June 28, 2013 Update

DJIA:15,024 S&P 500:1,613 NASDAQ:3,402 Gold:$1,202 Oil:$97.58 EURO:$1.31 YEN:99.06

A Student Opinion on Student Loans  

The Federal Reserve Bank of NY reported in 2012 that 43% of 25 year olds held outstanding student loans, with their debt averaging to $20k. This disturbing statistic is roughly 20% more young adults carrying 91% more debt now than in 2003, which is an outrageous increase over a nine year period. At the moment, the interest rate on federal student loans stands at 3.4%. If congress does not act by July 1st, students taking out these loans will see their borrowing costs double. It is largely believed that the student debt market will be the next bubble to burst. Keeping borrowing rates low provides incentive for students to take advantage of the cheap credit and, as such, continue to leverage themselves for success by attending universities they simply cannot afford. Colleges have increased tuition knowing that the government will foot a portion of the bill. Instead of inducing future generations to pile on debt for their dreams, society should be promoting financial planning and responsibility. I believe that the government would actually be doing my generation a favor by raising the interest rate, as it would likely discourage lending. Student debt repayment is already taking a drag on the economy, as disposable income that could have gone to investments in cars and homes are not being used for loan repayment, and this is bound to only get worse. Raising student loan borrowing costs could deter further increases in debt and help slowdown the bursting of this country’s next credit crisis. 

Domestic News

• Market Update Futures are rising from strong economic data overseas, ahead of Blackberry’s earnings release.
• The Chicago purchasing managers index will be released at 9:45, and is expected to decline in June to 55% from May’s 58.7%
• The University of Michigan/Thompson Reuters consumer sentiment survey will be released at 9:55, and is expected to show a reading of 83. 

International Updates

Asia

• Market Update  Markets traded up across the board. DXJ was the strongest thanks to solid economic data while FXI lagged behind in the rally as investor sentiment on China’s credit crunch remains weary.
• Japanese industrial production topped expectations in May rising 2%, which is substantially higher than April’s 0.9%. Output grew for the fourth consecutive month, due to increased demand from power companies. Retail sales rose for the first time since December, increasing 0.8% YoY. Unemployment was stagnant at 4.1%. Household spending declined 1.6%, which is higher than the forecast of 1.4%. 

Europe

• Market Update Markets are mixed, with support coming from Japanese economic data and Fed policy makers stating that QE will not end abruptly. 
• German retail sales for May are 0.8%, which is 0.2% higher than expected. 
• French consumer spending rose 0.5% in May, which is also better-than-expected. Produce price index came in at 1.2%, rosier than the -0.3% consensus. The unexpected strong consumer spending figures contrast with the decaying consumer confidence in June.    

Corporate

• Blackberry Inc. (BBRY) will release earnings which are expected to be profitable for the first time in two years.

Commodities and Forex

• Dollar is headed towards a loss for June, but rose against the Yen. 
• Gold prices continue to sharply fall, while oil had its first monthly gain since March.