicago Board Options Exchange, CME Group Inc. and Intercontinental Exchange (following the May 6, 2010).
- SEC restricts short sales (February 24) once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.
EU leaders (16 euro nations) agree to a €750 billion ($940 billion) stabilization facility fund for the Euro.
Basel III, 27 nations agree to raising bank Tier 1 capital ratio to 6% (core to 4.5%, up from 4% and core of 2%) and a capital conservation buffer up to 2.5% - phased in 2013-18.
China surpasses Japan to become the world's second largest economy. Japan was second since 1968, when it surpassed West Germany. Chinese RMB (renminbi) fixed-rate ends on June 21 (band, low 6.78 8/26/08 to high 6.885 12/1/08) and re-floats against the U.S. dollar after nearly 2 years.
Prime Minister Brian Cowen negotiates Ireland's rescue as government budget deficit reaches 32% of gdp, a bailout from the European Union and the International Monetary Fund.
Greece receives a €110 billion ($146 billion) rescue package, EU nations (led by Germany and France) €80 billion and the IMF €30 billion. Greek government receives EU-IMF aid backstop (€30 billion EU and up to €15 billion IMF, total $61 billion) at below-market interest rates.
GM goes public with an IPO with both overallotments the deal raises a total of $23.1 billion. General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.
Goldman Sachs settles $550 million SEC fraud (July 15), largest SEC penalty in Wall Street history.
British Petroleum's Deepwater Horizon oil rig explodes (April 20), 50 miles southeast of Louisiana in the Gulf of Mexico, 11 crewmen dead. British Petroleum stops leaking Macondo well July 15 (4-5 million barrels).
Haiti Earthquake 7.0 (Jan 14) 16 mi from Port-au-Prince, 200,000 people may have died. U.N. suffers its greatest loss of life (101) in single event - G7 to cancel all Haiti bilateral debt.
Chilean earthquake 8.8 (Feb. 28) 70 miles north-east of Concepcion and 200 miles south-west of Santiago, 500 people may have died about 1.5 million homes damaged. Chile's 1960 Valdivia earthquake 9.5 (May 22, 1960) is to date the most powerful earthquake ever recorded, killing 1,700-6,000 people.
Vancouver 2010 Olympics - U.S. wins most medals 37 (9 golds) while Canada wins the most golds 14 (26 total), Germany wins 30 medals and Norway 23. Apolo Anton Ohno wins 3 medals (1 Silver and 2 Bronzes) for a total of 8 Olympic medals the most-decorated American male Winter Olympian.
Dow 2009: 8,776.39 to 10,428.05
Dow return for 2009: 18.82%
S&P 500 2009: 903.25 to 1,115.10
S&P 500 return for 2009: 23.45%
NASDAQ 2009: 1,577.03 to 2,269.15
NASDAQ return for 2009: 43.89%
10 year Treasury: 3.81% yield up 72.40% prices down
World Equity Market: $45.958 trillion up 43.03%
MSCI Europe Index 878.70 up 22.40%
MSCI Asia Pacific Index 120.45 up 34.64%
S&P Latin America 40 4,599.67 up 94.66%
MSCI BRIC 332.29 up 89.25%
S&P Middle East & Africa 265.35 up 48.94%
From panic lows to year-end:
Global Markets rises from $25.5 [Mar 9 '09] to $45.958 trillion
gaining $20.5 trillion or 80.2%:
DJIA rises 61.2% from 6,469.95 [Mar 6 '09] to 10,428.05
S&P 500 rises 67.2% from 666.79 [Mar 6 '09] to 1,115.10
NASDAQ rises 79.3% from 1,265.52 [Mar 9 '09] to 2,269.15.
MSCI Europe Index rises 66.1% from 529 [Mar 9 '09] to 878.70
MSCI Pacific Index rises 71.8% from 70.13 [Mar 10 '09] to 120.45
S&P Latin America 40 rises 146.9% from 1,862.84 [Nov 20, 2008] to 4,599.67
S&P Emerging Middle East & Africa rises 81.4% from 146.30 [Mar 9, 2009] to 265.35
S&P BRIC rises 145.7% from 135.25 [Oct 27, 2008] to 332.29.
Japan's NIKKEI Index 6,994.90 [Oct 28, 2008] to 10,546.44 - up 50.8%
Germany's DAX Index 3,588.89 [Mar 9 '09] to 5,957.43 - up 66.0%
Britain's FTSE Index 3,460.71 [Mar 9 '09] to 5,412.88 - up 56.4%
France's CAC Index 2,465.46 [Mar 9 '09] to 3,936.33 - up 59.7%
Canada's TSX Index 7,479.96 [Mar 6 '09] to 11,746.11 - up 57.0%.
Brazil's BOVESPA Index 29,435 [Oct 27, 2008] to 68,588.41 - up 133.0%
Russia's RTS Index 492.59 [Jan 23 '09] to 1,444.61 - up 193.3%
India's Bombay SENSEX Index 7,697.39 [Oct 27, 2008] to 17,464.81 - up 126.9%
China's Shanghai Composite 1,664 [Oct 28, 2008] to 3,277.14 - up 96.9%
data
U.S. Total stock market returned 26% in 2009, Stocks had historic gains, Bonds had historic losses of -3.5% and inflation was -0.3% ( lowest since 1954). Only January and February had losses in all 3 major U.S. Indexes.
Of the 5 largest sectors in the U.S. Economy: Technology 50.8%, Natural Resources 21.5%, Healthcare 19.2%, Real Estate 19% and Financials 17%. By size: Mid Cap 35% while Small Cap, Large Cap and Micro Cap returned 23-25%. Both gold 27.8% and oil 88% rose with commodity prices (CRB) which rose 23.5%.
Global markets rose 43.1% of the World's largest economic regions: Latin America 94.7% and Emerging Markets 89.3% (recovered from terrible selloffs), Asia 34.6% and Europe 22.4%. Of the World's largest Developed non-U.S. Economies: Canada 30.7%, Germany, Britain and France 22-24% and Japan 19%. In the Emerging markets Russia 128.6%, Brazil, India and China 80-83%. Hedge funds 20% (in 2008, -19%; bettering 2003, 19.5%; 31.3% in 1999) and Private Equity both underperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. U.S. returns in 2009 recovered from oversold panic levels in March - assets that fell the furthest generally recovered the most.
Months 2009-12 (click)
2007-09 PANIC facts (click)
Markets lost 13 years of value:
DJIA trades 6,469.95 (Mar 6) lowest since November 1996 - 54.6% lower than 14,279 (10/11/07).
S&P 500 trades 666.79 (Mar 6) lowest since May 1996 - 57.7% lower than 1,576 (10/11/07).
NASDAQ trades 1,265.52 (Mar 9) lowest since October 1996 - 55.7% lower than 2,861 (10/11/07).
MSCI Europe Index trades 529 (Mar 9) lowest since December 1996 - 61.8% lower than 1,388 (7/13/07).
MSCI Pacific Index trades 70 (Mar 10) lowest since June 2003 - 59.5% lower than 173 (11/1/07).
U.S. unemployment rate rose to 10.1%, 17.4% U-6 (Oct). 8.7 million jobs lost since December 2007. U.S. household wealth fell by about $16.4 trillion from a 2Q/07 peak of $65.8 trillion to $49.4 trillion 1Q/09.
US economy contracts -2.4% (worst since 1946) though gdp grows by 1.6% in the 3Q09 and 5.0% in the 4Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp).
Federal Reserve left interest rates at 0%-0.25% and the Discount rate to 0.50%, historic lows - for all of 2009.
Government and Central banks provide over $11 trillion of support for Financial institutions: $1.56 trillion in capital injections, $5.21 trillion for asset purchases and guarantees and $4.64 trillion in debt guarantees.
10yr Treasury ends the year at 3.81%. Treasuries fell -3.5% this year, the worst annual performance since 1978. U.S. Treasuries posted their biggest 1 day rally (March 18, since 1962) rallying from 3.01% to 2.46% following the Fed's announcement to begin purchases of $300 billion of 2-10 year Treasuries. U.S. Treasury yield curve steepens to record as 2-10 year Treasury spread increases to 2.88%, Dec 22.
U.S. Dollar closed the year at $1.43 to the Euro - depreciating from $1.2326 (Oct 27 '08) to 1.5135 (Nov 25). U.S. dollar's share of global currency reserves rises to 65% the euro's share 25.9%, flight to quality.
Gold traded at a new all-time high $1226, Dec 2 - rising from $681 (Oct 23 '08) to $1,096 (Dec 31 '09) a 60.9% gain. Silver $9.09 (Oct 24 '08) to $16.84 a 85.3% gain. Platinum $752.10 (Oct 27 '08) to $1460 a 94.1% gain. Copper $1.25 (Dec 26 '08) to $3.32 a 165.6% gain. Oil $32.40 (Dec 19 '08) to $79.36 a 144.9% gain. CRB 327.50 (Dec 5 '08) to 485.75 a 48.3% gain. Wheat $4.71 (Dec 5 '08) to $5.41 a 14.9% gain. Corn $3.05 (Dec 5 '08) to $4.14 a 35.7% gain. Rice $11.19 (Mar 16 '09) to $14.56 a 30.1% gain. Soybeans $7.76 (Dec 5 '08) to $10.39 a 33.9% gain.
LIBOR trades below 0.25% (Dec 21) falling from 3.64% (Oct 10 '08). VIX trades below 20 (Dec 22) falling from 89.53 (Oct 24 '08). TED spread trades below 0.16% (Sep 10) falling from 4.64% (Oct 10 '08) and 3-Month LIBOR-OIS Spread trades below 0.07% (Dec 28) falling from 3.64% (Oct 10 '08).
Federal Reserve requires 10 of the 19 major U.S. banks to raise a total of $74.6 billion in capital.
- Fed returns $47.4 billion (total net income $53.4 billion, 2009) to the Treasury up from $27.5 billion (total net income $35.5 billion, 2008).
- Treasury Secretary Timothy Geithner announced the Public-Private Investment Program using $75 to $100 billion from TARP.
- Federal Reserve began Term Asset-Backed Securities Loan Facility (TALF), up to $1 trillion.
- EESA/TARP invests second $350 billion (with new programs) in other financial institutions - more than 700 institutions participating.
U.S. Banks and securities firms (Citigroup, B of A, Wells Fargo, etc.) write off losses of $1.1 trillion (banks writedown $885 billion). Worldwide reported losses over $1.78 trillion of mortgage-related writedowns (and the securities on those loans totaled more than $1 trillion). Asset-backed securities (losses from CDOs and other ABS derivatives $64.7 billion). Banks have raised over $1.5 trillion of new capital.
S&P 500 earnings for 4Q09 is positive 65% - ending a record 9 quarters of negative growth.
140 banks fail at a cost of over $30 billion (2008, 25 banks failed, $17.6 billion) and 31 Credit Unions (2008, 15 failed).
Mergers and acquisitions fell to $1.75 trillion from $2.5 trillion 2008 and 2007's record $4.04 trillion.
Real estate prices fell - S&P/Case-Shiller 20 cities high of 206.52 (July 2006) falls to 139.21 (April 2009) - down 37.4%.
Swedish Riksbank, August 7, 2009 (world's oldest central bank, 1668) is the first central bank to post a negative interest rates (their repo rate was cut to 0.25% and their deposit rate 50 bps lower at to -0.25%).
- European Central Bank cut interest rates to 1.00%, a record low.
- Bank of England (founded in 1694) cut interest rates 0.50%, lowest ever, founded in 1694.
- Reserve Bank of Australia (Oct 6) becomes first major central bank to raise its policy rate 25 bps. to 3.25% rate, following a 49-year low.
President Obama signs the American Recovery and Reinvestment Act of 2009, a $787.2 billion Stimulus bill.
- Obama announces a housing plan that may help 3-4 million homeowners, the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac).
- Obama signs $24 billion Worker, Homeownership, and Business Assistance Act of 2009.
- President Barack Obama wins the 2009 Nobel Prize for Peace.
SEC rules 'Naked' Short-Selling ends requiring that brokers must promptly buy or borrow securities to deliver on a short sale.
FASB (Financial Accounting Standards Board) requires off-balance-sheet loans (qualifying special purpose entities) to be reported.
- FASB loosens fair value rules from mark-to-market to cash flows and other factors for distressed assets.
China's foreign-exchange reserves exceed $2.4 trillion.
- China purchase more cars 13.6 million (up 46%, 2008) then the U.S. 10.4 million (down -21%, 2008) first time since 1908.
- China passes Germany as largest exporter $1.2 trillion compared to $1.17 trillion.
- China sells an inaugural 6 billion yuan ($878.7 million) of sovereign bonds in Hong Kong (issued Oct. 27) representing 0.013% of $7 trillion of total foreign exchange reserves.
- ChiNext opens (Oct 31) China's newest exchange for small cap companies. All 28 ChiNext IPOs worth $10 billion (68.6 billion yuan) double on the first day to $20.5 billion (140 billion yuan).
- China approaches second largest economy, Japan's total GDP $5.085 trillion while China's was $5.02 trillion (34 trillion yuan). In 2009, China's economy expanded 9.1%, and in 2008, up 9.6%.
Group of 20 nations to replace G-8 (G-7 from 1975 until 1997) as primary organization coordinating global economic policy. IMF offers $250 billion of SDRs (Special Drawing Rights) on Aug. 28. and an additional $33 billion on September 9.
- Japan, China, South Korea, Thailand, Indonesia, Malaysia, Singapore, Philippines and 5 Southeast Asian nations agree to form a $120 billion pool of foreign-exchange reserves to defend their currencies.
- G20 agrees to provide the IMF with $1 trillion of lending power by selling 403 tons of gold.
- European Union pledges $100 billion (€75bn) to the IMF and doubles funds for non-Eurozone countries to $68 billion (€50bn).
BlackRock buys Barclays Global Investors for $13.5 billion and retains a 19.9% stake, the world's largest money manager, with over $2.7 trillion (State Street $1.44 trillion and Fidelity Investments, $1.25 trillion) in assets under management.
- AIG receives up to $30 billion of new loans from TARP funds after reporting a $61.7 billion loss in 4Q08 (largest in corporate history), total authorized assistance of $182.3 billion.
- Citigroup converts $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 33.6% of outstanding shares.
- FDIC sells IndyMac Bank to IMB Management Holdings LP for $13.9 billion - FDIC's bank insurance fund losses are expected to be approximately $9 billion.
- Morgan Stanley agrees to buy 51% of Citigroup's Smith Barney for $2.7 billion.
$27 trillion (notional value/gross exposure) of credit-default swaps, ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts (March 9, 2009) before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited.
- $458 trillion (notional value/gross exposure) of interest rate derivatives, International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008.
General Motors exits bankruptcy ($91 billion, 4th largest in U.S. history) in 40 days, closing 2,400 dealerships with $30 billion in exit financing from the US government. General Motors Co. is 60.8% owned by U.S. taxpayers.
- Chrysler Group exits bankruptcy ($39 billion, 7th largest bankruptcy in U.S. history) in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government. Chrysler is 23% owned by U.S. taxpayers.
CIT Group files Chapter 11 bankruptcy, $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders - the fifth-largest bankruptcy in U.S. history.
- Capmark Financial Group (formerly commercial lending at GMAC) filed for bankruptcy (Oct 25) debt of $21 billion and consolidated assets of $20.1 billion, a top servicer of U.S. commercial real estate loans and the largest servicer of loans in the rest of the world.
- Colonial BancGroup fails with assets of $25 billion, biggest U.S. bank failure in 2009, taken over by BB&T Corp.
- NCUA (National Credit Union Administration Board) placed U.S. Central Federal Credit Union ($34 billion) and Western Corporate unions ($23 billion) into conservatorship.
British government (Nov 3) bails out: RBS £25.5 billion (total £45.5 billion, U.K.'s government stake increases to 84.4% from 70%), the world's most expensive bank bailout. Lloyds Banking Group (acquired HBOS Plc on Jan 16) to receive £5.6 billion pounds (government's rights to buy stock, in addition to earlier £17 billion) and plans to raise £21 billion (£13.5 billion pounds in a rights offering and £7.5 billion in a bond exchange) denying the government majority control which owns 43.5%.
UBS paid (Feb. 18) $780 million to avoid prosecution for helping wealthy Americans evade taxes, disclosing information on more than 250 secret accounts, the U.S. continues to seek the identities of 52,000 American account holders suspected of tax evasion on $20 billion in assets.
- UBS AG agrees to disclose details on 4,450 accounts to the Internal Revenue Service. Switzerland, Liechtenstein, Andorra and Monaco banking authorities all pledged to comply with OECD (Organization for Economic Cooperation and Development) standards for banking transparency and information exchange.
SIPC releases $534.25 million to 1,558 Madoff's vicitms. Exceeding the $520 million (from all 321 prior SIPC liquidations) since the program began in 1970.
SEC charges Robert A. Stanford for a fraudulent $7.2 billion CD / Ponzi scheme.
Dow 2008: 13,264.82 to 8,776.39
Dow return for 2008: -33.84%
S&P 500 2008: 1,468.36 to 903.25
S&P 500 return for 2008: -38.49%
NASDAQ 2008: 2,652.28 to 1,577.03
NASDAQ return for 2008: -40.54%
10 year Treasury: 2.21% yield down -45.02% prices up
World Equity Market: $32.132 trillion down -47.20%
MSCI Europe Index 717.9 down -45.84%
MSCI Asia Pacific Index 89.46 down -42.75%
S&P Latin America 40 2362.96 down -51.86%
MSCI BRIC 175.58 down -60.33%
S&P Middle East & Africa 178.16 down -39.15%
data
U.S. Total stock market returned -38% in 2008, Stocks had historic losses, Bonds had historic gains of 14.9% and inflation was 0.1%. Only April and August had gains in all 3 major U.S. indexes - Dow lost -33.8% (worst year since 1931), S&P 500 lost -38.5% (worst year since 1937), while NASDAQ lost -40.5% (worst year since conceived in 1971).
Of the 5 largest sectors in the U.S. Economy: Healthcare lost -23.6%, Natural Resources -39%, Technology -41.6%, Real Estate -41.9% and Financials lost -54%. By size: Small Cap lost -32%, Mid Cap -37.3%, Large Cap -38.5%, while Micro Cap lost -39.4%. Gold rose 3.3% and oil fell a historic -56.3% with commodity prices (CRB) -36%.
Global markets fell a historic -47.2% of the World's largest economic regions: Asia fell -42.7%, Europe -45.8% and Latin America -51.8%. Of the World's largest Developed non-U.S. Economies: Britain fell -31.3%, Canada -35%, Germany -40.4%, Japan -42.1% and France -42.7%. In the Emerging markets which lost -60.3%: Brazil fell -41.2%, India -52.5%, China -65.4%, while Russia lost -72.4%. Hedge funds lost on average -19% (assets fell to $1.1 trillion from an all-time high of $1.9 trillion in June 2008).
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of U.S. denominated assets which rose against all major currencies (except the Japanese Yen and Chinese Yuan). Government and sovereign bond returns muted one of the worst years for equities.
Months 2005-08 (click)
2007-09 PANIC facts (click)
The Dow and S&P 500 Index have worst year since 1931 and 1937 respectively, NASDAQ it's worst year ever.
VIX (volatility index, fear) hits new record high of 89.53 spiking 32% from 67.80 (Oct 24) - spiked 22% to 81.17 (Oct 16), spiked 19% to 76.94 (Oct 10) and spiked 29% to 58.24 (Oct 6). TED spread (3-month Treasuries to 3-month Eurodollars) trades at 4.64% and the Libor-OIS spread (3-month London interbank offered rate to Overnight indexed swap rates) trades at record 3.64% on October 10.
Federal Reserve loosening cycle - FOMC cut Fed Funds rate on December 16 to 0%-0.25% and the Discount rate to 0.50% easing started with the Emergency FOMC inter-meeting Fed Funds rate cut on Jan 22 of 0.75% to 3.5% from 4.25%.
U.S. unemployment rate rises to 6.7% from 5% - 2.6 million jobs losts in 2008, most since 1945.
10yr Treasury ends the year at 2.21% trades 2.035% (12/18) rallying from 4.32% (Jun 13) up 52.8% in 6 months - the lowest yield in its 46-year history. 3 month Treasuries traded below 0%, Dec. 9 - first time since the U.S. began selling them in 1929.
- U.S. Treasuries return 14.9% highest since 1995 (18.5%). 19.7% is a record spread on yields between high-yield, high-risk corporate bonds and Treasuries, Dec 2008.
U.S. Dollar trades an all-time low of $1.6038 (July 15) to the Euro - falling from $0.8228 (October 26, 2000) a 95% decline in little more than 7 years. U.S. dollar rallies to $1.23 (Oct 23) from $1.60 (Jul 15) - up 22% in 3 months.
U.S. home prices fell (S&P/Case-Shiller) falls from a high of 206.52 (7/06) to 150.66 (Dec '08) - down 27.0% - 3.2 million foreclosures in 2008.
Oil trades $32.40 (Dec 19) down from an all-time high of $147.27 (Jul 11, oil trades above $100 for the first time on Jan 3) - down 77.2% in 4 months. CRB futures trade $327.50 (Dec 5) down from an all-time high of $618 (July 2) - down 47.0% in 4 months. Gold trades $681 (Oct 27) down from an all-time high of $1033.90 (Mar 17) - down 34.1% in 7 months. Platinum trades $752.10 (Oct 27) down from an all-time high of $2308.80 (Mar 4) - down 67.4% in 7 months. Silver trades $9.09 (Oct 24) down from $21.44 (Mar 17) matching its highest level since December 1980 - down 57.6% in 7 months. Copper trades $4.26 lbs. (May 5) down 70.6% to $1.25 (Dec 26). Wheat trades $13.49 (Feb 17) down 65.0% to $4.71 (Dec 5). Corn trades $7.79 (Jun 27) down 60.8% to $3.05 (Dec 5). Soybeans trades $16.60 (Jun 27) down 53.2% to $7.76 (Oct '06). Rice trades $24.35 (Apr 18) down 47.5% to $12.77 (Dec 5)
U.S. corporations raised $4.54 trillion issuing securities down from $5.14 trillion in 2007. Global merger activity fell 39% to $2.5 trillion from the record $4.1 trillion in 2007. Takeovers fell 43% to $873 billion from the record $1.54 trillion in 2007.
Banks and securities firms (Citigroup, UBS, Merrill, etc.) report over $1.012 trillion of mortgage-related writedowns from subprime securities - while raising over $750 billion of new capital.
Earnings season for 2008 the blended growth rate for the S&P 500 index was negative for all 4 quarter - the worst quarterly performance since 1991.
NASDAQ OMX Group becomes the world's largest exchange - operations of over 60 exchanges in 50 countries. NYSE Euronext agrees to buy the American Stock Exchange. CME Group (Chicago Mercantile Exchange and Board of Trade, merged July 2007) buys Nymex (NY Mercantile Exchange) the world's largest physical commodity futures exchange.
VISA becomes the largest U.S. IPO ever at $17.86 billion - surpassing the $10.62 billion record held by AT&T in 2000.
World leaders summit (G20) in Washington DC (November 15) to issue guidance to financial markets and the global economy and agree on a common set of principles to reform global regulation of the markets.
G20 Declaration on Nov 15, 2008 (click)
ECB cuts rates from 4.25% to 2.5%. Bank of England cuts rates to 2% - lowest since 1951. The central banks of China, Japan, Switzerland, Sweden, Danmark and New Zealand all lowered their rates.
Oct. 8, 2008, U.K freezes Iceland's bank assets, Iceland's krona falls 58% in 2 months, Iceland's resolution committee seizes and liquidates failing Kaupthing Bank, Landsbanki Islands and Glitnir, in receivership creditor claim $107 billion, assets had risen to $209 billion, 11 times Iceland's gdp.
China becomes the third largest economy passing Germany - behind the U.S. and Japan.
Barack Obama defeats John McCain to become 44th President of the United States.
Federal Reserve increases its balance sheet to $2.3 trillion from $924 billion (9/10) in 2 months. Federal Reserve increases currency swaps with foreign central banks to unlimited amounts and increased the Term Auction Facility, the Fed's emergency loan program, to $900 billion.
- Federal Reserve begins to purchase U.S. commercial paper from U.S. companies and Money market funds - a $1.8 trillion market. Federal Reserve allows GSEs (government sponsored enterprises) Fannie Mae and Freddie Mac access to their discount window - they guarantee $5.4 of $12 trillion of U.S. mortgages. Federal Reserve announces $200 billion of support for debt backed by consumer and small-business debt (credit-card, auto, student and SBA loans) and the Fed will purchase up to $100 billion of debt from Fannie Mae and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Freddie Mac, Fannie and Ginnie Mae.
- Federal Reserve's new regulations for mortgage lenders: banning repayment penalties, prohibiting lenders from issuing loans to borrowers that cannot repay while requiring the verification of their incomes and assets, and requiring escrow accounts for property taxes and homeowner's insurance, as well as: actual appraisal of a home's value and good faith lending practices. Federal Reserve, CFTC and SEC announce that a central clearinghouse for the $33 trillion credit-default swap market will be running by December 31.
$168 billion Stimulus plan signed into law - Tax rebates (to over 130 million Americans), Business tax breaks and Housing provisions (Fannie Mae and Freddie Mac may temporarily purchase mortgages up to $793,000 up from $417,000 while the FHA can insure loans for up to $729,000).
Housing bill signed into law creating the FHFA (Federal Housing Finance Agency, GSE's regulator) for Fannie Mae and Freddie Mac - FHFA then places Fannie Mae and Freddie Mac into conservatorship and through senior preferred stock and warrants will own 79.9% of each agency. Fannie Mae and Freddie Mac (own or back 31 million U.S. mortgages) modify mortgages. FHFA orders Fannie Mae and Freddie Mac to purchase $40 billion a month of underperforming mortgage bonds.
President Bush and the Treasury intercede extending $13.4 billion in loans to GM and Chrysler (another $4 billion in February - Ford did not seeking government assistance) and the Federal Reserve approves GMAC's request to become a bank holding company.
FDIC guarantees $1.4-1.8 trillion of bank-to-bank lending for more than 3 years (FDIC depositor insurance increases from $100k to $250k through Dec 31, 2013) as part of the EESA.
SEC issues an emergency rule (July 21 - August 12) to limit naked short selling in 19 major financial firms - the 'tick test rule' was repealed on July 6, 2007. SEC issues rules for short sales requiring delivery of securities by the settlement date, effective Sep 18. Short selling by Hedge funds of $100 million must now report positions to the SEC.
- SEC halts short selling of Financial stocks (Sep 19, effective immediately) protecting 799 financial companies - through Oct 2. SEC extends short selling ban of Financial stocks protecting 950 financial companies - through Oct 8.
Paulson's Treasury Dept. administers the Troubled Asset Relief Program, or TARP (Emergency Economic Stabilization Act of 2008, EESA) a $700 billion rescue of financial institutions by investing $125 billion in 9 large banks: Citigroup, J.P. Morgan, Wells Fargo, Bank of America/Merrill Lynch, Goldman Sachs, Morgan Stanley, Bank of New York Mellon and State Street.
- EESA/TARP also invests $125 billion in: AIG, Federal Home Loan Mortgage, PNC, U.S. Bancorp, Capital One, SunTrust, Regions Financial, Fifth Third Bancorp, BB&T, KeyCorp, Comerica, Marshall & Ilsley, Northern Trust, Huntington Bancshares, Zions Bancorporation, Synovus Financial, Popular, First Horizon National, ETrade Financial, Colonial BancGroup, Associated Banc-Corp, Webster Financial, City National, Fulton Financial, TCF Financial, South Financial Group, Wilmington Trust, East West Bancorp, Sterling Financial, Whitney Holding, Susquehanna Bancshare, Valley National Bancorp, Citizens Republic Bancorp, UCBH Holdings, Cathay General Bancorp, Wintrust Financial, First Merit, SVB Financial Group, Trustmark, Umpqua Holdings, Washington Federal - and 88 banks borrowing less than $200 million. EESA invests second $350 billion in other financial institutons: GMAC, American Express, CIT, Discover Financial Services, GM and M&T Bank.
Paulson's Treasury Dept. protects US money market mutual funds with insurance as some of the $3.6 trillion of funds 'broke the buck'. Treasury announces the Credit Union Homeowner Affordability Relief Program a $41 billion lending facility where retail credit unions could borrow up to $2 billion at favorable rates - about 8,400 U.S. credit unions with $775 billion in assets.
15 leading European nations commit $2.3 trillion and agree to a 14pt plan to aid troubled banks by adding capital through investment and by guaranteeing inter-bank lending. China announced a $586 billion (4 trillion yuan) economic stimulus package. Japan expands package to $385 billion - ¥10 trillion of stimulatory spending to save job cuts and ¥13 trillion to protect the banking system.
IMF provides loans to Hungary (approved $15.7 billion), Ukraine (approved $16.4 billion), Iceland (approved $2.1 billion), Latvia (approved $10.4 billion), Serbia (approved $516 million), Pakistan (approved $7.6 billion), Belarus (approved $2.5 billion) both Turkey and Romania seek loans - Britain was the last European country to receive an IMF loan in 1976. Japan promises $100 billion in loans to IMF raising their funding capacity to $250 billion.
Countrywide Financial (January 11, 2008) is purchased by Bank of America for $4.1 billion.
- Bear Stearns fails, the 5th largest U.S. investment bank, March 17, 2008 is purchased by JP Morgan Chase for $10 (down from $172, 2007) the Fed intervenes (non-recourse loan of $29 billion) in the protection of investment banking for the first time since the 1930s.
- IndyMac Bancorp (July 11, 2008) is seized from imminent failure by the Office of Thrift Supervision and files for bankruptcy with $33 billion of assets (exceeding Continental Illinois, $9.5 billion in 1984) costing the FDIC $10.7 billion.
- FHFA (Federal Housing Finance Agency) places Fannie Mae and Freddie Mac into conservatorship.
- Lehman Brothers Holdings (September 15, 2008) files $639 billion, largest U.S. bankruptcy - passing WorldCom which filed for bankruptcy (7/21/02 at $103.9 billion). Lehman's bankrupcy sets their credit-default swap liability to counterparties at $0.91375 creating $270 billion in payments.
- Merrill Lynch fails, the 3rd largest U.S. investment bank, September 14, 2008, is purchased by Bank of America for $50 billion.
- Federal Reserve approves Goldman Sachs and Morgan Stanley to become bank holding companies - ending independent investment banks.
- AIG fails with $1.1 trillion assets and 74 million clients in 130 countries subsequently receiving an $85 billion emergency U.S. Federal Reserve loan (total authorized assistance of $182.3 billion), September 16, 2008 - consequently relinquishes 79.9% percent ownership in the company.
- Washington Mutual (September 26, 2008) seized by Federal regulators filing a $327.9 billion, largest U.S. bank bankruptcy and sold to J.P. Morgan Chase for $1.9 billion - 2nd largest in U.S. history.
- Wachovia (October 12, 2008) purchased by Wells Fargo (as Citigroup exits) in an $11.7 billion all-stock offering.
- American Express (and AmEx Travel Related Services) becomes a bank-holding company.
- Citigroup receives $20 billion (in addition to the initial $25 billion) from TARP to protect $306 billion of troubled mortgages and assets - Citigroup assumes losses on the first $29 billion the Treasury will absorb 90% of the remaining losses and $27 billion of preferred with an 8% dividend.
- Bradford and Bingley nationalised (joins Northern Rock as U.K.'s 2nd mortgage lender) and rescues for European lenders Fortis (Benelux's banking and insurance group), Hypo Real Estate (Germany's real estate firm), Glitnir (Iceland's third-largest lender) and Dexia (Franco-Belgian's bank, world's biggest lender to global local governments).
Bank of America modifies (cuts interest rates and/or principal) 265,000 mortgages and 400,000 of acquired Countrywide's mortgages - the largest predatory lending settlement, $8.6 billion.
- J.P. Morgan Chase will modify 400,000 borrower's mortgages from their acquisition of Washington Mutual.
Citigroup will modify 500,000 borrower's mortgages.
UBS, Merrill Lynch, Wachovia, Citigroup, Morgan Stanley, Bank of America, JPMorgan Chase and Royal Bank of Canada agree to buy back failed auction-rate securities.
SEC charges Bernard L. Madoff with securities fraud for a $65 billion dollar Ponzi scheme. The largest U.S. securities fraud settlement - Enron shareholders and investors will share $7.2 billion.
Hurricane Gustav (Sep 1) made landfall in Louisiana (near New Orleans) and Hurricane Ike (Sep 13) made landfall on Galveston Island causing 145 deaths and $31.5 billion of damage - the 3rd most destructive U.S. hurricane (behind Katrina 2005 and Andrew 1992).
Over 4,000 U.S. soldiers lose their lives in Iraq - the Vietnam War claimed 58,000 American lives, the Korean War 36,000 and World War II 405,000.
2008 Beijing Summer Olympics begins with 100 heads of state in attendance, 204 nations participate (87 nations win medals) - Michael Phelps wins a record eight Olympic gold medals (totaling 14 career golds), Natalie Coughlin wins 6 medals and Usain Bolt wins three golds. The United States takes a total of 110 medals while China takes the most golds, 51. Great Britain takes 47 medals 19 are gold heading into the 2012 London games.
Dow 2007: 12,463.15 to 13,264.82
Dow return for 2007: 6.43%
S&P 500 2007: 1,418.30 to 1,468.36
S&P 500 return for 2007: 3.53%
NASDAQ 2007: 2,415.29 to 2,652.28
NASDAQ return for 2007: 9.81%
10 year Treasury: 4.02% yield down -14.10% prices up
World Equity Market: $60.851 trillion up 21.75%
MSCI Europe Index 1,325.54 up 7.04%
MSCI Asia Pacific Index 156.26 up 11.19%
S&P Latin America 40 4,909.01 up 48.46%
MSCI BRIC 442.56 up 55.98%
S&P Middle East & Africa 292.8 up 39.45%
data
U.S. Total stock market returned 6% in 2007, Stocks have underperformed while Bonds were above their historic average and inflation was above average 4.1%. Gains were punctuated by sell-offs in February/March (NASDAQ -7.9%), July/August (NASDAQ -12.4%) and November (NASDAQ -11.2%).
Of the 5 largest sectors in the U.S. Economy: Natural Resources performed best 36.7%, Technology 15.5% and Health 7.1% while Financials -18.9% and Real Estate -19% returns were negative. By size: Mid Cap 6.7%, Large Cap 3.5% while Small Cap -1.2% and Micro Cap -9.4% lost. Gold rose 31.6% and oil 57.4% had historic gains with commodity prices (CRB) 16.7%.
Global markets rose 21.8% of the World's largest economic regions: Asia driven by China (Shenzen 167.7% / Shanghai 96.6% / Hong Kong 39%) and India 47.1%, followed by Latin America 48.5% and Europe 7.0%. Of the World's largest Developed non-U.S. Economies: Germany returned 22.3%, Canada 7.1%, Britain 3.8%, France 1.3% while Japan -11.1% was negative. In the Emerging markets which returned 56%: Brazil 43.6% and Russia 19.2%. Hedge funds returned on average less than 5% with Private Equity outperforming hedge funds (PE had problems in Q4 acquiring funding).
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. U.S. returns in 2007 were muted because of the 'credit crisis' caused by non-performing, non-prime U.S. mortgage loans.
Months 2005-08 (click)
2007-09 PANIC facts (click)
Federal Reserve loosening cycle - FOMC cut inter-meeting 8/17 - the 'discount rate' to 5.75% from 6.25% citing tighter credit and shaken financial markets. Central banks in the U.S., Europe and Asia had injected more then $400 billion (Aug 9-16) into the banking system providing liquidity to global credit markets. Libor traded up to 240 bps over 3-month Fed funds rate. Fed Funds rate currently stands at 4.25%.
Congress, Federal Reserve and other Federal agencies proposed new guidelines for subprime mortgage loans (7.5 million and approximately 5 million Alt-A or non-traditional / non-prime loans) because of growing delinquencies, foreclosures and bankruptcies. Effecting over 2 million Americans with over $1.9 trillion of subprime mortgage loans.
U.S. 10 yr Treasuries end the year at 4.02%. Inverted Yield curve of U.S. Treasuries ends Jun 7 '07 it began on Dec 27 '05 (75 weeks) - the last U.S. Bond yield inversion was from Feb 24, '00 - Dec 22, '00, 8th time since 1980. Investors shied away from shorter U.S. Treasury maturities impacting global debt markets (10 yr typically exceeds 2 yr yields by aprox. 90 bps). Inversions had averaged 30 weeks (9 to 59 weeks) and -46 bps (-8 to -133 bps). The "carry-trade" (borrowing in low-interest rate countries) fueled M&A activity worldwide.
- U.S. Treasuries returned an average of 8.7% in 2007 - compared with 3.0% in 2006, 2.9% in 2005, 3.5% in 2004 and 2.3% in 2003. U.S. 10 yr. Treasuries rallied 27.8% from 5.32% (Jun 13) to 3.84% (Nov 26) - in 23 weeks.
Dollar ends the year at $1.46 - traded $1.49 (Nov 23) to the Euro – falling from $1.17 (Dec '05) a 26% depreciation in 2 years. British pound hits a 26-year high trading above $2.11 to the dollar while the Canadian dollar traded above $1.10.
U.S. GDP in 2007 advanced by 2.2%. GDP advanced by 3.3% in 2006, 3.2% in 2005, 4.4% in 2004, 3.0% in 2003 and 1.9% in 2002.
Earnings for S&P 500 companies in the 3rd quarter of 2007 was negative for the first time since Q4 2001 - Q1 2002.
2007 sales of single-family homes declined 13% and prices dropped 1.8% - the first decrease since 1968 and probably since the 1930's (NAR records began in 1968).
$100 billion in reported losses at more than 20 of the world's largest banks and securities firms holding SIVs (Structured Investment Vehicles holding non-performing, non-prime U.S. motgage loans).
U.S. venture capital climbed to a 6 year high of $29.4 billion in 2007 (3,813 deals), $26.6 billion in 2006 up from $19.7 billion in 2003 - $40.6 billion in 2001 (4,500 deals).
Gold ends the year at $838 - traded $848 (Nov 7) - highest in 27 years (when it traded 2 days above $800, 1/18/80, $835 and 1/21/80, $850). Platinum trades at all-time high of $1551.50 (Dec 26). Silver traded $15.90 matching its highest level in December 1980. Uranium traded at an all-time high of $136.
- Oil ends the year at $96 - traded at an all-time high of $99.29 (Nov 21) - up almost 100% from Jan '07 lows.
- Reuters-CRB (Commodity Research Bureau) Index of 17 commodities trades at an all-time high $479.50 (Dec 31) up 26% in 2007.
Total global foreign-exchange reserves surpass $6 trillion - the U.S. dollar accounts for 63% while the Euro accounts for 27%.
ECB raised interest rates to 4% - the 8th increase for the Euro since Dec '05. The Bank of England raised rates up to 5.75% and the Bank of Japan raised interest rates from 0.25% to 0.50%.
Global mergers and acquisitions exceed $4.4 trillion - a record surpassing the $3.55 trillion in 2006.
Europe (24 markets, including Russia and eastern Europe) at $15.7 trillion passes U.S. in stock market value ($15.6 trillion) for the first time since WWI.
BRIC emerging markets - Brazil became the last member to reach $1 trillion in overall stock market value. Russia surpassed $1 trillion in September of 2006, then China (January '07) and India (May '07).
China's CSI 300 index surged 161% - the Chinese stock market overtook the Japanese market (8/07) in capitalization. Shanghai Composite Index rallied from below 1000 (Jun 6 '05) to 6,124 (Oct 16, '07) more than 512%, in little more than 2.3 years - as over $2.3 trillion of Chinese savings (earning less than 3%) flooded into Chinese stocks.
- PetroChina became the first $1 trillion company as it debuted on the Shanghai Exchange, 11/5 (Exxon Mobil is valued at $475 billion). The People's Bank of China raised borrowing and lending rates in order to cool inflation. Additionally, the Chinese government reduced the tax on personal savings and raised bank reserve requirements to encourage savings and curb a possible asset bubble. 60 million brokerage accounts were opened in 2007.
- China adds gold (also aluminum and steel) becoming the world's largest producer - 276 metric tons of gold in 2007 overtaking South Africa (largest producer since 1905).
Sovereign wealth funds 2007 high-profile purchases: China $20 billion in China Development Bank (Dec. 31), Singapore up to $5 billion in Merrill Lynch (Dec. 24), Singapore $9.75 billion and undisclosed Middle Eastern $1.8 billion in UBS (Dec. 10), Abu Dhabi $7.5 billion in Citigroup (Nov. 26), China $2.7 billion in China Everbright Bank (Nov. 7), Abu Dhabi $1.1 billion in Och-Ziff (Oct. 29), China $1 billion in Bear Stearns (Oct. 22), Qatar 20% of the London Stock Exchange and 10% in the Nordic bourse (Sept. 20), Abu Dhabi $1.35 billion in Carlyle Group (Sept. 20), China $3 billion and Singapore $2 billion in Barclays (July 23), Abu Dhabi $750 million in ICICI Bank (India's largest bank) (July 13), China $3 billion in Blackstone Group (May 20) and Abu Dhabi undisclosed stake in HSBC (May 2).
- Sovereign wealth fund (SWF) first established in the 1950s (Kuwait's Kiribati, the oldest) estimated value of $1.8 trillion. 31 SWFs from 23 nations, the largest is Norway's Government Pension Fund ($326 billion) - 13 are based in the Middle East / North Africa, 10 Asia-Pacific, 4 Sub-Saharan Africa, 3 Non-Pacific Asia and Norway, about half the funds were established since 2000.
UAW workers at General Motors, Ford & Chrysler (Cerberus Capital Management) divested their multi-billion dollar health care obligation to a UAW-run VEBA trust.
Steriods dominated Major League, Olympic and International sports as Barry Bonds, Marion Jones, Flyod Landis and many other faced accusations / reprisals.
Dow 2006: 10,717.50 to 12,463.15
Dow return for 2006: 16.29%
S&P 500 2006: 1,248.29 to 1,418.30
S&P 500 return for 2006: 13.62%
NASDAQ 2006: 2,205.32 to 2,415.29
NASDAQ return for 2006: 9.52%
10 year Treasury: 4.68% yield up 7.59% prices down
World Equity Market: $49.979 trillion up 22.41%
MSCI Europe Index 1,238.31 up 16.71%
MSCI Asia Pacific Index 140.53 up 14.51%
S&P Latin America 40 3,306.69 up 38.37%
MSCI BRIC 283.73 up 52.87%
S&P Middle East & Africa 209.97 down 11.03%
data
U.S. Total stock market returned 14% in 2006, Stocks outperformed while Bonds underperformed and inflation was average. Most gains for the year were accumulated in the second half of 2006.
Of the 5 largest sectors in the U.S. Economy: Real Estate performed best 27.5%, Financial 17.8%, Natural Resources 17.2%, Technology 13.4% and Health 6.6%. By size: Large Cap13.6%, Small Cap 14.1% and Micro Cap 14.4% while Mid Cap stocks returned 9%. Gold 22.8% and oil 1.8% had gains with commodity prices (CRB) falling -7.4%.
Global markets rose 22.4% of the World's largest economic regions: Latin America performed best 38.4% followed by Europe 16.7% and Asia 14.5%. Of the World's largest Developed non-U.S. Economies: Germany returned 22%, France 17.5%, Canada 14.5%, Britain 10.7% and Japan 6.9%. In the Emerging markets which returned 52.9%: China 128.7%, Russia 71.3%, India 46.7 and Brazil 43.6% continue to excel. Hedge funds (8,000, controling $1.3 trillion) and Private Equity firms (over $700 million) - returned on average 13% (PE generally outperformed hedge funds).
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. Returns in 2006 were strong aided by historic corporate earnings, low unemployment and borrowing costs.
Months 2005-08 (click)
U.S. residential housing market cools from its record unsustainable (price) growth rate - over $1.9 trillion of ARMs will reset at higher interest rates in 2007-08 ($11 trillion mortgage loans outstanding).
FOMC Tightening Cycle - Fed Funds rate increases to 5.25% (17 consecutive increases). Fed Funds rate began the year at 4.25% (Fed Funds was 1% from Jun '03 - Jun '04 and 6.5% from May '00 - Jan '01).
U.S. 10 yr Treasuries end the year at 4.68% - trades 5.24% (Jul 5). U.S. inverted yield curve tests markets worldwide (began, Dec 27 '05 - first time since Feb 24, '00 - Dec 22, '00, 8th time since 1980). U.S. Treasuries returned an average of 3.0% in 2006 - compared with 2.9% in 2005, 3.5% in 2004 and 2.3% in 2003.
U.S. unemployment rate falls to 4.4%.
United States (as a nation) for the first time since 1915 owns less assets oversees than foreigners own of U.S. assets - a trend which is expected to increase. $8.4 trillion of U.S. Treasuries outstanding.
Dollar ends the year at $1.32 to the Euro – falling from $1.18 at the beginning of the year an 11% depreciation.
U.S. GDP in 2006 advanced by 3.3%. GDP advanced by 3.2% in 2005, 4.4% during 2004, 3.0% during 2003 and 1.9% in 2002.
Oil ends the year at $61 - trades $77.03 (7/10) an all-time cash high - up from $10 (Dec '98). Oil started the year at $60.
- Gold ends the year at $636 - traded $732, highest since February 1980, when Gold spent 3 weeks above $700. Platinum traded $1335 and Copper traded $4.03/lbs at all-time cash highs. Silver traded $15.21 - highest since February 1983. Uranium (actually more common than silver) rose
more than 10-fold from $7.10/lb (1/01) to $72/lb.
- Reuters-CRB (Commodity Research Bureau) Index of 17 commodities trades at an all-time high above $409 (Dec '06).
Global mergers and acquisitions exceed $3.55 trillion - a record surpassing the $3.4 trillion in 2000.
World’s financial stock of the 5 wealthiest: US (35%), the Eurozone (32%), Japan (20%), the UK (8%) and China (5%) - estimated at $150 trillion. Foreign exchange reserves - China's reserves surpass $1 trillion eclipsing Japan's $900 billion - foreign buyers hold $4.4 trillion of $8.4 trillion of U.S. Treasury debt.
European Central Bank (ECB) raised interest rates to 3.5% from 2.00% (6th time since Dec '05) for 12 European nations - Slovenia to become the 13th EU member state to introduce the Euro, Jan. 1. Bulgaria and Romania join the European Union, bringing membership to 27 nations.
Bank of Japan raises interest rate to 0.25% up from 0.0% ends over 7 years of deflation fighting.
China increases interest rates in order to cool domestic economy growing at 9-11%. Industrial and Commercial Bank of China (ICBC) launches the world's largest IPO ever - $21.9 billion.
Russia ($1 trillion economy) invited to join the World Trade Organisation (WTO) of 149 members - China joined the WTO in 2001.
Inter-American Development Bank estimates that 12.6 million U.S. Latin American-born immigrants will send home more than $45 billion — of about $460 billion earned in 2006.
U.S. population exceeds 300 million (China, 1.32B and India, 1.10B) 100 million reached in 1915 and 200 million in 1967.
Ben Bernanke succeeds Alan Greenspan as Chairman (retires after 18½ years) of the Federal Reserve.
NYSE, the world's largest stock market, demutualizes and mergers with Archipelago Holdings Inc. (and Pacific Exchange) then NYSE Group reaches deal to acquire Euronext. NASDAQ purchases a 30% interest in the London Stock Exchange.
Medicare (Part D) Prescription Drug benefit over 38 million of Medicare's 43 million beneficiaries enroll in 2006. 77 million Baby Boomers are estimated to be eligible for Medicare by 2031.
SEC and State Attorney Generals investigate the backdating of corporate options at 140+ companies (resulting in 70+ firings/resignations of corporate officials) - the practice, appears to have originated in Silicon Valley (in companies like Sanmina, Novellus & Juniper Networks pre-9/11).
U.N. Security Council adopts resolutions to impose sanctions on North Korea (for a nuclear-bomb test, Oct 9) and Iran (for its nuclear program, Dec 23).
AIG (Feb 9) settled $1.64 billion for insurance and securities fraud. Marsh & McLennan settled $850 million (February 1, 2005) for insurance bid-rigging.
2006 XX Olympic Winter Games Torino, Italy where German, American, Canadian, Austrian, Russian & Norwegian athletes scoop up medals.
Michael Schumacher retires as the world's first billionaire athlete - Formula One driver. Schumacher, 7-time world champion, 91 race wins & 154 podium finishes - brought wins to Ferrari (2000-04) for the first time since 1979.
Warren Buffett gifts 10 million of Berkshire Hathaway (B shares - over $31 billion) to the Gates Foundation - surpassing Bill and Melinda Gates' endowment of $25.9 billion.
Dow 2005: 10,783.01 to 10,717.50
Dow return for 2005: -0.61%
S&P 500 2005: 1,211.92 to 1,248.29
S&P 500 return for 2005: 3.06%
NASDAQ 2005: 2,175.44 to 2,205.32
NASDAQ return for 2005: 1.24%
10 year Treasury: 4.35% yield up 2.35% prices down
World Equity Market: $40.829 trillion up 13.69%
MSCI Europe Index 1,061 up 22.67%
MSCI Asia Pacific Index 122.72 up 21.81%
S&P Latin America 40 2,389.73 up 53.35%
MSCI BRIC 185.61 up 39.81%
S&P Middle East & Africa 236.01 up 71.77%
data
U.S. Total stock market returned 5% in 2005, Stocks and Bonds underperformed and inflation was average. Most gains for the year were earned in May 3.7%, July 3.9% and November 4.0%.
Of the 5 largest sectors in the U.S. Economy: Natural Resources performed best 40%, Real Estate 12%, Health 6.4%, Financial 6%, while Technology -0.3% lost. By size: Mid Cap 9%, Small Cap 14.1% and Micro Cap 14.4% stocks outperformed for the 6th year and Large Cap 13.6%. Gold 19.1% and oil 42.9% had gains with commodity prices (CRB)19.1%.
Global markets rose 13.7% of the World's largest economic regions: Latin America performed best 53.3% followed by Europe 22.7% and Asia 21.8%. Of the World's largest Developed non-U.S. Economies: Japan returned 40.2%, Germany 27%, France 23.4%, Canada 21.9% and Britain 16.7%. In the Emerging markets which returned 39.8%: Russia 82.7% and India 42.3% continue to excel while China fell -7.6%. Hedge fund performance in 2005 was spotty with a wide dispersion of performance (mean 6%).
Those who diversified with MPT did best, a trend which should accelerate – indicative is the Dow Jones: the DJ 30 Industrials returned -0.6%, while the DJ 20 Transportation returned 11% and DJ 15 Utilities 21%. Performance of non-U.S. markets was equally impressive. Returns in 2005 were dampened by increases in borrowing costs (Fed Funds rate) and increases in commodity prices (oil/gasoline, metals etc.) but offset by good corporate earnings, low mortgage rates and a stronger dollar.
Months 2005-08 (click)
FOMC Tightening Cycle - Fed Funds rate increases to 4.25% (13th consecutive increase). Fed Funds rate began the year at 2.5% (Fed Funds was 1% from Jun '03 - Jun '04 and 6.5% from May '00 - Jan '01).
U.S. 10 yr Treasuries end the year at 4.35% - trades 3.80% (Jun '05) lowest since Mar '04 (3.65%) and 3.07% on Jun 16 '03. Greenspan warns that the long U.S. Treasury bond's yield is unusually low - "a conundrum”. Inverted yield curve starts (Dec 27, '05) between 2-year and 10-year U.S. Treasury notes for the first time since Dec '00 as investors shy away from shorter maturities. U.S. Treasuries returned an average of 2.9% in 2005 - compared with 3.5% in 2004 and 2.3% in 2003.
World’s financial stock of the 5 wealthiest: US (35%), the Eurozone (32%), Japan (20%), the UK (8%) and China (5%) - estimated close to $145 trillion. Foreign exchange reserves - Japan holds $847 billion and China $819 billion (foreigners hold $4.2 trillion of $7.9 trillion of U.S. Treasury debt outstanding).
Hedge funds surpass $1 trillion in assets under management - SEC oversight forthcoming.
U.S. GDP in 2005 advanced by 3.2%. GDP expanded 4.4% during 2004, 3.0% during 2003 and 1.9% in 2002.
Gold ends the year at $517 - futures trade $544 (Dec '05, 24½ year high) up from $440 at the start of the year. Silver futures trade above $9.30 (18 year high). Platinum futures trade above $1,025 for first time in 25 years. Copper futures trade above $2.20 /lbs. an all-time record high.
Oil ends the year at $60 - trades $55 (Nov '05) down from $70.85 (Aug '05). Oil reaches an all-time record, a 600% rally in 6½ years, up from $10 (Dec '98). Oil started the year at $42.
Dollar ends the year at $1.18 to the Euro - trades $1.16 (Nov '05), strongest in 2 years - rallying from an all time low of $1.36 (Jan '05).
Reuters-CRB (Commodity Research Bureau) Index trades a (non-adjusted) all-time high of $351 (Dec '05).
Hurricanes Katrina, Wilma & Rita ravage Gulf Coast residents from Texas to Florida - taking over 2,140 lives, displacing 2 million Gulf Coast residents, costing possibly $250 billion and years of rebuilding.
National home prices stall. U.S. bank regulators issue new tighter guidelines on mortgage loans ($11 trillion outstanding).
Japan, world's second largest Developed economy, Prime Minister Junichiro Koizumi wins landslide relection and a popular mandate to push through market reforms - Japan Post to be separated and privatised.
Germany, world's third largest Developed economy, Christian Conservative Angela Merkel (Iron Frau) defeats 7 year incumbent Social Democrat Chancellor Gerhard Schroeder to become Germany's first female Chancellor.
European Union agrees on 7 year budget (2007-13, €862.4 billion
Euros). Tony Blair negociates to reduce the U.K.'s EU budget rebate by €10.5 Billion Euros - though the EU constitution was rejected for now.
China decouples the Yuan from the Dollar - pegging instead to a basket of international currencies.
Pope John Paul II (Karol Wojtyla, 1978-05 the first non-Italian in 455 years) is mourned by 5 million people visiting Rome including dignataries. Cardinal Joseph Ratzinger (German) becomes Pope Benedict XVI.
Chief Justice William Rehnquist dies at 80; 16th in U.S. Supreme Court history 1972-2005. John Roberts is confirmed as the 17th Supreme Court Chief Justice, the youngest Chief Justice in over 200 years.
London terrorist bombings on 7/7 kills 52 on subways and one bus - prompting new British laws.
Iraqi people vote and adopt their first democratic constitution and first regional parlimentary General elections - the Council of Representatives, a 275-member body, will shape Iraq's future government.
Kashmir earthquake (October 8) kills over 85,000 and leaves over 3.5 million Pakastanis homeless.
Lance Armstrong wins Tour de France for his 7th consecutive victory (1999-2005).
Chicago White Sox win their first World Series title since 1917.
Dow 2004: 10,453.92 to 10,783.01
Dow return for 2004: 3.15%
S&P 500 2004: 1,111.92 to 1,211.92
S&P 500 return for 2004: 8.99%
NASDAQ 2004: 2,003.37 to 2,175.44
NASDAQ return for 2004: 8.59%
10 year Treasury: 4.25%
World Equity Market: $35.911 trillion up 12.43%
MSCI Europe Index 864.93 up 17.62%
MSCI Asia Pacific Index 100.75 up 15.06%
S&P Latin America 40 1,558.35 up 38.86%
MSCI BRIC 132.76 up 13.63%
S&P Middle East & Africa 137.4 up 20.98%
data
U.S. Total stock market returned 12% in 2004, Stocks outperformed, Bonds underperformed and inflation was average. Most gains for the year were earned in November 4.5% and December 3.5%.
Of the 5 largest sectors in the U.S. Economy: Real Estate 23.8% and Natural Resources 22.7% performed best, Financial 7%, Technology 6% while Health 1.3%. By size: Small Cap value stocks 21.6% (fifth year of returns in excess of 20%), Mid & Small Value Cap stocks have appreciated 125% in the past 5 years. Gold 4.3% and oil 31.3% had gains with commodity prices (CRB) 16.6%.
Global markets rose 12.4% of the World's largest economic regions: Latin America performed best 38.9% followed by Europe 17.6% and Asia 15.1%. Of the World's largest Developed non-U.S. Economies: Japan returned 7.6%, Germany 7.3%, Britain 7.5%, France 7.4% and Canada 12.5%. In the Emerging markets which returned 13.6%: Russia 8.3% and India 13.1 continue to excel while China fell -15.4%. Hedge fund performance 8% was disappointing (compared to '00-'03), generally underperforming the Stock market. U.S. Treasury bills yielded an (inflation adjusted) loss of 2% due to historic low Fed funds rate of 1%.
Those who diversified with MPT did best, a trend which should accelerate. Despite a rally from March ‘03 through the end of 2004 Large Growth Technology stocks still lag (worth 2/5 of their values from their peak). The NASDAQ Composite Average fell from 5,132.52 (its Mar 10, 2000 peak) to 1,253 (its Mar 12, 2003 low) a 77% decline. The S&P 500 is still down about 21% from its peak of 1552.87 on Mar 24, 2000.
Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
FOMC Tightening Cycle - Fed Funds rate increases 5 consecutive times to 2.5% from 1% (from Jun 25, '03 - Jun 30, '04 rate was 1%, in 2000 Fed Funds rate was 6.5%).
U.S. 10 yr Treasuries end the year at 4.25% - U.S. Treasuries returned an average of 3.5% in 2004 up from 2.3% in 2003.
Dollar ends the year at an all-time low of $1.36 falling from $0.8228 (October 26, 2000) to $1.36 in the past 4 years (a 65% decline) to the Euro. The Euro began trading on Jan 1, 1999 between European banks at $1.17.
Oil ends the year at $42. Oil started the year at $27 then traded just below $50 at Halloween. In December 1998 oil was $10.
Gold ends the year at $440 with highs of $470 and lows of $385 (up from $250 in April of 2001).
Prescription Drug Bill, Medicare (Part D) signed into Law.
Sumatra-Andaman earthquake occurs on Dec 26. The 9.2 earthquake lasted nearly 10 minutes causing the entire planet to vibrate (the total fault slip measured nearly 50 feet over about an hour). The subsequent Tsunami (may have reached as high as 100 feet) and killed between an estimated 223,000 - 283,000 making it one of the worst natural disaster in recorded human history. Donor nation pledges exceeded $13.6 billion.
President George Bush defeats John Kerry in 2004 Elections for 2nd term.
U.S. and Coalition forces had successes and failures in Iraq after toppling Saddam Hussein's Ba'ath Party government. More than 200,000 people are estimated killed/"disappeared" during Saddam's rule, and more than 1 million were killed during the Iran-Iraq War (1980-1988), the first Persian Gulf War (1991) and the current Operation Iraqi Freedom (2003-).
9/11 Commission hearings undertaken and reports released.
Madrid terrorist train blasts kill 190 people, which consequently effects Spanish Elections.
Chechen militants seize school in Russia more than 330 children and adults killed.
China undergoes first peaceful leadership transition since the 1949 Communist revolution.
Afghanistan holds its first democratic Presidential election since the removal of the Taliban. Operation Enduring Freedom returned rule to the Afghani people in 2002.
North Korea and Iran are pressured by U.N. member states on their nuclear programs.
European Union admits 10 new members, mostly from the former Soviet bloc - Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
Sudan's Darfur region ravaged by violence - a humanitarian crisis claim tens of thousands of lives.
Hurricanes (4) hit Florida: 117 killed, damage tops $22 billion.
President Ronald Reagan dies at 93; 40th President of the United States from 1980-88. Reagan abandoned detente instead indentifying the Soviet Union as the "Evil Empire" and demanding that East Germany "tear down" the Berlin Wall. Reagan, Margaret Thatcher, Pope John Paul II, Solidarnosc and the power of the American economy forced Mikhail Gorbachev in 1986 to introduce glasnost ("openness") and perestroika ("restructuring") effectively ending the Nuclear Arms Race and the Cold War. Russian Economic and Political reforms followed in 1988 dismantling the totalitarian state (established in 1917 by Lenin and Stalin) and freeing Eastern European states from Soviet control for the first time since 1945. Reagan introduced supply-side economics lifting the U.S. economy out of stagflation, creating 16.7 million jobs and the greatest economic recovery since post-WWII.
Athens defies skeptics and hosts a successful 2004 Summer Olympics. American swimmers stand out - Jenny Thompson becomes the most decorated swimmer in Olympic history with 12, Michael Phelps won 8 medals a record for a non-boycotted Olympics Games and Natalie Coughlin won 5 medals tying her for the most medals by a U.S. woman in any sport in a single Summer Olympics.
Boston Red Sox win their first World Series title since 1918, beating the New York Yankees (ending the "Curse of the Bambino" the infamous trade of Babe Ruth to the New York Yankees following the 1919 season) and then the St. Louis Cardinals in 8 straight games.
NASA's 2 rovers reach Mars and transmit images and data. Hubble Space Telescope estimates the age of the universe at 13.7 billion years.