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What if there's no deal on fiscal cliff

Written By limadu on Senin, 31 Desember 2012 | 14.44

Failure by Congress to avert the tax increases and spending cuts will cause continued uncertainty and headaches for consumers and businesses about paychecks, tax returns, investments and more.

NEW YORK (CNNMoney)

Practically speaking, they likely have a "grace period" of a couple of weeks to pass a bill that wards off the bulk of scheduled tax increases and spending cuts without causing too much damage. But there's no guarantee that they'd be able to forge an agreement quickly.

That means Americans would be living with continued uncertainty about tax and spending policies for an indefinite period in 2013.

And that uncertainty is likely to create problems for tax filers, payroll processors, wage earners, doctors, federal contractors, federal agencies, federal workers and the unemployed -- to name just a few. They are the ones who will pay an increasing price as lawmakers try to redeem themselves and come up with a deal in January or February.

Your paycheck: If you'll be paid in the coming week, your company's payroll processor probably already cut your check. And since the IRS hasn't told the payroll companies yet how much tax to withhold for 2013, they used 2012 withholding rates.

So in that sense, your paycheck in early January won't be much different than what it was in December.

But your paycheck still will be smaller, because the 2% payroll tax holiday is expiring. Starting in January, workers will once again have 6.2% of their wages up to $113,700 withheld to pay for Social Security, up from the 4.2% rate that's been in effect for the past two years.

Effectively that means someone making $50,000 might get about $83 less a month in their paychecks. Someone making twice that would see their pay reduced by roughly $167 a month.

If you're getting a bonus, you'll have more withheld there, too, said Michael O'Toole, senior director of government relations for the American Payroll Association. That's because there's one supplemental withholding rate that applies to bonuses. This year it's 25%, but it's set to rise to 28% on Jan. 1, unless Congress decides to change it.

For paychecks that will be cut during the second, third and fourth weeks of January, payroll processors will follow withholding guidance that the IRS has said it will issue by the end of the year.

If there is no fiscal cliff deal in the next day, and the IRS advises payroll processors to follow 2013 law, paychecks will get smaller because they will have more withheld.

There has been some debate whether Treasury Secretary Tim Geithner has the authority to instruct employers to continue using 2012 withholding tables until further notice. If he does step in, the income tax withheld from paychecks processed in January would not go up.

Such a strategy runs the risk, however, that many wage earners, if not all, could end up being underwithheld for the year. That would be the case if Congress doesn't end up doing anything to avert the cliff in 2013 or lets the Bush-era rates go up on income above a certain threshold.

Your 401(k) and IRA: There's no telling how markets will respond if fiscal cliff gridlock persists.

They had been relatively sanguine. But in the past week, stocks have closed down every day.

Some believe, however, that markets may not move too much on fiscal cliff news -- whether Congress cuts a deal soon or not.

Your 2012 tax return: Here's where things potentially become a dumb mess.

The IRS warned lawmakers that if they don't act to protect the middle class from having to pay the Alternative Minimum Tax for tax year 2012 by Dec. 31, up to 100 million taxpayers may not be able to file their 2012 taxes until late March.

That would mean their refunds will be delayed. And they wouldn't be injecting those refunds into the economy during the first quarter.

Based on Treasury Department records from the past three years, refunds paid during January, February and March combined have ranged from $117 billion to $136 billion.

Government spending: Unless lawmakers avert the so-called sequester, a series of automatic cuts will reduce the budgets of most federal agencies and programs by 8% to 10%.

But that doesn't necessarily mean those cuts would have to occur immediately, according to a former official with the Office of Management and Budget.

Both the White House budget office and federal agencies themselves will have some latitude to postpone the cuts from occurring "for several weeks if necessary," added OMB Watch, a group that monitors the federal budget.

The cuts, if not reversed, would likely lead to unpaid furloughs of federal workers. Agencies must give at least 30 days' notice to employees for a furlough that would last less than 22 work days; 60 days' notice is required for longer furloughs. So far, federal workers have been told to report to work as scheduled on Jan. 2, the day the spending cuts formally kick in.

U.S. economy: Economists expect the U.S. economy would fall into a recession if Congress does nothing to avert the fiscal cliff and lets it stay in effect.

Specifically, the CBO forecasts a drop of 0.5% in real gross domestic product and a 9.1% unemployment rate by the end of next year.

On the bright side, no one expects that Congress would let all fiscal cliff measures have their way with the economy for an extended period.

But there could still be an economic hit if lawmakers push the country over the fiscal cliff temporarily and then pass a fallback deal that primarily averts just some of the tax increases.

For example, Congress may end up passing only a stopgap measure that does not address the automatic spending cuts or raise the country's debt ceiling. In that case, economic growth could be dragged down somewhat in the first half of next year, according to economists at Goldman Sachs.

And remember that the economy is already going to be dragged back somewhat by the expected expiration of the payroll tax cut.

Unemployment benefits: A federal extension of unemployment benefits is set to expire. If Congress does not renew it, workers who lost their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 73 weeks in state and federal benefits that have been available in 2012.

As a result, more than 2 million of the long-term unemployed will run out of benefits at the end of this year, according to the National Employment Law Project, an advocacy group.

And another 1 million workers will exhaust their 26 weeks in the first quarter of next year and will not be able to sign up for the federal extension.

If Congress chooses early next year to keep the extension in place, and makes the extension retroactive, many of the 2 million who fell off the rolls may be paid retroactively, said Rick McHugh, a NELP staff attorney.

Doctors' pay: Medicare physicians are facing a nearly 27% cut in their payments for treating Medicare patients because Congress has failed to pass the so-called doc fix to override that scheduled cut, as they usually do.

But here again there may be a few weeks' grace period for Congress to change its mind and reverse the cut. That's because claims are held for at least two weeks before they are paid. To top of page

First Published: December 30, 2012: 7:17 PM ET


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Manufacturing expansion accelerates in China

HONG KONG (CNNMoney)

HSBC said its Chinese purchasing managers' index, or PMI, rose to a 19-month high of 51.5 in December from 50.5 last month. The reading was above 50, meaning that manufacturing is now in a state of accelerated expansion.

A preliminary reading of 50.9 was published by HSBC earlier in December.

"Momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilize," said Hongbin Qu, an economist at HSBC.

The fate of manufacturing in China is considered a barometer of the global economy because of the country's role as a powerhouse exporter. And because it makes up a large part of China's economy, manufacturing strength plays an important role in shaping domestic policy.

Related: Chinese firms go on U.S. spending spree

China's economy has grown at an average of around 10% a year for the past three decades, allowing the country to rocket past international competition to become the world's second largest economy.

While GDP growth was slower last quarter than many economists expected at 7.4%, recent data on manufacturing and exports suggest growth is beginning to rebound.

"Beijing's reiteration of keeping pro-growth policy in place into the coming year, should support a modest growth recovery of around 8.6% year-over-year in 2013, despite the ongoing external headwinds," Qu said. To top of page

First Published: December 30, 2012: 9:21 PM ET


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Debt ceiling is the next fiscal cliff

Congress has about two months before it must act to raise the debt ceiling, but lawmakers are showing few signs they are ready to act on it soon.

NEW YORK (CNNMoney)

Congress will have to raise the debt ceiling soon, probably by late February or early March.

The deadline sets the tables for another fight on Capitol Hill, where some Republican lawmakers view the debt limit as leverage in negotiations with President Obama over spending cuts and reforms to Medicare and Social Security.

The debt ceiling is a law that goes back to the early 1900s that caps how much debt the federal government can hold.

Last week, Treasury Secretary Tim Geithner warned Congress that federal borrowing would hit the $16.394 trillion debt ceiling on Monday.

Treasury can then buy the government about $200 billion of borrowing headroom by temporarily shifting how some U.S. holdings are invested. With the public debt increasing about $100 billion a month, that gives Treasury about two more months to borrow and stay under the cap.

Geithner ruled out "fire sale" sales of stock it still owns in companies bailed out during the financial crisis; he also said it made no sense to raise money by selling gold held in U.S. reserves.

Last year, political brinksmanship over the debt limit led to the downgrade of the country's credit rating, roiled stock markets and raised questions about the country's willingness to pay all of its bills on time.

In fact, the debt ceiling has long pitted Congress and the White House, regardless which party controls each branch of government.

It shouldn't be such a divisive issue.

While the Treasury secretary runs the government bond-selling operation, and the president appoints the Treasury secretary, the debt is ultimately racked up because of budget decisions made by Congress in partnership with the president.

In other words, Congress authorizes spending on Program X in a budget the president signs off on. If there's not enough tax revenue coming in to pay for Program X, the Treasury Department goes out and borrows money to pay for it.

The debt ceiling is an artificial limit on the debt -- not a trip wire on spending.

"The debt limit does not restrict Congress's ability to enact spending and revenue legislation," the Government Accountability Office wrote in a report last year. "[I]t restricts Treasury's authority to borrow to finance the decisions already enacted by Congress and the president."

That GAO report chronicled how the 2011 debt ceiling fight wasted $1.3 billion in taxpayer money because of the uncertainty it wrought on the complex task of federal borrowing. To top of page

First Published: December 31, 2012: 2:14 AM ET


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Fiscal cliff could put your tax refund on hold

Written By limadu on Minggu, 30 Desember 2012 | 14.44

Tax refunds could be delayed.

NEW YORK (CNNMoney)

Congressional dithering over a fiscal cliff fix could force the Internal Revenue Service to delay the start of the filing season. So those expecting to file their returns in mid-January, when the agency usually begins accepting them, may have to wait several weeks.

If Congress doesn't approve a patch for the alternative minimum tax in the next few days, then up to 100 million taxpayers will not be able to file their returns -- or collect refunds, if owed -- until late March, said Steven Miller, the agency's acting commissioner. (The AMT itself would hit nearly 30 million filers with higher tax bills, and returns of the others would be held up while the IRS reprograms its systems.)

Filing and refunds would also be put on hold by the uncertain fate of a dozen other provisions, including the deduction for state and local sales taxes and the $250 tax break for teachers who buy their own school supplies.

This isn't the first time the IRS has had to deal with this. Two years ago, it took until mid-December for President Obama and lawmakers to reach an agreement on many of the same issues. That delayed the opening of the tax season by four weeks to mid-February, affecting some 9 million taxpayers.

Most of them were likely owed refunds, since that's who files early, said John Lieberman, managing director of Perelson Weiner, an accounting firm in New York. They are often folks whose income is just from wages and who take the standard deduction, making their returns fairly simple. Many are low-income families who file for the earned income tax credit.

"They need that money back to pay Christmas bills, for a downpayment on a car or a security deposit on an apartment," said Lieberman.

Related: Fiscal cliff confusion on Form 1040

This year, the situation is even more dire since we are only days away from the start of 2013.

While the IRS has published the Form 1040 for 2012, several lines are listed as "reserved." The designation is a "placeholder" for provisions that have yet to be passed, an agency spokesman said. The IRS has yet to publish an instruction booklet for filling out the tax forms, leaving tax preparers in a holding pattern.

"How they are going to handle this?" said John Roth, senior federal tax analyst for CCH, a tax services company. "We are in virgin territory."

The IRS spokesman declined to answer questions on how the Congressional delay will affect taxpayers, but said more information would be available shortly. To top of page

First Published: December 28, 2012: 4:44 PM ET


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S&P says fiscal cliff impasse won't spark downgrade

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

NEW YORK (CNNMoney)

S&P made headlines in August of 2011 by knocking the U.S. down from AAA status to to AA+ following the political wrangling over the debt ceiling. At the time, the rating agency said the affair showed "America's governance and policymaking becoming less stable, less effective, and less predictable."

More than a year later, S&P said Friday that this characterization "still holds."

Fellow rating agencies Moody's and Fitch still have the U.S. rated AAA, though with negative outlooks.

Fitch warned earlier this month that it may downgrade the U.S. should lawmakers fail to avoid the fiscal cliff and allow the debt ceiling to rise. Moody's has said it will strip the country's AAA rating should lawmakers fail to produce a long-term debt reduction plan.

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

Should lawmakers fail to avert the package of tax hikes and spending cuts that constitute the fiscal cliff, the U.S. economy is likely to contract by half a percent next year, with unemployment rising to 9% by 2014, S&P said. This contraction could mitigate the reduced spending and additional tax revenue that would come to the government.

Related: Fiscal cliff could put your tax refund on hold

On the other hand, should lawmakers reach a deal within the next few days, it's likely to be "insufficient to place the U.S. medium-term public finances on a sustainable footing," S&P said.

"Our existing negative outlook on the U.S. rating speaks to the risk of a deliberate further loosening of fiscal policy," the agency said.

Back in June, S&P warned that the United States could be in for another credit downgrade by 2014 if Congress doesn't come up with a plan to reduce the national debt. S&P spokesman John Piecuch said in an email Friday that the rating agency could make a downgrade decision before the end of that time frame. To top of page

First Published: December 28, 2012: 5:46 PM ET


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Stocks brace for fiscal cliff reckoning

The deadline to avert a looming fiscal crisis is fast approaching. Investors are hoping for the best, but bracing for the worst.

NEW YORK (CNNMoney)

For weeks, many have worried that no resolution to the fiscal cliff would lead to the kind of brutal sell-off that followed the voting down of the TARP bailout and the downgrade of America's credit rating.

Now, with the deadline fast approaching and no clear resolution in sight, strategists aren't so sure.

"I don't know how the market is going to react," said Ben Schwartz, chief market strategist at Lightspeed Financial. "But I do know that people are upset with what's going on in Washington."

The dysfunction in Washington has cast a pall over Wall Street since Election Day. But despite all the hand-wringing, stocks are currently trading at levels seen just before President Obama won a second term.

So, where do stocks go from here? Good question.

Much depends on what House lawmakers do Sunday, when they meet for a last-ditch round of budget talks. The hope is that a stopgap measure is put in place to prevent some of the tax hikes and spending cuts set to take effect on Jan. 1.

Related: Going over the cliff: What changes, what doesn't

Here are two possible outcomes:

Partial deal, modest sell-off

Like most Americans, investors view the budget impasse as an epic failure of leadership in Washington. But they still expect a deal, because doing nothing would be "political suicide" for members of both parties.

"We think they will reach some kind of agreement before the end of the year, but not until the very last minute. And it won't be much," said Kate Warne, chief investment strategist at Edward Jones.

While the details remain sketchy, investors are expecting a short-term extension of Bush-era tax breaks and a suspension of defense spending cuts, among other things.

Despite its name, many strategists say the fiscal cliff will not hit the economy right away. That could give lawmakers some time to continue negotiating, but it's unclear how long the market will tolerate such uncertainty.

Related: Real fiscal cliff deadline is inauguration

"Unlike the debt ceiling and government shutdowns in the past, not all that much changes on January first," Warne said. "But the tone will get more and more negative as time goes on."

Even with a stopgap deal, stocks could sell off, according to Peter Tuz, a portfolio manager at Chase Investment Counsel.

"It doesn't have to be sharp," he said. "A 20% drop would be astounding, but a modest drop would not be surprising."

No deal, more volatility:

Investors could be in for a rude awakening on New Year's day. Despite the political and economic stakes, it's not a given that Congress will act.

"I don't think investors have taken into account that nothing gets done," Warne said.

Wall Street vigilantes believe a sell-off may be necessary to force America's elected officials into action. But there is no guarantee that a riot in the stock market will inspire sound policymaking.

For example, the sell-off that followed the S&P downgrade did not result in a long-term solution to the debt ceiling problem, said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors.

"The market can act as a disciplinarian, but that doesn't ensure that we get a clean and lasting solution," Creatura said. "We didn't get that last time, and it's probably not realistic to expect it this time either."

The fiscal cliff was designed to force Washington to deal with the nation's long-term debt problems, but hopes for a grand bargain have diminished as talks devolved into stalemate.

The lack of progress on structural issues, such as entitlement spending, means investors will be dealing with a certain degree of political risk long after the fiscal cliff deadline has passed.

"They're not dealing with the big issues," Tuz said. "They'll come up with a band aid approach that just delays the inevitable."

In the meantime, trading in the stock market could be volatile as investors monitor the blow-by-blow in Washington.

The market's fear gauge, the VIX (VIX)has jumped 14% over the past five days -- a sure sign that volatility is indeed on the rise.

"We're floating around here and no one has any real idea where we're going to go," Schwartz said. "That's why volatility has popped up." To top of page

First Published: December 29, 2012: 9:03 AM ET


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Snapchat's 'disappearing' videos don't actually vanish

Written By limadu on Sabtu, 29 Desember 2012 | 14.44

Snapchat messages are designed to vanish seconds after they're opened, but a security probe revealed that some videos are being stored on recipients' iPhones.

NEW YORK (CNNMoney)

Snapchat's twist is a messaging trail that self-destructs. When a user sends an image, they can choose how long the receiver has to view it, picking a timeframe of up to 10 seconds after opening. Then it vanishes.

The allure of a disappearing act frees users to send funny, embarrassing and personal images meant to leave no digital trail. (And yes, it's often used for 'sexting.') The app has been a giant hit, especially with teens. Launched one year ago, Snapchat now hosts 50 million shared images a day, according to the company. Facebook copied the feature last week for its new Poke app.

Except that in the digital realm, nothing ever seems to vanish for good. A newly discovered security flaw can resurrect Snapchat's supposedly nuked videos.

A Buzzfeed article on Thursday explained the hack, which involves opening up an iPhone file browser, navigating to a Snapchat folder, and copying videos over to your computer. Turns out that all those video files that were intended to vanish are actually being accumulated in a cache. Photos don't seem to be stored, according to Buzzfeed's tests.

Snapchat did not respond to CNNMoney's request for comment. Founder Evan Spiegel told Buzzfeed: "The people who most enjoy using Snapchat are those who embrace the spirit and intent of the service. There will always be ways to reverse engineer technology products — but that spoils the fun!"

A similar flaw also affects Facebook's Poke app, which lets users send Facebook messages and videos that disappear in seconds. Facebook (FB) acknowledged the glitch and urged users to proceed with caution.

"While Pokes disappear after they are read, there are still ways that people can potentially save them," a Facebook spokeswoman said in a written statement. "People should think about what they are sending and share responsibly."

Security experts say it's no surprise that "vanishing" messages don't disappear as completely as users expect. True privacy is a huge technical challenge, according to Robert Leshner, founder of Safe Shepherd, a personal-data protection service.

"Some of these photos and videos have to disappear from the servers of the company and have to cease to exist entirely. It's not just removing the accessibility, it's about removing the content," he said. "There are always weak links and chinks in the armor that can be discovered."

Snapchat's app icon is a ghost, intended to illustrate how its messages are fleeting and ephemeral. Now it's got an ironic kicker: Some of those missives can stick around to haunt you. To top of page

First Published: December 28, 2012: 3:16 PM ET


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Fiscal cliff could put your tax refund on hold

Tax refunds could be delayed.

NEW YORK (CNNMoney)

Congressional dithering over a fiscal cliff fix could force the Internal Revenue Service to delay the start of the filing season. So those expecting to file their returns in mid-January, when the agency usually begins accepting them, may have to wait several weeks.

If Congress doesn't approve a patch for the alternative minimum tax in the next few days, then up to 100 million taxpayers will not be able to file their returns -- or collect refunds, if owed -- until late March, said Steven Miller, the agency's acting commissioner. (The AMT itself would hit nearly 30 million filers with higher tax bills, and returns of the others would be held up while the IRS reprograms its systems.)

Filing and refunds would also be put on hold by the uncertain fate of a dozen other provisions, including the deduction for state and local sales taxes and the $250 tax break for teachers who buy their own school supplies.

This isn't the first time the IRS has had to deal with this. Two years ago, it took until mid-December for President Obama and lawmakers to reach an agreement on many of the same issues. That delayed the opening of the tax season by four weeks to mid-February, affecting some 9 million taxpayers.

Most of them were likely owed refunds, since that's who files early, said John Lieberman, managing director of Perelson Weiner, an accounting firm in New York. They are often folks whose income is just from wages and who take the standard deduction, making their returns fairly simple. Many are low-income families who file for the earned income tax credit.

"They need that money back to pay Christmas bills, for a downpayment on a car or a security deposit on an apartment," said Lieberman.

Related: Fiscal cliff confusion on Form 1040

This year, the situation is even more dire since we are only days away from the start of 2013.

While the IRS has published the Form 1040 for 2012, several lines are listed as "reserved." The designation is a "placeholder" for provisions that have yet to be passed, an agency spokesman said. The IRS has yet to publish an instruction booklet for filling out the tax forms, leaving tax preparers in a holding pattern.

"How they are going to handle this?" said John Roth, senior federal tax analyst for CCH, a tax services company. "We are in virgin territory."

The IRS spokesman declined to answer questions on how the Congressional delay will affect taxpayers, but said more information would be available shortly. To top of page

First Published: December 28, 2012: 4:44 PM ET


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S&P says fiscal cliff impasse won't spark downgrade

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

NEW YORK (CNNMoney)

S&P made headlines in August of 2011 by knocking the U.S. down from AAA status to to AA+ following the political wrangling over the debt ceiling. At the time, the rating agency said the affair showed "America's governance and policymaking becoming less stable, less effective, and less predictable."

More than a year later, S&P said Friday that this characterization "still holds."

Fellow rating agencies Moody's and Fitch still have the U.S. rated AAA, though with negative outlooks.

Fitch warned earlier this month that it may downgrade the U.S. should lawmakers fail to avoid the fiscal cliff and allow the debt ceiling to rise. Moody's has said it will strip the country's AAA rating should lawmakers fail to produce a long-term debt reduction plan.

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

Should lawmakers fail to avert the package of tax hikes and spending cuts that constitute the fiscal cliff, the U.S. economy is likely to contract by half a percent next year, with unemployment rising to 9% by 2014, S&P said. This contraction could mitigate the reduced spending and additional tax revenue that would come to the government.

Related: Fiscal cliff could put your tax refund on hold

On the other hand, should lawmakers reach a deal within the next few days, it's likely to be "insufficient to place the U.S. medium-term public finances on a sustainable footing," S&P said.

"Our existing negative outlook on the U.S. rating speaks to the risk of a deliberate further loosening of fiscal policy," the agency said.

Back in June, S&P warned that the United States could be in for another credit downgrade by 2014 if Congress doesn't come up with a plan to reduce the national debt. S&P spokesman John Piecuch said in an email Friday that the rating agency could make a downgrade decision before the end of that time frame. To top of page

First Published: December 28, 2012: 5:46 PM ET


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New-home sales strongest in more than 2 years

Written By limadu on Jumat, 28 Desember 2012 | 14.44

New home sales in November rose to their highest level since 2010.

NEW YORK (CNNMoney)

The Census Bureau reported Thursday that sales of new homes rose to an annual rate of 377,000 in the month, up 4.4% from October, and up 15% from year-earlier levels. It was the highest rate of new-home sales since April 2010, when sales were inflated by a temporary $8,000 tax credit for home buyers.

The housing market is now showing numerous signs of improvement, including better existing home sales and home construction.

A combination of near record low mortgage rates, lower unemployment and a drop in foreclosures means there are more buyers interested in purchasing, and fewer available homes. That in turn has lifted home prices.

Related: Five signs to look for in housing

Those supply-and-demand dynamics are especially true in the new-home market.

There was only a 4.7 month supply of new homes on the market in November, the same tight inventory as has been the case in four of the previous six months. The last time there was a tighter supply of new homes available was in October 2005, near the height of the housing bubble.

The tight supply has lifted the median price of a new home sold in November to $246,200, up 14.9% from the comparable price a year earlier.

Anika Khan, senior economist with Wells Fargo Securities, said the report was stronger than expected, especially for what is traditionally a slow month for home sales. She said new-home sales and construction are becoming a more important driver of overall economic growth, which is even more important with the economy facing other headwinds such as a cutback on business investment and consumer worries about the fiscal cliff.

"New-home sales is a good story and it will continue to be a good story," she said.

New-home sales can be more important to the economy than sales of previously owned homes since they require purchase of other goods, such as appliances, and because of the construction jobs needed to build the homes.

Related: 2013 housing outlook

The continued rebound in prices likely will be a positive for both purchases and construction in the year ahead. Higher prices give current homeowners an incentive to sell their homes and procure the down payment they need for their next home purchase. Potential home buyers, who may have been on the sidelines because of uncertainty about home prices, might also be lured into the market.

Home builders benefit from higher prices and increased demand. Leading home builders such as PulteGroup (PHM), Lennar (LEN), KB Home (KBH), D.R. Horton (DHI) and Toll Brothers (TOL) have all enjoyed at least a 50% rise in their stock price over the last 12 months, with PulteGroup's stock nearly tripling in value. To top of page

First Published: December 27, 2012: 10:21 AM ET


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Shares in Spain's Bankia plunge as bailout looms

A rescue recapitalisation backed by EU funds will dilute small shareholders

LONDON (CNNMoney)

The European Commission agreed last month to inject nearly 37 billion euros from the eurozone's bailout fund into Bankia and three more Spanish banks, which had been nationalized to prevent them from collapsing under massive losses on real estate lending.

Spain's bank restructuring fund said it would draw on the EU funds to inject 13.5 billion euros into Bankia's parent company BFA before the end of the year. BFA will then use part of that money to buy new Bankia bonds worth 10.7 billion euros, which will convert into shares early in 2013.

"[W]e are safeguarding the principle established by law ... which requires that shareholders are the first to bear losses or restructuring cuts," the Spanish restructuring fund said in a statement.

A Bankia spokesman declined to comment on the share price fall or details of the capital increase, which was first announced in November, saying only that "existing shareholders will retain a small stake in Bankia".

The EU-backed bailout is designed to allow Bankia, NCG Banco and Catalunya Banco to become viable in the long term without continued state support. The fourth, Banco de Valencia, is being sold to CaixaBank.

Independent stress tests conducted on the Spanish banking sector earlier this year identified a capital hole of about 59 billion euros, to a large extent created by the collapse of the country's property bubble.

Spain is suffering its second recession in three years and can no longer prop up its ailing banking industry. But it has stopped short of following in the footsteps of Greece, Ireland and Portugal in requesting a full-blown sovereign bailout.

Related: EU strikes deal to bring banks under single supervisor

A second group of four banks -- Liberbank, Caja3, BMN, and Banco CEISS -- had their restructuring programs approved by the European Commission last week and will receive some 1.9 billion euros in assistance.

All eight banks in receipt of EU funding have committed to conduct major overhauls of their businesses, shrinking balance sheets, selling assets, offloading property loans to a "bad bank" and imposing losses on existing holders of equity and debt. Together these measures are expected to have reduced the bailout bill by at least 14 billion euros.

Bankia's shares will be suspended from Spain's benchmark Ibex index starting January 2, the stock exchange said. The stock has lost about 85% of its value since the bank was listed in July 2011 via a public offering that was promoted to small investors. To top of page

First Published: December 27, 2012: 2:56 PM ET


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Dinosaur smuggler faces 17 years in prison

The U.S. attorneys office said that skeletons of Tyrannosaurus bataar dinosaurs were looted from Mongolia as part of a smuggling scheme.

NEW YORK (CNNMoney)

Florida native Erik Prokopi illegally bought and sold whole and partial dinosaur skeletons between 2010 and 2012, as part of what he described as a "commercial paleontology" business, according to the U.S. Attorney for the Southern District of New York.

The fossils included three Tyrannosaurus bataar skeletons, which are believed to have roamed the earth 70 million years ago, a Saurolophus skeleton and an Oviraptor skeleton.

Prokopi, 38, also faces fines totaling $750,000.

The attorney's office said Prokopi bought fossils from foreign countries and unlawfully transported them back to the U.S. The dinosaur remains slipped through customs, because Prokopi is believed to have misrepresented the shipments on customs forms.

Related: Feds bust black market in dinosaur fossils

The offenses violate laws of the United States and Mongolia, where it is a crime to take dinosaur fossils out of the country.

As part of his plea agreement, Prokopi will forfeit the remains, which will be returned to the country of origin.

"Black marketeers like Prokopi, who illegally export and sell these wonders, steal a slice of ... history," said Preet Bharara, Manhattan U.S. Attorney. "Fossils and ancient skeletal remains are part of the fabric of a country's natural history and cultural heritage."

Prokopi is scheduled to be sentenced on April 25, 2013. To top of page

First Published: December 27, 2012: 5:27 PM ET


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'Marriage penalty' could make costly return

Written By limadu on Kamis, 27 Desember 2012 | 14.44

NEW YORK (CNNMoney)

As a result of the Bush tax cuts, married couples get a standard deduction that's exactly twice that of individuals. And the income ranges for the 10% and 15% tax brackets are also doubled. Prior to 2001, many married couples had paid a "penalty" because their standard deduction and income tax brackets were less than twice those of singles.

Next year the imbalance could return. While the standard deduction for single filers should rise to $6,100, married couples would receive a deduction of only $10,150 if lawmakers don't extend the provision, according to estimates by the Tax Foundation. To erase the marriage penalty, it would have to be $12,200.

Married couples would also be moved into higher tax brackets more quickly. Individual taxpayers would be in the 15% tax bracket until they hit $36,250 in taxable income, but married filers could be pushed above it after only $60,550 in income, as opposed to $72,500.

The marriage penalty never went away for higher tax brackets above 15% -- and that would continue to be the case. Even if the Bush tax cuts are extended, the 25% bracket would end at $87,850 for singles, but only at $146,400 for joint filers. And the highest bracket starts at the same income level regardless of whether the filer is a married couple or a single person.

Related: Going over the Cliff - what changes, what doesn't

Married couples benefiting from the Earned Income Tax Cut would also get hit if the fiscal cliff isn't addressed. The last two administrations raised the income threshold at which the credit begins to phase out for married couples to $5,000 above the amount for individuals.

Of course, the marriage penalty is only one of a bevy of provisions that are set to expire after 2012 so exactly what both married couples and single filers will pay next year remains up in the air. To top of page

First Published: December 26, 2012: 11:01 AM ET


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Geithner: U.S. to hit debt ceiling on Monday

Treasury Secretary Tim Geithner warned Congress in a letter that U.S. borrowing will hit the debt ceiling on Monday, and that Treasury will begin using 'extraordinary measures' to keep under the cap.

NEW YORK (CNNMoney)

As a result, the Treasury Department will soon start using what it calls "extraordinary measures" to prevent government borrowing from exceeding the legal limit.

Such measures include suspending the reinvestment of federal workers' retirement account contributions in short-term government bonds.

On Monday, debt subject to the limit was just $95 billion below the $16.394 trillion debt ceiling.

All told, the extraordinary measures can create about $200 billion of headroom under the limit -- normally about two months worth of borrowing.

But it's unclear how much time the extraordinary measures can buy now because there are so many unanswered questions about tax and spending policies, Geithner said, referring to the lack of any resolution of the fiscal cliff.

"If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures," he wrote.

After the extraordinary measures run out, Treasury won't be able to pay all the country's bills in full and on time. At that point, the United States will run the very real risk that it could default on some of its obligations.

Geithner has predicted for months that the country would hit the debt ceiling by the end of December.

But Congress, first consumed with the 2012 elections and now with the fiscal cliff, has made little effort to raise the ceiling.

Now there's a good chance the debt ceiling issue won't be resolved until the 11th hour and only after an ugly fight.

Indeed, some Republicans have been saying they view the debt ceiling as leverage in budget negotiations in early 2013 in their bid to secure spending cuts.

Before fiscal cliff legislation died last week, House Speaker John Boehner offered President Obama a one-year debt ceiling increase, but only on the condition that spending cuts and reforms exceeded the size of any increase.

The last standoff over the debt ceiling in 2011 ended badly, with Congress raising it only at the last minute. The debacle led to the downgrade of the country's AAA credit rating and caused tumult in the markets.

The Government Accountability Office has long called for Congress to come up with a smarter way to handle the debt ceiling.

"Congress should consider ways to better link decisions about the debt limit with decisions about spending and revenue to avoid potential disruptions to the Treasury market and to help inform the fiscal policy debate in a timely way," the GAO said in a recent report.

Meanwhile, a variety of fiscal and monetary experts have called for the debt ceiling to be abolished altogether. To top of page

First Published: December 26, 2012: 4:32 PM ET


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Toyota to pay $1.1 billion in recall case

In one of the largest of its kind, Toyota agreed to pay $1.1 billion to settle claims of acceleration issues in 2009-2010.

NEW YORK (CNNMoney)

This is one of the largest lawsuits of its kind, according to Steve Berman, one of the lead plaintiff lawyers.

Under the agreement, Toyota (TM) will also install a brake-override system in cars where acceleration pedals got stuck in floor mats, leading them to accelerate unintentionally.

The company will also set up a fund of $250 million to be paid to former Toyota owners who sold their cars between Sept. 1, 2009, and Dec. 31, 2010, to compensate the owners for the reduced value of the cars from the negative publicity.

A statement from the attorneys representing Toyota owners said that a separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system.

About 16 million current owners will be eligible for a customer care plan, that will provide a warranty on certain parts tied to unintended acceleration for between three and 10 years.

This settlement doesn't cover any product liability or personal injury claims related to unintended acceleration issues, according to a Toyota spokesperson.

The car maker said that the settlement will lead to a one-time, $1.1 billion pre-tax charge against fourth quarter earnings to cover the costs.

Related: Toyota set to reclaim 'top car maker' spot from GM

Until these problems surfaced, Toyota held the top reputation for vehicle quality and safety. But since then, it has been dogged by significant recall problems. It has already announced recalls of more than 10 million vehicles worldwide for various problems so far this year.

Earlier this month, the car company agreed to pay a record $17.4 million to the National Highway Traffic Safety Administration for problems related to a 2012 recall in one of its Lexus models. That's the largest fine allowed by law for a single investigation.

And in November, it recalled 7.43 million cars due to a power window problem that poses a fire risk.

In 2011, Toyota relinquished its title as "the world's biggest car marker," when car recalls and Japan's earthquake and tsunami delivered a blow to sales and production.

But the Japanese car maker has since staged a comeback, thanks to a banner year of sales worldwide. To top of page

First Published: December 26, 2012: 5:08 PM ET


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Italy's Monti may lead again, reforms key

Written By limadu on Rabu, 26 Desember 2012 | 14.44

Monti says he may be a candidate for prime minister if asked by reformist parties

LONDON (CNNMoney)

Monti stood down, and parliament was dissolved Friday, after former Prime Minister Silvio Berlusconi withdrew his support for Monti's unelected government of technocrats, appointed a year ago to save Italy from the financial crisis then threatening to tear the eurozone apart.

Speaking on Sunday, Monti said he was more concerned that his policies survived than taking sides in the campaign but added he was ready to offer advice and leadership if a party or coalition came forward with a program he could support.

"I would be much more interested if the Monti agenda - and I apologise if my name appears here - would serve to provide clarity and perhaps help unite the forces," he said at a news conference.

Monti, an economics professor and former European Commissioner, has been credited with restoring confidence in Italy, as well as with its eurozone partners and investors, thanks to his commitment to reduce government borrowing and introduce economic and political reforms.

"While he may not have thrown his hat into the ring, Il Professore has become Il Politico whether he likes it or not," said Nicholas Spiro, managing director of London consulting firm Spiro Sovereign Strategy.

Related: Greece may remain in euro after all

Yields on 10-year Italian government bonds have risen recently on the renewed political instability but remain way below the 7% level Monti inherited a year ago, when he succeeded Berlusconi, who resigned under a cloud of scandal.

In a taste of a bitter election campaign to come, Berlusconi criticized Monti's lack of business experience and said his government had made too many errors

"Last night I had a nightmare, I woke up screaming. I dreamed of a government still with Mario Monti as president of the council," he said, according to the transcript of an interview posted on his website.

Fiscal tightening, weak confidence and tight credit supply have kept Italy deep in recession for the past five quarters. The economy is expected to shrink by about 2.4% this year, and continue to contract in 2013. Unemployment hit 11% in October and is forecast to rise even further next year.

Related: Europe needs new ideas - Vodafone CEO

Opinion polls suggest the center-left Democratic Party led by Pier Luigi Bersani will win the lower house elections, but may need to build a coalition to gain a majority.

Bersani said in a statement on his website that he had no reason to apologize for supporting Monti's program in government and would consider his policy proposals carefully.

Analysts at Nomura said a Bersani-led government including Monti in some capacity was the "best case" likely outcome for financial markets but cautioned that even such a government may struggle to implement reforms, particularly if it failed to win a majority in the upper house.

"Given all this political uncertainty, we see a non-negligible risk that markets will become unsettled over Italy again early in the new year," wrote Alastair Newton in a research note.

-- CNN's Alex Felton contributed to this article To top of page

First Published: December 24, 2012: 9:47 AM ET


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Last minute shoppers bring hope to stores

Shopping has ramped up as consumers rush to get last minute gifts, but experts say the late push may not be enough to save holiday retail sales.

NEW YORK (CNNMoney)

Estimates for the final shopping weekend aren't out yet, but there's evidence that more shoppers were coming into stores as the holidays drew near.

At North Point Mall in Alpharetta, Georgia, the parking lots were at capacity this past weekend, and it was standing room only at the food court, according to the mall's general manager Nick Nicolosi.

"By the amount of bags I saw, with people carrying four or five each, it's looking like a great season," he said.

A poll conducted by The NPD Group and CivicScience revealed that 42% of consumers were still shopping for the holidays last week, since many have been groomed to wait for better deals later in the season.

Related: Last minute deals at Wal-Mart, Target, Bloomingdales

The long holiday shopping calendar also played a role in why many customers waited, said Bill Martin, founder of ShopperTrak, which analyzes retail foot traffic.

"Many consumers delayed their Christmas shopping -- and with good reason," he said. "They saw 32 shopping days between Black Friday and Christmas."

Even if shopping ramped up during the final rush, experts are expecting disappointing numbers for the holiday season overall.

Superstorm Sandy forced many stores to close for days in October and early November. It also left many people in the Northeast without power for weeks, hurting their psyche. Looming worries over whether tax rates will go up from the fiscal cliff has also kept shoppers from going overboard with their holiday lists.

ShopperTrak lowered its holiday sales forecast for the months of November and December. It now predicts that sales will increase 2.5% over last year, down from the 3.3% it initially projected in September.

Retailers were pulling out all the stops at the last minute to lure in late shoppers.

Toys R Us stores were staying open open for 88 consecutive hours until 10 p.m. on Christmas Eve. Macy's (M, Fortune 500) stores were open for more than 48 hours straight.

Other retailers are handing cash back to customers. For every $50 spent at Kohl's (KSS, Fortune 500), the department store gave out a $10 store coupon. Target (TGT, Fortune 500) handed out gift cards worth up to $130 to shoppers who bought certain Dyson vacuums. And Wal-Mart (WMT, Fortune 500)slashed prices on iPhones and iPads.

Trae Bodge, senior editor of RetailMeNot.com Insider, said that these discounts are a sign that retailers want to get stale inventory moving, since shopping so far this season has been slow. To top of page

First Published: December 24, 2012: 12:02 PM ET


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Stocks tumble as fiscal cliff deadline nears

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average fell 0.4%. The S&P 500 and the Nasdaq both lost about 0.3%. U.S. markets closed at 1 p.m. ET and will remain dark Tuesday for the Christmas holiday.

With time running out, investors are increasingly concerned about the lack of progress in talks over tax hikes and spending cuts set to kick in automatically on Jan. 1, known as the fiscal cliff.

Stocks fell 1% on Friday after a plan by Speaker John Boehner to avert the fiscal cliff failed to get enough support in the House late Thursday. President Obama spoke about the negotiations Friday evening before leaving for the holiday, urging a scaled-back deal that would stop taxes from rising on 98% of Americans -- something both sides say they want.

No one expects progress on a deal Monday, with members of Congress having left Washington for their homes to celebrate the Christmas holiday.

Related: What happens to stocks if we go over fiscal cliff?

But investors are still holding out hope for a temporary fix before the end of the year, said Mark Luschini, chief investment strategist at financial advisory firm Janney Montgomery Scott. Such a deal would only forestall the immediate crisis and delay more difficult decisions until later next month, he added.

"If they can avert the worst, the market will find some support," said Luschini. "Absent that, we will definitely see some pressure on equities."

Fear & Greed Index

Most federal offices and many businesses were closed on Monday. There are no economic reports or corporate news scheduled for release.

European markets ended a holiday-shortened day mixed, with markets in Germany closed. Italy's Mario Monti said this weekend he may consider a second term as prime minister if asked by parties committed to the economic reforms he began over the past 12 months.

Asian markets ended slightly higher, while markets in Japan were closed.

The U.S. dollar rose versus the euro, British pound and Japanese yen. In the bond market, U.S. Treasuries were lower, with the 10-year note yielding 1.78%. Oil prices fell while gold prices edged higher. To top of page

First Published: December 24, 2012: 9:41 AM ET


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Italy's Monti may lead again, reforms key

Written By limadu on Selasa, 25 Desember 2012 | 14.44

Monti says he may be a candidate for prime minister if asked by reformist parties

LONDON (CNNMoney)

Monti stood down, and parliament was dissolved Friday, after former Prime Minister Silvio Berlusconi withdrew his support for Monti's unelected government of technocrats, appointed a year ago to save Italy from the financial crisis then threatening to tear the eurozone apart.

Speaking on Sunday, Monti said he was more concerned that his policies survived than taking sides in the campaign but added he was ready to offer advice and leadership if a party or coalition came forward with a program he could support.

"I would be much more interested if the Monti agenda - and I apologise if my name appears here - would serve to provide clarity and perhaps help unite the forces," he said at a news conference.

Monti, an economics professor and former European Commissioner, has been credited with restoring confidence in Italy, as well as with its eurozone partners and investors, thanks to his commitment to reduce government borrowing and introduce economic and political reforms.

"While he may not have thrown his hat into the ring, Il Professore has become Il Politico whether he likes it or not," said Nicholas Spiro, managing director of London consulting firm Spiro Sovereign Strategy.

Related: Greece may remain in euro after all

Yields on 10-year Italian government bonds have risen recently on the renewed political instability but remain way below the 7% level Monti inherited a year ago, when he succeeded Berlusconi, who resigned under a cloud of scandal.

In a taste of a bitter election campaign to come, Berlusconi criticized Monti's lack of business experience and said his government had made too many errors

"Last night I had a nightmare, I woke up screaming. I dreamed of a government still with Mario Monti as president of the council," he said, according to the transcript of an interview posted on his website.

Fiscal tightening, weak confidence and tight credit supply have kept Italy deep in recession for the past five quarters. The economy is expected to shrink by about 2.4% this year, and continue to contract in 2013. Unemployment hit 11% in October and is forecast to rise even further next year.

Related: Europe needs new ideas - Vodafone CEO

Opinion polls suggest the center-left Democratic Party led by Pier Luigi Bersani will win the lower house elections, but may need to build a coalition to gain a majority.

Bersani said in a statement on his website that he had no reason to apologize for supporting Monti's program in government and would consider his policy proposals carefully.

Analysts at Nomura said a Bersani-led government including Monti in some capacity was the "best case" likely outcome for financial markets but cautioned that even such a government may struggle to implement reforms, particularly if it failed to win a majority in the upper house.

"Given all this political uncertainty, we see a non-negligible risk that markets will become unsettled over Italy again early in the new year," wrote Alastair Newton in a research note.

-- CNN's Alex Felton contributed to this article To top of page

First Published: December 24, 2012: 9:47 AM ET


14.44 | 0 komentar | Read More

Last minute shoppers bring hope to stores

Shopping has ramped up as consumers rush to get last minute gifts, but experts say the late push may not be enough to save holiday retail sales.

NEW YORK (CNNMoney)

Estimates for the final shopping weekend aren't out yet, but there's evidence that more shoppers were coming into stores as the holidays drew near.

At North Point Mall in Alpharetta, Georgia, the parking lots were at capacity this past weekend, and it was standing room only at the food court, according to the mall's general manager Nick Nicolosi.

"By the amount of bags I saw, with people carrying four or five each, it's looking like a great season," he said.

A poll conducted by The NPD Group and CivicScience revealed that 42% of consumers were still shopping for the holidays last week, since many have been groomed to wait for better deals later in the season.

Related: Last minute deals at Wal-Mart, Target, Bloomingdales

The long holiday shopping calendar also played a role in why many customers waited, said Bill Martin, founder of ShopperTrak, which analyzes retail foot traffic.

"Many consumers delayed their Christmas shopping -- and with good reason," he said. "They saw 32 shopping days between Black Friday and Christmas."

Even if shopping ramped up during the final rush, experts are expecting disappointing numbers for the holiday season overall.

Superstorm Sandy forced many stores to close for days in October and early November. It also left many people in the Northeast without power for weeks, hurting their psyche. Looming worries over whether tax rates will go up from the fiscal cliff has also kept shoppers from going overboard with their holiday lists.

ShopperTrak lowered its holiday sales forecast for the months of November and December. It now predicts that sales will increase 2.5% over last year, down from the 3.3% it initially projected in September.

Retailers were pulling out all the stops at the last minute to lure in late shoppers.

Toys R Us stores were staying open open for 88 consecutive hours until 10 p.m. on Christmas Eve. Macy's (M, Fortune 500) stores were open for more than 48 hours straight.

Other retailers are handing cash back to customers. For every $50 spent at Kohl's (KSS, Fortune 500), the department store gave out a $10 store coupon. Target (TGT, Fortune 500) handed out gift cards worth up to $130 to shoppers who bought certain Dyson vacuums. And Wal-Mart (WMT, Fortune 500)slashed prices on iPhones and iPads.

Trae Bodge, senior editor of RetailMeNot.com Insider, said that these discounts are a sign that retailers want to get stale inventory moving, since shopping so far this season has been slow. To top of page

First Published: December 24, 2012: 12:02 PM ET


14.44 | 0 komentar | Read More

Stocks tumble as fiscal cliff deadline nears

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average fell 0.4%. The S&P 500 and the Nasdaq both lost about 0.3%. U.S. markets closed at 1 p.m. ET and will remain dark Tuesday for the Christmas holiday.

With time running out, investors are increasingly concerned about the lack of progress in talks over tax hikes and spending cuts set to kick in automatically on Jan. 1, known as the fiscal cliff.

Stocks fell 1% on Friday after a plan by Speaker John Boehner to avert the fiscal cliff failed to get enough support in the House late Thursday. President Obama spoke about the negotiations Friday evening before leaving for the holiday, urging a scaled-back deal that would stop taxes from rising on 98% of Americans -- something both sides say they want.

No one expects progress on a deal Monday, with members of Congress having left Washington for their homes to celebrate the Christmas holiday.

Related: What happens to stocks if we go over fiscal cliff?

But investors are still holding out hope for a temporary fix before the end of the year, said Mark Luschini, chief investment strategist at financial advisory firm Janney Montgomery Scott. Such a deal would only forestall the immediate crisis and delay more difficult decisions until later next month, he added.

"If they can avert the worst, the market will find some support," said Luschini. "Absent that, we will definitely see some pressure on equities."

Fear & Greed Index

Most federal offices and many businesses were closed on Monday. There are no economic reports or corporate news scheduled for release.

European markets ended a holiday-shortened day mixed, with markets in Germany closed. Italy's Mario Monti said this weekend he may consider a second term as prime minister if asked by parties committed to the economic reforms he began over the past 12 months.

Asian markets ended slightly higher, while markets in Japan were closed.

The U.S. dollar rose versus the euro, British pound and Japanese yen. In the bond market, U.S. Treasuries were lower, with the 10-year note yielding 1.78%. Oil prices fell while gold prices edged higher. To top of page

First Published: December 24, 2012: 9:41 AM ET


14.44 | 0 komentar | Read More

Financial planners: How to survive fiscal cliff

Written By limadu on Senin, 24 Desember 2012 | 14.44

Financial planners are "doing a lot of hand holding" as they help clients prepare for the fiscal cliff.

NEW YORK (CNNMoney)

Their advice: Prepare for the worst but don't panic.

"We're doing a lot of hand holding," said Lynn Ballou, Certified Financial Planner and managing partner at Ballou Plum Wealth Advisors. "Clients were really hopeful that Congress would set aside its differences and come to a decision, so most people don't actually know what it's going to mean to them if they go over the fiscal cliff. They're concerned but they're also just mad."

Here are a few questions advisers have been fielding from their clients.

1. What's going to happen to my money if we go over the fiscal cliff?

If the fiscal cliff isn't avoided, tax rates on income, estates, gifts, capital gains and dividends will increase, and a number of tax breaks will expire.

The average household will face a total tax increase of $3,500, according to the Tax Policy Center.

Income tax rates would revert to higher levels if the Bush tax cuts expire. Gift and estate tax rates are slated to soar to 55% for anything worth $1 million or more next year -- up from the current 35% tax and exemption of $5.12 million.

Related: Going over the cliff -- What changes, what doesn't

Ballou said it's a smart idea for certain clients to convert retirement accounts to a Roth IRA. And for clients who were planning to give big gifts next year, it could be beneficial to do it this year to avoid a big tax hit.

In addition to the rate increases, key tax breaks for families -- like the American Opportunity Credit and the Earned Income Tax Credit -- are set to revert to lower levels at the beginning of the year. The payroll tax cut is also slated to expire, which would leave 160 million workers with smaller paychecks.

2. Should I get out of the stock market?

Ross Levin, president of Accredited Investors in Minneapolis, said that many of his clients are especially concerned that going over the fiscal cliff could spark a stock market sell-off.

For those particularly worried about investment losses, Levin has been shifting their stock and bond holdings. While a typical portfolio has 70% stocks and 30% bonds, he said in some cases he will scale back the stock investment to as little as 55%.

But he says it's a bad idea to do any drastic repositioning. "As an investor, you need to be comfortable with uncertainty -- it is that uncertainty that allows you to have returns," he said.

For clients who were already planning on selling a stock next year, however, Levin said he may advise them to do it this year instead, in order to take advantage of the lower capital gains tax rate.

Related: What will happen to stocks if we go over the cliff

Otherwise, planners are telling clients not to panic.

"Some people want to take drastic actions like go to all cash," said Paul Jarvis, a CFP and portfolio manager at Bell State Bank & Trust in Fargo, North Dakota. "Investors are worried that if the fiscal cliff negotiations fail, they'll have a significant loss."

Along with making modest portfolio adjustments, Jarvis advises people to put aside enough money to last one to three years. And stash this money in an FDIC-insured savings account -- not under a mattress, Levin recommends.

Ballou said she doesn't have any clients who want to get out of the stock market completely, but she said that many have thought about selling their dividend-paying stocks because they're worried about dividend taxes increasing.

"We have to tell clients, 'Your portfolio is designed to get you where you need to go in life irrespective of tax law, so there's no rush to go out and start selling things because you think you're paying lower tax rates now."

3. Am I on track to survive a fiscal cliff?

Making it through the fiscal cliff unscathed will likely involve readjusting your spending and saving habits, advisers say.

"Many clients are saying their biggest concern is whether they're going to run out of money," said Jarvis. He recommends setting up an emergency fund, making sure investments are diversified and maximizing tax-deferred accounts like 401(k)s and IRAs.

Related: World aghast at fiscal cliff mess

Ballou, who has received more calls than usual in recent weeks, said many clients are particularly worried about affording income tax hikes. To help them budget accordingly, she sits down with them and looks over last year's tax returns to show them just how much taxes would increase if Congress doesn't act.

"We're looking at people's budgets to make sure they have room for an extra tax bite," she said.

Even if Congress reaches a deal and their taxes don't end up rising, this is still a good way for people to make sure they're living within their means and their finances can sustain an emergency or future tax code changes.

"It's a good reminder of what we should be doing anyway," she said. To top of page

First Published: December 23, 2012: 10:26 AM ET


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Stocks: Investors hope for a 'Cliff-mas' miracle

Click the chart for more stock market data

NEW YORK (CNNMoney)

Lawmakers in Washington have only one week left to strike a fiscal cliff deal that will avert automatic tax increases and spending cuts due January 1. Many fear that the fiscal cliff could tip the U.S. into another recession.

Investors are on heightened alert over the gridlock in Washington, since politicians struck down their "Plan B" late last week, and debate is halted until after the Christmas holiday.

Anxious investors are also bracing for a low volume trading week. U.S. stock markets will close at 1 p.m. Eastern Time on Monday and be closed entirely on Tuesday, Christmas day.

Related: Fear & Greed Index

The week is also light on economic data. Reports due on the housing market include new and pending home sales and the Case-Shiller 20 city index on home prices.

The housing market has been showing numerous signs of recovery in recent months. Demand for homes have been helped by record low mortgage rates, thanks to the Federal Reserve's decision to buy $40 billion in mortgages every month.

Foreclosures have also fallen to a five-year low, which has cut down the supply of distressed homes available in the market and helped lift home prices.

Aside from housing, investors will get a glimpse into consumer sentiment as holiday shopping wraps up. Last month, optimism about the job market had consumers feeling more upbeat about the U.S. economy than they had been in four and a half years. It's a closely watched gauge, because consumer spending accounts for more than two thirds of U.S. economic activity.

Related: Top fiscal cliff dodgers

All three U.S. stock indexes finished last week higher, even though fiscal cliff fears sent markets tumbling on Friday.

Overall stocks are up significantly in 2012. The Dow Jones Industrial Average has gained 8%, while the S&P 500 and Nasdaq are up 14% and 16% respectively. To top of page

First Published: December 23, 2012: 12:05 PM ET


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New deal to give MF Global customers more money

Trustees reached a deal that will likely return an estimated $500 million to $600 to MF Global's U.S. brokerage estate.

NEW YORK (CNNMoney)

The trustee trying to recover funds for MF Global customers announced that a settlement was reached on Friday. Under the deal an estimated $500 million to $600 million will be returned to the U.S. brokerage estate, which has been giving money back to customers.

Many of the firm's roughly 38,000 customers were left in the lurch after MF Global collapsed in October 2011, when its disclosure of billions of dollars worth of bets on risky European debt sparked panic among investors.

The firm was left scrambling for cash to make good on its obligations and ended up tapping customer funds, failing to replace them in violation of industry rules and leaving a shortfall of $1.6 billion.

Customers who traded on U.S. exchanges have since received roughly 80% of their money back. But customers trading on foreign exchanges have just recovered 5%.

Related: MF Global FAQ

James Giddens, a trustee appointed to unwind MF Global's estate, said in a statement that the deal resolves disputes between MF Global's brokerage division and its London operations. He said the agreement would result in "significant" additional payouts for clients.

The deal must be approved by a U.S. bankruptcy judge, who is expected to hear the case at the end of January. To top of page

First Published: December 23, 2012: 12:24 PM ET


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EPA study supports more natural gas

Written By limadu on Minggu, 23 Desember 2012 | 14.44

NEW YORK (CNNMoney)

"As the administration and EPA has made clear, natural gas has a central role to play in our energy future," the agency said in a press release. "The administration continues to work to expand production of this important domestic resource safely and responsibly."

EPA outlined several steps it's taking to assess the impacts fracking -- short for hydraulic fracturing -- has on the nation's water supply, as directed by Congress in 2009.

Steps include:

-- Analyzing existing data from natural gas companies on chemicals and practices used

-- Modeling how discharging waste might impact the water

-- Lab testing on water discharge

-- Testing fracking chemicals for toxicity

-- Testing groundwater in five regions near drilling activity

As expected, the study contained no new data or conclusions. The final results are not expected until late 2014.

Related: World's 10 most expensive energy projects

Some see the lack of data or negative comments in Friday's progress report as a positive for the industry.

"It signals that the Obama administration has no real appetite for additional federal regulations until 2014 at the earliest," said Nitzan Goldberger, a natural gas analyst at Eurasia Group, a political risk consultancy. "That's good news for the oil and gas guys."

The Obama administration has tightened some rules around fracking, but for the most part has left regulation up to the states.

Fracking involves injecting massive amounts of water, sand and some chemicals deep underground in a bid to crack shale rock and ease the flow of oil and natural gas.

The process has unleashed an energy boom in the United States, creating thousands of jobs, driving down the price of oil and natural gas and cutting energy imports to levels not seen in decades.

But it's also raised serious concerns over its effects on the environment, including air pollution from trucks and wells, its links to earthquakes and fears that it is contaminating drinking water.

For environmentalists, the negatives seem to outweigh the positives.

Fracking was once seen by some environmentalists as a technology that, given the proper regulations, could be done safely and provide a fuel that emits far fewer greenhouse gases than coal. Natural gas was seen as a good alternative to coal, at least until renewables like wind and solar were ready for prime time.

But declining costs for renewables, more instances of water contamination, uncertainly over the heat-trappng nature of natural gas that escapes from wells unburned, and a fear that cheap gas is crowding out wind and solar have led many to change their minds.

Several environmental groups are calling for an immediate ban on fracking, while others favor a gradual phase out combined with greater federal regulation.

On the other side are many analysts and economists that believe this technology can give the United States a significant economic and geopolitical advantage. To top of page

First Published: December 21, 2012: 2:54 PM ET


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Going over the cliff: What changes, what doesn't

Senate Majority Leader Harry Reid may need to do some heavy lifting to pass a fiscal cliff deal in the Senate, after House Speaker John Boehner's so-called Plan B did not garner enough support in the House.

NEW YORK (CNNMoney)

The good news: It won't be the end of the world.

The bad news: Going over the cliff could create problems that no one should have to deal with, simply because Congress and the White House couldn't get the job done on time.

Practically speaking, however, there is likely to be a "grace period" of a couple of weeks during which Congress could pass a deal to ward off the bulk of scheduled tax increases and spending cuts. And there are ways both may be postponed temporarily while lawmakers work that out.

Your paycheck: If you'll be paid during the first week in January, your company's payroll processor will probably be cutting your check during Christmas week. So far, however, the IRS hasn't told the payroll companies how much tax to withhold for 2013.

Unless new withholding tables are issued, payroll processors will continue to use 2012 withholding rates for the early January paychecks. In that sense, your paycheck in early January won't be much different than what it was in late December.

But your paycheck still could be smaller, because the 2% payroll tax holiday is expiring. Starting in January, workers will once again have 6.2% of their wages up to $113,700 withheld to pay for Social Security, up from the 4.2% rate that's been in effect for the past two years.

Effectively that means someone making $50,000 might get about $83 less a month in their paychecks. Someone making twice that would see their pay reduced by roughly $167 a month.

If you're getting a bonus, you'll likely have more withheld there, too, said Michael O'Toole, senior director of government relations for the American Payroll Association. That's because there's one supplemental withholding rate that applies to bonuses. This year it's 25%, but it's set to rise to 28% on Jan. 1, unless Congress decides to change it.

For paychecks that will be cut during the second, third and fourth weeks of January, payroll processors will likely continue to use 2012 income tax withholding tables if they've heard nothing from Treasury and the IRS by that point, O'Toole said.

CNN: Breakdown of support for Plan B

There also is some debate whether Treasury Secretary Tim Geithner will have the authority to tell employers that they should continue to use the 2012 withholding tables until further notice if he chooses.

The other option, of course, is that the IRS could issue new withholding tables reflecting 2013 law, which means everyone's tax rates will go up officially on Jan. 1. In that case, paychecks that are processed in January will have more withheld than they do currently.

If, as expected, Congress eventually chooses to extend the Bush tax cuts for all but the highest earners, adjustments would need to be made for paychecks that went out earlier in the year.

Treasury did not indicate to CNNMoney whether it would issue new withholding tables by Jan. 1.

Your 401(k) and IRA: There's no telling how markets will respond if fiscal cliff gridlock persists into 2013.

They've been relatively sanguine so far. But that may not be the case going forward.

After news that House Speaker John Boehner tabled Plan B because it lacked sufficient support, U.S. stocks fell Friday by just under 1%. World markets also ended the day modestly in the red.

Then again, some believe, markets may not move much on fiscal cliff news - whether Congress cuts a deal soon or not.

Your 2012 tax return: Here's where things potentially become a dumb mess. The IRS warned lawmakers that if they don't act to protect the middle class from having to pay the Alternative Minimum Tax for tax year 2012 by Dec. 31, up to 100 million taxpayers may not be able to file their 2012 taxes until late March.

That would mean their refunds will be delayed. And they wouldn't be injecting those refunds into the economy during the first quarter.

Based on Treasury Department records from the past three years, refunds paid during January, February and March combined have ranged from $117 billion to $136 billion.

Related: What's in the fiscal cliff?

Government spending: Unless lawmakers avert the so-called sequester, a series of automatic cuts will reduce the budgets of most federal agencies and programs by 8% to 10%.

But that doesn't necessarily mean those cuts would have to occur immediately, according to a former official with the Office of Management and Budget.

Both the White House budget office and federal agencies themselves will have some latitude to postpone the cuts from occurring "for several weeks if necessary," added OMB Watch, a group that monitors the federal budget.

The White House Budget Office did not respond to questions from CNNMoney.

Doctors' pay: Absent a fiscal cliff deal that includes a so-called "doc fix," Medicare physicians are facing a nearly 27% cut in their payments for treating Medicare patients.

But here again there may be a few weeks' grace period for Congress to change its mind and reverse the cut. That's because a claim submitted will be paid no less than two weeks after it's received.

Unemployment benefits: A federal extension of unemployment benefits is set to expire. If Congress does not renew it, workers who lost their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 73 weeks in state and federal benefits that have been available in 2012. As a result, more than 2 million of the long-term unemployed will run out of benefits in January, according to the National Employment Law Project, an advocacy group.

If Congress chooses early next year to keep the extension in place, and makes the extension retroactive, then many of the 2 million who fell off the rolls may be paid retroactively, said Rick McHugh, a NELP staff attorney. To top of page

First Published: December 21, 2012: 4:39 PM ET


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'Dairy cliff': Milk prices may double in New Year

If Congress doesn't act on an expiring protection for dairy farmers before Jan 1, milk prices could double.

NEW YORK (CNNMoney)

With Congress spending all its time trying to avert the fiscal cliff, a slew of other legislative matters are going unattended. One of them is the agriculture bill which, if not addressed, could lead to a doubling of the price of milk early next year.

It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has a formula that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon.

Problem is, the current bill expired last summer, and Congress had been unable to agree on a new one. Several protections for farmers have already expired, and several more are set to do so over the next few months. One of them is the dairy subsidy, which expires January 1.

But instead of leaving farmers entirely out in the cold, the law states that if a new bill isn't passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today's price -- driving up the cost for everyone.

"If you like anything made with milk, you're going to be impacted by the fact that there's no farm bill," U.S. Secretary of Agriculture Tom Vilsack told CNN's Candy Crowley in an interview on State of the Union airing Sunday, Dec. 30.

"Consumers are going to be a bit shocked when instead of seeing $3.60 a gallon for milk, they see $7 a gallon for milk. And that's going to ripple throughout all of the commodities if this thing goes on for an extended period of time," Vilsack said.

Related: Independent farms rake in millions

Sky-high milk prices wouldn't necessarily be good for dairy farmers either, according to Chris Galen, a spokesman for the National Milk Producers Federation, which represents over 30,000 dairy farmers.

While it might provide a short term boost to profits, there's a fear that consumers would either cut back on dairy or opt for imported dairy products. It could also force food makers to search for alternatives to dairy, like soy.

"We call it the dairy cliff," Galen said.

Fortunately, there's still time for Congress to act.

Galen said the government would have to issue a notice saying it was going to pay the increased price for dairy products, then set up a schedule for when purchases would start, a process that could take a few weeks.

"It's not like people would dump blocks of cheese on the USDA's front lawn January first," he said.

To prevent the price spike, Congress either needs to extend the current bill, pass a new bill, or enact some provision to keep the 1949 law from taking effect.

Given the current state of the fiscal cliff talks and Congress' inability to get things done in general, dairy lovers might want to stock up now. To top of page

First Published: December 21, 2012: 3:31 PM ET


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