Daily Digest

Daily Digest 9/22 - Bernanke Admits Inflation Too Low, The Fate Of Paper Money, Food Pantries In Trouble

Wednesday, September 22, 2010, 9:56 AM
  • U.S. Mint Sales: Gold and Silver Coins in Focus
  • Muni Debt Cost May Increase on Tougher Bank Capital Rules, RBC Report Says
  • New Jersey Governor Says Broken Pension Promise Necessary
  • Survey Finds €1,900bn Hole In EU Pensions
  • Kansas Treasurer Hopefuls See Pension Gap As Issue
  • Eight official of scandal-hit small U.S. city of Bell arrested in probe
  • Bernanke Admits Inflation Is Too Low (Peter Schiff)
  • Robin Griffths Tells CNBC Paper Money Always Goes To Zero
  • Japan's Kan Says Intervention in Markets "Unavoidable"
  • Yuan Appreciation Will Not Solve U.S. Trade Deficit: China FM Spokeswoman
  • Brazil Central Bank Buys $5.9 Billion in 12 Days to Help Stem Real's Gain
  • House Panel Eyes Action On China Currency Bill
  • Maine Food Pantries in Trouble (Video)
  • Food Bbank Shelves Are Low (Video..Indiana)
  • State Park To Close Due To Budget Cuts (Mississippi)
  • New York City Freezes Hiring as It Seeks $2 Billion of Savings to Cut Gap

Crash Course DVDTake home the Crash Course DVD for an insightful look at the next twenty years (NTSC or PAL)

Economy

U.S. Mint Sales: Gold and Silver Coins in Focus

Gold and silver coins were the heavy focus of collectors based on the latest weekly US Mint sales report. Nearly every product containing coins struck in a composition of gold or silver exhibited a sharp increase in sales.

Muni Debt Cost May Increase on Tougher Bank Capital Rules, RBC Report Says

State and local governments using banks as buyers of last resort for variable-rate bonds may see the cost of the debt rise by a percentage point or more because of rules intended to strengthen the financial system, according to RBC Capital Markets.

The measures, known as Basel III for the Swiss city where world banking regulators meet, would require banks to hold more capital to absorb unexpected losses and more cash to make them less vulnerable in a financial crisis. The steps would increase banks costs, which may be passed on to customers including local governments, RBC said in a report today.

New Jersey Governor Says Broken Pension Promise Necessary

Gov. Chris Christie says he had to renege on a campaign promise to New Jersey firefighters not to touch their pensions in order to save their pensions....The governor says past promises made by other governors about the level of benefits "can't be kept." The state pension system is underfunded by at least $46 billion. The health benefits system is underfunded by $76 billion.

Survey Finds €1,900bn Hole In EU Pensions

Workers across the European Union need to save €1,900bn ($2,490bn) more each year if they hope to retire with pensions that will maintain their standard of living, according to new insurance industry research.

The so-called “pensions gap” is worst in Germany and the UK, where the total additional savings required each year are €468.8bn and €379bn respectively. When calculated per head, the situation is worse for UK citizens, who need to save an average €12,300 a year extra, while Germans should put aside an extra €11,600.

Kansas Treasurer Hopefuls See Pension Gap As Issue

KPERS valued its assets at $11.8 billion at the start of this year, or about 64 percent of what it would need to cover its obligations to some 260,000 current and future retirees, leaving a gap of nearly $7.7 billion. A Pew Center for the States study earlier this year said Kansas has the second-worst ratio of assets to long-term pension obligations of any state.

    Crash Course DVDTake home the Crash Course DVD for an insightful look at the next twenty years (NTSC or PAL)

Eight official of scandal-hit small U.S. city of Bell arrested in probe

Bell City kicked off a national outcry when the Los Angeles Times reported last month that some top city officials were making exorbitant salaries. City Manager Robert Rizzo was being paid an annual salary of 787,637; Police Chief Randy Adams, 457,000; and Assistant City Manager Angela Spaccia, 376,000.

Additionally, Mayor Oscar Hernandez and three of the city's four council members -- Teresa Jacobo, Luis Artiga and George Mirabal -- were being paid 97,000 for their part-time jobs.

Bernanke Admits Inflation Is Too Low (Peter Schiff video)

Robin Griffths Tells CNBC Paper Money Always Goes To Zero (Video)

Japan's Kan Says Intervention in Markets "Unavoidable"

Japanese Prime Minister Naoto Kan has said intervention in the foreign exchange markets would be "unavoidable" if there is drastic change in the currency...In an interview with the Financial Times published on Wednesday, Kan said Tokyo also plans to create a "total" package of measures that will expand domestic demand and help to weaken the currency

Yuan Appreciation Will Not Solve U.S. Trade Deficit: China FM Spokeswoman

The appreciation of the Chinese currency would not solve the U.S. trade deficit problem, China Foreign Ministry spokeswoman Jiang Yu said Tuesday.

When answering a question at the regular press briefing, Jiang said the Sino-U.S. trade imbalance was a result of the international division of labor rather than exchange rate fluctuations.

Brazil Central Bank Buys $5.9 Billion in 12 Days to Help Stem Real's Gain

Perfeito said currency traders in Brazil are being made “nervous” by the strong language government officials are using to express their discomfort with the appreciation of the real. A stronger currency makes Brazilian exports more expensive in dollar terms, cutting into profits at companies that rely on overseas sales.

House Panel Eyes Action On China Currency Bill

The House of Representatives Ways and Means Committee could vote as early as Friday on a bill that would allow the Commerce Department to apply duties against China's "undervalued" currency, a source familiar with the discussions said on Tuesday.

Maine Food Pantries in Trouble (Video)

Some of Maine's wealthiest towns are seeing an overwhelming need at area food banks. The food pantry at the First Congressional Church in South Portland, which also serves the Cape Elizabeth area, has bare shelves. Since May, the pantry has fed hundreds of families, and pantry organizers say the needy are from areas of town you would least expect.

Food Bbank Shelves Are Low (Video..Indiana)

Indiana ranks number 25 out of all the states for poverty according to a U.S. census bureau report. Food bank officials tell us the need locally has grown by 15% in the past year.

State Park To Close Due To Budget Cuts (Mississippi)

Budget cuts are forcing the closure of the George Payne Cossar State Park in Yalobusha County. A spokesperson for the Mississippi Department of Wildlife, Fisheries, and Parks says the move is just one of the steps the agency is taking to offset a nearly $4 million reduction in it's budget.

New York City Freezes Hiring as It Seeks $2 Billion of Savings to Cut Gap

The mayor’s directive today comes as he anticipates a $3.3 billion budget gap for the 2012 fiscal year that begins July 1. He ordered officials to seek savings of about $800 million in the remaining nine months of this fiscal year and $1.2 billion in 2012.

This year, Bloomberg said in a letter to agency heads, he wants public-safety agencies and schools to cut spending by 2.7 percent and all other agencies to trim by 5.4 percent. The following year, the targets rise to 4 percent and 8 percent, respectively.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

16 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

"LONDON (MarketWatch) -- The cost of insuring Irish government debt against default through credit default swaps rose to a new record Wednesday morning, reversing relief seen the previous day following an auction of Irish government debt. The spread on five-year Irish sovereign CDS widened by 33 basis points to 467 basis points, according to data provider Markit. That means it would now cost $467,000 a year to insure $10 million of Irish debt against default for five years, up from $434,000 on Tuesday. Other peripheral euro-zone CDS spreads also widened, Markit said, with Portugal widening 20 basis points to 385 ahead of an auction of up to 1 billion euros of debt."

"Portugal raised euro750 million ($1 billion) in a debt auction Wednesday that drew strong investor interest but its borrowing cost was the highest since it joined the euro, underlining market worries about the country's financial health."

"The Public Debt Management Agency said it sold euro300 million in 10-year bonds and euro450 million in 4-year bonds. The average interest yield on the longer bonds was 6.2 percent, up from 5.3 percent in a 10-year bond auction last month.

The yield on the 4-year bond was 4.7 percent, up form 3.6 percent in July."

"Navistar International Corp., has become the latest big business to play the relocation card to extract a lucrative incentive package from a job-starved state.

The big truck maker's threat to leave Illinois helped lead Gov. Pat Quinn to pony up an incentive package valued at about $65 million to keep the company whose state ties can be traced back to the 1800s and Cyrus Hall McCormick's labor-saving mechanical reapers. It was one of the richer incentive packages offered by the state in recent years, according to a government spokeswoman for Illinois.

It comes at a time that Illinois's finances—like those in many other states—are increasingly strained. Illinois's general-obligation bond credit rating was downgraded to "A" in June, the second-lowest rating of any state after California, and Illinois faces an operating deficit for its fiscal 2011 budget ending in June of 2011, according to Fitch Ratings.

Illinois officials say they had to make the offer in order to keep other states, like Alabama, Indiana, South Carolina or Texas, from snatching away Navistar's 2,480 existing jobs in Illinois and about 400 permanent promised new jobs. "These were viable risks for the state to consider," the state spokeswoman said.

Similar examples of corporate brinksmanship are occurring throughout the country as state and local governments struggle with the repercussions of high unemployment. "

"The Bank of England signaled that it’s moving closer to more asset purchases, joining the Federal Reserve in contemplating further stimulus to revive a flagging economic recovery.

That may put both the expansion of the central bank’s 200 billion-pound ($313 billion) government-bond holdings and buying other securities on U.K. officials’ agenda. Policy maker Adam Posen said last week that a “plan B” approach for the Bank of England should be “heavy-duty credit easing.” "

"WASHINGTON (MarketWatch) -- U.S. home prices fell 0.5% in July compared with June, and were down 3.3% compared with a year earlier, the Federal Housing Finance Agency reported Wednesday. Prices fell a revised 1.2% in June, much weaker than the initial estimate of a 0.3% drop. The FHFA purchase-only home-price index is down 13.8% from the peak in 2007. The biggest losses in July came in the South Atlantic states with a 1.6% drop. Economists at Majestic Research said that home prices are weakening because existing inventory is growing at the fastest rate since 2007."

  • Other news, headlines and opinion:

 

Mcalvany Weekly (Audio..."End of the recession", gold and other topics. Very good info)

Mortgage demand idles despite low loan rates

Irish pensions gap at €20bn per year

Almost a quarter of major urban roads are in poor shape

Romania needs to borrow $7.9 billion in 2011, will sign new IMF deal in 2011

Moody's Cuts Credit Ratings $37 Billion in Municipal Bonds Backed by Banks

States May Borrow $13.9Bln (Russia)

Europe's Banks Get Creative With Refinancing

Average tuition fees rose four per cent: StatsCan (Canada)

Ottawa faces $60M pension shortfall (Canada)

Deficit widens as borrowing costs rise (Portugal)

Italy water system needs 64 bln euro over 30 yrs-study

Consumer debt 'hits record levels' (Australia)

Comptroller claims state's Medicaid program lost $114 million (NY)

Sacramento County looks at shifting homeless services to nonprofit group

Gold and Silver Are Sounding The Alarm (Inflation US video)

Moody's Forecast for Housing and the Economy: Dim

Child Hunger, As Seen At Wal-Mart

DavidC's picture
DavidC
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

You've been busy today saxplayer! Thanks for those, the Peter Schiff video was good, I think he's getting angrier!

DavidC

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Doug
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

How many believe this is our near term monetary future?  Besides buying PMs, what's the best protection?  currencies?

Doug

http://www.safehaven.com/article/18282/currency-crisis-has-begun

It's been my position for a while that Bernanke's monetary policy would eventually create a currency crisis in the world's reserve currency.

I warned that crisis would begin as soon as it became apparent the dollar was caught in the grip of the 3 year cycle decline.

I had three conditions that had to be met before I was willing to call the beginning of the end. The first condition was for the dollar to move below '82. That was the warning shot that problems were developing.

The second and third conditions were a move below long term support (80) and a failed intermediate cycle.

The drop below 80 this morning has now completed the final two conditions.

US Dollar 2.5-year Chart

I've marked the last three intermediate cycles with the blue arrows. The move below the last intermediate cycle low this morning initiates a failed intermediate cycle. This is also an extremely left translated cycle. Left translated cycles tend to produce the worst losses as they have a long time to move down. The ongoing cycle shouldn't bottom until it puts in a larger degree yearly cycle low in November or December. I expect that low to test the '08 bottom at 71.

.......

Finally we should see a full on mini crisis by the time the dollar drops into the major 3 year cycle low next spring or early summer.

US Dollar 2.5-year Chart 3

I've been pointing out for months that deflation just isn't a possibility in a purely fiat monetary system. A determined government can create inflation any time it wants as long as they are willing to sacrifice the currency. I think it's safe to say the United States has no compunction against destroying the dollar.

We are now heading into an inflationary storm that will expose deflation theory as the pure nonsense that it is.

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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

Very interesting analysis. I wish I knew enough about this type of analysis to know, but I wouldn't bet against you at this point. Thanks for all your work in putting that together.

idoctor's picture
idoctor
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

Handy calculator

http://coinmill.com/ZWD_calculator.html

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SagerXX
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

Today's story selection (thanks once more SaxPlayer!) is heavy on pension woes.  I've been saying for some time now that pension realities will be the straw that breaks the camel's bee-hind.  When pensions either start defaulting or slashing payouts, that's when IMO the new reality of things economic will set in with the population at large.  And as has been pointed out here time and again (most recently by Dr. Chris yesterday) -- once the illusion of solidity is punctured, ponzi schemes collapse...

Viva anyway -- Sager

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TNdancer
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

Sager,

On pensions:

10 to15 years ago, I told my wife this would all come down about the time we hit retirement age....and it's coming to pass. I just turned 591/2, she is couple years younger.

Fortunately, seeing what was coming allowed me to divert my retirement savings into a self sustainable farmstead and stock it with long term goods. I derived the bulk of my income over the last ten years as "unearned" and capital gains...my yearly social security statements look like I clearly must have died about 2000....ahahahaaaaa....."the reports of my death are greatly exaggerated" ( Mark Twain late in life, to a young reporter )

She continued in a job with a decent pension on the chance I was wrong.....but each day that goes by now, it's looking more and more like her pension will be reduced and/or eliminated down the road.....and the farm, lack of debt, and stored items may turn out to be our salvation.

Davos's picture
Davos
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...
TNdancer wrote:

Sager,

On pensions:

10 to15 years ago, I told my wife this would all come down about the time we hit retirement age....and it's coming to pass. I just turned 591/2, she is couple years younger.

Fortunately, seeing what was coming allowed me to divert my retirement savings into a self sustainable farmstead and stock it with long term goods. I derived the bulk of my income over the last ten years as "unearned" and capital gains...my yearly social security statements look like I clearly must have died about 2000....ahahahaaaaa....."the reports of my death are greatly exaggerated" ( Mark Twain late in life, to a young reporter )

She continued in a job with a decent pension on the chance I was wrong.....but each day that goes by now, it's looking more and more like her pension will be reduced and/or eliminated down the road.....and the farm, lack of debt, and stored items may turn out to be our salvation.

Now that is diversification!

dave s's picture
dave s
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...
Davos wrote:

Now that is diversification!

Boy, you think you know someone and then Davos doesn't say a peep about Doug's post!  (-;

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Davos
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...
dave s wrote:
Davos wrote:

Now that is diversification!

Boy, you think you know someone and then Davos doesn't say a peep about Doug's post!  (-;

??? What'd I miss???

Davos's picture
Davos
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

Oh, sorry, yes excellent post. I agree, not sure about the dollar as it is compared to other sinking Fiats but I'm in total agreement with the inflation/deflation bit.

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Damnthematrix
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but the recession's over....

http://www.businessspectator.com.au/bs.nsf/Article/US-banks-recession-double-dip-zombie-banks-pd20100923-9JSYN?OpenDocument&src=kgb

Casualties of the zombie banks

Karen Maley

Published 7:44 AM, 23 Sep 2010 Last update 10:20 AM, 23 Sep 2010


The dance of the zombie US banks is just starting to rock, according to leading bank analyst, Chris Whalen.

In his latest note, Whalen, the co-founder of Institutional Risk Analytics, highlights the financial damage being done to the balance sheets of the big US banks as a result of falling house prices.

The situation in US housing is so dire that some estimate that one-third of all US households with a mortgage have negative equity, where the size of their home loan is greater than the value of their house. The number of US households at risk of foreclosure has been estimated at one in five.

And the banks are struggling to cope with the mountain of problem residential and commercial loans. Some believe the US is less than one-quarter through the process of restructuring defaulted commercial and residential real estate loans, and the backlog of problem loans is growing. And the lags between when mortgage default and liquidation is now estimated to have stretched out beyond 18-24 months.

As a result, the banks are left with a situation where they’re not collecting interest on a huge chunk of their loan book. At the same time, the banks are also facing higher administration costs as they deal with the problem property loans. Banks nursing large portfolios of problem loans typically become wary of making them new loans – effectively turning them into 'zombie' banks.

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Damnthematrix
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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

http://www.yesmagazine.org/issues/food-for-everyone/the-city-that-ended-hunger

The City that Ended Hunger

A city in Brazil recruited local farmers to help do something U.S. cities have yet to do: end hunger.
by Frances Moore Lappé
posted Feb 13, 2009

“To search for solutions to hunger means to act within the principle that the status of a citizen surpasses that of a mere consumer.”
CITY OF BELO HORIZONTE, BRAZIL

In writing Diet for a Small Planet, I learned one simple truth: Hunger is not caused by a scarcity of food but a scarcity of democracy. But that realization was only the beginning, for then I had to ask: What does a democracy look like that enables citizens to have a real voice in securing life’s essentials? Does it exist anywhere? Is it possible or a pipe dream? With hunger on the rise here in the United States—one in 10 of us is now turning to food stamps—these questions take on new urgency.

To begin to conceive of the possibility of a culture of empowered citizens making democracy work for them, real-life stories help—not models to adopt wholesale, but examples that capture key lessons. For me, the story of Brazil’s fourth largest city, Belo Horizonte, is a rich trove of such lessons. Belo, a city of 2.5 million people, once had 11 percent of its population living in absolute poverty, and almost 20 percent of its children going hungry. Then in 1993, a newly elected administration declared food a right of citizenship. The officials said, in effect: If you are too poor to buy food in the market—you are no less a citizen. I am still accountable to you.

<MORE>

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Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

For 9/23

  • Just headlines:

Wen Says 20% Gain in Yuan Would Cause Social Upheaval

Gold set to soar as faith in paper money wanes

Sinai Says Fed's Sept. 21 Statement Means `Gotta Buy Gold'

Pension Funding Shortfall Worst Since 1999 for S&P 500, Credit Suisse Says

Moody's cuts state's credit outlook (New Jersey)

Ireland Auctions $533 Million of Bills, Less Than Maximum, as Growth Slows

Ireland, Portugal default insurance costs jump 

Republic of Ireland powerless stop 'fleeing' developers

Wisconsin deficit higher than first predicted says UW Prof  ("State in the hole $3.1 billion; new report takes changing expenditures into account")

Watchdog says US must sell GM for $133.78 per share to get back bailout money

Receiver Named for Jefferson County, Ala.

Next Budget Year May Be Worst Ever (Video...San Diego Unified School Distict.....1,500 layoffs?)

Yields Hit Five-Month Low as Central Bank Prints Pesos: Argentina Credit

Two Thirds of Atlanta's 3.6 Million Square Feet of New Office Space Sits Empty

Ky. Medicaid Chief Resigns Amid Budget Problems, ($500 million shortfall)

Detroit's Mayor Bing Seeks to Impose 10% Wage Cut for Unionized Employees

Cash-Strapped Detroit Struggles to Stem Fires

Bloomberg Sues the Federal Government

Economist: Budget Woes Likely To 'Replay' In 2012 (Dallas)

Analyst says pension costs could cut Ford earnings ("were $12 billion underfunded at the end of 2009, and that could worsen to $17.5 billion by year-end")

State employers brace for PERS rates to skyrocket (Oregon..."The rates are expected to more than double")

Los Angeles Mayor: We Will Not Go Bankrupt

Weekly jobless claims climb 12,000 to 465,000

GMAC Drew `False Testimony' Sanction Years Before Eviction Halt

China Denies Japan Rare-Earth Ban Amid Diplomatic Row

Central Banks Struggle for Exit as Recovery Weakens

Moody's: Commercial Real Estate Prices Dive 3.1% in July

Mom-and-pop investors to stock market: "No thanks"

American Eagle Gold Uncirculated Coins (Suspended)........Click on each coin. Both Gold and silver coins suspended

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idoctor
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Posts: 1731
Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...
Microsoft sells debt at record US low rate
Published: Thursday, Sep 23, 2010, 13:49 IST
Place: Seattle | Agency: Reuters
 

Microsoft Corp on Wednesday sold $4.75 billion in new debt, some of it at the lowest US corporate borrowing rate on record, as the world's largest software company takes advantage of low interest rates to raise cash.

The bonds -- due in three years, five years, 10 years and 30 years -- are raising money for capital expenditures, share buybacks and acquisitions, among other things, Microsoft said in a filing with securities regulators.

Microsoft sold $1 billion of the three-year notes at a coupon of 0.875 percent, or 25 basis points over comparable Treasuries, according to a source familiar with the offering.

It means Microsoft is paying even less in interest than a government-insured savings account. The overnight average yield on a one-year certificate of deposit (CD) is 1.2%, according to Bankrate.com.

Blue-chip companies have swarmed to the high-grade corporate debt market this year, taking advantage of historically low funding levels.

But Microsoft struck the lowest coupon yet, beating the previous low mark of IBM's 1% coupon on an August offering. The next lowest, Hewlett-Packard and Procter & Gamble Co, sold three-year debt at 1.12% and 1.375% respectively this year, according to Thomson ReutersIFR data.

Microsoft also sold $1.75 billion of its five-year bond at 40 points above comparable treasuries, $1 billion of the 10-year at 55 points above and $1 billion of the 30-year at 83 points above, according to the source.

Microsoft, which has the highest credit ratings from Standard & Poor's and Moody's, has almost $37 billion of cash on its balance sheet, but as most of that cash is overseas it prefers to borrow money at cheap rates rather than pay taxes to repatriate cash.

The offering comes a day after the company's board granted permission to issue up to $6 billion of new debt.

On Tuesday, Microsoft raised its quarterly dividend by 23% to 16 cents per share, disappointing some investors who had looked for more.

Its shares closed down 2.1 percent to $24.61 on the Nasdaq.

 

 

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TNdancer
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Posts: 127
Re: Daily Digest 9/22 - Bernanke Admits Inflation Too Low, ...

You'd think Bill Gates would have just self financed the MS bond issue.  I see in today's news, he is worth 54 billion.....so a measely 1 billion wouldn't have hurt him any.....and just think if the confidence that would inspire  Wink

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