News Analysis for the Investor on Feb. 9, 2012

Greeks to attend meeting with EU and IMF without a deal

Greek leaders have failed to reach a complete agreement on austerity measures but will meet with the EU and the IMF to explain the parts of the deal already agreed upon, according to Reuters. The Greeks must cut 3.3 billion euros this year in order to obtain the 130 billion euro bail out.  Government officials indicate that 90 percent of the terms have been agreed upon, including a 22 percent cut in the minimum wage. Pension reforms remain the sticking point. Taxes will also be increased.  Greek unemployment is at over 20 percent and at almost 50 percent for younger individuals.  Recent offers from the IMF and EU include a bond swap with private creditors for new eurozone safety bonds.  The private bondholders will have to swallow a 70 percent cut in the value of their holdings.  Keep in mind that the bondholders include numerous European banks and insurance companies, however, the euro zone leaders have been working hard to shore up the core banking system.  While today was a key deadline, anonymous reports indicate the Greeks have until February 15 to have a full resolution.

Banks and government soon to agree on foreclosure settlement

State attorney generals, the federal government and five banks are soon to announce an agreement to settle federal and state probes of alleged foreclosure abuses by lenders. The agreement is worth $26 billion and includes Bank of America, JP Morgan Chase, Citigroup, Ally Financial and Wells Fargo.  Together they hold 55 percent of all outstanding loans, according to the Wall Street Journal.  The agreement includes $5 billion of cash penalties which will go to individuals, including those who went through foreclosure from 2008 to 2011.  More than $20 billion in aid, including cutting loan balances for underwater loans, will be available.  This settlement will open up funding for housing and is expected to have a positive impact on the overall housing market.

App creation spurs job growth

The creation of apps for mobile devices has created a slew of jobs in this tight economy, according to a new study conducted by TechNet and reported by Fox Business News.  There have been 466,000 jobs created since 2007.  California is the top spot for app production, followed by New York.  But less tech heavy states such as Illinois, George and Florida are also creating jobs. As the desire for mobile technology increases, especially with younger consumers, it is anticipated that this market niche will continue to grow.

Will there be a sales tax on your online purchases in the near future?

USA Today reports that more than a dozen states have passed legislation or rules to force online retailers to collect taxes on online purchases and similar legislation is pending in 10 states.  Federal legislation to permit interstate collection of sales tax is stalled in Congress.  The Supreme Court ruled in 1992 that states couldn’t require retailers to collect sales tax unless the retailer had a physical presence in the state, thus the need for Congress to act. Why do states seek the ability to collect sales tax on online purchases?  Uncollected sales taxes cost the states $23 billion each year.  Additionally local retail stores argue that online providers have an advantage because they are not forced to pay sales tax.  On the other hand, brick and mortar retailers have to keep track of sales taxes for only one state while online retailers will need to file in 50 states.  This will be hard for small businesses that sell online.  It could harm e-commerce, one of the few growth spots in a stagnant economy.

Hotel mini-bars turn exotic

Ready for a diamond encrusted water bottle?  For $25 you can have one directly from your mini-bar at the Trump International Hotel and Tower in Chicago.  Upscale hotels are now using mini-bars as a marketing tool to “extend their personalities”, according to USA Today. From 2009 to 2010, annual mini-bar revenue dropped from $392 to $368 per mini bar, according to PFK Hospitality research.  But in 2012 those revenue numbers are increasing. Among luxury hotels, 83 percent have mini-bars, which is a sign of an upscale experience. So next time you’re hungry for coconut water or papaya chips…check out the mini-bar in your room.  You will certainly get a great deal.