Water Cooler Finance: Goodbye 2010 (And Good Riddance?)

By Tara Struyk | January 03, 2011 AAA
Water Cooler Finance: Goodbye 2010 (And Good Riddance?)

This past week marked the last trading day of a tumultuous year. While stock prices are recovering from their credit crisis lows, the real estate market still has a long way to go as it struggles against a tide of underwater mortgages, foreclosures and regulatory issues. Let's take a look at some of the top stories that made financial news in the last week of 2010. (Catch up on last week's news in Water Cooler Finance: Canadian Takeover And U.S. Tax Breaks.)

IN PICTURES: 5 Risky Mortgages To Avoid

Stocks Are Up
Friday marked the last trading day of 2010 and while it was a volatile year for many stocks, gold bugs were left cheering after gold locked in a 29.7% gain for the year, the largest in three years. But for those who dared put money in the market in 2009, it's been a rewarding ride. Overall, stocks are up for the year, with the S&P gaining 12.8% in the year just ended, while the Dow gained 11%. Both indexes are up more than 75% since they hit their lows in March 2009.

New Year, New Cable Network
Oprah Winfrey rang in the first day of the New Year with the launch of her new cable channel, OWN (short for The Oprah Winfrey Network). The new channel will replace the Discovery Health channel, and will be beamed into 85 million homes across the United States. Whether Winfrey can capitalize on the success of her talk show - which ends later this year - and expand it into a full network remains to be seen, but OWN is certainly the highest profile channel to hit the airwaves in years. (Learn about Oprah's power over the markets in Measuring The Oprah Effect.)

A Big Iron Bid
ArcelorMittal (NYSE:MT), the world's biggest steel maker, raised its bid for Baffinland Iron Mines in Canada's high arctic. ArcelorMittal had the highest bid at C$1.40 per share until Nunavut Iron, an acquisition vehicle backed by U.S. private equity firm Energy and Minerals Group, bumped its bid to C$1.45 a share late Friday night, valuing the company at about C$570 million.

Baffinland's Mary River deposit is estimated to contain 365 million tons of iron ore, and is viewed as one of the world's best undeveloped deposits. Iron ore is one of the main components in the production of steel, making it one of the most important commodities. Lower supply and higher demand are both working to produce a global scramble for iron ore deposits. As a result, iron ore prices are approaching a two-year high, and it is believed they will continue to rise through 2011. (Learn more about commodities in our Commodities Tutorial.)

Other Commodities Surge Too
But iron ore isn't the only commodity that's rising. In fact, drivers will be facing some sticker shock the first time they fill up their cars this year. On Thursday December 30, U.S. gas prices surpassed the $3/gallon mark - a price that's expected to hold through 2011. The $3 mark is a barrier that gas prices haven't exceeded since 2008; experts attribute this most recent rise to a decrease in production, both in the United States and abroad. Thankfully, it is expected that global refiners will up production, preventing the price from rising much more. (Learn more about why you're paying more in What Determines Gas Prices?)

Good News for Air Travelers
While air travelers may not begrudge the airlines a profit, most flyers aren't too happy that the profit has come at travelers' expense in the form of overcrowded planes and fees on baggage, snacks and just about everything else. Now there appears to be some good news: 2011 will bring new protections for air travelers. U.S. Transportation Secretary Ray LaHood is working on new rules that are likely to be finalized in April, including greater transparency in airline pricing, higher reimbursements for bumped passengers and a rule that would force airlines to let passengers off a plane if a tarmac delay exceeds three hours (that one seems like a no-brainer).

Other rules would make improvement in ticket cancellation and luggage fees. Anyone who's flown in the last few years has surely noticed that things couldn't get much worse for air travelers, so here's hoping the new rules make some much-needed improvement. (For related reading, check out 7 Air Travel Perks That Used To Be Free.)

The Bottom Line
So far, analysts are predicting more of the same in 2011 - the rebound will continue, but not in a big way. However, if investors have learned anything over the past few years, it's certainly that the "experts" are often off the mark, and it's best to be prepared for anything. Many Americans are likely happy to see the back of a difficult 2010, and while it's tough to bank on the current stock market rally, investors can always hold out hope.

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