What's Important in the Financial World (12/12/2011) Berkshire's New Chairman, Unemployment Benefits for 2012

It may be that holiday spending actually is accelerating into mid-December. Some economists argued that the surge of Black Friday activity would burn out consumer activity. The contrary is true, based on recent data. FedEx (NYSE: FDX) stuck to its forecast that it would ship 17 million packages today, about double its normal daily average. Comscore reported that e-commerce activity was up by 15% in the first week in December. Online retail revenue has reached $24.6 billion, the research firm reports, since the start of November — a record by a big margin.

Uncertainty in Europe

The sovereign debt crisis in Europe, which appeared to be largely solved last week, apparently is not. Moody’s reported today that it may still downgrade the debts of some major nations in the region. The grand plan set by EU leaders is still short on details. The money added to a new fund will be inadequate to cover a default of Italy’s national obligations. Yields on Italian and Spanish paper are still near historic highs. Stock markets across the globe likely will tick down this week unless there is more evidence that the EU has its financial house in order.

The New Warren Buffett

A new mystery surrounds who will take Warren Buffett’s  job as head of Berkshire Hathaway (NYSE: BRK-A, BRK-B) if he dies or retires. It has been widely believed that the company would add a CEO to run operations and one or more investment professionals to oversee the huge investment portfolio. A profile of Buffett on “60 Minutes” showed that the “Oracle of Omaha” plans to replace himself as chairman with his son Howard Buffett, who is a farmer on a nearly full-time basis. Buffett commented, “You worry that somebody will be in charge of Berkshire that uses it as their own sandbox in some way; that changes the way that decisions are made in reference to the shareholders. The odds of that happening are very, very low. Having Howie there adds just one extra layer of protection.” Investors who do not want a farmer to play a key role in the conglomerate may not take the news well.

No Jobless Benefits Extension

Congress may not pass a bill to extend jobless benefits into 2012. The first effect will be that 1.7 million Americans completely lose their financial safety nets. The figure would rise to 6 million by the end of 2012. The debate about the extension revolves around several issues. The first is whether, in a time of austerity, the federal government can afford the tens of billions of dollars it would have to pay to extend payments. The second is whether people who receive benefits are less likely to seek jobs because they have little economic incentive to do so. And another is how much the effect would be on the consumer economy, and thus GDP, if 6 million consumers drop out the number of Americans who currently can afford to buy goods and services.

Douglas A. McIntyre