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$32 billion is what BP says it’s expected to pay for that gulf oil spill. $20 billion of that includes a fund that BP agreed to pay a while back on claims relating to the spill. $3billion is spent already on the company’s clean up process, and there are these other expected costs which may include costs of litigation and other fines under the clean water act. If $32 billion is all they are going to pay, its a bit unclear. Get this, BP said that they are going to raise this $32 billion by selling assets, more precisely about 10% of their assets. It’s still just a little piece. BP also announced it is tapping its current CEO Tony Hayward with Managing Director Robert Dudley.

What did Hayward have to say ?

Life isn’t fair

I’m sorry come again Mr. Hayward…Did you actually say life isn’t fair. What isn’t fair is what really happened in the gulf spill. What’s not fair is perhaps the actions taken by someone under your command that caused the greatest environmental disaster that our country has ever seen. What’s not fair is 20 killed workers of yours might I add. What’s not fair is 94 million to 184 million gallons of oil spewed into the ocean killing I don’t know how many other living creatures. Think again Mr. Hayward.  The American people need a bit more than just “Life isn’t fair”

For some good news around the biz world, Microsoft beat Wall Street with a 48% rise in quarterly profits and mostly if not surely due to the 175 million Windows 7 licenses sold. The new Office 2010 suite of applications, launched earlier this year, and were off to a strong start. Nothing could Microsoft do to match chip maker Intel Corp’s optimistic run last week. Home Sales dropped another 8.1% in June, and all on the heels of the homebuyers tax credit expiration. Although the numbers are down from the previous month, existing home sales are up 9.8 percent from last June. Analysts agree that a sustainable pick up in the housing market is largely dependent on the jobs market getting much healthier and I have to strongly agree. Here below you will see a graph for existing home sale for the last five years.

When Obama took a vow to serve this country and turn this economy around we all stared and glared with amazed inciting eyes while whispering the ol’ phrase…YES We Can! Ok not really! But we are at a most climactic point for the turn of this economy. Housing has been dropping, jobs have been lost, stocks have been rising and falling, but one trend seems to be as steady and firm as anything goes in this world: the US debt. Our US debt is at over 13 trillion and clicking away. With the signing of this reform bill Obama vows that

the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more tax payer funded bailance period. This bill will crack down on abusive practices and unscrupulous mortgage lenders. From now on every American will be empowered with the clear and concise information you need to make financial decisions that are best for you

OK, in case we all missed it, this reform bill has an amounting stack of unanswered questions. We really don’t have the concise information to really understand how this bill will affect the financial system. But i can assure that it will affect it somehow, and if we start promises of concise and accurate information on the premises of an unclear and confusing financial reform platform, where and oh where could this lead?

BP appears to have finally capped its oil gusher in the Gulf of Mexico Thursday afternoon. Friday morning they saw their first profit increase in nine quarters for economic bellwether General Electric. The financial community can afford to relax and kick their feet up, and maybe even have a latte.

Goldman Sachs is paying out a record $550 million to settle fraud allegations, admitting nothing except for incomplete disclosure. Goldman’s agreement with the U.S. securities watchdog is surprisingly a good outcome for the firm and its rivals considering the circumstances. $550 million is only a fraction of the amount investors stroked from Goldman’s market value.

Im sure, right about now you’ve heard about the new finance bill about to become law. But wait, as it turns out this bill doesnt answer some key principal questions. How much money are the banks going  to hold as a saftey cushion? You can read this 2,300 page piece of legislature but you still won’t learn the answers to a lot of super-critical questions. In reality, the statute and the enactment of the statute is  act 1 of this whole scene where we have the Congress beating up on the banks, and what we have now coming up with this legislature is act 2 where the details are going to be flushed out. To put it plainly and as simply as I can, this bill covers the big banks right? It covers JP Morgan, Chase, Bank of America, etc. But the bill also gives regulators the power to decide that big companies that are not banks but are really important to the economy should be subject to some of these regulations. There’s going to be this oversight counsel to deem certain entities, non-bank financial companies. As a result they would have to register with the government and be subject to new regulations. Do we know what companies this is going to apply to? NO. We don’t know who is covered by this bill. So big companies whoever you might be be prepared to get a call from the feds to announce you are being regulated now. Who knows how the FDIC will use this new authority to bail out non-financial institutions? We do know that bail out authority is unlimited. If a large systematically important company were to go bankrupt, and the feds would have to move in and take over, the stockholders of that company would most likely lose all their money. Then there are the bond holders, people that have lent money to that company, who could very likely get bailed out. This is just what drives economists crazy. So bond holders are more likely to lend to large bad run companies rather than smaller more efficient run companies, because to them it doesn’t matter. It’s like taking a high risk stock for a ride on a win-win situation horse.  That’s why this is so dangerous to the economy, because if the government is saying you can lend to large bad run company, these bond holders don’t have to pay attention and in the end won’t have to pay for their bad investment decisions. The bill does not also say anything about requirements structure on liquidity vs capital of a non-financial istitution. As a result of the bill, 80-90% of what we know as the financial system is subject to huge uncertainty. And that’s not a good thing if you catch the drift. It’s probably going to take years before we all see what this finally means.

Yes, %42.3 billion is the US trade deficit for the month of May. US consumers, government, businesses, spent $42.3 billion more on products and services that we imported than the rest of the world spent on US products and services that we exported. This is in case you don’t know, an increase over the last several months. Why is it going up? It’s going up because as the economy slowly starts to come back US consumers buy more stuff and at the same time exports are going up as US is selling more stuff overseas. But the margin between imports and exports is a rough 0.5% with the exports being outpaced of course.  In the short term expert economists might agree that it is a good thing, but in the long term it is bad.  It is unsustainable, it causes problems globally and in the US for the trade deficit to be as high as it is. One solution is to buy american. Too many foreign companies for too long have infiltrated our market and it is abviously affecting our economy.

 Since July of 2008, the housing market crumble started to bring the whole economy down with it. Later that year the millions of mortgage defaults had inevitably melted Wall Street down. It was scary none the less. Very few people were gonna buy a house if they saw the prices still dropping. When Congress decided to step in and help with the tax credit, the market seemed to stabilize and heal itself when the prices on starter homes rose, but it’s just not clear that those gains are sustainable. After  that tax credit expired at the end of April, the market crashed again. We saw new home sales plunge 33% in May, a discouraging sign. Experts that have been tracking this cursed course of the real estate market, are stating that prices are starting to slide again in a lot of cities. Can Congress create a new round of tax credits this fall? Yes, they can do whatever they want? I think they are more keen to reduce the budged e rather than tax revenues. The bright spot in all of this… the interest rates are at rock bottom low levels just under 4.5%. You know, for a country who scored #1 in student confidence, our confidence in our economy is lacking immensely. People are just not buying. It’s a downward spiral. Let’s just hope the low interest rates and low house prices will be enough to find a new generation of buyers.

Wednesday’s stock market jump was as surprising to some as Steve Jobs not knowing what happens tomorrow in the tech world, or the next 365 days for that matter.  As traders were encouraged by the gains, almost everybody (except for Steve Jobs) had no real explanation for the boost.  As the market enjoys the earnings, greater clarity and much explanation is needed for the economic future of this country especially when everybody doesn’t know why the markets rallied by 3 percent on all major fronts. Optimism is good but during the greatest recession of our history I believe every move, rise or fall,  is cataclystic in balancing the wounded market. Therefore better knowledge of the recurring events should be presented by our experts. We’ll see how things look on Thursday.

Just as predicted in one of my previous posts, the US payroll market has performed expectantly due to the fake growth from the temporary census jobs. Non-farm payrolls employment fell by 125,000 jobs in June following an upwardly revised increase of 433,000 jobs in May. The unemployment rate fell to 9.5% in June from 9.7% in May, as people gave up looking for work and left the labor force.