Fed rates to stay low until Miley Cyrus is 30
Recapping the day's news and newsmakers through the lens of CNBC.
For months, everyone's been obsessing over the Federal Reserve's tapering of its bond-purchasing program—now not expected until next year. The next big question is, when will the Fed start to raise interest rates? Perhaps, not for years. A couple of papers by Fed economists suggest rates should be kept low until unemployment, currently 7.2 percent, falls to 6 percent, or perhaps even 5.5 percent. Until now, the expected goal was 6.5 percent. According to one analysis, even if tapering began as early as next month, the Fed's near-zero target for short-term rates could remain in effect until 2017, and the Fed could keep rates lower than normal into the 2020s.
"Given the structure of the Federal Reserve Board, we believe it is likely that the most senior officials—in particular, Ben Bernanke and (Chair-elect) Janet Yellen—agree with the basic thrust of the analysis."—Jan Hatzius, chief economist at Goldman Sachs
"Just because we decide at some point that we should reduce the amount of purchases that we make in long-term securities doesn't necessarily mean we change when we raise the short-term rates."—Eric Rosengren, Boston Fed president
You've got ... an ad 'megatrend'
How can a 91 percent drop in earnings be a good thing? Easy: when you can write it off to one-time charges. In fact, AOL, the venerable online service that at times may seem a thing of the past, enjoyed a big bounce in share price today after reporting third-quarter results. Investors were impressed with a 6 percent jump in revenue, thanks to a 14 percent jump in advertising. Without one-time charges for things like restructuring, AOL would have reported earning 55 cents per share, beating analysts' expectations for 49 cents. Moves into video, as well as a new automated advertising system, are key to the future, the company stated. CEO Tim Armstrong referred to a new advertising "megatrend."
"Just as automation hit Wall Street it's hitting Madison Avenue..... Even though automation has gone up, our pricing has gone up as well."—AOL CEO Tim Armstrong
A tough singles market
Though home prices are up around 12 percent over the past year, a look inside the numbers reveals some ugly details: buyers who are single account for just 25 percent of sales, down from 32 percent in 2010. And first-time buyers accounted for just 28 percent of sales in September, way down from the 40 percent average of the past. The problem: credit is still very tight. Investors, who typically pay cash, have been shoring up the sales figures and driving up prices. But investor demand could wane if rising prices eliminate the great deals of the past few years. To be healthy, the market needs those single and first-time buyers.
"Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores."—Lawrence Yun, chief economist for the National Association of Realtors
The fast food election
Tuesday's off-year general elections include races for governor, mayor and state legislatures. But two special ballot initiatives to raise the minimum wage—part of a growing effort across the country to increase it—may be the most important to businesses.
"Millions of the nation's lowest-paid workers are putting in long hours and working multiple jobs, yet are still struggling to afford basic expenses."—Christine Owens, executive director of the National Employment Law Project.
Gasoline prices are the lowest since 2010 and are likely to go lower still—possibly bringing the national average below $3 a gallon. The national average is $3.24, but 70 percent of the country is below $3. Credit the drop in oil prices, to $95 a barrel from $110 at the end of August, partly due to eased tensions over Syria. Also, the end of the summer driving season has produced an abundant supply of gasoline, with inventories 7 percent higher than at this time last year. Finally, winter gasoline blends are cheaper to make than summer blends.
"Prices probably won't start to rise again until Valentine's Day as we anticipate the spring and summer driving season of 2014. But for now, this market is very well supplied."— Anthony Grizanti of GRZ Energy
—By Jeff Brown, Special to CNBC.com