Prison of Debt Paralyzes West 11/16
After four years of financial crisis, this balance between democracy and the market has been destroyed. On the one hand, governments' massive intervention to rescue the banks and markets has only exacerbated the fundamental problem of legitimization that haunts governments in a democracy. The usual accusation is that the rich are protected while the poor are bled dry. Rarely has it been as roundly confirmed as during the first phase of the financial crisis, when homeowners deeply in debt lost the roof over their heads, while banks, which had gambled with their mortgages, remained in business thanks to taxpayer money.
In the second phase of the crisis, after countries were forced to borrow additional trillions to stabilize the financial markets, the governments' dependency on the financial markets grew to such an extent that the conflict between the market and democracy is now being fought in the open: on the streets of Athens and Madrid, on German TV talk shows, at summit meetings and in election campaigns. The floodlights of democracy are now directed at the financial markets, which are really nothing but a silent web of billions of transactions a day. Every twitch is analyzed, feared, cheered or condemned, and the actions of politicians are judged by whether they benefit or harm the markets.
White House Grand Bargain offer to Speaker Boehner Obtained by Bob Woodward
"This is a confidential document, last offer the president -- the White House made last year to Speaker Boehner to try to reach this $4 trillion grand bargain. And it's long and it's tedious and it's got budget jargon in it. But what it shows is a willingness to cut all kinds of things, like TRICARE, which is the sacred health insurance program for the military, for military retirees; to cut Social Security; to cut Medicare. And there are some lines in there about, "We want to get tax rates down, not only for individuals but for businesses." So Obama and the White House were willing to go quite far."
Will Obama Agree to Entitlement Cuts? He Already Has 11/13
But both candidates had to know how thoroughly disingenuous this debate really was. The fact is that Mr. Obama, during his “grand bargain” negotiations with the House speaker, John A. Boehner, in the summer of 2011, had already signed off on painful cuts to Medicare, Medicaid and Social Security, even if he never once mentioned that during his re-election campaign. So he knew there was a deal to be had that would preserve — and perhaps even strengthen — these programs without destroying them.
And if Republicans were outraged over those cuts, it’s only because they were demanding far steeper reductions in all three programs. The idea that Republicans had to stop Mr. Obama from recklessly cutting Medicare was probably Mr. Romney’s most misleading attack, and that’s saying something.
To calculate the standard CPI, Bureau of Labor Statistics employees shop for a market basket of 80,000 goods and services that are weighted to reflect consumer-spending patterns. Since 2002, the BLS has also compiled the chained CPI, a more exact measure that accounts for the substitutions consumers make when a product’s price goes up. A shopper might respond to an increase in the cost of Granny Smith apples, for example, by switching to lower-cost Red Delicious, a process known as lower-level substitution. Or a consumer might react to a price increase in one item by switching to another category altogether, say less-expensive oranges instead of pricier apples -- called upper-level substitution.
Where is the C-CPI-U currently being used? Wouldn't the C-CPI-U be a more appropriate index to tie Social Security or other adjustments to?
The C-CPI-U, which in final form is said to be a "superlative" index, is designed to be a closer approximation to a cost-of-living index than other CPI measures.
That said, BLS publishes thousands of indexes each month; these indexes can vary by which items, geographic areas, and populations are covered. As different users have different needs, BLS cannot say which index is necessarily better than another. As such, BLS takes no position on what the Congress or the Administration should use to make adjustments to Social Security or any other federal program.
The C-CPI-U to our knowledge currently is not used in any federal legislation as an adjustment mechanism.
The CPI is based on a modified Laspeyres formula, while the PCE price index is based on a Fisher-Ideal formula. This difference is referred to as the “formula effect.” Second, the relative weights as signed to each of the detailed item prices in the CPI and in the PCE price index are based on different data sources. The relative weights used in the CPI are based primarily on household surveys, while the relative weights used in the PCE price index are based primarily on business surveys.
This conceptual difference implies that some items in the CPI are out-of-scope of the PCE price index; that is, some items in the CPI are not included in the PCE price index. Even more importantly, some items in the PCE price index are out-of-scope of the CPI. These dif ferences are referred to as the “scope effect.” Finally, there are a variety of other differences, consisting of seasonal adjustment differences, price differences, and residual differences. Collectively, these are referred to as “other effects.”
I am following up on my voicemail to see if we can arrange a time either today or sometime this week for you to speak with our director, Doug Elmendorf. He wanted to speak with you about your blog post that appeared Sunday on Naked Capitalism regarding CBO.
The Great Betrayal -- and the Cynicism of Calling It a Grand Bargain (Fiscal Cliff Edition)
Kuttner wrote to warn that Obama intends to seek a "grand bargain" causing the U.S. to adopt the type of austerity program that threw the Eurozone back into a gratuitous recession.
Worse, Obama intends to begin to unravel the safety net (Social Security, Medicare, and Medicaid) to convince the Republicans to enter into this Faustian bargain. Just as only a conservative Republican could visit "Red" China, only a Democrat can begin the destruction of the safety net. The difference, of course, is that normalizing relations with China was a good thing while unraveling the safety net is a terrible thing.
Chained-CPI is not an accurate deflation gauge (Fiscal Cliff Edition)
Both Fed chief Bernanke and Treasury Secretary Geithner believe that this is a better measure of “underlying” inflation. Apparently, they don’t believe that Americans are much impacted by the cost of petroleum products or food. I promise, however, that when the “core” CPI is higher than the CPI itself, “core” will be ignored!
If the methodology for computing the CPI-U were the same formula that was used in 1980, then the 3 percent rate of inflation reported for 2011 would have been closer to 11 percent, according to John Williams of Shadowstats.com, who follows this indicator in detail. In 1980, the CPI measured a “standard of living,” with the price index telling us how many dollars more it would take to buy the exact same basket of items we bought in a prior period, say, last year. Below is a simple example using two goods: T-bone steaks and hamburger.If you think about it, the two weighted average costs using different weights are not really comparable at all. What would you say if consumers had to substitute canned dog food for hamburger? Would you think the measure of inflation meant anything? The 3.8 percent is a math result, the product of numbers in a formula. But the numbers being used in the calculation measure different things and are not comparable. The result is that the Chained-CPI doesn’t really measure anything.
Nevertheless, the coming use of the Chained-CPI will allow reporting of much lower rates of inflation than is the reality, reducing Social Security, Medicare and government pension COLAs, all without any action on the part of Congress or the administration.
It also will distort to the upside the reporting of other economic activity where nominal” (i.e. current dollar) indicators, such as GDP, are translated into “real” terms by deflating them with an artificially low measure of inflation.
Statistical Wonkery and Grandma's Social Security Check (Fiscal Cliff Edition)
Cato last year called switching to the chained CPI for Social Security a "sound and overdue reform." But when it came to using the chained CPI to adjust tax brackets, Cato called that "a very bad idea."
....It's a measure of the cynicism that guides debate in the nation's capital that an "overdue reform" that would take $112 billion from the needy can be regarded as "a very bad idea" if it costs the rich $72 billion — and that no one pauses to ponder the rank injustice involved. Must be that they can't make out their own words over the purring of those Mercedes engines.
Obviously Michael is right about this. If BLS adopts chained CPI as its new official measure of general inflation, then the change should be global throughout the government. Anything else is just obvious special pleading.
The Unreliability of Credit-to-GDP Ratio Gaps in Real Time: Implications for Countercyclical Capital Buffers∗ (Fiscal Cliff Edition)
... as described in the countercyclical capital buffer proposal of the Basel Committee’s Macro Variables Task Force (MVTF)—could potentially suffer from the same problem, thus making it difficult to implement this type of macroprudential policy
==> As noted by Orphanides and van Norden, there are several rea- sons why real-time estimates of gap measures can differ from their final estimates. First, the underlying data used to calculate the gap measures can be revised.
For example, the credit-to-GDP ratio gaps reported in the document all extract the one-sided Hodrick-Prescott trend, because this measure only uses information that is available at the time of the observation period.
Economist's View: Fed Watch: Careful With That HP Filter (Fiscal Cliff Edition)
Scott Sumner questions whether the application of the Hodrick-Prescott filter to the entire 1947-2011 period was appropriate, given the collapse of NGDP after 2008, thereby distorting estimates of the trend ...
ShadowStats.com Response to BLS Article on CPI Misconceptions (Fiscal Cliff Edition)
The BLS touts the use of geometric weighting in the narrow CPI categories as a way of measuring shifting consumer preferences based on changes in prices in related items. The weights that shift based upon price changes (relatively higher price changes end up with relatively lower weightings) do so by straight mathematical adjustment that the BLS once described as "mimicking" substitution effects. The shifts are not calculated based on any consumer surveying done, for example, as to how candy bar consumption would vary given relative price changes.
The BLS claims support for using geometric weightings in the CPI, because everyone else does it. One also could argue that other sovereign statistical agencies, by their nature, have a tendency to want to reduce reported inflation as much as possible, as did Messrs. Greenspan and Boskin.
UK risks triple-dip recession, Mervyn King warns 11/ 14
The UK economy risks suffering from a triple-dip recession amid a period of persistently low growth that will last until the next election, the governor of the Bank of England has warned.
Sir Mervyn King cut Britain's growth forecast to 1% next year and warned that output was more likely than not to remain below pre-crisis levels over the next three years. "There seems a greater risk that the UK economy may be in a period of persistent low growth," he said on Wednesday.
Women less likely to be political outsiders now 11/07
What changed in this election was that women accumulated power in a calm and measured way, and began to look for the first time much less like outsiders to the political process.
New Hampshire, arguably a state populated by the greatest concentration of political insiders and obsessives, gave us our first ever matriarchy -- a delegation of House, Senate and governor that is entirely female. We elected a record number of women to the Senate. One of those new senators is Elizabeth Warren, who over the rest of her career has the potential to embody women's transition from outsider status to right in the thick of things.
Cautious consumers are not persuaded that recession is over 11/07
ACCORDING to official figures, recession is behind us, but it seems that the average UK consumer may take a little more persuasion than the gospel according to the Office of National Statistics to part with their hard-earned cash.
Yesterday, the British Retail Consortium (BRC) said October’s UK retail sales, down 0.1 per cent year on year, were the worst outside a seasonal period for 11 months, ending hopes that September’s more buoyant results would spark a retail revival on the run-up to Christmas.
JOLTS - There were 3.4 People Looking for a Job for each Position Available in September 2012
Graphed below are people who quit their jobs minus those who were fired and laid off. The lower the bar on the below graph, the worse labor conditions are. The number of quits were 1.976 million for September, a -8.1% monthly decline. People who quit their jobs are still way below pre-recession levels of 2.8 million. People are clearly not voluntarily leaving their jobs because the job market is so bad, even though the jobs slaughter of 2009 where people were laid off and fired in mass is over.
Why Aren't People Moving in America Anymore? 11/06
It's not just jobs that are the same across states. Wages are too. Kaplan and Schulhoffer-Wohl find there's been less variance between states among industry-specific average wages. In other words, there's less reason to move for work. That's even more true when it comes to moving to find out if you want to move, which isn't as tautological as it sounds. Before the age of cheap travel and Facebook, nomadic twentysomethings were more likely to move somewhere to find out if they wanted to live there. That's not to say that doesn't happen now, just not as much -- there are fewer serial movers nowadays.
Graphed below are people who quit their jobs minus those who were fired and laid off. The lower the bar on the below graph, the worse labor conditions are. The number of quits were 1.976 million for September, a -8.1% monthly decline. People who quit their jobs are still way below pre-recession levels of 2.8 million. People are clearly not voluntarily leaving their jobs because the job market is so bad, even though the jobs slaughter of 2009 where people were laid off and fired in mass is over.
Why Aren't People Moving in America Anymore? 11/06
It's not just jobs that are the same across states. Wages are too. Kaplan and Schulhoffer-Wohl find there's been less variance between states among industry-specific average wages. In other words, there's less reason to move for work. That's even more true when it comes to moving to find out if you want to move, which isn't as tautological as it sounds. Before the age of cheap travel and Facebook, nomadic twentysomethings were more likely to move somewhere to find out if they wanted to live there. That's not to say that doesn't happen now, just not as much -- there are fewer serial movers nowadays.
Why the U.S. Has a Worse Youth Unemployment Problem than Europe 11/ 05
So why are young people in the U.S. so affected by this phenomenon? Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics, says the NEET numbers probably reflect the depth of the labor-market contraction in the U.S. during the financial crisis, which has actually been worse than in parts of Europe. At the same time, “American youth have fewer education and training opportunities than in Europe — especially following the dramatic cuts to U.S. state and local government education budgets during the crisis.”
S&P found guilty of misleading investors 11/5
In a 1,500 page ruling handed down by the Federal Court of Australia on Monday, Justice Jayne Jagot said S&P’s rating of derivative linked notes created by ABN Amro in 2006 had been “misleading and deceptive”. The court added that the rating also involved the publication of information and statements that were either “false” or involved “negligent misrepresentations”.
While Nobody Was Paying Attention, The Bank Of Japan Took A Surprise Step 11/4
The executive branch politicians in Japan have, for the first time ever, infiltrated the mother ship. BoJ independence is now under explicit political attack. This should be a warning to all central bankers with "sound money" religion - if you don't let the inflation dogs out and crank up the printing presses as the economy deteriorates, the politicians will come and shut you down. What we are witnessing is the beginning of the end for independent Japanese monetary policy.
Empire of the In-Between 11/02
This is an economy changing too fast for the residents to keep up. For many who live along the corridor, the central theme is the decline that’s all too visible. The old brick factory buildings with huge windows that gave workers light and air in a pre-air-conditioned world are boarded up, crumbling or, in a few of the luckier spots, being converted into condos.
Congressional Research Service Report On Tax Cuts For Wealthy Suppressed By GOP 11/1
The report is extensive, but the reasoning behind its conclusion is fairly straightforward. The richest Americans are the least likely to spend extra money they get as a result of a tax cut, and are more likely to save it or invest it offshore. Those on the lower end of the economic spectrum, meanwhile, are the most likely to spend transfer payments they receive from the government.
A release by the Democratic Policy & Communications Center on Wednesday accused Republicans of attempting to bury the report because its "findings undermine a central tenet of Republican party orthodoxy on taxes."
Little Federal Help for the Long-Term Unemployed 11/1
Nearly five million Americans out of work for more than six months are left to wonder what kind of help might be coming, as the Federal Reserve, the International Monetary Fund and a bipartisan swath of policy experts implore Washington to act — both to alleviate human misery and to ensure the strength of the economy.
But it remains a bleak situation. About 800,000 workers want a job but have simply given up looking, and so are no longer even counted as unemployed. About 1.7 million people have joined the disability rolls since the recession began at the end of 2007, an increase of 24 percent, as workers use the disability program as a backdoor safety net when their unemployment insurance runs out. After searching for a new position for a year, a worker trying to regain employment finds that his chance to do so in the coming month falls below 10 percent.
A firefighter will risk their lives to save more than humans during a hurricane.
Quarter-billion-dollar stimulus grant creates just 400 jobs 10/29
The Massachusetts-based battery maker received a $249 million grant in December 2009 through President Obama’s stimulus program, of which the company received about $129 million before it went bankrupt this month. Like all other recipients of stimulus loans or grants, A123 Systems was required to report job creation statistics to Recovery.gov.
The last quarterly report on file, from March to June 2012, lists seven jobs created, but it also hinted at other challenges, with the company acknowledging “operational challenges and quality assurance issues.”
Home Prices Rise, but Pressure Ahead 10/26
"The precipitous drop in the share of distressed properties in the housing market is largely attributable to fewer foreclosed properties or real estate owned (REO) being put up for sale by banks," according to the report. "HousingPulse respondents reported in October that major banks appear to be keeping many REO properties off the market this year. But they also suggest banks may be looking to unload significant amounts of REO next year - a move that could put downward pressure on home prices.
The Fight Against Inequality Takes a Giant Stride Forward 10/24
The Walmart model is preventing real growth by championing inequality. The International Monetary Fund recognizes that reducing inequality is a prerequisite of growth. IMF research presented to the IFI meetings in Tokyo last week shows that governments underestimated the impact of austerity on growth, jobs and investment. The New York Times reports that "income inequality has soared to the highest levels since the Great Depression." Walmart's Bentonville boardroom are the chief beneficiaries along with the rest of the 1 percent. Where better to draw a line in the sand against inequality than with Walmart, the world's third largest public company? A family-owned business lacking family values.
So why are young people in the U.S. so affected by this phenomenon? Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics, says the NEET numbers probably reflect the depth of the labor-market contraction in the U.S. during the financial crisis, which has actually been worse than in parts of Europe. At the same time, “American youth have fewer education and training opportunities than in Europe — especially following the dramatic cuts to U.S. state and local government education budgets during the crisis.”
S&P found guilty of misleading investors 11/5
In a 1,500 page ruling handed down by the Federal Court of Australia on Monday, Justice Jayne Jagot said S&P’s rating of derivative linked notes created by ABN Amro in 2006 had been “misleading and deceptive”. The court added that the rating also involved the publication of information and statements that were either “false” or involved “negligent misrepresentations”.
While Nobody Was Paying Attention, The Bank Of Japan Took A Surprise Step 11/4
The executive branch politicians in Japan have, for the first time ever, infiltrated the mother ship. BoJ independence is now under explicit political attack. This should be a warning to all central bankers with "sound money" religion - if you don't let the inflation dogs out and crank up the printing presses as the economy deteriorates, the politicians will come and shut you down. What we are witnessing is the beginning of the end for independent Japanese monetary policy.
Empire of the In-Between 11/02
This is an economy changing too fast for the residents to keep up. For many who live along the corridor, the central theme is the decline that’s all too visible. The old brick factory buildings with huge windows that gave workers light and air in a pre-air-conditioned world are boarded up, crumbling or, in a few of the luckier spots, being converted into condos.
Congressional Research Service Report On Tax Cuts For Wealthy Suppressed By GOP 11/1
The report is extensive, but the reasoning behind its conclusion is fairly straightforward. The richest Americans are the least likely to spend extra money they get as a result of a tax cut, and are more likely to save it or invest it offshore. Those on the lower end of the economic spectrum, meanwhile, are the most likely to spend transfer payments they receive from the government.
A release by the Democratic Policy & Communications Center on Wednesday accused Republicans of attempting to bury the report because its "findings undermine a central tenet of Republican party orthodoxy on taxes."
Nearly five million Americans out of work for more than six months are left to wonder what kind of help might be coming, as the Federal Reserve, the International Monetary Fund and a bipartisan swath of policy experts implore Washington to act — both to alleviate human misery and to ensure the strength of the economy.
But it remains a bleak situation. About 800,000 workers want a job but have simply given up looking, and so are no longer even counted as unemployed. About 1.7 million people have joined the disability rolls since the recession began at the end of 2007, an increase of 24 percent, as workers use the disability program as a backdoor safety net when their unemployment insurance runs out. After searching for a new position for a year, a worker trying to regain employment finds that his chance to do so in the coming month falls below 10 percent.
A firefighter will risk their lives to save more than humans during a hurricane.
Quarter-billion-dollar stimulus grant creates just 400 jobs 10/29
The Massachusetts-based battery maker received a $249 million grant in December 2009 through President Obama’s stimulus program, of which the company received about $129 million before it went bankrupt this month. Like all other recipients of stimulus loans or grants, A123 Systems was required to report job creation statistics to Recovery.gov.
The last quarterly report on file, from March to June 2012, lists seven jobs created, but it also hinted at other challenges, with the company acknowledging “operational challenges and quality assurance issues.”
Home Prices Rise, but Pressure Ahead 10/26
"The precipitous drop in the share of distressed properties in the housing market is largely attributable to fewer foreclosed properties or real estate owned (REO) being put up for sale by banks," according to the report. "HousingPulse respondents reported in October that major banks appear to be keeping many REO properties off the market this year. But they also suggest banks may be looking to unload significant amounts of REO next year - a move that could put downward pressure on home prices.
The Fight Against Inequality Takes a Giant Stride Forward 10/24
The Walmart model is preventing real growth by championing inequality. The International Monetary Fund recognizes that reducing inequality is a prerequisite of growth. IMF research presented to the IFI meetings in Tokyo last week shows that governments underestimated the impact of austerity on growth, jobs and investment. The New York Times reports that "income inequality has soared to the highest levels since the Great Depression." Walmart's Bentonville boardroom are the chief beneficiaries along with the rest of the 1 percent. Where better to draw a line in the sand against inequality than with Walmart, the world's third largest public company? A family-owned business lacking family values.
Outsourcing America's Infrastructure (Recent)
The deck for the largest US suspension bridge built in half a century, Seattle’s Tacoma Narrows Bridge – made in South Korea. The span slated to be Alaska’s longest bridge – the steel was made in China. Chinese workers also built the 500-foot tower and steel road decks for the east span of the San Francisco-Oakland Bay Bridge, billed as the most complex engineering feat in California history.
Cash-strapped states say they’re acting in the interests of taxpayers, choosing a superior, often cheaper, product by looking offshore. Critics say states are prioritizing the immediate bottom line without taking into account the trickle-down benefits of employing US workers. Meanwhile, the once-proud bridge builders whose labor assured them a place in America’s middle class are watching the ground disappear beneath them.
Getting around the Keystone pipeline restrictions: pumping oil through gas lines 10/25
Although ETP has kept tight-lipped about its plans, the proposal was dragged into the public spotlight through a motion to “intervene and protest” by Michigan Gov. Rick Snyder filed with the Federal Energy Regulatory Commission. Snyder said the proposal to convert a “key piece of the natural gas infrastructure” in Michigan into an oil pipeline “will not serve Michigan’s energy needs” to heat homes and businesses in a large part of the state.
Amazon, Google, Microsoft et al: It's time to pay your tax bills 10/24
Corporation tax stood at 28 percent in 2010, dropping to 26 percent in 2011. For the current 2012 tax year it stands at 24 percent, but will drop to 23 percent next year in a bid to make British businesses "more competitive." It may well encourage growth, but it also places the onus of generating that lost 1 percent onto the ordinary individual British taxpayer. (Thanks for that, George.)
Yet what riles the tens of millions of British residents is not as such the amount of tax we each pay, but how little the major billion-dollar technology powerhouses pay by comparison.
Let's take a moment to reflect upon how little corporations actually pay in the U.K. with some figures. I'll keep it in the same consistent style simply for your reading ease, and we'll just skim off the surface from recent news reports. No doubt there are more, but this selection will suffice as mere highlights for now...
Global Gender Gap Report 2012: The Best And Worst Countries For Women 10/24
Gender equality has been more of a national focus than usual in the United States over the past few months, thanks to the 2012 presidential election. Republican nominee Mitt Romney recently discussed the "binders full of women" that he tried to hire when he was governor of Massachusetts, and President Barack Obama touched upon the importance of "protecting women's rights" around the world during the third and final presidential debate Monday.
But how does the United States stack up against other countries when it comes to said gender equality? According to the 2012 Global Gender Gap Report, released on October 23rd by the World Economic Forum, we're only 22nd best...
Tory cuts hit us all in the pocket 10/23
As bankers continued to swagger around with taxpayers' money and bumper bonuses in their back pockets, official figures revealed household incomes got it in the neck more than in other recessions, with many people being forced to turn to loan sharks.
The Office for National Statistics (ONS) said net national income per person - which includes wages - fell by more than 13 per cent this year compared with four years ago.
Britain is reeling under the longest double-dip recession in 50 years and is heading for a third. It also confirmed that at the end of 2011 national debt was in excess of £1 trillion - the first time on record and equivalent to 65.7 per cent of gross national product.
King warns Bank action reaching limit 10/23
In a bleak assessment of the economy and the ability of monetary policy to generate a strong recovery, the Bank governor urged Britain to be “patient” in the face of a difficult global economic adjustment, which may force younger generations to “live under its shadow for a long time to come”.
Sir Mervyn urged banks, in particular, to recognise the need to accept many of their pre-crisis loans would ultimately go sour. “I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalisation of their financial systems,” he said.
The young and the restless 10/23
In the United States, youth unemployment leaped by one-third during the economic crisis to above 17%, where it has remained.
It seems unlikely that the global economy can generate enough jobs to employ the estimated 100 million young people entering the labour force each year, let alone the tens of millions of ageing workers.”
In the European Union, youth unemployment hit 23% in August 2012, and in Spain and Greece most young people are now out of work. The duration of youth unemployment has increased. In the UK, for example, the percentage of unemployed young people out of work for longer than one year has nearly doubled since late 2008.
Home loans granted drop to record lows 10/22
According to official figures released last week, house prices have fallen 25 percent from their peaks at the start of 2008. Experts reckon they will have to fall more to clear an estimated pile of 670,000 new housing units built up over a decade-long boom that came to an abrupt halt around the start of 2008.
The government is setting up a so-called bad bank to absorb the toxic real estate assets of the country’s banking sector. Those assets are likely to be transferred at strong discounts to their current book value.
Obama spins symptoms into fixes 10/22
It was arguably Ronald Reagan’s favorite joke. In one version, two kids — one an optimist, the other a pessimist — rush downstairs on Christmas morning. The pessimistic kid gets a new bike and weeps that he’ll probably break it soon. The optimistic kid is presented with an enormous pile of manure and squeals with delight: “There’s got to be a pony in here somewhere!”
In fact, the joke took on a life of its own in the Reagan White House. Whenever bad news came in, someone would remark, “There’s got to be a pony in there somewhere.”
President Barack Obama, who always wanted to be a liberal version of Ronald Reagan, has his own version of the joke. It’s not particularly funny, alas. In Obama’s telling, the kid runs downstairs, sees a huge pile of manure and yells, “Yay! Manure! Who needs a pony!”
Food Stamp Bashing, Race, and the Bi-Partisan Attack on the Safety-Net 10/22
When Romney waxes indignant about poverty and food stamps, this is the context. He’s wielding a double-edged sword, at the same time lambasting the President for steering the country into economic chaos and then attacking the very programs that struggling people need. “We don’t have to settle” for 47 million people on food stamps, he declared, just weeks after deriding 47 percent of the country for being mooches.
For a moment, let’s think about what expanded food stamp rolls really mean. Yes, 46,681,833 people using food stamps is a sign that things are not good, a direct result of staggering levels of poverty: 46 million people living below the poverty line, over 40 percent of whom survive in deep poverty. It’s also a sign of consistently high unemployment that only just dropped below eight percent and remains much higher in low-income communities and communities of color.
China Can't Hide The Recession Any Longer (Recent)
Bad loans will flood the banking system. This comes at a very bad time. Fitch Ratings warned that China’s banking sector assets are near $21 trillion, up from $9 trillion in late 2008. (Note: assets for banks are loans on the books.)
The Fitch analyst said that “even a modest shock could wipe out the sector’s entire earnings.” They didn’t say how many banks it would wipe out. The huge accumulated reserves of China’s government are only around $3 trillion. That’s not enough to bail out all the banks.
Poll shows 63 per cent of Brits do not expect economy to recover until 2017 10/21
TWO out of three people fear Britain’s economy will fail to recover for at least five years, according to an opinion poll.
The survey paints a bleak picture as recession-hit High Streets gear up for the crucial run-up to Christmas. A total of 63 per cent of the public do not expect the economy to return to health until 2017 at the earliest. Just 17 per cent disagree and 20 per cent were unsure.
More than half of those quizzed in the survey for our sister paper the Sunday Mirror said they would spend less on Christmas this year. But it is down on 2011, when 61 per cent said they would cut festive spending
The deck for the largest US suspension bridge built in half a century, Seattle’s Tacoma Narrows Bridge – made in South Korea. The span slated to be Alaska’s longest bridge – the steel was made in China. Chinese workers also built the 500-foot tower and steel road decks for the east span of the San Francisco-Oakland Bay Bridge, billed as the most complex engineering feat in California history.
Cash-strapped states say they’re acting in the interests of taxpayers, choosing a superior, often cheaper, product by looking offshore. Critics say states are prioritizing the immediate bottom line without taking into account the trickle-down benefits of employing US workers. Meanwhile, the once-proud bridge builders whose labor assured them a place in America’s middle class are watching the ground disappear beneath them.
Getting around the Keystone pipeline restrictions: pumping oil through gas lines 10/25
Although ETP has kept tight-lipped about its plans, the proposal was dragged into the public spotlight through a motion to “intervene and protest” by Michigan Gov. Rick Snyder filed with the Federal Energy Regulatory Commission. Snyder said the proposal to convert a “key piece of the natural gas infrastructure” in Michigan into an oil pipeline “will not serve Michigan’s energy needs” to heat homes and businesses in a large part of the state.
Amazon, Google, Microsoft et al: It's time to pay your tax bills 10/24
Corporation tax stood at 28 percent in 2010, dropping to 26 percent in 2011. For the current 2012 tax year it stands at 24 percent, but will drop to 23 percent next year in a bid to make British businesses "more competitive." It may well encourage growth, but it also places the onus of generating that lost 1 percent onto the ordinary individual British taxpayer. (Thanks for that, George.)
Yet what riles the tens of millions of British residents is not as such the amount of tax we each pay, but how little the major billion-dollar technology powerhouses pay by comparison.
Let's take a moment to reflect upon how little corporations actually pay in the U.K. with some figures. I'll keep it in the same consistent style simply for your reading ease, and we'll just skim off the surface from recent news reports. No doubt there are more, but this selection will suffice as mere highlights for now...
Global Gender Gap Report 2012: The Best And Worst Countries For Women 10/24
Gender equality has been more of a national focus than usual in the United States over the past few months, thanks to the 2012 presidential election. Republican nominee Mitt Romney recently discussed the "binders full of women" that he tried to hire when he was governor of Massachusetts, and President Barack Obama touched upon the importance of "protecting women's rights" around the world during the third and final presidential debate Monday.
But how does the United States stack up against other countries when it comes to said gender equality? According to the 2012 Global Gender Gap Report, released on October 23rd by the World Economic Forum, we're only 22nd best...
Tory cuts hit us all in the pocket 10/23
As bankers continued to swagger around with taxpayers' money and bumper bonuses in their back pockets, official figures revealed household incomes got it in the neck more than in other recessions, with many people being forced to turn to loan sharks.
The Office for National Statistics (ONS) said net national income per person - which includes wages - fell by more than 13 per cent this year compared with four years ago.
Britain is reeling under the longest double-dip recession in 50 years and is heading for a third. It also confirmed that at the end of 2011 national debt was in excess of £1 trillion - the first time on record and equivalent to 65.7 per cent of gross national product.
King warns Bank action reaching limit 10/23
In a bleak assessment of the economy and the ability of monetary policy to generate a strong recovery, the Bank governor urged Britain to be “patient” in the face of a difficult global economic adjustment, which may force younger generations to “live under its shadow for a long time to come”.
Sir Mervyn urged banks, in particular, to recognise the need to accept many of their pre-crisis loans would ultimately go sour. “I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalisation of their financial systems,” he said.
The young and the restless 10/23
In the United States, youth unemployment leaped by one-third during the economic crisis to above 17%, where it has remained.
It seems unlikely that the global economy can generate enough jobs to employ the estimated 100 million young people entering the labour force each year, let alone the tens of millions of ageing workers.”
In the European Union, youth unemployment hit 23% in August 2012, and in Spain and Greece most young people are now out of work. The duration of youth unemployment has increased. In the UK, for example, the percentage of unemployed young people out of work for longer than one year has nearly doubled since late 2008.
Home loans granted drop to record lows 10/22
According to official figures released last week, house prices have fallen 25 percent from their peaks at the start of 2008. Experts reckon they will have to fall more to clear an estimated pile of 670,000 new housing units built up over a decade-long boom that came to an abrupt halt around the start of 2008.
The government is setting up a so-called bad bank to absorb the toxic real estate assets of the country’s banking sector. Those assets are likely to be transferred at strong discounts to their current book value.
Obama spins symptoms into fixes 10/22
It was arguably Ronald Reagan’s favorite joke. In one version, two kids — one an optimist, the other a pessimist — rush downstairs on Christmas morning. The pessimistic kid gets a new bike and weeps that he’ll probably break it soon. The optimistic kid is presented with an enormous pile of manure and squeals with delight: “There’s got to be a pony in here somewhere!”
In fact, the joke took on a life of its own in the Reagan White House. Whenever bad news came in, someone would remark, “There’s got to be a pony in there somewhere.”
President Barack Obama, who always wanted to be a liberal version of Ronald Reagan, has his own version of the joke. It’s not particularly funny, alas. In Obama’s telling, the kid runs downstairs, sees a huge pile of manure and yells, “Yay! Manure! Who needs a pony!”
Food Stamp Bashing, Race, and the Bi-Partisan Attack on the Safety-Net 10/22
When Romney waxes indignant about poverty and food stamps, this is the context. He’s wielding a double-edged sword, at the same time lambasting the President for steering the country into economic chaos and then attacking the very programs that struggling people need. “We don’t have to settle” for 47 million people on food stamps, he declared, just weeks after deriding 47 percent of the country for being mooches.
For a moment, let’s think about what expanded food stamp rolls really mean. Yes, 46,681,833 people using food stamps is a sign that things are not good, a direct result of staggering levels of poverty: 46 million people living below the poverty line, over 40 percent of whom survive in deep poverty. It’s also a sign of consistently high unemployment that only just dropped below eight percent and remains much higher in low-income communities and communities of color.
China Can't Hide The Recession Any Longer (Recent)
Bad loans will flood the banking system. This comes at a very bad time. Fitch Ratings warned that China’s banking sector assets are near $21 trillion, up from $9 trillion in late 2008. (Note: assets for banks are loans on the books.)
The Fitch analyst said that “even a modest shock could wipe out the sector’s entire earnings.” They didn’t say how many banks it would wipe out. The huge accumulated reserves of China’s government are only around $3 trillion. That’s not enough to bail out all the banks.
TWO out of three people fear Britain’s economy will fail to recover for at least five years, according to an opinion poll.
The survey paints a bleak picture as recession-hit High Streets gear up for the crucial run-up to Christmas. A total of 63 per cent of the public do not expect the economy to return to health until 2017 at the earliest. Just 17 per cent disagree and 20 per cent were unsure.
More than half of those quizzed in the survey for our sister paper the Sunday Mirror said they would spend less on Christmas this year. But it is down on 2011, when 61 per cent said they would cut festive spending
Economic Madness (Recent)
On Sept. 27, the Bureau of Economic Analysis revised second quarter Gross Domestic Product growth downward, from 1.7 percent to 1.3 percent. America now trails Cuba in GDP growth.
President Obama continues to say America is in an economic recovery. The families broken by his recovery, whose cornerstone was Obama's $787 billion economic stimulus package, know otherwise: Public-sector employees and union workers got "shovel-ready" projects and dollars; the private-sector got the shaft and more regulations.
Thousands marched in London against cuts 10/20
"The culture of two nations runs right across this government. They cut taxes for millionaires and raise them for ordinary people".
He made a joke at the expense of the Chancellor George Osborne who "tries to travel first class on a standard class ticket" and described the Prime Minister as "weak and clueless".
Sony to close factory in central Japan, cut workforce by 2,000 in moves aimed to cut $385M
Its profitability battered by Japan’s March 2011 disasters and other factors, Sony reported the worst loss in its 66-year corporate history for the business year that ended in March, with red ink of 457 billion yen ($5.7 billion).
The real deal 10/20
Could this time be different? One possibility is that central banks are overestimating the scale of economic weakness, and keeping interest rates too low as a result. That might be good for corporate profits, but excessively loose monetary policy would also lead to higher inflation. So how are equity markets affected by inflation? In years when the annual inflation rate has been falling, the real return from American stocks has been 9.6%; in years when it has been rising, the real return has been minus 1.1%. So past experience suggests a sudden jump in inflation would not be great for the stockmarket.
Plutocracy Rising: Moyers, Freeland, and Taibbi 10/19
I was struck by the comparison that Taibbi makes between post-Soviet Russia and the emerging US plutocracy. I have drawn the same conclusion some years ago, that post-empire America may face the same outcome. The merging of private and state power is well underway. And everyone lost the Cold War, except a predatory few.
Is that too big of a statement? A presidential candidate, Jill Stein of the Green Party, is denied access to the 'debate.' She goes to the debate to protest this peacefully, is arrested, and is then gratuitously handcuffed to a chair for eight hours, just to show her how things are. A Wall Street fund manager refuses to pay a cabdriver his legitimate fare, stabs him, and flees the scene. All charges are dropped by the prosecutor despite the protests of the cabbie. A powerful friend of the President breaks every taboo against stealing millions in customer money, and no one knows anything, and no one is charged.
Disappointing Earnings Season Has CEOs In Full Spin Mode 10/19
"There it is again, this whole revenue story. They hit on the earnings number, but revenues keep missing. That is the story that we are hearing across the line," said Ken Polcari, managing director of ICAP Equities in New York.
It "further solidifies the same story that people are concerned. And although these companies are beating these numbers, the numbers are much lower so the beat is not that difficult. But clearly they are all missing on the revenue line, which is a concern."
Millions on Pet Halloween Costumes? Why We Spend More and More on Pets (Recent Trend)
American consumers are expected to collectively spend $370 million on pet costumes this Halloween. That’s $70 million more than last year, and a whopping 40% increase compared to 2010.
There are one million dogs in the U.S. that have been named the primary beneficiary of their owners will. Higher status translates to pets deserving more — be it vacation care in pet hotels rather than kennels, more toys, or better healthcare.
Abercrombie and Fitch, Other Retail Workers Protest 'Abusive' Scheduling (Recent Trend)
Employees of Abercrombie & Fitch, Best Buy and other retailers protested Wednesday along New York City's posh Fifth Avenue shopping district against what they call "abusive" work scheduling.
Walmart Workers Walk Out (Recent Trend)
It appears unlikely that Walmart can quell this level of unrest easily. Workers in Walmart-controlled warehouses in Illinois and Southern California were on strike for several weeks this fall. The OUR Walmart strikers are back in their stores, but they have told the company that if their demands are not met, Black Friday—the day after Thanksgiving, the busiest shopping day of the year—will be a rowdy one, with strikes and actions at stores all over the country.
Retail Crisis: Chain Store Closures Hit 32 A Day 10/18 (Christmas Update)
There has been an acceleration in the number of chain stores closing on the UK's high streets - hitting 32 a day on average amid high rent bills and the recession.
According to data released by professional services firm PwC and the Local Data Company (LDC), an average of 20 shut their doors every 24 hours in the first half of 2012. It amounted to a net reduction of 953 shops compared to 174 shops in the whole of 2011, the research suggested.
5 Ways Companies Are Already Ruining the Holidays 10/18
Christmas creep is the phenomenon of stores busting out their late-season holiday merchandise -- most notably, the Christmas crap -- earlier and earlier each year. The term also applies to annoying holiday advertisements, which we now have to suffer through for nearly a quarter of the calendar year.
Target is 2012’s worst offender, having unleashed its first Christmas ad in mid-October. Doesn’t it just seem wrong to be looking at Christmas lights on TV when you haven’t even picked a Halloween costume yet?
Britain's Labour Market Mystery: 'We're Either Too Lazy or We Can't Count' 10/17
The dismal scientists are calling it the "productivity puzzle" and it seems to have spawned a host of theories.
Labour hoarding is one of them. The thinking is that companies are hanging onto staff in anticipation of an economic turnaround and would rather do this than go through the slow, expensive process of redundancies and re-hiring.
The increase in part-time staff in the private sector would seem to give this notion a bit of weight, given that companies might simply decide to extend the part-time hours of full time workers once the economy kicks-back into gear. Since the pre-crisis peak, part-time jobs in the private sector have risen by a net 724,000, nearly double the pace of growth for full-time positions.
Manufacturing in New York Region Contracts for Third Month 10/15
Manufacturing, a mainstay of the three-year economic expansion, has been cooling as overseas demands slows. Companies have also been curbing investment on concern that Congress will fail to avert more than $600 billion of automatic federal tax increases and spending cuts scheduled to go into effect early next year, slowing the economy.
“Manufacturing is stuck in neutral,” said Thomas Simons, an economist at Jefferies Group Inc. in New York, which had forecast minus 6 for the so-called Empire State index.
For Every Person Added to Labor Force, 10 Added to Those Not in Labor Force 10/15
Senator Jeff Sessions, the ranking member of the Senate Budget Committee, comments: “The essential point of this chart is not simply how many people are employed or unemployed, but to illustrate that more and more people are simply not part of the U.S. labor force. This confirms that we are on the wrong track. It is unsustainable to have such a large and growing number of people who are not part of the productive economy. This is not a political argument, but a description of the underlying instability in our economy that has so many Americans worried about the future. The question is what can we do to reverse these trends and start moving in the right direction.
Drunks Running Colleges and Students Into Bankruptcy (Recent)
Social Security increase for 2013 could be lowest since 1975 10/14
The size of the increase will be made official Tuesday, when the government releases inflation figures for September. The announcement is unlikely to please a big block of voters -- 56 million people get benefits -- just three weeks before elections for president and Congress.
The cost-of-living adjustment, or COLA, is tied to a government measure of inflation adopted by Congress in the 1970s. It shows that consumer prices have gone up by less than 2 percent in the past year (thus the increasing prices you are paying are not real, so relax and enjoy the bullshit).
Questions From a Bailout Eyewitness 10/13
On Sept. 27, the Bureau of Economic Analysis revised second quarter Gross Domestic Product growth downward, from 1.7 percent to 1.3 percent. America now trails Cuba in GDP growth.
President Obama continues to say America is in an economic recovery. The families broken by his recovery, whose cornerstone was Obama's $787 billion economic stimulus package, know otherwise: Public-sector employees and union workers got "shovel-ready" projects and dollars; the private-sector got the shaft and more regulations.
Thousands marched in London against cuts 10/20
"The culture of two nations runs right across this government. They cut taxes for millionaires and raise them for ordinary people".
He made a joke at the expense of the Chancellor George Osborne who "tries to travel first class on a standard class ticket" and described the Prime Minister as "weak and clueless".
Sony to close factory in central Japan, cut workforce by 2,000 in moves aimed to cut $385M
Its profitability battered by Japan’s March 2011 disasters and other factors, Sony reported the worst loss in its 66-year corporate history for the business year that ended in March, with red ink of 457 billion yen ($5.7 billion).
The real deal 10/20
Could this time be different? One possibility is that central banks are overestimating the scale of economic weakness, and keeping interest rates too low as a result. That might be good for corporate profits, but excessively loose monetary policy would also lead to higher inflation. So how are equity markets affected by inflation? In years when the annual inflation rate has been falling, the real return from American stocks has been 9.6%; in years when it has been rising, the real return has been minus 1.1%. So past experience suggests a sudden jump in inflation would not be great for the stockmarket.
Plutocracy Rising: Moyers, Freeland, and Taibbi 10/19
I was struck by the comparison that Taibbi makes between post-Soviet Russia and the emerging US plutocracy. I have drawn the same conclusion some years ago, that post-empire America may face the same outcome. The merging of private and state power is well underway. And everyone lost the Cold War, except a predatory few.
Is that too big of a statement? A presidential candidate, Jill Stein of the Green Party, is denied access to the 'debate.' She goes to the debate to protest this peacefully, is arrested, and is then gratuitously handcuffed to a chair for eight hours, just to show her how things are. A Wall Street fund manager refuses to pay a cabdriver his legitimate fare, stabs him, and flees the scene. All charges are dropped by the prosecutor despite the protests of the cabbie. A powerful friend of the President breaks every taboo against stealing millions in customer money, and no one knows anything, and no one is charged.
Disappointing Earnings Season Has CEOs In Full Spin Mode 10/19
"There it is again, this whole revenue story. They hit on the earnings number, but revenues keep missing. That is the story that we are hearing across the line," said Ken Polcari, managing director of ICAP Equities in New York.
It "further solidifies the same story that people are concerned. And although these companies are beating these numbers, the numbers are much lower so the beat is not that difficult. But clearly they are all missing on the revenue line, which is a concern."
Millions on Pet Halloween Costumes? Why We Spend More and More on Pets (Recent Trend)
American consumers are expected to collectively spend $370 million on pet costumes this Halloween. That’s $70 million more than last year, and a whopping 40% increase compared to 2010.
There are one million dogs in the U.S. that have been named the primary beneficiary of their owners will. Higher status translates to pets deserving more — be it vacation care in pet hotels rather than kennels, more toys, or better healthcare.
Income Is Flat (Recent Trend)
The median U.S. household saw a 0.2 percent increase in income from January 2009 to August 2012. The increase, which does not account for the effect of inflation, covers all kinds of income, including interest and dividends, while excluding noncash sources such as food stamps and Medicaid.
Abercrombie and Fitch, Other Retail Workers Protest 'Abusive' Scheduling (Recent Trend)
Employees of Abercrombie & Fitch, Best Buy and other retailers protested Wednesday along New York City's posh Fifth Avenue shopping district against what they call "abusive" work scheduling.
Walmart Workers Walk Out (Recent Trend)
It appears unlikely that Walmart can quell this level of unrest easily. Workers in Walmart-controlled warehouses in Illinois and Southern California were on strike for several weeks this fall. The OUR Walmart strikers are back in their stores, but they have told the company that if their demands are not met, Black Friday—the day after Thanksgiving, the busiest shopping day of the year—will be a rowdy one, with strikes and actions at stores all over the country.
Retail Crisis: Chain Store Closures Hit 32 A Day 10/18 (Christmas Update)
There has been an acceleration in the number of chain stores closing on the UK's high streets - hitting 32 a day on average amid high rent bills and the recession.
According to data released by professional services firm PwC and the Local Data Company (LDC), an average of 20 shut their doors every 24 hours in the first half of 2012. It amounted to a net reduction of 953 shops compared to 174 shops in the whole of 2011, the research suggested.
5 Ways Companies Are Already Ruining the Holidays 10/18
Christmas creep is the phenomenon of stores busting out their late-season holiday merchandise -- most notably, the Christmas crap -- earlier and earlier each year. The term also applies to annoying holiday advertisements, which we now have to suffer through for nearly a quarter of the calendar year.
Target is 2012’s worst offender, having unleashed its first Christmas ad in mid-October. Doesn’t it just seem wrong to be looking at Christmas lights on TV when you haven’t even picked a Halloween costume yet?
Britain's Labour Market Mystery: 'We're Either Too Lazy or We Can't Count' 10/17
The dismal scientists are calling it the "productivity puzzle" and it seems to have spawned a host of theories.
Labour hoarding is one of them. The thinking is that companies are hanging onto staff in anticipation of an economic turnaround and would rather do this than go through the slow, expensive process of redundancies and re-hiring.
The increase in part-time staff in the private sector would seem to give this notion a bit of weight, given that companies might simply decide to extend the part-time hours of full time workers once the economy kicks-back into gear. Since the pre-crisis peak, part-time jobs in the private sector have risen by a net 724,000, nearly double the pace of growth for full-time positions.
Manufacturing in New York Region Contracts for Third Month 10/15
Manufacturing, a mainstay of the three-year economic expansion, has been cooling as overseas demands slows. Companies have also been curbing investment on concern that Congress will fail to avert more than $600 billion of automatic federal tax increases and spending cuts scheduled to go into effect early next year, slowing the economy.
“Manufacturing is stuck in neutral,” said Thomas Simons, an economist at Jefferies Group Inc. in New York, which had forecast minus 6 for the so-called Empire State index.
For Every Person Added to Labor Force, 10 Added to Those Not in Labor Force 10/15
Senator Jeff Sessions, the ranking member of the Senate Budget Committee, comments: “The essential point of this chart is not simply how many people are employed or unemployed, but to illustrate that more and more people are simply not part of the U.S. labor force. This confirms that we are on the wrong track. It is unsustainable to have such a large and growing number of people who are not part of the productive economy. This is not a political argument, but a description of the underlying instability in our economy that has so many Americans worried about the future. The question is what can we do to reverse these trends and start moving in the right direction.
Drunks Running Colleges and Students Into Bankruptcy (Recent)
The way Trachtenberg saw it, selling George Washington over the other schools was like selling one brand of vodka over another. Vodka, he points out, is a colorless, odorless liquid that varies little by maker. He realized the same was true among national private universities: It was as simple as raising the price and upgrading the packaging to create the illusion of quality. Trachtenberg gambled that prospective students would see costly tuition as a sign of quality, and he was right. "People equate price with the value of their education," he says.
THE EXPLOSION IN MOBILE AUDIENCES (RECENT)
Mobile users, moreover, are not just checking headlines on their devices, although nearly all use the devices for the latest new updates. Many also are reading longer news stories - 73% of adults who consume news on their tablet read in-depth articles at least sometimes, including 19% who do so daily. Fully 61% of smartphone news consumers at least sometimes read longer stories, 11% regularly.
There has been movement over the last year toward using the browser rather than apps for tablet news consumption. Fully 60% of tablet news users mainly use the browser to get news on their tablet, just 23% get news mostly through apps and 16% use both equally. In 2011, 40% got news mostly through a browser, 21% mostly through apps and 31% used both equally. The browser is preferred on the smartphone as well (61% get news mostly through a browser, 28% mostly through apps and 11% use both equally).
THE EXPLOSION IN MOBILE AUDIENCES (RECENT)
Mobile users, moreover, are not just checking headlines on their devices, although nearly all use the devices for the latest new updates. Many also are reading longer news stories - 73% of adults who consume news on their tablet read in-depth articles at least sometimes, including 19% who do so daily. Fully 61% of smartphone news consumers at least sometimes read longer stories, 11% regularly.
There has been movement over the last year toward using the browser rather than apps for tablet news consumption. Fully 60% of tablet news users mainly use the browser to get news on their tablet, just 23% get news mostly through apps and 16% use both equally. In 2011, 40% got news mostly through a browser, 21% mostly through apps and 31% used both equally. The browser is preferred on the smartphone as well (61% get news mostly through a browser, 28% mostly through apps and 11% use both equally).
Social Security increase for 2013 could be lowest since 1975 10/14
The size of the increase will be made official Tuesday, when the government releases inflation figures for September. The announcement is unlikely to please a big block of voters -- 56 million people get benefits -- just three weeks before elections for president and Congress.
The cost-of-living adjustment, or COLA, is tied to a government measure of inflation adopted by Congress in the 1970s. It shows that consumer prices have gone up by less than 2 percent in the past year (thus the increasing prices you are paying are not real, so relax and enjoy the bullshit).
Questions From a Bailout Eyewitness 10/13
The other disturbing theme in Ms. Bair’s book involves favored treatment given to Citibank and its parent by top regulators. Even as the bank racked up billions in losses on its mortgage and derivatives businesses in 2007 and 2008, Ms. Bair writes, no meaningful supervisory measures were taken against Citi by either the Office of the Comptroller of the Currency or the New York Fed, its main regulators.
“A smaller bank with those types of problems would have been subject to a supervisory order to take immediate corrective action, and it would have been put on the troubled bank list,” Ms. Bair writes. “Instead the O.C.C. and the New York Fed stood by as that sick bank continued to pay major dividends and pretended that it was healthy.”
At the Corner of Hope and Worry 10/13
That is the communal hope. Donna, for example, is dogged by the day’s anxieties. Why are her receipts going down? What lunch special can she offer to clean out the refrigerator? Should she buy less perch for her Friday fish fry? Can she slide a month on her electric bill? Since she already doesn’t have health insurance, what else can she cut?
“A smaller bank with those types of problems would have been subject to a supervisory order to take immediate corrective action, and it would have been put on the troubled bank list,” Ms. Bair writes. “Instead the O.C.C. and the New York Fed stood by as that sick bank continued to pay major dividends and pretended that it was healthy.”
At the Corner of Hope and Worry 10/13
That is the communal hope. Donna, for example, is dogged by the day’s anxieties. Why are her receipts going down? What lunch special can she offer to clean out the refrigerator? Should she buy less perch for her Friday fish fry? Can she slide a month on her electric bill? Since she already doesn’t have health insurance, what else can she cut?
“I’m just going in circles and circles and circles,” Donna says one day, gazing through smudged glasses. “And not getting anyplace.”
Do Not Track? Advertisers Say ‘Don’t Tread on Us’ 10/13
Next came an incensed open letter from the board of the Association of National Advertisers to Steve Ballmer, the C.E.O. of Microsoft, and two other company officials. Microsoft had committed a grievous infraction, wrote executives from Dell, I.B.M., Intel, Visa, Verizon, Wal-Mart and other major corporations, by making Do Not Track the default option in the company’s forthcoming Internet Explorer 10 browser. If consumers chose to stay with that option, the letter warned, they could prevent companies from collecting data on up to 43 percent of browsers used by Americans.
EU telcos defend UN Internet takeover plans (RECENT)
In June, for example, the U.S. House of Representatives unanimously passed a joint resolution (PDF) reiterating the "unequivocal policy of the United States to promote a global Internet free from government control and preserve and advance the successful multi-stakeholder model that governs the Internet today."
And last week, the Senate Foreign Relations Committee voted to send the resolution for a full vote in the Senate. Sen. John Kerry (D-Mass.), chairman of the Committee, indirectly condemned the ETNO proposal. "We're facing off against those who want the world's approval," he said, "to balkanize the Internet into countries where governments can censure speech or impose new taxes on the transmission of information across national boundaries."
The White House, the State Department, and Republican and Democratic commissioners of the FCC have all voiced similar concerns.
Dismay over latest hike in power prices 10/13
Ms Sturgeon said the rises would have an "extremely damaging effect on the finance of Scottish households" and that she wanted to meet all energy companies as soon as possible to discuss them. She added: "For every 5% price increase in energy prices, 46,000 households are pushed into fuel poverty. Not only is this completely unacceptable in an energy-rich country like Scotland, it also risks undoing the good work the Scottish Government is doing to tackle fuel poverty."
Netherlands' mothball ships tell tale of Europe's woes (Recent)
In sharp contrast with Rotterdam, Europe's busiest port, a mere 60 kilometres (37 miles) downstream, the 25 laid-up ships at Dutch Harbour -- some as much as 10,000 tonnes in weight -- lay silent, "crewed" by one or two watchmen to keep an eye on operations and security.
"At least half the ships here belong to firms that have gone bankrupt. The other half belong to companies that have no work for them," Heuvelman told AFP. "It has never been as bad as this," added Carel van Lynden, an expert lawyer in the ship-brokering industry in Rotterdam. "Until 2008 things had been going well -- everybody wanted a slice of the shipping industry pie during the boom times. Lots of orders were placed."
"But because of first the financial crisis and now the euro crisis, less goods are being shipped and less ships are required. Many of the ships ordered when things were still going well are only being delivered now -- basically there is a huge over-capacity," Van Lynden told AFP.
The Myth Of Deleveraging 10/12
The history of money is a sad state of affairs. Failing to learn from a litany of previous monetary fiascos, “money” is these days being abusively over-issued. And when the marketplace inevitably decides that over-issuance (in conjunction with only deeper structural maladjustment) has sufficiently impaired the “moneyness” of federal and related debt, there will be no one to step in to backstop Washington’s Creditworthiness. There will be no entity left with the wherewithal for backstopping system “moneyness,” as the Treasury and Federal Reserve have done for Trillions of intermediated mortgage debt since the bursting of the previous Bubble. Moreover, in the meantime, outrageous fiscal and monetary policies will continue to foment uncertainties that will impinge the type of sound investment and wealth creation necessary to get our economy on sounder footing.
The US Health Care Solution: Both Sides Have It Wrong (Recent)
... However, since the mid-'80s, the components of health care entered an un-brittle wild spiral of inflation and by the year 2012 they have rendered the U.S. economy near bankrupt. Who are the culprits? Based on the CPI chart, empirical evidence shows that the major culprits are the pharmaceuticals, private physicians, hospitals, and others. All of them have a CPI that is significantly greater than the current CPI average. They all engaged in monopolistic rent, and shifted national wealth to their advantage in the absence of competition and regulation. The excessive annual profits of the pharmaceutical companies, the earnings of physicians, and salaries of health administrators are obscene. In the U.S. alone, the pharmaceutical manufacturers have combined annual revenue of about $200 billion.
Is The Way Central Banks View Inflation Simply Wrong? 10/12
This is the worrying prospect, the assumption that inflation is related to domestic money supply and domestic output presumes the outcome of Quantitative Easing would be to push the money supply up to the level needed to hit inflationary targets. When in fact, if the true impact domestic money supply alterations have is the effect on currency value and the ability to purchase foreign goods, all that Quantitative Easing will do is depreciate the purchasing power of the currency creating inflation.
Cash-strapped Postal Service -- & Shadow Inflation 10/12
Under the law, the post office cannot raise stamp prices more than the rate of inflation, or 2.6 percent, unless it gets special permission. The post office, which expects to lose a record $15 billion this year, has asked Congress to give it new authority to raise prices by 5 cents, but lawmakers have failed to act.
The mail agency also will increase rates on its shipping services, such as priority mail, by an average of 4 percent. (which is the real rate of inflation)!
"The Postal Service is in the midst of a financial crisis, and pricing adjustments are one way to increase revenue to help the Postal Service return to sound financial footing," USPS spokeswoman Katina Fields said. "We also urgently need enactments of comprehensive, long-term legislation to provide the Postal Service with a more flexible business model."
An America eternally 'at war' 10/9
The U.S., by contrast, has 1,000 or more bases around the world. It spends as much on its military as the next 14 powers (mostly allies) combined.
It will spend an estimated $1.45 trillion to produce and operate a new aircraft, the F-35 — more than any country, the U.S. included, now spends on its national defense annually. The U.S. Navy, with its 11 nuclear-powered aircraft carrier task forces, dominates the global waves, and the U.S. Air Force controls the skies in much of the world.
Defence sector plans for hard times ahead (Last Month)
According to the Centre for European Reform, a UK-based think-tank, over the next few years, most medium-sized states in Europe will cut annual defence budgets by 10 to 15 per cent.
However, it is cuts in the US, the world’s biggest defence spender, that are of greatest concern. The US has already cut its budget over the next 10 years by $350bn in real terms. But if additional cuts – technically called “sequestration” – kick in next year, a further $500bn in cuts will be implemented.
Critics offer caution on consumer layaway programs (Recent Crappy Trend)
A layaway purchase is like a very expensive loan that doesn’t allow the borrower to use the goods until he or she pays off the loan, Hyman said. “It’s like you had to pay your mortgage in advance for 30 years and you don’t even get to live in your home.”
To illustrate his point, Hyman gives the example of a woman who puts $100 worth of toys on layaway. She makes a down payment of $10, plus a $5 service fee, and pays off the rest over a 60-day period.
According to Hyman’s calculations, she’d be paying the equivalent of a 44 percent annual percentage rate for a $90 loan. The national average for APR on a credit card is about 15 percent. For those with bad credit, it’s about 24 percent.
If the woman failed to make all the payments and had to fork over the $10 cancellation fee, she would have paid the equivalent of 131 percent APR for a two-month loan, Hyman said.
“I think there’s a predation quality,” he said. “To my mind, there’s no advantage to the consumer to using layaway as opposed to saving. I think it makes more sense to just put the money under your bed, or even better, in a bank.”
Forecast predicts 4.1% increase in holiday sales 10/7
Still, Johnson, who’s been grappling with higher food and gas prices, says the economy is still not stable enough for her to splurge during this holiday shopping season. And she’s worried about how the debt crisis could affect her.
Johnson says this past year, she overindulged and spent about $5,000. It took until this past May to pay down her credit card debt. As a result, this year, she plans to cut her holiday spending to $1,500.
“I felt too much pressure financially,” said Johnson, who works for the National Institutes of Health, a government agency that’s a conglomerate of research centers. “I am not going to do it to myself again.”
Will QE3 Cause Serious Inflation? 10/7
But lending would be inhibited even if the banks were healthier. After all, small enterprises rely on collateral-based lending, and the value of real estate—the main form of collateral—is still down one-third from its pre-crisis level. Moreover, given the magnitude of excess capacity in real estate, lower interest rates will do little to revive real-estate prices, much less inflate another consumption bubble.
There is a further risk for Europe: If the ECB focuses too much on inflation, while the Fed tries to stimulate the U.S. economy, interest-rate differentials will lead to a stronger euro (at least relative to what it otherwise would be), undermining Europe’s competitiveness and growth prospects.
Federal deficit higher than predicted in budget 10/5
Contributing to the softer finances were the continued global economic uncertainty spreading from Europe’s ongoing sovereign debt and banking crisis, as well as a sluggish recovery in the United States, says the annual report for the fiscal year ending last March.
“The global economic recovery remains fragile and uncertain. The global recovery began to slow toward the end of 2011 and decelerated more notably early in 2012,” says the report.
“Looking ahead, there continue to be significant downside risks to the Canadian outlook, with the key risk being the ongoing crisis in Europe.”
California gas prices 10/5
"Service stations are shutting down, fearing that the market won't bear the price they would have to charge and that they will have to sell at a loss," he said. "In the next three days, if we don't see relief, we could be looking at $5.70 gasoline and close to $6."
Consumer advocates said that a lack of competition was to blame for high prices.
"When you've got such a small handful of (GOP) owners controlling 14 refineries, it is inevitable that prices will go through the roof where there is friction in the delivery system," said Jamie Court, president of Consumer Watchdog. "There are too few oil companies controlling too few refineries and they want too much in profits."
Twisting employment numbers 10/5
... only 114,000 jobs were created, yet unemployment has plunged to 7.8% as the number of unemployed people dropped by over 400,000. The number of people who are employed rose by 879,000 but the U6 Unemployment rate is flat at 14M. The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1M in September, while the labor force participation rate was little changed at 63.6 percent.
U.S. Economy Adds 114,000 Jobs In September 10/5
The revisions also showed that federal, state and local governments added 63,000 jobs in July and August, compared with earlier estimates that showed losses.
Still, many of the jobs the economy added last month were part time. The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most since February 2009.
Why Retailers Can Expect a Poor Christmas 10/4
... But an 8.3 percent unemployment rate and high gasoline prices have continued to crimp spending and there are genuine fears that the U.S. economy could tip back into recession next year. The economy expanded at a 1.3 percent annual rate in the third quarter and consumer spending accounts for 70 percent of that growth. Davidowitz says retailers cannot continue to report big profits when the economy is barely moving.
"If the data wasn't mixed we'd have a guaranteed recession," he says. "If GDP increases 1.3 percent, you're going to have a poor Christmas."
Families suffer as cost of living soars (Last Month's Global Trend)
Yes, the Rich Are Different (Recent)
The economic data bear out the public’s perception that the gap has widened. Whether the metric is income or wealth, the rich have outpaced the poor in recent decades. A Pew Research Center analysis of U.S. Census Bureau data shows that incomes have risen much more sharply for the wealthiest Americans over the past 40 years, and as a result the upper-income tier of the public now takes in a much larger share of U.S. aggregate household income than it did in the past. In addition, an even larger gap in wealth (measured by assets, minus debt, accumulated over time) has emerged, particularly in the past 10 years with the collapse of the housing market
State Budget Solutions’ third annual State Debt Report shows total state debt over $4 trillion (Aug, 28th)
Last month, the California Public Employees’ Retirement System (CalPERS) stunned Wall Street with the announcement of a 1% return for its 2012 fiscal year, far short of its 7.5% return assumptions, thus requiring increased state and local contributions to make up the pension shortfall.
In May and June 1998 returns from the fund were -6.42% and -10.14% respectively, reducing LTCM's capital by $461 million. This was further aggravated by the exit of Salomon Brothers from the arbitrage business in July 1998. Such losses were accentuated through the Russian financial crises in August and September 1998, when the Russian Government defaulted on their government bonds. Panicked investors sold Japanese and European bonds to buy U.S. treasury bonds. The profits that were supposed to occur as the value of these bonds converged became huge losses as the value of the bonds diverged. By the end of August, the fund had lost $1.85 billion in capital.
Bankrupt San Bernardino hides city budget (Aug, 27)
So how does budget of fiscal 2012-13 deal with what is expected to include 30 percent in cuts?
The city isn’t saying.
A budget prepared for City Council review and for later submission to bankruptcy court is being kept secret — at least for now. This 72-page plan for spending will go to the City Council on Tuesday, Aug. 28, in closed session.
City Attorney James Penman claims that this budget is a litigation document and thus can be kept confidential.
“The document that’s going to be considered in closed session Wednesday is a draft and the council needs to make the decision what to include in the document and what not to include,” he told PE.com reporter Imran Ghori.
Japan Cuts Economic Assessment As BNP Says Contraction Looms (Aug 27)
“Europe’s debt crisis is having the effect of a body blow to Japan’s economy,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Concerns over Japan’s economic outlook will probably build pressure on the BOJ to apply more monetary stimulus,” ...
For Spain's Jobless, Time Equals Money (August 27)
Some economists worry that the rise of such informal systems of economic exchange is pushing more of Spain's economy underground—out of the view of regulators and tax collectors, and effectively sending the country back in time developmentally.
"There has to be a change in the mentality for there to be a change in the country," she says. "We can't continue to spend resources we don't have. We have to learn to live with less."
German Business Optimism Drops For Straight Fourth Month: Ifo Survey (Aug 27)
“Enterprises are increasingly pessimistic about their business development,” said Hans-Werner Sinn, the president of Ifo. “The German economy is weakening further.” So far, the German economy was growing with the help of exports to Asia and the US, and low unemployment rates. But it may not be enough to outweigh the troubles posed by the Eurozone crisis. Many German companies, including Opel and Thyssenkrupp, have announced plans to cut the working hours due to weaker demands in the international market.
China worries about social fallout of soybean oil price jump (Recent)
Poor U.S. harvests could fuel Chinese food inflation and social discontent. China has already begun tapping its grain reserves to ensure price stability. The government has ordered the nation's biggest cooking oil producers twice in recent months to keep their prices in check. And it's scouring the globe for alternative supplies.
It won't be easy. More than two-thirds of cooking oil consumed in China comes from soybeans, and most of those soybeans are supplied by the U.S., according to Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultant Co. For now, Chinese consumers are bound to the fortunes of farmers in the American heartland.
Trade With China Has Cost the U.S. 2.7 Million Jobs (Recent)
So says the Economic Policy Institute in an updated study. Over the last decade, from 2001 to 2011, the United States has lost a whopping 2.7 million jobs to China alone and this estimate is conservative. The China PNTR trade agreement was signed by President Clinton on October 10th, 2000 and China entered the WTO in 2001.
The more than 2.7 million jobs lost or displaced in all sectors include 662,100 jobs from 2008 to 2011 alone—even though imports from China and the rest of the world plunged in 2009.
Fitch: rising delinquency rates pose looming threat for FHA (Recent & Of Interest)
Fitch Ratings sees a growing divergence between 90-day past due delinquency patterns for guaranteed and nonguaranteed loans as a potentially troubling signal of future losses. This may eventually force the FHA to look for opportunities to put back some defaulted loans to the banks, particularly if the agency’s funding status worsens and U.S. home prices fail to rebound quickly.”
US horse rescues overwhelmed by abandoned animals (Recent)
The owner began locking up the property last month in an effort to keep people from driving up at night and dropping off horses they can no longer afford to feed.
Horse rescue groups nationwide have been struggling to care for a growing number of animals abandoned since the Great Recession hit more than four years ago, but leaders say their work has become even more difficult and expensive this summer as drought and wildfires burned up pastures and sent hay prices skyrocketing. Many people who held on to their horses in the downturn are now letting them go because they can't find or afford feed that has more than doubled in price.
Negative $4,019 (Aug 24)
It's true that the Bush years overall were also not great for household incomes. According to Sentier's analysis, real median household income is down about 8% from $55,470 in 2000 before the dot-com bubble burst. Some of this decline is due to the continuation of a trend of smaller family size, lower fertility rates and more Americans living alone. But some was also due to the subpar economic growth across the 2000s.
World Watches As Danes Venture Below Zero (August 24)
In an attempt to maintain its strict currency peg to the euro, the Danish central bank lowered its main deposit rate for banks – the certificate of deposit or CD rate – to -0.2 per cent last month. The Nationalbanken felt it had little choice. Investors flocked to Denmark in search of a haven outside the eurozone – one that has no currency risk with the euro and offers cheap protection against a break-up of the single currency. The move to negative rates is being watched closely by central banks around the world. “We have never been so popular,” laughs one Danish policy maker.
Mitt Romney, John Kerry And Italians All Like To Save Taxes (Recent)
In response, many boat owners did a Kerry, weighing anchor and setting course for more tax-friendly Mediterranean marinas. Approximately 30,000 boats fled Italy since March. Destinations include Slovenia, Croatia, Montenegro, France, Spain, Tunisia and Malta. The Italian association of marinas says the exodus will cost the Italian economy $350 million this year.
Beware: 'Triple Top Reversal Pattern' Almost Complete (Recent)
... below is a three-year chart of the S&P 500. Those blue circles to the right of the chart represent the rough equivalent high price points that the S&P 500 has reached since the beginning of the year; notice that the S&P 500 has reached this level three times.
According to technical analysis, a Triple Top Reversal forms over a period of three to six months. Any Triple Top Reversal that forms over a period of time greater than six months is said to be indicative of a major top.
==> See my capture from Yahoo today of a 16 year Triple Top Pattern:
During the period involved in the comparison, incomes grew the fastest in Bulgaria (20.5%), Poland (12.4%), Norway (12.3%) and in Slovakia (11.5%). The countries that saw a decline in incomes during the abovementioned period were the Baltic States, Greece, Hungary, Italy and Ireland.
Despite Low Mortgage Rates, Home Affordability Falls To 12-Month Low
The HOI is a home affordability gauge, tracking median home prices across 225 metropolitan areas, and comparing them to the given area's median household income.
An "affordable" home is one for which monthly mortgage payments -- assuming a 10% downpayment and a 30-year fixed rate mortgage -- would be 28% or less of a median income-earning household's monthly income.
Job Losses Persist for the Less-Educated 8/15/12
“The economy we all have in our minds is the one we had in 2006, and it’s gone.”
The study, based on data collected by the Census Bureau and the Bureau of Labor Statistics, divided the nation’s work force of 140 million people into three groups: those who did not go to college, those with some college education or an associate degree, and those with at least a bachelor’s degree.
Here's The Truth Behind The 'Strong Dollar' Excuse For Disappointing Revenue
As figures 10-11 also show, the correlation between profits and unit output – domestic or global production, is far more potent than exchange-rate correlation. As the U.S. exchange rate and global growth are often inversely correlated, the correlation between earnings and the exchange rate is magnified beyond the exchange rate’s own causal influence.
US Labor Department announces nearly $100 million in grants available for states to implement, improve short-time compensation or 'work sharing'
The department will provide technical assistance through webinars and other methods to help states achieve the purposes of the grants. The department also will collect and disseminate successful practices based on program implementation as well as outreach tools developed as a result of these grants.
U.S. Economic Recovery Is Weakest Since World War II 08/15/12
Usually, workers' pay rises as the economy picks up momentum after a recession. Not this time. Employers don't have to be generous in a weak job market because most workers don't have anywhere to go.
Merkel Doesn’t Deserve Sub-Zero Yields As Draghi Plan Gains Aug 12
Falling demand is hurting German companies. Munich-based BMW, the world’s biggest maker of luxury cars, reported on Aug. 1 its first drop in quarterly operating profit in almost three years and said that Europe’s debt crisis could cause “the global economic climate to cloud over further.”
Puma, Europe’s second-largest sporting-goods maker, said last month it will speed up a reorganization after second- quarter profit fell 29 percent and it cut a forecast for net sales growth. Siemens AG (SIE), the region’s largest engineering company, reported new orders fell from a year earlier last month.
Global shift in US business confounds Washington August 12, 2012
Four decades ago, 90 per cent of the company’s sales were in the US. Now, however, 90 per cent are outside the US. Yes, you read that right: Tupperware might look as American as apple pie; its headquarters are even in Orlando, near Disneyworld.
But it is not American consumers who are now driving the group’s success, but those in Indonesia or Korea or Germany. And the company is structured accordingly. It has shifted much of its production overseas and only 1,000 of its 13,600 employees are in the US.
Hermosa Beach meter maids making nearly $100K? August 10th, 2012
There are four qualifications for being a city “community service officer,” Bobko told me: “You have to be able to drive a standard transmission; you have to able to handle large animals; you have to read and interpret statutes and regulations; and you have a high school diploma or equivalent.”
Wal-Mart to add more detail in financial reports after SEC query
Therefore, lenders that originate loans that are sold to the GSEs while they are in conservatorship will not be required to retain risk associated with those loans.
Do Not Track? Advertisers Say ‘Don’t Tread on Us’ 10/13
Next came an incensed open letter from the board of the Association of National Advertisers to Steve Ballmer, the C.E.O. of Microsoft, and two other company officials. Microsoft had committed a grievous infraction, wrote executives from Dell, I.B.M., Intel, Visa, Verizon, Wal-Mart and other major corporations, by making Do Not Track the default option in the company’s forthcoming Internet Explorer 10 browser. If consumers chose to stay with that option, the letter warned, they could prevent companies from collecting data on up to 43 percent of browsers used by Americans.
EU telcos defend UN Internet takeover plans (RECENT)
In June, for example, the U.S. House of Representatives unanimously passed a joint resolution (PDF) reiterating the "unequivocal policy of the United States to promote a global Internet free from government control and preserve and advance the successful multi-stakeholder model that governs the Internet today."
And last week, the Senate Foreign Relations Committee voted to send the resolution for a full vote in the Senate. Sen. John Kerry (D-Mass.), chairman of the Committee, indirectly condemned the ETNO proposal. "We're facing off against those who want the world's approval," he said, "to balkanize the Internet into countries where governments can censure speech or impose new taxes on the transmission of information across national boundaries."
The White House, the State Department, and Republican and Democratic commissioners of the FCC have all voiced similar concerns.
Dismay over latest hike in power prices 10/13
Ms Sturgeon said the rises would have an "extremely damaging effect on the finance of Scottish households" and that she wanted to meet all energy companies as soon as possible to discuss them. She added: "For every 5% price increase in energy prices, 46,000 households are pushed into fuel poverty. Not only is this completely unacceptable in an energy-rich country like Scotland, it also risks undoing the good work the Scottish Government is doing to tackle fuel poverty."
Netherlands' mothball ships tell tale of Europe's woes (Recent)
In sharp contrast with Rotterdam, Europe's busiest port, a mere 60 kilometres (37 miles) downstream, the 25 laid-up ships at Dutch Harbour -- some as much as 10,000 tonnes in weight -- lay silent, "crewed" by one or two watchmen to keep an eye on operations and security.
"At least half the ships here belong to firms that have gone bankrupt. The other half belong to companies that have no work for them," Heuvelman told AFP. "It has never been as bad as this," added Carel van Lynden, an expert lawyer in the ship-brokering industry in Rotterdam. "Until 2008 things had been going well -- everybody wanted a slice of the shipping industry pie during the boom times. Lots of orders were placed."
"But because of first the financial crisis and now the euro crisis, less goods are being shipped and less ships are required. Many of the ships ordered when things were still going well are only being delivered now -- basically there is a huge over-capacity," Van Lynden told AFP.
The Myth Of Deleveraging 10/12
The history of money is a sad state of affairs. Failing to learn from a litany of previous monetary fiascos, “money” is these days being abusively over-issued. And when the marketplace inevitably decides that over-issuance (in conjunction with only deeper structural maladjustment) has sufficiently impaired the “moneyness” of federal and related debt, there will be no one to step in to backstop Washington’s Creditworthiness. There will be no entity left with the wherewithal for backstopping system “moneyness,” as the Treasury and Federal Reserve have done for Trillions of intermediated mortgage debt since the bursting of the previous Bubble. Moreover, in the meantime, outrageous fiscal and monetary policies will continue to foment uncertainties that will impinge the type of sound investment and wealth creation necessary to get our economy on sounder footing.
The US Health Care Solution: Both Sides Have It Wrong (Recent)
... However, since the mid-'80s, the components of health care entered an un-brittle wild spiral of inflation and by the year 2012 they have rendered the U.S. economy near bankrupt. Who are the culprits? Based on the CPI chart, empirical evidence shows that the major culprits are the pharmaceuticals, private physicians, hospitals, and others. All of them have a CPI that is significantly greater than the current CPI average. They all engaged in monopolistic rent, and shifted national wealth to their advantage in the absence of competition and regulation. The excessive annual profits of the pharmaceutical companies, the earnings of physicians, and salaries of health administrators are obscene. In the U.S. alone, the pharmaceutical manufacturers have combined annual revenue of about $200 billion.
Is The Way Central Banks View Inflation Simply Wrong? 10/12
This is the worrying prospect, the assumption that inflation is related to domestic money supply and domestic output presumes the outcome of Quantitative Easing would be to push the money supply up to the level needed to hit inflationary targets. When in fact, if the true impact domestic money supply alterations have is the effect on currency value and the ability to purchase foreign goods, all that Quantitative Easing will do is depreciate the purchasing power of the currency creating inflation.
Cash-strapped Postal Service -- & Shadow Inflation 10/12
Under the law, the post office cannot raise stamp prices more than the rate of inflation, or 2.6 percent, unless it gets special permission. The post office, which expects to lose a record $15 billion this year, has asked Congress to give it new authority to raise prices by 5 cents, but lawmakers have failed to act.
The mail agency also will increase rates on its shipping services, such as priority mail, by an average of 4 percent. (which is the real rate of inflation)!
"The Postal Service is in the midst of a financial crisis, and pricing adjustments are one way to increase revenue to help the Postal Service return to sound financial footing," USPS spokeswoman Katina Fields said. "We also urgently need enactments of comprehensive, long-term legislation to provide the Postal Service with a more flexible business model."
An America eternally 'at war' 10/9
The U.S., by contrast, has 1,000 or more bases around the world. It spends as much on its military as the next 14 powers (mostly allies) combined.
It will spend an estimated $1.45 trillion to produce and operate a new aircraft, the F-35 — more than any country, the U.S. included, now spends on its national defense annually. The U.S. Navy, with its 11 nuclear-powered aircraft carrier task forces, dominates the global waves, and the U.S. Air Force controls the skies in much of the world.
Defence sector plans for hard times ahead (Last Month)
According to the Centre for European Reform, a UK-based think-tank, over the next few years, most medium-sized states in Europe will cut annual defence budgets by 10 to 15 per cent.
However, it is cuts in the US, the world’s biggest defence spender, that are of greatest concern. The US has already cut its budget over the next 10 years by $350bn in real terms. But if additional cuts – technically called “sequestration” – kick in next year, a further $500bn in cuts will be implemented.
Critics offer caution on consumer layaway programs (Recent Crappy Trend)
A layaway purchase is like a very expensive loan that doesn’t allow the borrower to use the goods until he or she pays off the loan, Hyman said. “It’s like you had to pay your mortgage in advance for 30 years and you don’t even get to live in your home.”
To illustrate his point, Hyman gives the example of a woman who puts $100 worth of toys on layaway. She makes a down payment of $10, plus a $5 service fee, and pays off the rest over a 60-day period.
According to Hyman’s calculations, she’d be paying the equivalent of a 44 percent annual percentage rate for a $90 loan. The national average for APR on a credit card is about 15 percent. For those with bad credit, it’s about 24 percent.
If the woman failed to make all the payments and had to fork over the $10 cancellation fee, she would have paid the equivalent of 131 percent APR for a two-month loan, Hyman said.
“I think there’s a predation quality,” he said. “To my mind, there’s no advantage to the consumer to using layaway as opposed to saving. I think it makes more sense to just put the money under your bed, or even better, in a bank.”
Forecast predicts 4.1% increase in holiday sales 10/7
Still, Johnson, who’s been grappling with higher food and gas prices, says the economy is still not stable enough for her to splurge during this holiday shopping season. And she’s worried about how the debt crisis could affect her.
Johnson says this past year, she overindulged and spent about $5,000. It took until this past May to pay down her credit card debt. As a result, this year, she plans to cut her holiday spending to $1,500.
“I felt too much pressure financially,” said Johnson, who works for the National Institutes of Health, a government agency that’s a conglomerate of research centers. “I am not going to do it to myself again.”
Will QE3 Cause Serious Inflation? 10/7
But lending would be inhibited even if the banks were healthier. After all, small enterprises rely on collateral-based lending, and the value of real estate—the main form of collateral—is still down one-third from its pre-crisis level. Moreover, given the magnitude of excess capacity in real estate, lower interest rates will do little to revive real-estate prices, much less inflate another consumption bubble.
There is a further risk for Europe: If the ECB focuses too much on inflation, while the Fed tries to stimulate the U.S. economy, interest-rate differentials will lead to a stronger euro (at least relative to what it otherwise would be), undermining Europe’s competitiveness and growth prospects.
Federal deficit higher than predicted in budget 10/5
Contributing to the softer finances were the continued global economic uncertainty spreading from Europe’s ongoing sovereign debt and banking crisis, as well as a sluggish recovery in the United States, says the annual report for the fiscal year ending last March.
“The global economic recovery remains fragile and uncertain. The global recovery began to slow toward the end of 2011 and decelerated more notably early in 2012,” says the report.
“Looking ahead, there continue to be significant downside risks to the Canadian outlook, with the key risk being the ongoing crisis in Europe.”
California gas prices 10/5
"Service stations are shutting down, fearing that the market won't bear the price they would have to charge and that they will have to sell at a loss," he said. "In the next three days, if we don't see relief, we could be looking at $5.70 gasoline and close to $6."
Consumer advocates said that a lack of competition was to blame for high prices.
"When you've got such a small handful of (GOP) owners controlling 14 refineries, it is inevitable that prices will go through the roof where there is friction in the delivery system," said Jamie Court, president of Consumer Watchdog. "There are too few oil companies controlling too few refineries and they want too much in profits."
Twisting employment numbers 10/5
... only 114,000 jobs were created, yet unemployment has plunged to 7.8% as the number of unemployed people dropped by over 400,000. The number of people who are employed rose by 879,000 but the U6 Unemployment rate is flat at 14M. The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1M in September, while the labor force participation rate was little changed at 63.6 percent.
U.S. Economy Adds 114,000 Jobs In September 10/5
The revisions also showed that federal, state and local governments added 63,000 jobs in July and August, compared with earlier estimates that showed losses.
Still, many of the jobs the economy added last month were part time. The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most since February 2009.
Why Retailers Can Expect a Poor Christmas 10/4
... But an 8.3 percent unemployment rate and high gasoline prices have continued to crimp spending and there are genuine fears that the U.S. economy could tip back into recession next year. The economy expanded at a 1.3 percent annual rate in the third quarter and consumer spending accounts for 70 percent of that growth. Davidowitz says retailers cannot continue to report big profits when the economy is barely moving.
"If the data wasn't mixed we'd have a guaranteed recession," he says. "If GDP increases 1.3 percent, you're going to have a poor Christmas."
Families suffer as cost of living soars (Last Month's Global Trend)
Basic foods saw some of the most dramatic price increases. The price of potatoes has jumped a stagging 17% in the last month and more than 11% in the past year. The combined effects of poor yields, due to a bad summer, and lower acreage is largely to blame.
California Gas Stations Begin to Shut on Record-High Spot Prices 10/3
Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular, Jeff Cole, Costco’s vice president of gasoline, said by telephone. The company hasn’t been able to find enough unbranded summer-grade gasoline to keep its stations supplied, he said.
The gasoline shortage “feels like a hurricane to me, but it’s the West Coast,” Cole said yesterday. “We’re obviously extremely disheartened that we are unable to do this, and we’re pulling fuel from all corners of California to fix this.”
Portugal announces ‘enormous’ tax rises 10/3
After contracting an expected 3 per cent this year, the Portuguese economy is forecast to shrink a further 1 per cent in 2013, with unemployment climbing further above the current record level of almost 16 per cent.
However, using extraordinary revenue to meet deficit goals means Portugal will have to make a bigger adjustment than planned over the next two years to meet the 2.5 per cent of output target agreed for 2014.
China’s Slowdown Reverberates as ADB Cuts Forecasts 10/3
The purchasing managers’ index from the Chinese government and logistics federation fell to 53.7 in September from 56.3 the previous month, a report showed today, while Australia recorded its widest trade deficit since March 2008 in August. The ADB today forecast Asia excluding Japan will expand 6.1 percent this year, the slowest pace since 2009.
Cheap Chinese steel, stagnant economy are Severstal's main challenges (Recent)
According to a report prepared Sept. 25 by Thomas J. Gibson and Kevin M. Dempsey for the American Iron and Steel Institute, steel imported from China has increased almost 30 percent since 2011. As the U.S. and global economies continue to slow, the risk factors for imported steel will increase. Risk factors include an over-capacity of steel, with China alone having more the 200 million metric tons. The report claims China's demand for steel is slowing but Chinese steel production in 2012 is on pace to set a record and prices for steel are declining. The Chinese government is also looking at tax rebates for the exports of steel.
"They are not playing on a level playing field," Nunnelee said. "We want to protect our jobs and our environment. We want people to not buy steel from a country that is polluting our environment."
Less Than 900 Days For Hyperinflation In The U.S.? 10/1
John Williams, who is the founder of ShadowStats.com, stated during a recent interview that the US is on track to become victim of hyperinflation the latest in 2014. He believes that “open ended QE” (which is nothing more than monetizing debt) is the key problem. He explains there is an annual deficit of 5 trillion dollar per year in the US, which includes the unfunded liabilities. He declares the situation “beyond containment”. Central planners are responding to the current economic problems by simply increasing the amount of printed money. John Williams his expectations are that we’ll soon see a heavy sell off in the dollar, quickly followed by a significant first spike in inflation. That will ultimately lead to hyperinflation the latest somewhere in 2014. We are just before the kick off of inflation.
Jobs Outlook Seen Weak as U.S. Companies Reporting Cost Cuts 10/1
A global slowdown triggered by Europe’s debt crisis is exacerbated by the potential impact of the impending U.S. fiscal cliff of changes in taxes and government spending. All this is pushing finance chiefs back to the drawing board, with some limiting hiring and investment and others slashing more jobs than originally announced. Such belt-tightening will dominate employment prospects for the rest of the year.
Euro Zone Factory Data Flag ‘New Recession’ 10/1
"Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September," said Chris Williamson, chief economist at data collator Markit. "The sector will act as a severe drag on economic growth. It therefore seems inevitable that the region will have fallen back into a new recession in the third quarter."
Eurozone unemployment hits record high and reveals two-speed Europe 10/1
The eurozone unemployment rate was 11.4pc in August, up from 10.2pc last year. Data from the EU statistics agency Eurostat estimated that 25.5m men and women were out of work over the period, 18.2m of whom were in the eurozone.
ECB's Weidmann: OMT Could Do More Harm Than Good In Long Term (Last Week)
Other foods like coffee (4.3%), confectionery products (3%), lamb and goat (2.3%), pork (2.1%), dried fruit and nuts (1.6%), fruit and vegetable juices (1.3%), tea (1.2%), breakfast cereals (0.9%) and baby food (0.9%) also saw price increases.
Clothing and footwear have also seen significant price rises, with the price of garments up 7.7%, shoes and other footwear (4.3%), other articles of clothing and clothing accessories (3%), and dry cleaning and laundry (0.4%). There were also price increases for diesel (4%), petrol (3.5%), other vehicle costs (2%) and air travel (1%).
There are definite headwind to retail growth this year, said Rafique Malik, managing director of Metro Shoes Ltd, who said that at the low-end, consumers are not buying on account of high inflation and increasing prices, while the top-end consumers are deferring their purchases because of the gloomy economic environment.
Factors such as the rupee’s depreciation against the dollar, which makes imports more expensive, has also probably influenced consumers to delay purchases, said L.K Gupta, vice-president (marketing), LG Electronics India Pvt. Ltd.
California Gas Stations Begin to Shut on Record-High Spot Prices 10/3
Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular, Jeff Cole, Costco’s vice president of gasoline, said by telephone. The company hasn’t been able to find enough unbranded summer-grade gasoline to keep its stations supplied, he said.
The gasoline shortage “feels like a hurricane to me, but it’s the West Coast,” Cole said yesterday. “We’re obviously extremely disheartened that we are unable to do this, and we’re pulling fuel from all corners of California to fix this.”
Portugal announces ‘enormous’ tax rises 10/3
After contracting an expected 3 per cent this year, the Portuguese economy is forecast to shrink a further 1 per cent in 2013, with unemployment climbing further above the current record level of almost 16 per cent.
However, using extraordinary revenue to meet deficit goals means Portugal will have to make a bigger adjustment than planned over the next two years to meet the 2.5 per cent of output target agreed for 2014.
China’s Slowdown Reverberates as ADB Cuts Forecasts 10/3
The purchasing managers’ index from the Chinese government and logistics federation fell to 53.7 in September from 56.3 the previous month, a report showed today, while Australia recorded its widest trade deficit since March 2008 in August. The ADB today forecast Asia excluding Japan will expand 6.1 percent this year, the slowest pace since 2009.
Cheap Chinese steel, stagnant economy are Severstal's main challenges (Recent)
According to a report prepared Sept. 25 by Thomas J. Gibson and Kevin M. Dempsey for the American Iron and Steel Institute, steel imported from China has increased almost 30 percent since 2011. As the U.S. and global economies continue to slow, the risk factors for imported steel will increase. Risk factors include an over-capacity of steel, with China alone having more the 200 million metric tons. The report claims China's demand for steel is slowing but Chinese steel production in 2012 is on pace to set a record and prices for steel are declining. The Chinese government is also looking at tax rebates for the exports of steel.
"They are not playing on a level playing field," Nunnelee said. "We want to protect our jobs and our environment. We want people to not buy steel from a country that is polluting our environment."
Less Than 900 Days For Hyperinflation In The U.S.? 10/1
John Williams, who is the founder of ShadowStats.com, stated during a recent interview that the US is on track to become victim of hyperinflation the latest in 2014. He believes that “open ended QE” (which is nothing more than monetizing debt) is the key problem. He explains there is an annual deficit of 5 trillion dollar per year in the US, which includes the unfunded liabilities. He declares the situation “beyond containment”. Central planners are responding to the current economic problems by simply increasing the amount of printed money. John Williams his expectations are that we’ll soon see a heavy sell off in the dollar, quickly followed by a significant first spike in inflation. That will ultimately lead to hyperinflation the latest somewhere in 2014. We are just before the kick off of inflation.
Jobs Outlook Seen Weak as U.S. Companies Reporting Cost Cuts 10/1
A global slowdown triggered by Europe’s debt crisis is exacerbated by the potential impact of the impending U.S. fiscal cliff of changes in taxes and government spending. All this is pushing finance chiefs back to the drawing board, with some limiting hiring and investment and others slashing more jobs than originally announced. Such belt-tightening will dominate employment prospects for the rest of the year.
Euro Zone Factory Data Flag ‘New Recession’ 10/1
"Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September," said Chris Williamson, chief economist at data collator Markit. "The sector will act as a severe drag on economic growth. It therefore seems inevitable that the region will have fallen back into a new recession in the third quarter."
Eurozone unemployment hits record high and reveals two-speed Europe 10/1
The eurozone unemployment rate was 11.4pc in August, up from 10.2pc last year. Data from the EU statistics agency Eurostat estimated that 25.5m men and women were out of work over the period, 18.2m of whom were in the eurozone.
ECB's Weidmann: OMT Could Do More Harm Than Good In Long Term (Last Week)
The Bundesbank president said central banks could not be made into the only "problem solver" in the crisis. Asked whether ECB President Mario Draghi was right to declare the euro's irreversibility, Weidmann said this was a decision only for government policymakers.
"We cannot and should not stand against political decisions about the composition of the Eurozone," Weidmann said. "Such decisions can only be taken by democratically legitimized bodies," he said.
Weidmann argued that maintaining price stability remained the ECB's primary mandate. Ensuring the Eurozone's financial stability, while important, came second, he said.
The Celtic poster child demonstrates the failure of austerity (Recent)
So Ireland’s growth strategy has been based on increasing exports of real goods and services which are a cost to the domestic economy (forgoing local use). Further, any growth dividend is being largely expatriated to foreigners as rising income.
The only conclusion you can draw at this stage is that the austerity package is further impoverishing the local residents and handing over increasing quantities of Ireland’s real resources to the benefit of foreigners. That doesn’t sound like a very attractive option to me.
CDS Flinch As Corporate Bonds Play Chicken With Equities (Recent)
The spread on the benchmark index, CDX Investment Grade (IG) 5-Year has widened by almost 20 basis points to a spread of 102. This spread, which is usually correlated to corporate bonds, is widening due to either selling of credit risk or an increased interest to sell short.
Having said this, warning signals are filling the sky emanating from the market’s take on the creditworthiness of corporations. Historically, this is revealed via jumps in spreads of the transparent corporate bond market. Without knowing the overwhelming effect of QE on the markets, the lack of movement in corporate bond spreads would suggest that all is fine. However, the sudden gap in the CDS market suggests that the selloff in equities may have some legs to it.
“I strongly opposed purchasing additional agency mortgage- backed securities,” Lacker said in a statement released today by the Richmond Fed. “Such purchases, as compared to purchases of an equivalent amount of U.S. Treasury securities, distort investment allocations and raise interest rates for other borrowers.” Lacker said that “channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve.”
Liquidity Freeze not going to thaw for decades (??)
No matter which way you examine it, money simply isn't moving about within the United States economy. What this essentially means is that the Federal Reserve's efforts to continue decreasing the yield on assets currently will not transcribe into higher levels of consumption and business activity. Sure, individuals can take out loans at historically low rates, but according to the past few years of data, they are actually less likely to move that money back through the economy as time progresses. This decrease in velocity signals that the current quantitative easing program is more than likely not going to fix the current economic situation.
QE3 Will Crash Economy w/ Double-Dip Slammer (yah)
The Federal Reserve’s “money printing,” Hassiepen said, has not “really contributed to the improvement in the general economy” so far.
Instead, all it has done is increase inflation and the cost structure in the general economy, as will the new round of QE just announced Thursday. “We actually think this is going to cause unemployment, not employment,” he said. the Fed’s policy will reduce household’s disposable income and raising costs will also “lead companies to lay off people,” he said.
TREASURIES-Prices plunge as Fed pushes buyers out of bonds 9/14
"There may be a little bit of disappointment that they are not doing Treasuries, but the Fed is still taking out virtually all the long-end duration being added by the Treasury for the rest of 2012," Schumacher said.
"I would think they will consider doing full-blown QE in Treasuries but not until Operation Twist is done," he added. Treasuries also weakened as bond investors feared the new stimulus would increase inflationary pressures, which would reduce the value of the debt.
Inflation expectations as measured by breakeven rates on Treasury Inflation-Protected Securities (TIPS) have risen sharply on the announcement. The breakeven rate on five-year TIPS jumped to 2.31 percent on Friday, up from 2.09 percent on Wednesday, before the Fed statement.
Counterparties: The Fed’s bottomless punch bowl (Recent)
The Fed wants to lower yields on mortgage-backed securities and thereby lower mortgage rates for consumers. This is pretty darn close to “Uncle Ben’s Crazy Housing Sale” that Ezra Klein called for back in July. As the NYT’s Binyamin Appelbaum notes, QE3 has an open-ended timeline and variable targets: the Fed will buy mortgage-backed securities “until the outlook for the labor market improves”.
The Fed says that its “highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens”. This, as Felix notes, is a big departure:
The job of monetary policy, in the famous words of Fed chairman William McChesney Martin, is “to take away the punch bowl just as the party gets going”. The Fed, here, is essentially disowning Martin, and saying that they’ll keep refilling that punch bowl with high-grade hooch even after the party is getting going.
Marc Faber: If I Were Bernanke, I Would Resign (Recent)
"This unlimited QE (quantitative easing) , buying mortgage-backed securities (MBS) and continuing operation twist has the implication of simply having asset prices go up and the money flows down to the Mayfair economy," Faber said.
A Mayfair economy is one which benefits the wealthier and better off in society. Faber said this latest round of QE would not help the "man on the street".
"QE helps rich people whose asset prices go up and whose net worth then increases but it doesn't flow to the man on the street who is faced with higher costs of living with price rises. You just have a small economy that is booming but the majority of the economy is damaged by QE," he said.
Shadow Bankers Vanishing Leave China Victims Seeing Scams (Recent)
The shadow bankers are now disappearing, committing suicide or reneging on agreements, leaving thousands of victims in their wake. In the first half of the year, more than 58,000 lawsuits involving disputes over 28.4 billion yuan in private lending were filed in Zhejiang province, where Wenzhou is located, up 27 percent from the same period in 2011 and the most in five years, according to the provincial supreme court. One-fifth of the cases were in Wenzhou, where authorities have set up a special court to handle the surge.
Private-lending victims nationwide filed more than 600,000 lawsuits valued at 110 billion yuan in 2011, an increase of 38 percent from the previous year. In the first half of 2012, the number of filings rose 25 percent to 376,000, according to People’s Court, a newspaper run by China’s Supreme Court.
Plans for EU referendum drawn up for Britain 9/14
Mr Barroso's call for a European federation has triggered fresh calls for a popular British vote on the EU, which would be the first referendum on Europe since the 1975 plebiscite on the "Common Market". "It is clear now what the EU is trying to do. The question for David Cameron is does he want to be part of it and when is he going to give us a say in a referendum."
Mats Persson, the director of Open Europe, said: "His call for a federal Europe clashes head on with the increasingly sceptical UK public and political class." Nigel Farage, leader of Ukip accused Mr Barroso of supporting an "emerging, creeping European dictatorship".
“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,” the FOMC said. Despite holding interest rates at zero for more than three-and-a-half years, and the central bank buying $2.3 trillion in assets, the unemployment rate has been stuck above 8% since early 2009. There are 12.5 million unemployed workers.
ADB chief Kuroda scolds Europe over sovereign debt crisis (Recent)
Kuroda also warned that the crisis has led many European banks to change their business strategies and withdraw funds from Asian markets, in a move that has saddled some companies in the region with rising borrowing costs.
Kuroda also said the BOJ should play a greater role in stemming the sharp appreciation of the yen, which has hit the economy by slowing exports.
"A vicious cycle has continued, in which the yen's rise leads to deflation," he said. "Market interventions work only temporarily. If we want to maintain their effect, then we need support" from a central bank aggressively easing policy.
Karlsruhe weiß, wo Europas Hammer der Macht hängt 9/13
“The Court watches over German money and the issue of democratic legitimacy. It is clear that the ECB’s decision has in principle opened the way into a bottomless transfer union… This must and will result in yet more legal challenges. It is equally clear that the legitimacy of the path towards the further deepening of European integration is poorly grounded.”
Debt crisis: as it happened 9/12
[The ruling] makes topping up ESM more difficult: The current lending capacity of the ESM, €500bn, is not nearly enough to take, say, Italy and Spain off the market, meaning that the cap could prove a real obstacle for large-scale Eurozone bailouts down the line. However, the impact of this could be offset by last week’s ECB decision to buy unlimited short-term government debt – via the OMT – which reduces reliance on the ESM. It is also worth considering that a situation where the ESM needed to be topped up, would mean the crisis had significantly worsened once again and an extra layer of parliamentary approval may be the least of the eurozone's worries.
Why Not Raise Taxes Instead of Interest Rates to Reduce the Deficit? (Recent Concept)
Top 1% Investing in American Debt, making trillions 9/10
"The cost of that," Davies explained, if we just focus on the interest on the debt "is $200 billion a year right now....[that's what] we have to pay in taxes that doesn't go to services, we just pour it down a hole. [And] that will rise to $1 trillion a year a decade from now," Davies said. So if it isn't bad enough that $0.10 of every dollar in taxes is going to pay for interest on the national debt, in 10 years, according to Davies and Harrington's calculations, $0.30 of every dollar will be going "down the hole" (or more realistically, into the pockets of wealthy people that are investing in the deficit through Treasury notes).
Consumer credit falls unexpectedly in July 9/10
Consumer credit shrank by $3.28 billion in July, the Federal Reserve said on Monday. That was well below the $9.1 billion advance Wall Street economists had forecast in a Reuters poll.
In July, revolving credit, which includes credit cards, shrank by $4.82 billion. "(The data) looks consistent with the lackluster gains in consumer spending reported elsewhere," JPMorgan economist David Silver said in a note to clients.
Fed Stuck at Zero Into 2015 Seen in Swaps 9/9
Bond strategists and economist have reduced their yield forecasts. The median of more than 70 estimates in a Bloomberg survey published Aug. 9 found that they see 10-year yields ending this year at 1.65 percent and 2.38 percent in 2013. In the prior monthly poll they saw 1.9 percent and 2.7 percent.
Central bank action may be losing some of its punch. Currency trades designed to benefit from expectations of stronger growth as the Fed eases are instead losing money. The so-called carry trade, where investors borrow in lower- rate currencies such as dollars to buy higher-yielding ones, has fallen 2.8 percent from a four-month high on Aug. 9, the UBS AG V24 Carry Index shows.
German Court Holds Bailout Fund's Fate 9/9
Last year, the court approved the euro zone's temporary bailout fund, the European Financial Stability Facility, rejecting complaints that it undermined German democracy and the no-bailout clause of the European Union treaty. But the judges forced the government to seek parliamentary approval for every new aid package.
Many legal analysts say the court might once again strengthen parliaments' rights as its condition for allowing the ESM to proceed. That could potentially make new bailout deals in Europe even trickier politically for Chancellor Angela Merkel at home, where she faces growing opposition to bailouts within her governing coalition.
US debt tops $16 trillion: So who do we owe most of that money to? (Recent)
Fully two-thirds of the national debt is owed to the U.S. government, American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel. China, it turns out, holds less than 8 percent of the money our government has borrowed over the years.
“It is true that China is the largest foreign owner of our debt,” said Josh Gordon, policy director of the Concord Coalition, a Virginia-based nonprofit that advocates getting the nation’s debt under control. “But the vast majority of our debt is held by us.” ==> (Baby Boomers)
==> Inside the U.S., private investors hold nearly $1 trillion in federal debt, while mutual funds, insurance companies and state and local governments hold nearly double that amount (all of whom benefit from debt in the form of future interest streams ... and hence, all the global bailouts are simply methods for taxpayers to provide interest payments to bond holders ...
==> Recall post from several weeks ago: "The floating-rate notes would be the first new U.S. government debt security since Treasury Inflation-Protected Securities, known as TIPS, were introduced in 1997. With a budget deficit estimated at $1.21 trillion this year, the Treasury needs to expand its base of investors, and the notes may appeal to those who are seeking to protect themselves from a possible increase in interest rates or faster inflation stemming from the Federal Reserve’s unprecedented stimulus."
White House to miss deadline for report on 'fiscal cliff' budget cuts (Recent)
Under the terms of the Sequestration Transparency Act signed in August, President Obama was to tell Congress by Friday how the administration plans to implement the $109 billion in automatic cuts mandated by the Budget Control Act.
Sequestration clock ticks louder (Recent)
“What is holding us up right now is the Republican refusal to have the top 2 percent [of earners] pay their fair share,” Zients said.
Despite Republicans’ efforts to blame Democrats and vice versa, sequestration is a bipartisan problem. It is part of the Budget Control Act of 2011, the same law that created the Joint Select Committee on Deficit Reduction. Sequestration was meant to be a last-ditch measure if the so-called supercommittee members could not agree on $1.2 trillion of what would have been targeted and deliberately planned cuts over the next 10 years.
China slowdown turns off Swan's money tap 9/8
It's easy to be beguiled by the drama of a collapse that might always be reversed. The Swiss investor Marc Faber (known as Dr Doom) identifies four mega bubbles in the last four decades, the biggest of which is the tenfold increase in the price of iron ore. He is able to produce a frightening graph making this year's collapse in the iron ore price look like the earlier collapses in the price of gold, the Nikkei and the Nasdaq.
China’s steel mills braced for slowdown (Recent)
Steel traders are also finding themselves in a desperate position. “We have to try every possible means to sell [our steel] even if we lose money. We will lose more if we don’t sell,” says a trader with a large steel trading company in Henan province.
Another reason for the slump in China’s steel markets is the unique structure of China’s state-dominated steel sector. This year Chinese mills have maintained high levels of steel production – even when running at a loss – rather than shutting down their furnaces, because many state-owned mills are incentivised to maximise revenues instead of profit.
Miners forced to take discounted prices for iron ore (Recent)
The Chinese government has ordered all steel mills in the country producing less than one million tonnes annually to close in an effort to shut unprofitable capacity.
The prospect of declining Chinese demand has hit Australian miners hard, as they have become increasingly reliant on Chinese state-owned traders to sell stock at a time when the miners are struggling to find buyers for their inventory. The AFR reported that Rio Tinto now sends nearly a third of its iron ore through Sinosteel to stockpiles in China.
Schnitzer Steel to lay off 300 people (Recent)
Schnitzer Steel Industries Inc, which makes recycled ferrous metal products, said it will reduce its workforce by about 7 percent, as falling prices hit profits.
The company, which will cut 300 jobs, expects to break even on an adjusted basis, excluding restructuring charges of about 12 cents per share, in the current quarter.
Schnitzer's gloomy forecast comes after Dahlman Rose & Co downgraded the U.S. steel sector on the belief that metal and scrap prices will decline.
Steelmakers worldwide are facing plummeting demand in Europe and China, the world's biggest steel consumer, pressurizing prices.
U.S. Treasurys Advance; TIPS Sold at Record Negative Yield (Not Too Long Ago)
"This made TIPS all the more attractive," said Brown Advisory's Mr. Graff. He prefers TIPS dating five years and out given the fact that the central bank's unprecedented easing efforts today complicate its ability to manage inflation down the line.
Conveniently, the U.S. had a $14 billion five-year TIPS sale scheduled for Thursday afternoon. The auction drew the strongest demand seen in months as buyers accepted a record-low negative 1.286% yield, in hopes that future inflation will increase the compensation over time. ==> (-1.286%)
UBS Strategist Golub: 'Earnings Recession' Might Hurt US Stocks (Recent)
Earnings at the Standard & Poor’s 500 Index’s non-financial companies fell in the second quarter and may drop again in the third. The result would be the first back-to-back declines since 2009, according to data that Golub presented Tuesday in a report.
“It’s very hard for the market to move forward when earnings aren’t progressing,” the New York-based strategist wrote in an e-mail.
Global Economy Faces 'Perfect Storm' (9/7)
"History suggests that whenever (there is) a crisis with too much private debt first and public debt second you have a painful process of deleveraging," said the famously apocalyptic New York University professor, a glowering fixture at such international talk-shops.
OECD Slashes UK Economic Outlook By 0.7% (Recent)
The Paris-based think tank OECD added that the global economy is slowing, with key European countries entering a recession that is likely to spread worldwide.
However the economic outlook for the UK has been slashed more than any other country in the G7 bloc, prompting fears that Britain could enter another recession, reported Sky News.
The outlook is bleak in comparison to the forecast made in May, when it predicted growth of 0.5%. The UK is predicted to be the worst performing G7 nation apart from Italy in the year.
Generation lost? (Recent)
Spain's youth unemployment rate is a staggering 53 per cent, the highest in the 17-member eurozone. Among the jobless are Valiente's boyfriend, a qualified lawyer who has never had work in his field, and two of her sisters: one a graphic designer who has never worked and the other a psychologist who recently lost her job. All of this in a middle-class, educated family - Valiente's father is a doctor.
Weak Jobs Report Shows Obama's 'Long Road' Ahead 9/7
The unemployment rate fell to 8.1 percent from 8.3 percent, but that was only because 368,000 people left the labor force. The share of working-age people who are either working or looking for work—known as the labor-force participation rate—fell to its lowest level since September 1981.
White House consults experts as it mulls tapping oil reserve 9/6
"What's clear right now is there's a shortage of gasoline and that oil product markets are tight," said Verleger, who was not attending Thursday's meeting.
Verleger said that tapping SPR crude reserves now would do little to solve a problem of falling U.S. gasoline supplies, which last week dipped below 200 million barrels, or around 10 million barrels lower than the same week of 2011.
U.S. refineries might not quickly ramp up making gasoline even if more crude were offered from the SPR, he said.
Other ideas beyond tapping reserves would also likely be discussed: give drivers a holiday from the federal fuel taxes, which could push gasoline dramatically lower for a while. In 2008 Senator John McCain, who was then running against Barack Obama for the presidency, suggested a suspension of the federal gasoline tax for the summer months, but the idea faded.
Zero Bund Yields No Deterrent to Euro Breakup Bets (Recent of Interest)
“If you buy German assets denominated in euros today, you could find yourself holding an asset in a superior currency in a breakup scenario,” said Jamie Stuttard, who helps oversee $1.6 trillion as head of international bonds at Fidelity Management and Research Co. in London. “There isn’t a lot of value in German government bonds at these yield levels, and the single best reason to own German assets is re-denomination risk.”
OMT! 9/6
Draghi pointed to spreads to German debt – and interestingly, he did concede to the FT’s Michael Steen that Bunds currently contain a break-up premium – and bonds’ bid-ask spreads, a measure of liquidity. (The bigger the difference between a bond’s bid price and offer price, the more illiquid a bond is. And euro break-up risk is liquidity crisis risk writ large).
This is a point we’ve tried to make several times in the past month, ever since Draghi began mentioning convertibility risk. The risk’s Protean nature means the ECB should retain some discretion in how it repairs policy. The collateral rules are inseparable from the OMT itself, for instance. No collateral means liquidity crisis means euro exit.
Draghi unveils ECB bond-buying plan 9/6
By focusing on the short end of the market, the ECB action could lead to a sharp steepening of the yield curve in financially stressed euro-zone countries that could aggravate attempts to boost credit flow from the core of the region, said Ed Lalanne, senior strategist at Macro Risk Advisors in New York.
“The ECB’s insistence to sterilize the bond purchases means the ECB can only buy bonds as long as demand for euro T-bills remains,” Zangana said in emailed comments. That’s because the ECB absorbs the extra liquidity put into the financial system by its bond purchases by selling T-bills.
“If demand dries up, as it did [under the ECB’s previous bond-buying program] at the start of the year, then the bond purchases would be halted,” Zangana said. “In that sense, Draghi may be overreaching when he said the ECB would ‘backstop’ the monetary union.”
Baltic index down as capesize, panamax rates dip 9/6
"After last week's continued bearish sentiment we were hoping for some glimmers of positiveness this week. This is not the case and the (panamax) market in both hemispheres is continuing to drop like a rock," ship broker Fearnleys said in its weekly note.
"We see owners underbidding and waiting up to six days in order to even secure employment for their vessels. Some owners drop anchor waiting for cargoes to come."
The 29 Ugliest Charts In The World 9/5
Business Insider compiled 29 of the worst charts that got our attention. Many prelude further difficulty in Asia and Africa, while others document just how bad the European crisis is.
Warren attacks ‘rigged’ political, economic system 9/5
Without identifying any specific CEO by name, Warren said Wall Street executives had “wrecked our economy and destroyed millions of jobs,” but she said they “still strut around Congress, no shame, demanding favors, and acting like we should thank them.”
Companies boosted profits without hiring this spring 9/5
One reason productivity improved in the second quarter is hiring slowed to just 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter. U.S. employers added 163,000 jobs in July, the best month of hiring in five months. The unemployment rate edged up to 8.3%. Hiring probably won't accelerate from that level unless economic growth picks up or productivity slows, economists say.
Number Of PhD Recipients Using Food Stamps Surged During Recession 9/5
The number of PhD recipients on food stamps and other forms of welfare more than tripled between 2007 and 2010 to 33,655, according to an Urban Institute analysis cited by the Chronicle of Higher Education. The number of master's degree holders on food stamps and other forms of welfare nearly tripled during that same time period to 293,029, according to the same analysis.
The boost in PhD recipients receiving food stamps is just the latest indication of how Americans are struggling in a down economy. Overall, the number of Americans on food stamps rose 43 percent over the past three years to 46.3 million Americans as of February 2012, according to the Department of Agriculture.
Europe Outlook Dims as Bank Meets 9/5
Official data on retail sales were also poor, suggesting consumers remain cautious and aren't likely to drive an economic recovery. Volumes of sales in the currency area fell 0.2% on the month in July and slid 1.7% on the year, according to the European Union's statistics agency, Eurostat. Sales were notably weak in Germany and Spain.
Moody's threatens to slash EU's 'Aaa' credit rating 9/4
Though Britain is not in the euro, it is not immune to the turmoil as Europe is the country’s biggest export market and the UK banking sector has strong links with the continent.
Chris Scicluna, head of economic research at Daiwa Capital Markets Europe, said: ‘You would not want to rule out downgrades for all these member states in due course.’ A ratings downgrade could push up borrowing costs for the Government, businesses and households as lenders worry about getting their money back.
German division over euro bank regulation 9/4
Officials are developing plans for closer banking union as part of their response to the eurozone debt crisis. Michel Barnier, the EU’s finance commissioner, wants to place all 6,000 eurozone banks under the supervision of the ECB, taking power to restructure banks away from national regulators.
Germany’s stance on Mr Barnier’s plans is likely to have significant influence on their eventual adoption. About one-third of eurozone banks are German, including some local lenders that, while having just a handful of branches and assets, are linked to politically powerful national associations.
Citigroup agrees to $590 million subprime settlement (Recent)
“Citi blindsided its investors and shareholders by not disclosing that it had all of this off-balance sheet exposure to this debt,” said Janet Tavakoli, president of Tavakoli Structured Finance. “They were just stuffing junk into these CDOs.”
In the latest lawsuit, shareholders claimed that Citigroup repackaged securities that no one would purchase into new CDOs to hide its exposure to the securities. Tavakoli said that senior management at Citigroup should have been clued to the threat posed by their CDOs once HSBC began writing down billions of its securities in 2007.
Critics say these settlements, while significant in size, fall short of addressing the underlying problem of poor corporate governance.
U.S. Companies Brace for an Exit From the Euro by Greece (Recent)
Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain (9/3)
According to official statistics, 30,000 Spaniards registered to work in Britain in the last year, and analysts say that this figure would be many multiples higher if workers without documents were counted. That is a 25 percent increase from a year earlier.
Stocks Near 5-Year Highs Despite Worst Earnings Season Since 2009 (Recent of interest)
Only 58% of more than 2,300 companies reporting thus far have beat analyst estimates and 48.4% recorded higher-than-expected revenues. Both figures are the lowest since Q1 2009.
Paul Hickey from Bespoke Investment Group says the view out the windshield looks just as bad as what we see looking back on Q2 earnings. Bespoke's data show a -5.6% spread between the companies that raised guidance versus companies that warned. That's the lowest number since the bull market started — meaning the outlook in corporate America hasn't been this bad in three years.
Congress approval rating hits all time low (Recent & Amazingly Out-Of-Site)
The Gallup polling agency says approval rates hovered near 34 percent for 31 years. But approval has dropped below 20 percent every month since 2011, bottoming out at 10 percent in February and August of this year!
“That's a little scary if that's especially we put people in congress to look out for our benefit and it's surprising that they have such a low opinion,” said Liz Lasky of Westfield on Thursday afternoon.
And adding to those opinions was a December Gallup poll found telemarketers , stockbrokers and bankers score more positive ratings than Congress.
“Well, that's kind of a mind-blower when you think of how much we all can't stand those. So, I guess it's not surprising, but does the message get to who it needs to,” said Judith Fine of Northampton.
Jobless Claims In U.S. Unchanged Last Week At One-Month High (30th)
More Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a slowing economy.
“When people get nervous about the macroeconomic environment, they slow down spending,” said William Sullivan, president and chief executive officer of Agilent Technologies Inc. (A) in Santa Clara, California.
“It’s not supply and demand. It’s not a normal recession,” Sullivan said on an August 15 earnings call. “Given the issues of the euro and what’s going to happen and then you have this financial cliff in the U.S. in January, complete political disagreement in Washington, people are really nervous.”
Unemployment In Europe By Country (29th)
In June 2012, an estimated 25.1 million men and women were unemployed in the EU, according to official figures released by Eurostat, the Luxembourg-based statistical office of the European Union. A whopping 17.8 million of the total unemployed are in the eurozone, the highest level since the 17-nation group was formed in 1999.
80% of President Obama's Drought Relief Bill Is For Food Stamps (Recent)
The farm bill that President Obama was referring to, and that the Senate had passed, is proposed as an extension to current legislation which is due to expire next month. That new plan would cost taxpayers nearly $1 trillion over the next ten years, with an estimated $770 billion of that money going to fund an already out-of-control food stamp program. Yes, the vast majority of all the money budgeted to support the “Federal Agricultural Reform and Management Act” is specifically earmarked for the Supplemental Nutrition Assistance Program (SNAP), more commonly known as the food stamp program.
Food stamp program costs doubled between 2001 and 2006, and then doubled again between 2008 and 2012. Under the Obama administration, the number of food stamp recipients has also grown dramatically, up from 28.2 million in 2008 to more than 44.7 million in fiscal 2011. The proposed Senate extension will essentially lock in an $80 billion per year food stamp budget, but for appearances will, “cut spending” by a token $4.5 billion over the next decade.
EURO GOVT-Muted reaction to Italian sale, focus on ECB (30th)
"The fact that with all the speculation about what the ECB is going to do, yields are only 14 basis points lower than at the end of July suggests that investors are still demanding quite high risk premiums to hold Italian debt," ...
Re: Draghi announced Aug. 2 that the ECB might help indebted governments lower their borrowing costs by buying their bonds — but only if the countries first ask for help from the region's bailout fund and agree to take steps to reduce their deficits and debt levels. He left key details blank and said committees of top bank officials would be working on them.
It's also not clear whether the ECB will set a target interest rate — or yield — that a country's bonds would not be allowed to exceed when it launches purchase program.
Société Générale bought Geniki Bank in 2004. It had been losing money for the last several years, with losses of 796 million euros in 2011 and 411 million euros in 2010. Emporiki Bank has been a drag on Crédit Agricole’s earnings almost since the French bank acquired it in 2006. In the first nine months of 2011, Emporiki posted a loss of 954 million euros, and Crédit Agricole has pumped about 2 billion euros into the bank in the last two years to increase its capital.
Trillion Dollar Bank Deposits Despite Low Rates: MRI (29th)
“As long as lending is soft, deposited money is becoming more and more expensive to banks since they have to pay interest on the increased amount of deposits, as well as deposit insurance to the FDIC,” said Dan Geller, MRI executive vice president.
Insurers Waging Battle With Fed Over Regulation of Thrift Holding Companies (28th)
The proposal would subject institutions that have thrift holding companies to the same capital standards as banks at the holding company level, except for certain unique insurance activities.
An industry lawyer who asked not to be named said that between 25 and 27 insurance companies that operate thrifts could be subject to Fed oversight under the proposed capital standards. The lawyer, based in Washington, D.C. asked not to be named because he is advising several clients who are dealing with the proposal.
Construction Confidence Falls, According to Report from ABC (Recent)
"Despite data indicating that the nation is now in its fourth year of economic expansion, the nonresidential construction industry continues to struggle to establish sustained momentum," says ABC chief economist Anirban Basu. "In recent months, nonresidential construction spending levels have barely managed to edge higher, disappointing many contractors."
He adds, "Nonresidential construction firms have become unnerved by the possibility of the nation falling off a fiscal cliff-due to a number of tax increases and spending cuts that take effect at the end of the year-leading the economy back into recession in 2013. This would limit private nonresidential construction, which is among the nation's most cyclical industries."
The college-cost calamity (A little old, but still Recent; of Interest)
Long-term debt at not-for-profit universities in America has been growing at 12% a year, estimate Bain & Company, a consultancy, and Sterling Partners, a private-equity firm (see chart 1). A new report looked at the balance-sheets and cashflow statements of 1,692 universities and colleges between 2006 and 2010, and found that one-third were significantly weaker than they had been several years previously.
Education and Job Requirements: The Great Mismatch (Recent)
"We cannot and should not stand against political decisions about the composition of the Eurozone," Weidmann said. "Such decisions can only be taken by democratically legitimized bodies," he said.
Weidmann argued that maintaining price stability remained the ECB's primary mandate. Ensuring the Eurozone's financial stability, while important, came second, he said.
The Celtic poster child demonstrates the failure of austerity (Recent)
So Ireland’s growth strategy has been based on increasing exports of real goods and services which are a cost to the domestic economy (forgoing local use). Further, any growth dividend is being largely expatriated to foreigners as rising income.
The only conclusion you can draw at this stage is that the austerity package is further impoverishing the local residents and handing over increasing quantities of Ireland’s real resources to the benefit of foreigners. That doesn’t sound like a very attractive option to me.
Australia – external sector continues to drain growth (Economic FYI From Last Year)
While private capital formation is strong (associated with large mining infrastructure projects), the household saving ratio has been rising and there remains an unwillingness to return to the pre-crisis consumption growth (which was fuelled by an unsustainable escalation in private debt).
Add in the fact that the external sector is draining demand overall then you might wonder about the logic of the government sector wanted to undermine aggregate demand growth especially when broad labour underutilisation rates stand at around 12.5 per cent with updated numbers coming soon.
Overall, when the current account is in deficit the economy is net borrowing from the rest of the world – tapping foreign savings. Similarly for the capital account. The sum of the two equals the net balance on the financial account – which thus summarises the net lending (borrowing) position of the nation with respect to the rest of the world.
At any rate, volumes are declining on both goods and services (for temporary reasons relating to the difficulties coal production has faced after the floods earlier in the year, and for other more substantive reasons).
So at present, Australia is sacrificing real resources and getting less back in real terms. It might be argued (and I would probably agree) that the export is a cost, imports a benefit equation is dependent on the composition of each.
A current account deficit reflects the fact that a country is building up liabilities to the rest of the world that are reflected in flows in the financial account. While it is commonly believed that these must eventually be paid back, this is obviously false.
Resource Material:
==> Net international investment position
==> Official reserve assets, other foreign currency assets and related short-term liabilities
Many city pension plans are in massive F'ing trouble (Recent)
Pension plans are typically thought of as healthy if they are funded at 80 percent or above, but many Florida cities have been below that 80 percent benchmark since 2001, the report said. Additionally, with the baby boomer generation aging, fewer employees will be supporting a growing number of retirees.
The result of that is that cities will have to earmark more of their budgets to pay for promised retirement benefits. And that means, other services will likely face a cut. "You'll have to have some budgetary tradeoffs," Matkin said.
A report issued last November by the institute graded 11 city pension plans, with one-third earning a "D" or "F" for being underfunded.
Timothy Geithner Wants SEC To Reform The Money Market System 9/28
SEC head Mary Schapiro had favored changes, but she had to abandon the reforms last month, as three of the five SEC commissioners opposed the new regulations. The reforms were first proposed during the 2008 economic crisis, with the primary purpose of allowing funds to have capital cushions, just like banks. The mutual fund industry holds approximately $2.7 trillion in assets. Investors and professional money managers rely on mutual funds to reduce the losses when stocks plunge.
The money market funds have openly opposed the reforms, sending a clear warning that any further reforms would make mutual funds an unattractive bet, and investors will exit them altogether. Geithner urged the SEC to act immediately and effectively, otherwise FSOC will go on to label some of the money funds as SIFIs (Systemically Important Nonbank Financial Institutions). So, the Federal Reserve will keep a close watch on those firms.
While private capital formation is strong (associated with large mining infrastructure projects), the household saving ratio has been rising and there remains an unwillingness to return to the pre-crisis consumption growth (which was fuelled by an unsustainable escalation in private debt).
Add in the fact that the external sector is draining demand overall then you might wonder about the logic of the government sector wanted to undermine aggregate demand growth especially when broad labour underutilisation rates stand at around 12.5 per cent with updated numbers coming soon.
Overall, when the current account is in deficit the economy is net borrowing from the rest of the world – tapping foreign savings. Similarly for the capital account. The sum of the two equals the net balance on the financial account – which thus summarises the net lending (borrowing) position of the nation with respect to the rest of the world.
At any rate, volumes are declining on both goods and services (for temporary reasons relating to the difficulties coal production has faced after the floods earlier in the year, and for other more substantive reasons).
So at present, Australia is sacrificing real resources and getting less back in real terms. It might be argued (and I would probably agree) that the export is a cost, imports a benefit equation is dependent on the composition of each.
A current account deficit reflects the fact that a country is building up liabilities to the rest of the world that are reflected in flows in the financial account. While it is commonly believed that these must eventually be paid back, this is obviously false.
Resource Material:
==> Net international investment position
==> Official reserve assets, other foreign currency assets and related short-term liabilities
Many city pension plans are in massive F'ing trouble (Recent)
Pension plans are typically thought of as healthy if they are funded at 80 percent or above, but many Florida cities have been below that 80 percent benchmark since 2001, the report said. Additionally, with the baby boomer generation aging, fewer employees will be supporting a growing number of retirees.
The result of that is that cities will have to earmark more of their budgets to pay for promised retirement benefits. And that means, other services will likely face a cut. "You'll have to have some budgetary tradeoffs," Matkin said.
A report issued last November by the institute graded 11 city pension plans, with one-third earning a "D" or "F" for being underfunded.
Timothy Geithner Wants SEC To Reform The Money Market System 9/28
SEC head Mary Schapiro had favored changes, but she had to abandon the reforms last month, as three of the five SEC commissioners opposed the new regulations. The reforms were first proposed during the 2008 economic crisis, with the primary purpose of allowing funds to have capital cushions, just like banks. The mutual fund industry holds approximately $2.7 trillion in assets. Investors and professional money managers rely on mutual funds to reduce the losses when stocks plunge.
The money market funds have openly opposed the reforms, sending a clear warning that any further reforms would make mutual funds an unattractive bet, and investors will exit them altogether. Geithner urged the SEC to act immediately and effectively, otherwise FSOC will go on to label some of the money funds as SIFIs (Systemically Important Nonbank Financial Institutions). So, the Federal Reserve will keep a close watch on those firms.
The spread on the benchmark index, CDX Investment Grade (IG) 5-Year has widened by almost 20 basis points to a spread of 102. This spread, which is usually correlated to corporate bonds, is widening due to either selling of credit risk or an increased interest to sell short.
Having said this, warning signals are filling the sky emanating from the market’s take on the creditworthiness of corporations. Historically, this is revealed via jumps in spreads of the transparent corporate bond market. Without knowing the overwhelming effect of QE on the markets, the lack of movement in corporate bond spreads would suggest that all is fine. However, the sudden gap in the CDS market suggests that the selloff in equities may have some legs to it.
Fed Funds & Repo Rates to See Downward Pressure Into 2013 9/27
Roever's said the Fed is not inclined to cut IOER or lower the official Fed funds target (zero to 0.25% currently) due to unintended consequences such as market dislocations. But "the new round of asset purchases should eventually work to lower repo and Fed funds effective rates by increasing demand for near-cash assets."
Demand for these assets could increase if the FDIC TAG program (temporary liquidity and account guarantees that give a full guarantee for funds held at banks in noninterest-paying transactions accounts) expires as scheduled Dec. 31, he said, and as a result "depositors shift some of their cash into government-backed money market securities."
The end of the Fed's Operation Twist sales and increased liquidity and collateral requirements to meet more stringent capital and operating regulations also could alter the overnight markets ahead. Roever said repo rates currently are elevated thanks to Operation Twist because the Fed's action "has left dealers holding large positions in short-dated Treasuries that they are financing."
QE3.5 Linked to Infinity ∞ 9/27
“With skepticism growing over QE3 and its impact on the real economy, the unwind of the QE3 trade continues and the bond is the main beneficiary,” wrote Richard Gilhooly of TD Securities.
In fact, Gilhooly said, the market is now pricing in more QE3 in the form of an extension of the Fed’s Operation Twist debt-exchange program, “and bonds are the out-performer, with quarter-end and talk of asset allocation trades also boosting the long-end.”
GDP Revision, Durable Goods: Ouch! 9/27
“The sharp downward revision to the GDP report and the weaker-than-expected performance in durable goods orders in August provide a sobering reminder that the overall economic recovery is continuing to struggle to regain traction,” wrote Millan Mulraine, a strategist at TD Securities. “And while the improvement in consumer confidence and housing market activity offer some hope of better growth performance this quarter, the collapse in durable goods orders and weakness in shipments suggest that capital investment activity could continue to be a sore point for the economic recovery.”
Roever's said the Fed is not inclined to cut IOER or lower the official Fed funds target (zero to 0.25% currently) due to unintended consequences such as market dislocations. But "the new round of asset purchases should eventually work to lower repo and Fed funds effective rates by increasing demand for near-cash assets."
Demand for these assets could increase if the FDIC TAG program (temporary liquidity and account guarantees that give a full guarantee for funds held at banks in noninterest-paying transactions accounts) expires as scheduled Dec. 31, he said, and as a result "depositors shift some of their cash into government-backed money market securities."
The end of the Fed's Operation Twist sales and increased liquidity and collateral requirements to meet more stringent capital and operating regulations also could alter the overnight markets ahead. Roever said repo rates currently are elevated thanks to Operation Twist because the Fed's action "has left dealers holding large positions in short-dated Treasuries that they are financing."
QE3.5 Linked to Infinity ∞ 9/27
“With skepticism growing over QE3 and its impact on the real economy, the unwind of the QE3 trade continues and the bond is the main beneficiary,” wrote Richard Gilhooly of TD Securities.
In fact, Gilhooly said, the market is now pricing in more QE3 in the form of an extension of the Fed’s Operation Twist debt-exchange program, “and bonds are the out-performer, with quarter-end and talk of asset allocation trades also boosting the long-end.”
GDP Revision, Durable Goods: Ouch! 9/27
“The sharp downward revision to the GDP report and the weaker-than-expected performance in durable goods orders in August provide a sobering reminder that the overall economic recovery is continuing to struggle to regain traction,” wrote Millan Mulraine, a strategist at TD Securities. “And while the improvement in consumer confidence and housing market activity offer some hope of better growth performance this quarter, the collapse in durable goods orders and weakness in shipments suggest that capital investment activity could continue to be a sore point for the economic recovery.”
“The biggest problem with a stall-speed economy is that it’s exposed, and liable to be knocked over by any sort of exogenous shock.” ( ... durable goods orders dived 13.2 percent, the largest drop since January 2009.)
Europe's betrayal of Spain 9/27
The Spanish bubble was after all a joint venture. Spain was flooded with cheap capital from Germany and Holland that it could not prevent or control under the EMU system. Did the German and Dutch regulators recognise the danger, or try to stop the excesses? Not really. They were complicit.
The ECB’s uber-loose money (to help Germany when it was in slump) led to negative real interest rates for Spain – minus 2pc for years – that fuelled a massive credit boom. Policy was far too lax for a fast-growing Tiger economy.
Did the Spanish make big mistakes? Of course. But the ECB and the European Commission did not make that critique at the relevant moment. They too were smoking weed (with Bernanke and all the G8 CB's).
U.S. Grads Work as Waiters While Italy's Remain Jobless (Recent)
In Europe, the euro countries’ debt crisis is eroding young people’s opportunities from Spain to the U.K. Italy’s 15-to-24 year-olds watched the ranks of their jobless rise to 35.3 percent in July, almost doubling over five years and surpassing the highs reached in the 1990s. Youth unemployment in the European Union was 22.5 percent in July, close to 22.6 percent in May. That was the highest since the euro was created in 1999.
Health care costs rose more than expected in 2011: Study 9/26
Here’s a question worth pondering: If the general economy continues to struggle, why was there such a big jump in healthcare costs in 2011?
HCCI’s Health Care Cost and Utilization Report: 2011 found that average dollars spent on healthcare services climbed 4.6% in 2011, reaching $4,547 per person. This was well above the 3.8% growth rate in 2010.
Utah’s poverty rate climbs to 13.5 percent of population 9/26
The survey found 13.5 percent of Utah’s population and 15.9 percent of the state’s children lived in poverty in 2011 a definition established by the federal government as a family of four earning $22,350 or less in gross annual income.
According to U.S. Census data for 2011, close to 10 percent of Salt Lake County households received food stamps, 17.9 percent of families with children lived in poverty, and 43 percent of single mothers with kids lived below the federal poverty line.
The Washington, D.C.-based Economic Policy Institute, reports that 32 percent of working women nationwide earned poverty-level wages — $11.06 per hour — or less in 2011, and 24.3 percent of men were in that situation as well.
Currency Wars: Yen ETF Holds Steady After Stimulus 9/26
“As a consequence of QE3, the US dollar is the weakest performing G10 currency this quarter and pressure on the already overvalued yen has been stepped up,” Jane Foley, currency strategist at Rabobank, said in a report. “Retaliation against the Fed’s QE3 announcement provides a decent explanation as to why the BoJ decided to waste no time in announcing further monetary policy measures.”
The Fed, BoJ and other central banks appear to be in currency wars as they weaken currencies to help exporters and boost their economies.
Treasurys in Longest Rally Since 2008 as Hope Swings to Doubt 9/26
Investors are questioning the effectiveness of monetary policy actions led by the Federal Reserve and the European Central Bank to support the economy. Signs of renewed anxiety from the euro zone, highlighted by political instability and anti-austerity demonstrations in Spain, further dent market sentiment.
"Treasurys are back in vogue," said Kevin Walter, head of Treasury trading at BNP Paribas in New York. "We are seeing a dramatic shift" from euphoria to doubts.
The rally over the past week has helped the Treasury market recoup all the losses made following the Federal Reserve's Sept. 13 announcement of a third round of quantitative easing, or QE3, to support the economy.
Mr. Sulllivan said he won't rule out the benchmark note's yield revisiting the record low of 1.38% set in late July. Among factors to boost Treasury bonds are risks related to the euro zone's debt crisis, a global economic slowdown and the "tremendous uncertainty" surrounding the U.S.'s "fiscal cliff".
Warning from Fed official 9/25
Charles Plosser, president of the Fed's Philadelphia branch, told an audience Tuesday that the Fed's effort to support the economy would likely fall short of its goals.
The speech probably startled some investors who had faith in the Fed's latest plan, said Jack Ablin, chief investment officer Harris Private Bank. The plan includes buying $40 billion in mortgage bonds each month until the economy improves.
"I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment," Plosser told the CFA Society of Philadelphia and the Bond Club of Philadelphia at an event hosted by the Philly Fed.
Protesters Take to Street in Madrid 9/25
Mr. Rajoy has been debating whether to tap into a new bond-buying program proposed by the European Central Bank. While such additional help would considerably alleviate Spain’s debt problems, Mr. Rajoy finds himself in an increasingly tight bind between Spanish voters who oppose further cuts and investors and European finance officials demanding reassurance that Spain can meet budget deficit targets.
On Tuesday, Parliament took on the appearance of a fortress as about 1,400 police officers ringed the building to keep back demonstrators. The organizers of the latest protest said in a statement that they had no plans to try to occupy Parliament, but instead wanted to surround the building to show that “democracy has been kidnapped” by inept Spanish politicians.
Japan’s Confidence Poised to Weaken in Warning for BOJ 9/25
The Bank of Japan (8301)’s Tankan report will show Oct. 1 that its measure of business confidence deteriorated to -4, the fourth straight quarter that pessimists outnumbered optimists, according to the median of 12 estimates in a Bloomberg News survey. That would mark the longest string of negative readings since Japan emerged from the global recession in mid-2010.
The report may add to risks of the world’s third-largest economy slipping into a contraction in the second half of the year, offering little prospect of the BOJ quelling the nation’s deflation. A separate release in two days may show consumer prices slumped 0.3 percent in August from a year before, compared with the BOJ’s target of 1 percent inflation.
Further fall in German business confidence 9/25
BUSINESS CONFIDENCE in Germany has fallen for the fifth consecutive month, according to a closely watched survey, suggesting that Europe’s largest economy is catching a chill from its crisis-hit neighbours.
“The drop in Ifo business confidence is a potent reminder that the outlook for the German and euro zone economies still hangs in the balance,” said Holger Schmieding, economist at Berenberg investment bank. Yesterday’s Ifo data reflects a noticeable cooling off in Germany’s manufacturing sector, with industrial giants from Siemens to Daimler conceding a deteriorating situation among its foreign business.
US MORTGAGE MEMO: MBS On Fire But Some Caution Flags Raised 9/24
Nomura's mortgage team also says the MBS market must consider the possibility that the Fed might change the mix of the assets it buys at some point in time.
"As MBS spreads continue to tighten, there will be a point at which the Fed might deem distortions in the MBS market to be unacceptable and use other asset classes (specifically, Treasuries) for meeting its $40 billion per month target in the new asset purchase program. The end of "Operation Twist" in December may provide natural timing for the Fed to reevaluate their purchase program," Nomura says.
QE3 not the answer: Volcker 9/24
''Another round of QE is understandable - but it will fail to fix the problem.
''There is so much liquidity in the market that adding more is not going to change the economy.''
''We can no longer look to China to rescue the world. The Chinese economy has slowed 50 per cent since its peak and is no longer able to support international growth.
Europe's betrayal of Spain 9/27
The Spanish bubble was after all a joint venture. Spain was flooded with cheap capital from Germany and Holland that it could not prevent or control under the EMU system. Did the German and Dutch regulators recognise the danger, or try to stop the excesses? Not really. They were complicit.
The ECB’s uber-loose money (to help Germany when it was in slump) led to negative real interest rates for Spain – minus 2pc for years – that fuelled a massive credit boom. Policy was far too lax for a fast-growing Tiger economy.
Did the Spanish make big mistakes? Of course. But the ECB and the European Commission did not make that critique at the relevant moment. They too were smoking weed (with Bernanke and all the G8 CB's).
U.S. Grads Work as Waiters While Italy's Remain Jobless (Recent)
In Europe, the euro countries’ debt crisis is eroding young people’s opportunities from Spain to the U.K. Italy’s 15-to-24 year-olds watched the ranks of their jobless rise to 35.3 percent in July, almost doubling over five years and surpassing the highs reached in the 1990s. Youth unemployment in the European Union was 22.5 percent in July, close to 22.6 percent in May. That was the highest since the euro was created in 1999.
Health care costs rose more than expected in 2011: Study 9/26
Here’s a question worth pondering: If the general economy continues to struggle, why was there such a big jump in healthcare costs in 2011?
HCCI’s Health Care Cost and Utilization Report: 2011 found that average dollars spent on healthcare services climbed 4.6% in 2011, reaching $4,547 per person. This was well above the 3.8% growth rate in 2010.
Utah’s poverty rate climbs to 13.5 percent of population 9/26
The survey found 13.5 percent of Utah’s population and 15.9 percent of the state’s children lived in poverty in 2011 a definition established by the federal government as a family of four earning $22,350 or less in gross annual income.
According to U.S. Census data for 2011, close to 10 percent of Salt Lake County households received food stamps, 17.9 percent of families with children lived in poverty, and 43 percent of single mothers with kids lived below the federal poverty line.
The Washington, D.C.-based Economic Policy Institute, reports that 32 percent of working women nationwide earned poverty-level wages — $11.06 per hour — or less in 2011, and 24.3 percent of men were in that situation as well.
Currency Wars: Yen ETF Holds Steady After Stimulus 9/26
“As a consequence of QE3, the US dollar is the weakest performing G10 currency this quarter and pressure on the already overvalued yen has been stepped up,” Jane Foley, currency strategist at Rabobank, said in a report. “Retaliation against the Fed’s QE3 announcement provides a decent explanation as to why the BoJ decided to waste no time in announcing further monetary policy measures.”
The Fed, BoJ and other central banks appear to be in currency wars as they weaken currencies to help exporters and boost their economies.
Treasurys in Longest Rally Since 2008 as Hope Swings to Doubt 9/26
Investors are questioning the effectiveness of monetary policy actions led by the Federal Reserve and the European Central Bank to support the economy. Signs of renewed anxiety from the euro zone, highlighted by political instability and anti-austerity demonstrations in Spain, further dent market sentiment.
"Treasurys are back in vogue," said Kevin Walter, head of Treasury trading at BNP Paribas in New York. "We are seeing a dramatic shift" from euphoria to doubts.
The rally over the past week has helped the Treasury market recoup all the losses made following the Federal Reserve's Sept. 13 announcement of a third round of quantitative easing, or QE3, to support the economy.
Mr. Sulllivan said he won't rule out the benchmark note's yield revisiting the record low of 1.38% set in late July. Among factors to boost Treasury bonds are risks related to the euro zone's debt crisis, a global economic slowdown and the "tremendous uncertainty" surrounding the U.S.'s "fiscal cliff".
Warning from Fed official 9/25
Charles Plosser, president of the Fed's Philadelphia branch, told an audience Tuesday that the Fed's effort to support the economy would likely fall short of its goals.
The speech probably startled some investors who had faith in the Fed's latest plan, said Jack Ablin, chief investment officer Harris Private Bank. The plan includes buying $40 billion in mortgage bonds each month until the economy improves.
"I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment," Plosser told the CFA Society of Philadelphia and the Bond Club of Philadelphia at an event hosted by the Philly Fed.
Protesters Take to Street in Madrid 9/25
Mr. Rajoy has been debating whether to tap into a new bond-buying program proposed by the European Central Bank. While such additional help would considerably alleviate Spain’s debt problems, Mr. Rajoy finds himself in an increasingly tight bind between Spanish voters who oppose further cuts and investors and European finance officials demanding reassurance that Spain can meet budget deficit targets.
On Tuesday, Parliament took on the appearance of a fortress as about 1,400 police officers ringed the building to keep back demonstrators. The organizers of the latest protest said in a statement that they had no plans to try to occupy Parliament, but instead wanted to surround the building to show that “democracy has been kidnapped” by inept Spanish politicians.
Japan’s Confidence Poised to Weaken in Warning for BOJ 9/25
The Bank of Japan (8301)’s Tankan report will show Oct. 1 that its measure of business confidence deteriorated to -4, the fourth straight quarter that pessimists outnumbered optimists, according to the median of 12 estimates in a Bloomberg News survey. That would mark the longest string of negative readings since Japan emerged from the global recession in mid-2010.
The report may add to risks of the world’s third-largest economy slipping into a contraction in the second half of the year, offering little prospect of the BOJ quelling the nation’s deflation. A separate release in two days may show consumer prices slumped 0.3 percent in August from a year before, compared with the BOJ’s target of 1 percent inflation.
Further fall in German business confidence 9/25
BUSINESS CONFIDENCE in Germany has fallen for the fifth consecutive month, according to a closely watched survey, suggesting that Europe’s largest economy is catching a chill from its crisis-hit neighbours.
“The drop in Ifo business confidence is a potent reminder that the outlook for the German and euro zone economies still hangs in the balance,” said Holger Schmieding, economist at Berenberg investment bank. Yesterday’s Ifo data reflects a noticeable cooling off in Germany’s manufacturing sector, with industrial giants from Siemens to Daimler conceding a deteriorating situation among its foreign business.
US MORTGAGE MEMO: MBS On Fire But Some Caution Flags Raised 9/24
Nomura's mortgage team also says the MBS market must consider the possibility that the Fed might change the mix of the assets it buys at some point in time.
"As MBS spreads continue to tighten, there will be a point at which the Fed might deem distortions in the MBS market to be unacceptable and use other asset classes (specifically, Treasuries) for meeting its $40 billion per month target in the new asset purchase program. The end of "Operation Twist" in December may provide natural timing for the Fed to reevaluate their purchase program," Nomura says.
QE3 not the answer: Volcker 9/24
''Another round of QE is understandable - but it will fail to fix the problem.
''There is so much liquidity in the market that adding more is not going to change the economy.''
''We can no longer look to China to rescue the world. The Chinese economy has slowed 50 per cent since its peak and is no longer able to support international growth.
Caterpillar Cuts Forecasts on Weak Global Economy 9/24
Prices for coal and iron ore have dropped more than 20 percent this year, causing many of Caterpillar's customers in the mining sector to rethink capital expenditures. The slump in commodity prices comes a year after Caterpillar paid $7.6 billion for mining equipment maker Bucyrus International.
"We've seen a slowing in economic growth more than we expected," Caterpillar CEO Doug Oberhelman told analysts and reporters on Monday. "We expect fairly anemic and modest growth through 2015."
More Bank Layoffs Coming: 'Bad as I've Seen It': Whitney 9/24
Though banks already have jettisoned about half a million workers since the beginning of the financial crisis in 2008, Whitney said more are to come as the shrinking big institutions struggle to compete.
"The banks have been overstaffed for a really long time. If you think about all of the other industries that have gotten more competitive, more profitable, the banking sector and the insurance sector have been laggards behind it, and they employ a lot of people," Whitney said on "Closing Bell."
Steel Production Falls As Oversupply Grows 9/24
Making mattes worse, prices continue to fall amid rising levels of stock. At 730, the All Products Global Composite Steel Price came in lower in August than at any other time over the past two years.
That price drop comes because, despite the pull-back in production, the world remains awash in steel. With a global capacity utilisation ratio of just 75.5 per cent (down from 78.7 per cent in August, 2011), the world is using only three quarters of the steel it produces.
The US economy is still in a sorry state 9/23
Second, the hollowing out of America’s middle class – still politely described as median income stagnation rather than “decline” – is accelerating rather than slowing. According to the US Census last week, the US median household is 4.8 per cent poorer now than at the start of the recovery in 2009. Median incomes have now fallen to the pre-internet level of 1993. All of the gains of the Clinton years have been lost. The decline in the past three years follows a 3.2 per cent drop during the recession, which itself followed a shrinkage during the 2000-2007 cycle. Far from a new dawn of broad-based growth, America’s middle class decline is getting worse.
America's hidden unemployed: too discouraged to count 9/23
Economists, analyzing government data, estimate about 4 million fewer people are in the labor force than in December 2007, primarily due to a lack of jobs rather than the normal aging of America's population. The size of the shift underscores the severity of the jobs crisis.
If all those so-called discouraged jobseekers had remained in the labor force, August's jobless rate of 8.1 percent would have been 10.5 percent.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one has fallen by an unprecedented 2.5 percentage points since December 2007, slumping to a 31-year low of 63.5 percent.
"We never had a drop like that before in other recessions. The economy is worse off than people realize when people just look at the unemployment rate," said Keith Hall, senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia.
ECB to Set Up Repo Database as EU Moves to Rein in Shadow Banks (Recent)
Barnier told the meeting that he is working on regulations targeted at “key actors” in the shadow-banking system, in particular money-market mutual funds, according to the document.
Money-market mutual funds merit particular attention because of risks to their liquidity, Barnier told the meeting, adding that he was “disappointed” that the U.S. Securities and Exchange Commission had proved unable to agree on rules for the $2.6 trillion industry, according to the document.
Senate votes to shield US airlines from EU's carbon scheme 9/22
The Senate bill gives the U.S. transportation secretary authority to stop U.S. airlines from complying with the EU law.
But new amendments agreed to during negotiations among lawmakers said the secretary could only do so if the EU trading scheme is amended, an international alternative is agreed to, or the United States implements its own program to address aviation emissions.
Power, Pollution and the Internet 9/22
Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.
To guard against a power failure, they further rely on banks of generators that emit diesel exhaust. The pollution from data centers has increasingly been cited by the authorities for violating clean air regulations, documents show. In Silicon Valley, many data centers appear on the state government’s Toxic Air Contaminant Inventory, a roster of the area’s top stationary diesel polluters.
Former Fed governor Kevin Warsh: Fed will have a difficult time finding an exit from the years of QE programs (Recent)
"I suspect they concluded that the economy is at stall speed or worse," he said. "The global economy is weakening. The developments out of Europe, while they might be dealing with some of the tail risks, Europe is in the early innings of a serious recession."
Consequently, the Fed finds itself trying to compensate for policy failures in Washington and likely will "over-promise and under-deliver," Warsh said.
"If we continue the policies we've been going down, then it would be taking risks we need not take as a country," he said. "If you look at the markets now, where asset prices continue to melt up, where asset prices are driven less by fundamentals and particular companies and more by speeches and policies that come out of Washington, you're taking these risks. Risks are highest in the economy when measures of risk are the lowest."
Slackening job market, rising gasoline prices squeeze household finances 9/22
“The US economy is clearly in a soft patch right now that could deteriorate into a stall,” Scott Anderson, chief economist at Bank of the West in San Francisco, said. “Consumer spending is really driven by jobs and wealth effects and the consumer’s ability to borrow. All of those things are still suggesting moderate growth.”
U.S. GDP growth likely to slow in second-half 2012 9/21
"A strong economic recovery is likely a long ways away. Businesses have pulled back on hiring, with a monthly average of just 97,000 job gains over the past six months. That's well below the 240,000-plus monthly job gains we saw in the winter," said Ms. Bovino. "This gives us reason not to expect a revival in household spending any time soon." Worries that taxes may jump next year if Congress doesn't reach a compromise on the fiscal cliff will also keep people cautious this year.
BOJ Follows Fed to Bolster Stimulus as Growth Falters (Recent)
In its unanimous policy decision, the BOJ kept the benchmark interest rate between zero and 0.1 percent and maintained a separate fund that extends credit to banks at 25 trillion yen. The bank downgraded its economic assessment, saying growth has “come to a pause” while overseas economies have moved “somewhat deeper into a deceleration phase.”
Forces of factory decline trump Fed’s easy money (Recent)
The slowdown is global in scope, with factories in Europe and China actually pulling back, according to data firm Markit. Europe remains in recession, China’s growth is slumping, and warning signs are flashing for the United States. Easy money can do only so much. Pick your cliche — pushing on a string, or leading a horse to water — it’s all boils down to a fundamental imbalance between supply and demand.
Firms reported continuing declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months, however, improved notably this month, although the same firms forecast continued deceleration in production growth in the fourth quarter.
Prices for coal and iron ore have dropped more than 20 percent this year, causing many of Caterpillar's customers in the mining sector to rethink capital expenditures. The slump in commodity prices comes a year after Caterpillar paid $7.6 billion for mining equipment maker Bucyrus International.
"We've seen a slowing in economic growth more than we expected," Caterpillar CEO Doug Oberhelman told analysts and reporters on Monday. "We expect fairly anemic and modest growth through 2015."
More Bank Layoffs Coming: 'Bad as I've Seen It': Whitney 9/24
Though banks already have jettisoned about half a million workers since the beginning of the financial crisis in 2008, Whitney said more are to come as the shrinking big institutions struggle to compete.
"The banks have been overstaffed for a really long time. If you think about all of the other industries that have gotten more competitive, more profitable, the banking sector and the insurance sector have been laggards behind it, and they employ a lot of people," Whitney said on "Closing Bell."
Steel Production Falls As Oversupply Grows 9/24
Making mattes worse, prices continue to fall amid rising levels of stock. At 730, the All Products Global Composite Steel Price came in lower in August than at any other time over the past two years.
That price drop comes because, despite the pull-back in production, the world remains awash in steel. With a global capacity utilisation ratio of just 75.5 per cent (down from 78.7 per cent in August, 2011), the world is using only three quarters of the steel it produces.
The US economy is still in a sorry state 9/23
Second, the hollowing out of America’s middle class – still politely described as median income stagnation rather than “decline” – is accelerating rather than slowing. According to the US Census last week, the US median household is 4.8 per cent poorer now than at the start of the recovery in 2009. Median incomes have now fallen to the pre-internet level of 1993. All of the gains of the Clinton years have been lost. The decline in the past three years follows a 3.2 per cent drop during the recession, which itself followed a shrinkage during the 2000-2007 cycle. Far from a new dawn of broad-based growth, America’s middle class decline is getting worse.
America's hidden unemployed: too discouraged to count 9/23
Economists, analyzing government data, estimate about 4 million fewer people are in the labor force than in December 2007, primarily due to a lack of jobs rather than the normal aging of America's population. The size of the shift underscores the severity of the jobs crisis.
If all those so-called discouraged jobseekers had remained in the labor force, August's jobless rate of 8.1 percent would have been 10.5 percent.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one has fallen by an unprecedented 2.5 percentage points since December 2007, slumping to a 31-year low of 63.5 percent.
"We never had a drop like that before in other recessions. The economy is worse off than people realize when people just look at the unemployment rate," said Keith Hall, senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia.
ECB to Set Up Repo Database as EU Moves to Rein in Shadow Banks (Recent)
Barnier told the meeting that he is working on regulations targeted at “key actors” in the shadow-banking system, in particular money-market mutual funds, according to the document.
Money-market mutual funds merit particular attention because of risks to their liquidity, Barnier told the meeting, adding that he was “disappointed” that the U.S. Securities and Exchange Commission had proved unable to agree on rules for the $2.6 trillion industry, according to the document.
Senate votes to shield US airlines from EU's carbon scheme 9/22
The Senate bill gives the U.S. transportation secretary authority to stop U.S. airlines from complying with the EU law.
But new amendments agreed to during negotiations among lawmakers said the secretary could only do so if the EU trading scheme is amended, an international alternative is agreed to, or the United States implements its own program to address aviation emissions.
Power, Pollution and the Internet 9/22
Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.
To guard against a power failure, they further rely on banks of generators that emit diesel exhaust. The pollution from data centers has increasingly been cited by the authorities for violating clean air regulations, documents show. In Silicon Valley, many data centers appear on the state government’s Toxic Air Contaminant Inventory, a roster of the area’s top stationary diesel polluters.
Former Fed governor Kevin Warsh: Fed will have a difficult time finding an exit from the years of QE programs (Recent)
"I suspect they concluded that the economy is at stall speed or worse," he said. "The global economy is weakening. The developments out of Europe, while they might be dealing with some of the tail risks, Europe is in the early innings of a serious recession."
Consequently, the Fed finds itself trying to compensate for policy failures in Washington and likely will "over-promise and under-deliver," Warsh said.
"If we continue the policies we've been going down, then it would be taking risks we need not take as a country," he said. "If you look at the markets now, where asset prices continue to melt up, where asset prices are driven less by fundamentals and particular companies and more by speeches and policies that come out of Washington, you're taking these risks. Risks are highest in the economy when measures of risk are the lowest."
Slackening job market, rising gasoline prices squeeze household finances 9/22
“The US economy is clearly in a soft patch right now that could deteriorate into a stall,” Scott Anderson, chief economist at Bank of the West in San Francisco, said. “Consumer spending is really driven by jobs and wealth effects and the consumer’s ability to borrow. All of those things are still suggesting moderate growth.”
U.S. GDP growth likely to slow in second-half 2012 9/21
"A strong economic recovery is likely a long ways away. Businesses have pulled back on hiring, with a monthly average of just 97,000 job gains over the past six months. That's well below the 240,000-plus monthly job gains we saw in the winter," said Ms. Bovino. "This gives us reason not to expect a revival in household spending any time soon." Worries that taxes may jump next year if Congress doesn't reach a compromise on the fiscal cliff will also keep people cautious this year.
BOJ Follows Fed to Bolster Stimulus as Growth Falters (Recent)
In its unanimous policy decision, the BOJ kept the benchmark interest rate between zero and 0.1 percent and maintained a separate fund that extends credit to banks at 25 trillion yen. The bank downgraded its economic assessment, saying growth has “come to a pause” while overseas economies have moved “somewhat deeper into a deceleration phase.”
Forces of factory decline trump Fed’s easy money (Recent)
The slowdown is global in scope, with factories in Europe and China actually pulling back, according to data firm Markit. Europe remains in recession, China’s growth is slumping, and warning signs are flashing for the United States. Easy money can do only so much. Pick your cliche — pushing on a string, or leading a horse to water — it’s all boils down to a fundamental imbalance between supply and demand.
Firms reported continuing declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months, however, improved notably this month, although the same firms forecast continued deceleration in production growth in the fourth quarter.
U.S. Postal Service Hopes To Deliver More Junk Mail 9/20
Eighty-four billion pieces of junk mail were delivered to our doors last year
Eighty-four billion pieces of junk mail were delivered to our doors last year
... people who have a real aversion to junk mail can contact the Direct Marketing Association in New York and they will remove your name and address from some mailing lists.
Could Municipal Bonds Be the Next Financial Titanic? 9/20
At the end of last year, the principal of municipal securities outstanding was more than $3.7 trillion, of which more than 75% was held, directly or indirectly, by individuals. A million different municipal bonds are outstanding, and there are 44,000 state and local issuers.
3 more years of low rates ... 9/20
Could Municipal Bonds Be the Next Financial Titanic? 9/20
At the end of last year, the principal of municipal securities outstanding was more than $3.7 trillion, of which more than 75% was held, directly or indirectly, by individuals. A million different municipal bonds are outstanding, and there are 44,000 state and local issuers.
3 more years of low rates ... 9/20
A net $11 billion was withdrawn from U.S. stock funds in August, the sixth month in a row that withdrawals exceeded deposits, industry consultant Strategic Insight said on Thursday. It was the largest monthly withdrawal total this year, despite the 2.3 percent rise in the Standard & Poor’s 500 index during August.
Industrial Production in U.S. Falls by Most Since March 2009 (Last week)
“Manufacturing is clearly decelerating,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who predicted a decline in industrial production.
Interest Rate Manipulation Extends Far Beyond Libor, Secret Survey Reveals 9/19
That's the verdict of a new study by the International Organization of Securities Commissions, a copy of which was obtained by Bloomberg. Less than half of all benchmark lending rates, in contrast, were based on actual market transactions.
The financial system is "rigged" to benefit big banks, Dallas Federal Reserve Bank President Richard Fisher said on Wednesday, repeating his belief that the five largest U.S. banks should be broken up to protect the economy from another crisis.“Manufacturing is clearly decelerating,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who predicted a decline in industrial production.
Interest Rate Manipulation Extends Far Beyond Libor, Secret Survey Reveals 9/19
That's the verdict of a new study by the International Organization of Securities Commissions, a copy of which was obtained by Bloomberg. Less than half of all benchmark lending rates, in contrast, were based on actual market transactions.
FedEx Lowers Forecast, Citing Weak Economy (Recent)
FedEx’s forecasts are closely watched for signals of future economic health. Its results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business. Its rival U.P.S. said in July that it expected the global economy to get worse before it began to improve. U.P.S. also cut its earnings forecast.
Deposit Flight From Europe Banks Eroding Common Currency (Recent)
A total of 326 billion euros ($425 billion) was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg. The plight of Irish and Greek lenders, which were bleeding cash in 2010, spread to Spain and Portugal last year.
Beijing hints at bond attack on Japan 9/19
It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much,” he said. It is unclear whether he was speaking with the full backing of the Politburo or whether sales of Japanese debt would do much damage.
Fed's Bullard says QE3 was launched too soon (Recent)
James Bullard, president of the St. Louis Fed, also told Reuters that he is sufficiently concerned about the risk of future inflation that he backs a controversial proposal by congressional Republicans for the Fed to return to having only a single mandate: preventing inflation.
Doubts plague Europe's pledge for banking union 9/18
"Originally the idea of a banking union was to have deposit guarantees to stop the outflow of money from Spain," said Sharon Bowles, who chairs the European Parliament's influential economic and monetary affairs committee.
"But they are shying away from mutualisation and all you are left with is supervision, which if left on its own would have more drawbacks than benefits. It could split the (EU) single market."
Merkel Caught In The Middle Between The Bundesbank And The ECB (Recent)
Seehofer later confirmed that “this is the only issue which we interpret somewhat differently than in Berlin”, adding that it was nonsensical for the Court to cap Germany’s liability at €190bn only for “it to be suddenly increased by many multiples through other means”.
8,786,049: Yet Another Record for Americans Collecting Disability 9/17
According to the Bureau of Labor Statistics (BLS), a record 88,921,000 Americans were “not in the labor force” in August. These were Americans who were at least 16 years old, who were not in the military or in an institution such as a prison or a nursing home, and who did not have a job and had not actively sought one in the last four weeks.
CME says it won't cancel oil trades made during plunge 9/17
The entire crude complex on CME Globex including crude oil, RBOB, gasoline and heating oil, “saw a coordinated sell-off of a prolonged duration of 30-minutes.” the spokesman said.
NYMEX crude oil futures suddenly began to fall around $4 per barrel during mid-afternoon trading to a low of $94.65, after trading at a session high of $99.52.
Bond-buying plan will hurt risk asset 9/17
Mr Draghi has promised to remove the so-called tail risk in markets, allowing investors to focus more on normal asset class correlations, and valuation anomalies than on preserving capital.
The single-minded emphasis on rapid fiscal restraint has created an unsustainable, pro-cyclical austerity zone. It is undermining weak sovereign and bank funding and solvency, and substituting national central banks, notably the Bundesbank, for private investors in financing regional capital flow imbalances, especially deposit flight from the periphery. Political sparks are flying in Germany.
Yield Vanishes, Inflation Lurks 9/15
Current ultra-low yields don't just make it tough to earn income. They also heighten duration risk, or the vulnerability of bond prices to any rise in interest rates. Jeffrey Rosenberg, BlackRock's chief fixed-income investment strategist, said such interest-rate sensitivity is at record highs for many types of bonds, such that even a modest rate uptick could negate core fixed-income returns for the rest of this year.
"There are growing risks to some corporate credits," wrote Thomas Tzitzouris of Strategas Research Partners last week. "Investors now have to contend with historically high average durations, and thus a higher overall sensitivity to both spread and yield increases [which] will make it even harder to reach for yield without adding more and more risk."
Thus far policies have focused on easing credit conditions so that banks will lend. But can you successfully recapitalize an overleveraged economy with more leverage? A bankrupt company does not take on more debt to recapitalize, it converts debt into equity.
The Most Important Market No One Is Watching (about a week behind, but nice)
The 10-year futures ("TY") is what you trade when you need to hedge interest rate risk such as mortgage convexity hedging, the contract ("US") is what you trade when you want to speculate.
Operation Twist was balance sheet neutral and focused on the long end of the curve, but presumably QE III will expand the balance sheet. This is where it gets tricky for Bernanke. Unlike Operation Twist, the QE III paradox is that the Fed will be attempting to lower interest rates while making them more negative by engineering higher inflation; i.e., they will be raising the value of bonds while making them worth less.
Bernanke would tell you that QE has been successful in lowering interest rates, but think about it. The 10-year yield didn’t fall toward 1.50% until after QE II ended. On June 30, 2011 the 10-year was at 3.15%. It wasn’t until he balked at more QE and blew up the risk asset reflation correlation trade did bonds catch the bid. You may also recall that when they launched QE II in November 2010 the 10-year was at 2.50% and over the next four months rose over 100bps as the curve steepened on the inflation discount.
QE3 Bailout Fraud Explained with Wine (Recent Enough To Ponder)
Mortgage securitization for Dummies? Not exactly.
However, the diagram featured in this post - a tipped wine bottle floating above an inverted pyramid of wine glasses - really simplifies the migraine-inducing terminology and key concepts of mortgage securitization.
Fraud, piled on-top of Collusion and Corruption (Wall Street Casino Cheat Sheet)
Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.
The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.
FedEx’s forecasts are closely watched for signals of future economic health. Its results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business. Its rival U.P.S. said in July that it expected the global economy to get worse before it began to improve. U.P.S. also cut its earnings forecast.
Deposit Flight From Europe Banks Eroding Common Currency (Recent)
A total of 326 billion euros ($425 billion) was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg. The plight of Irish and Greek lenders, which were bleeding cash in 2010, spread to Spain and Portugal last year.
Beijing hints at bond attack on Japan 9/19
It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much,” he said. It is unclear whether he was speaking with the full backing of the Politburo or whether sales of Japanese debt would do much damage.
Fed's Bullard says QE3 was launched too soon (Recent)
James Bullard, president of the St. Louis Fed, also told Reuters that he is sufficiently concerned about the risk of future inflation that he backs a controversial proposal by congressional Republicans for the Fed to return to having only a single mandate: preventing inflation.
Doubts plague Europe's pledge for banking union 9/18
"Originally the idea of a banking union was to have deposit guarantees to stop the outflow of money from Spain," said Sharon Bowles, who chairs the European Parliament's influential economic and monetary affairs committee.
"But they are shying away from mutualisation and all you are left with is supervision, which if left on its own would have more drawbacks than benefits. It could split the (EU) single market."
Merkel Caught In The Middle Between The Bundesbank And The ECB (Recent)
Seehofer later confirmed that “this is the only issue which we interpret somewhat differently than in Berlin”, adding that it was nonsensical for the Court to cap Germany’s liability at €190bn only for “it to be suddenly increased by many multiples through other means”.
8,786,049: Yet Another Record for Americans Collecting Disability 9/17
According to the Bureau of Labor Statistics (BLS), a record 88,921,000 Americans were “not in the labor force” in August. These were Americans who were at least 16 years old, who were not in the military or in an institution such as a prison or a nursing home, and who did not have a job and had not actively sought one in the last four weeks.
CME says it won't cancel oil trades made during plunge 9/17
The entire crude complex on CME Globex including crude oil, RBOB, gasoline and heating oil, “saw a coordinated sell-off of a prolonged duration of 30-minutes.” the spokesman said.
NYMEX crude oil futures suddenly began to fall around $4 per barrel during mid-afternoon trading to a low of $94.65, after trading at a session high of $99.52.
Bond-buying plan will hurt risk asset 9/17
Mr Draghi has promised to remove the so-called tail risk in markets, allowing investors to focus more on normal asset class correlations, and valuation anomalies than on preserving capital.
The single-minded emphasis on rapid fiscal restraint has created an unsustainable, pro-cyclical austerity zone. It is undermining weak sovereign and bank funding and solvency, and substituting national central banks, notably the Bundesbank, for private investors in financing regional capital flow imbalances, especially deposit flight from the periphery. Political sparks are flying in Germany.
Yield Vanishes, Inflation Lurks 9/15
Current ultra-low yields don't just make it tough to earn income. They also heighten duration risk, or the vulnerability of bond prices to any rise in interest rates. Jeffrey Rosenberg, BlackRock's chief fixed-income investment strategist, said such interest-rate sensitivity is at record highs for many types of bonds, such that even a modest rate uptick could negate core fixed-income returns for the rest of this year.
"There are growing risks to some corporate credits," wrote Thomas Tzitzouris of Strategas Research Partners last week. "Investors now have to contend with historically high average durations, and thus a higher overall sensitivity to both spread and yield increases [which] will make it even harder to reach for yield without adding more and more risk."
Thus far policies have focused on easing credit conditions so that banks will lend. But can you successfully recapitalize an overleveraged economy with more leverage? A bankrupt company does not take on more debt to recapitalize, it converts debt into equity.
The 10-year futures ("TY") is what you trade when you need to hedge interest rate risk such as mortgage convexity hedging, the contract ("US") is what you trade when you want to speculate.
Operation Twist was balance sheet neutral and focused on the long end of the curve, but presumably QE III will expand the balance sheet. This is where it gets tricky for Bernanke. Unlike Operation Twist, the QE III paradox is that the Fed will be attempting to lower interest rates while making them more negative by engineering higher inflation; i.e., they will be raising the value of bonds while making them worth less.
Bernanke would tell you that QE has been successful in lowering interest rates, but think about it. The 10-year yield didn’t fall toward 1.50% until after QE II ended. On June 30, 2011 the 10-year was at 3.15%. It wasn’t until he balked at more QE and blew up the risk asset reflation correlation trade did bonds catch the bid. You may also recall that when they launched QE II in November 2010 the 10-year was at 2.50% and over the next four months rose over 100bps as the curve steepened on the inflation discount.
QE3 Bailout Fraud Explained with Wine (Recent Enough To Ponder)
Mortgage securitization for Dummies? Not exactly.
However, the diagram featured in this post - a tipped wine bottle floating above an inverted pyramid of wine glasses - really simplifies the migraine-inducing terminology and key concepts of mortgage securitization.
Fraud, piled on-top of Collusion and Corruption (Wall Street Casino Cheat Sheet)
Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.
The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.
- Bernanke: "Fuck it, let's solve this mess in the same way that we got into this ..."
“I strongly opposed purchasing additional agency mortgage- backed securities,” Lacker said in a statement released today by the Richmond Fed. “Such purchases, as compared to purchases of an equivalent amount of U.S. Treasury securities, distort investment allocations and raise interest rates for other borrowers.” Lacker said that “channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve.”
Liquidity Freeze not going to thaw for decades (??)
No matter which way you examine it, money simply isn't moving about within the United States economy. What this essentially means is that the Federal Reserve's efforts to continue decreasing the yield on assets currently will not transcribe into higher levels of consumption and business activity. Sure, individuals can take out loans at historically low rates, but according to the past few years of data, they are actually less likely to move that money back through the economy as time progresses. This decrease in velocity signals that the current quantitative easing program is more than likely not going to fix the current economic situation.
QE3 Will Crash Economy w/ Double-Dip Slammer (yah)
The Federal Reserve’s “money printing,” Hassiepen said, has not “really contributed to the improvement in the general economy” so far.
Instead, all it has done is increase inflation and the cost structure in the general economy, as will the new round of QE just announced Thursday. “We actually think this is going to cause unemployment, not employment,” he said. the Fed’s policy will reduce household’s disposable income and raising costs will also “lead companies to lay off people,” he said.
TREASURIES-Prices plunge as Fed pushes buyers out of bonds 9/14
"There may be a little bit of disappointment that they are not doing Treasuries, but the Fed is still taking out virtually all the long-end duration being added by the Treasury for the rest of 2012," Schumacher said.
"I would think they will consider doing full-blown QE in Treasuries but not until Operation Twist is done," he added. Treasuries also weakened as bond investors feared the new stimulus would increase inflationary pressures, which would reduce the value of the debt.
Inflation expectations as measured by breakeven rates on Treasury Inflation-Protected Securities (TIPS) have risen sharply on the announcement. The breakeven rate on five-year TIPS jumped to 2.31 percent on Friday, up from 2.09 percent on Wednesday, before the Fed statement.
Counterparties: The Fed’s bottomless punch bowl (Recent)
The Fed wants to lower yields on mortgage-backed securities and thereby lower mortgage rates for consumers. This is pretty darn close to “Uncle Ben’s Crazy Housing Sale” that Ezra Klein called for back in July. As the NYT’s Binyamin Appelbaum notes, QE3 has an open-ended timeline and variable targets: the Fed will buy mortgage-backed securities “until the outlook for the labor market improves”.
The Fed says that its “highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens”. This, as Felix notes, is a big departure:
The job of monetary policy, in the famous words of Fed chairman William McChesney Martin, is “to take away the punch bowl just as the party gets going”. The Fed, here, is essentially disowning Martin, and saying that they’ll keep refilling that punch bowl with high-grade hooch even after the party is getting going.
Marc Faber: If I Were Bernanke, I Would Resign (Recent)
"This unlimited QE (quantitative easing) , buying mortgage-backed securities (MBS) and continuing operation twist has the implication of simply having asset prices go up and the money flows down to the Mayfair economy," Faber said.
A Mayfair economy is one which benefits the wealthier and better off in society. Faber said this latest round of QE would not help the "man on the street".
"QE helps rich people whose asset prices go up and whose net worth then increases but it doesn't flow to the man on the street who is faced with higher costs of living with price rises. You just have a small economy that is booming but the majority of the economy is damaged by QE," he said.
Shadow Bankers Vanishing Leave China Victims Seeing Scams (Recent)
The shadow bankers are now disappearing, committing suicide or reneging on agreements, leaving thousands of victims in their wake. In the first half of the year, more than 58,000 lawsuits involving disputes over 28.4 billion yuan in private lending were filed in Zhejiang province, where Wenzhou is located, up 27 percent from the same period in 2011 and the most in five years, according to the provincial supreme court. One-fifth of the cases were in Wenzhou, where authorities have set up a special court to handle the surge.
Private-lending victims nationwide filed more than 600,000 lawsuits valued at 110 billion yuan in 2011, an increase of 38 percent from the previous year. In the first half of 2012, the number of filings rose 25 percent to 376,000, according to People’s Court, a newspaper run by China’s Supreme Court.
Plans for EU referendum drawn up for Britain 9/14
Mr Barroso's call for a European federation has triggered fresh calls for a popular British vote on the EU, which would be the first referendum on Europe since the 1975 plebiscite on the "Common Market". "It is clear now what the EU is trying to do. The question for David Cameron is does he want to be part of it and when is he going to give us a say in a referendum."
Mats Persson, the director of Open Europe, said: "His call for a federal Europe clashes head on with the increasingly sceptical UK public and political class." Nigel Farage, leader of Ukip accused Mr Barroso of supporting an "emerging, creeping European dictatorship".
ADB chief Kuroda scolds Europe over sovereign debt crisis (Recent)
Kuroda also warned that the crisis has led many European banks to change their business strategies and withdraw funds from Asian markets, in a move that has saddled some companies in the region with rising borrowing costs.
Kuroda also said the BOJ should play a greater role in stemming the sharp appreciation of the yen, which has hit the economy by slowing exports.
"A vicious cycle has continued, in which the yen's rise leads to deflation," he said. "Market interventions work only temporarily. If we want to maintain their effect, then we need support" from a central bank aggressively easing policy.
Karlsruhe weiß, wo Europas Hammer der Macht hängt 9/13
“The Court watches over German money and the issue of democratic legitimacy. It is clear that the ECB’s decision has in principle opened the way into a bottomless transfer union… This must and will result in yet more legal challenges. It is equally clear that the legitimacy of the path towards the further deepening of European integration is poorly grounded.”
Debt crisis: as it happened 9/12
[The ruling] makes topping up ESM more difficult: The current lending capacity of the ESM, €500bn, is not nearly enough to take, say, Italy and Spain off the market, meaning that the cap could prove a real obstacle for large-scale Eurozone bailouts down the line. However, the impact of this could be offset by last week’s ECB decision to buy unlimited short-term government debt – via the OMT – which reduces reliance on the ESM. It is also worth considering that a situation where the ESM needed to be topped up, would mean the crisis had significantly worsened once again and an extra layer of parliamentary approval may be the least of the eurozone's worries.
EU prime ministers unfriend IMF on Facebooks (Recent Concepts)
The IMF's list of conditions, Orban said, "contains everything that is not inHungary's The EU's (taxpayer) interests." (But nice for investors that are in on the corruption and fraud related to bailouts) ...
Orban's announcement took the markets by surprise, in part because just a day earlier he had said loan negotiations with the IMF and the European Union were going according to schedule and both sides were willing to reach an agreement.
Highlights From Census Report on Income, Poverty and Health Insurance 9/12
The lost decade continues. Median household income, adjusted for inflation, fell 1.5% in 2011, to $50,054. That’s 8.1% lower than before the recession and 8.9% lower than in 1999.
Inequality rose. Income inequality, as measured by the Gini index, rose 1.6% in 2011 from 2010, the first annual increase since 1993.
German Court Backs EU Play Money Game -- Setting Limit To Bazooka's Range 9/12
The Federal Constitutional Court in Karlsruhe dismissed motions that sought to block the European Stability Mechanism, while ruling Germany’s 190 billion-euro contribution can’t be increased without legislative approval. The court said Germany can ratify the ESM if it includes binding caveats that it won’t be forced to assume higher liabilities without its consent.
“No permanent mechanisms may be created under international treaties which are tantamount to accepting liability for decisions by the will of other states, above all if they entail consequences which are hard to calculate,” the eight judges wrote.
The ESM treaty must be interpreted as banning the fund from borrowing from the ECB or depositing bonds as collateral, the court said, because EU law doesn’t permit the central bank to buy government bonds on the secondary market with the intention of financing EU member state budgets independently of the capital markets.
Moody’s Says U.S. Faces Aaa Cut Without Budget Deal in 2013 (Who cares)
The U.S. economy will probably tip into recession next year if lawmakers and President Barack Obama can’t break an impasse over the federal budget and if George W. Bush-era tax cuts expire in what’s become known as the “fiscal cliff,” according to a report by the nonpartisan Congressional Budget Office published on Aug. 22. The rating would likely be cut to Aa1 from Aaa if an agreement on the debt ratio isn’t reached, Moody’s said in a statement today.
Spain digs in its heels over ECB's bailout conditions 9/12
The Rajoy government has already raised income tax and value-added tax and pushed through billions of euros of cuts to public services including education and health. However, the PM said that pensions would not be cut in the 2013 budget.
Speaking ahead of a government review of Spanish lenders, Mr Rajoy also questioned whether or not the country's banking industry actually needed the bailout of up to €100bn (£80bn) agreed last year as it tried to cope with massive debt write-offs following a property market collapse. (Bailouts are bonus mechanisms, so obviously the global banks do need extra cash).
As for when the dam may break, Mr O'Neill reckons that will come in mid-October, when the Spanish government has a "demanding market funding schedule".
Spain's crisis fuels Catalan independence fervour 9/11
A poll by the regional government in July showed for the first time that more than half of Catalonia's population favours independence. Economists calculate that Catalans pay 12 billion euros more in taxes per year to Madrid than they receive back for services like schools and hospitals. Many Catalans say the figure - difficult to calculate because of a complex system of transfers - is even higher, up to 16 billion.
"It's like a marriage you can't put up with any more," said Jauma Turra, a government worker who said his friends from outside the region who now live in Catalonia are increasingly sympathetic toward autonomy as the downturn drags on. "A lot of people who were not into independence are more and more into it now," said Elvira Farre, a retired secretary from Barcelona. "They are being driven into it by their feelings but also by their wallets."
European Stocks Fall Amid Concern ECB Bond Plan May Be Derailed 9/11
A policy of fiscal retrenchment “is pushing Europe into a deeper and longer depression,” Soros said during a speech in Berlin yesterday. “The German public doesn’t yet feel it and doesn’t quite believe it, but it’s all too real in the periphery and it will reach Germany in the next six months or so. My message is that the looming depression is largely self-inflicted and the nightmare can be escaped.”
Euro Bailout Fund Faces New Court Challenge in Germany 9/10
The CSU politician submitted a new petition over the weekend to the Karlsruhe court to delay its ruling on the ESM. Gauweiler has based the petition on the decision announced on Thursday by the European Central Bank (ECB) that it would purchase unlimited quantities of sovereign bonds from crisis-plagued euro-zone member states. Gauweiler argues in his petition that the ECB's step has "created an entirely new situation" and that "almost all of the discussion that has taken place so far is now invalid". Through the bond-buying program, he argues, the ECB itself will become an "unlimited ultra- and hyper- bailout fund" -- one that national parliaments will have no control over.
Now Gauweiler is demanding that the court reject the ratification of the ESM treaty until the ECB revises its decision. He is arguing that if the court is not able to decide on the emergency petition that it should delay the ruling on the ESM that has been scheduled for Wednesday.
Japan GDP revision raises recession fears 9/10
On an annualised basis, second-quarter growth was revised to 0.7 per cent, from the 1.4 per cent expansion reported last month. First-quarter growth was 5.3 per cent on an annualised basis, lifted by a resurgence of consumer spending and reconstruction efforts in the country’s tsunami-hit northeast.
Meanwhile, separate government data on Monday showed that exports fell 7.4 per cent in July from a year earlier, pushing down Japan’s current account surplus more than 40 per cent.
“This second GDP estimate is definitely downbeat,” said Masamichi Adachi, senior economist at JPMorgan, who is now preparing to publish a note entitled ‘Recession or stagnation? That is the question’.
The persistence of low interest rates 9/10
Japan offers a cautionary tale of how deflation, low growth and uncertainty can drive yields on interest rates to extraordinarily low levels. Over the last 20 years, Japan has experienced weak growth peppered with bouts of falling prices. Borrowing by Japan's government has soared and, relative to the size of its economy, its government is now the industrialised world's most indebted. Yet ten-year Japanese bond yields, at just 0.8%, are less than half US levels and are lower than in any country other than Switzerland.
The IMF's list of conditions, Orban said, "contains everything that is not in
Orban's announcement took the markets by surprise, in part because just a day earlier he had said loan negotiations with the IMF and the European Union were going according to schedule and both sides were willing to reach an agreement.
Highlights From Census Report on Income, Poverty and Health Insurance 9/12
The lost decade continues. Median household income, adjusted for inflation, fell 1.5% in 2011, to $50,054. That’s 8.1% lower than before the recession and 8.9% lower than in 1999.
Inequality rose. Income inequality, as measured by the Gini index, rose 1.6% in 2011 from 2010, the first annual increase since 1993.
German Court Backs EU Play Money Game -- Setting Limit To Bazooka's Range 9/12
The Federal Constitutional Court in Karlsruhe dismissed motions that sought to block the European Stability Mechanism, while ruling Germany’s 190 billion-euro contribution can’t be increased without legislative approval. The court said Germany can ratify the ESM if it includes binding caveats that it won’t be forced to assume higher liabilities without its consent.
“No permanent mechanisms may be created under international treaties which are tantamount to accepting liability for decisions by the will of other states, above all if they entail consequences which are hard to calculate,” the eight judges wrote.
The ESM treaty must be interpreted as banning the fund from borrowing from the ECB or depositing bonds as collateral, the court said, because EU law doesn’t permit the central bank to buy government bonds on the secondary market with the intention of financing EU member state budgets independently of the capital markets.
Moody’s Says U.S. Faces Aaa Cut Without Budget Deal in 2013 (Who cares)
The U.S. economy will probably tip into recession next year if lawmakers and President Barack Obama can’t break an impasse over the federal budget and if George W. Bush-era tax cuts expire in what’s become known as the “fiscal cliff,” according to a report by the nonpartisan Congressional Budget Office published on Aug. 22. The rating would likely be cut to Aa1 from Aaa if an agreement on the debt ratio isn’t reached, Moody’s said in a statement today.
Spain digs in its heels over ECB's bailout conditions 9/12
The Rajoy government has already raised income tax and value-added tax and pushed through billions of euros of cuts to public services including education and health. However, the PM said that pensions would not be cut in the 2013 budget.
Speaking ahead of a government review of Spanish lenders, Mr Rajoy also questioned whether or not the country's banking industry actually needed the bailout of up to €100bn (£80bn) agreed last year as it tried to cope with massive debt write-offs following a property market collapse. (Bailouts are bonus mechanisms, so obviously the global banks do need extra cash).
As for when the dam may break, Mr O'Neill reckons that will come in mid-October, when the Spanish government has a "demanding market funding schedule".
Spain's crisis fuels Catalan independence fervour 9/11
A poll by the regional government in July showed for the first time that more than half of Catalonia's population favours independence. Economists calculate that Catalans pay 12 billion euros more in taxes per year to Madrid than they receive back for services like schools and hospitals. Many Catalans say the figure - difficult to calculate because of a complex system of transfers - is even higher, up to 16 billion.
"It's like a marriage you can't put up with any more," said Jauma Turra, a government worker who said his friends from outside the region who now live in Catalonia are increasingly sympathetic toward autonomy as the downturn drags on. "A lot of people who were not into independence are more and more into it now," said Elvira Farre, a retired secretary from Barcelona. "They are being driven into it by their feelings but also by their wallets."
European Stocks Fall Amid Concern ECB Bond Plan May Be Derailed 9/11
A policy of fiscal retrenchment “is pushing Europe into a deeper and longer depression,” Soros said during a speech in Berlin yesterday. “The German public doesn’t yet feel it and doesn’t quite believe it, but it’s all too real in the periphery and it will reach Germany in the next six months or so. My message is that the looming depression is largely self-inflicted and the nightmare can be escaped.”
Euro Bailout Fund Faces New Court Challenge in Germany 9/10
The CSU politician submitted a new petition over the weekend to the Karlsruhe court to delay its ruling on the ESM. Gauweiler has based the petition on the decision announced on Thursday by the European Central Bank (ECB) that it would purchase unlimited quantities of sovereign bonds from crisis-plagued euro-zone member states. Gauweiler argues in his petition that the ECB's step has "created an entirely new situation" and that "almost all of the discussion that has taken place so far is now invalid". Through the bond-buying program, he argues, the ECB itself will become an "unlimited ultra- and hyper- bailout fund" -- one that national parliaments will have no control over.
Now Gauweiler is demanding that the court reject the ratification of the ESM treaty until the ECB revises its decision. He is arguing that if the court is not able to decide on the emergency petition that it should delay the ruling on the ESM that has been scheduled for Wednesday.
Japan GDP revision raises recession fears 9/10
On an annualised basis, second-quarter growth was revised to 0.7 per cent, from the 1.4 per cent expansion reported last month. First-quarter growth was 5.3 per cent on an annualised basis, lifted by a resurgence of consumer spending and reconstruction efforts in the country’s tsunami-hit northeast.
Meanwhile, separate government data on Monday showed that exports fell 7.4 per cent in July from a year earlier, pushing down Japan’s current account surplus more than 40 per cent.
“This second GDP estimate is definitely downbeat,” said Masamichi Adachi, senior economist at JPMorgan, who is now preparing to publish a note entitled ‘Recession or stagnation? That is the question’.
Stocks vs. bonds: The Japanese argument (Of Related Interest)
It begs the question: How did Japanese stocks fare the past 10 years, relative to Japanese sovereign debt?
It's not promising at all: Neither did well at all over the long-haul over the past 10 years.
The persistence of low interest rates 9/10
Japan offers a cautionary tale of how deflation, low growth and uncertainty can drive yields on interest rates to extraordinarily low levels. Over the last 20 years, Japan has experienced weak growth peppered with bouts of falling prices. Borrowing by Japan's government has soared and, relative to the size of its economy, its government is now the industrialised world's most indebted. Yet ten-year Japanese bond yields, at just 0.8%, are less than half US levels and are lower than in any country other than Switzerland.
Why Not Raise Taxes Instead of Interest Rates to Reduce the Deficit? (Recent Concept)
Top 1% Investing in American Debt, making trillions 9/10
"The cost of that," Davies explained, if we just focus on the interest on the debt "is $200 billion a year right now....[that's what] we have to pay in taxes that doesn't go to services, we just pour it down a hole. [And] that will rise to $1 trillion a year a decade from now," Davies said. So if it isn't bad enough that $0.10 of every dollar in taxes is going to pay for interest on the national debt, in 10 years, according to Davies and Harrington's calculations, $0.30 of every dollar will be going "down the hole" (or more realistically, into the pockets of wealthy people that are investing in the deficit through Treasury notes).
Consumer credit falls unexpectedly in July 9/10
Consumer credit shrank by $3.28 billion in July, the Federal Reserve said on Monday. That was well below the $9.1 billion advance Wall Street economists had forecast in a Reuters poll.
In July, revolving credit, which includes credit cards, shrank by $4.82 billion. "(The data) looks consistent with the lackluster gains in consumer spending reported elsewhere," JPMorgan economist David Silver said in a note to clients.
Fed Stuck at Zero Into 2015 Seen in Swaps 9/9
Bond strategists and economist have reduced their yield forecasts. The median of more than 70 estimates in a Bloomberg survey published Aug. 9 found that they see 10-year yields ending this year at 1.65 percent and 2.38 percent in 2013. In the prior monthly poll they saw 1.9 percent and 2.7 percent.
Central bank action may be losing some of its punch. Currency trades designed to benefit from expectations of stronger growth as the Fed eases are instead losing money. The so-called carry trade, where investors borrow in lower- rate currencies such as dollars to buy higher-yielding ones, has fallen 2.8 percent from a four-month high on Aug. 9, the UBS AG V24 Carry Index shows.
German Court Holds Bailout Fund's Fate 9/9
Last year, the court approved the euro zone's temporary bailout fund, the European Financial Stability Facility, rejecting complaints that it undermined German democracy and the no-bailout clause of the European Union treaty. But the judges forced the government to seek parliamentary approval for every new aid package.
Many legal analysts say the court might once again strengthen parliaments' rights as its condition for allowing the ESM to proceed. That could potentially make new bailout deals in Europe even trickier politically for Chancellor Angela Merkel at home, where she faces growing opposition to bailouts within her governing coalition.
US debt tops $16 trillion: So who do we owe most of that money to? (Recent)
Fully two-thirds of the national debt is owed to the U.S. government, American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel. China, it turns out, holds less than 8 percent of the money our government has borrowed over the years.
“It is true that China is the largest foreign owner of our debt,” said Josh Gordon, policy director of the Concord Coalition, a Virginia-based nonprofit that advocates getting the nation’s debt under control. “But the vast majority of our debt is held by us.” ==> (Baby Boomers)
==> Inside the U.S., private investors hold nearly $1 trillion in federal debt, while mutual funds, insurance companies and state and local governments hold nearly double that amount (all of whom benefit from debt in the form of future interest streams ... and hence, all the global bailouts are simply methods for taxpayers to provide interest payments to bond holders ...
==> Recall post from several weeks ago: "The floating-rate notes would be the first new U.S. government debt security since Treasury Inflation-Protected Securities, known as TIPS, were introduced in 1997. With a budget deficit estimated at $1.21 trillion this year, the Treasury needs to expand its base of investors, and the notes may appeal to those who are seeking to protect themselves from a possible increase in interest rates or faster inflation stemming from the Federal Reserve’s unprecedented stimulus."
White House to miss deadline for report on 'fiscal cliff' budget cuts (Recent)
Under the terms of the Sequestration Transparency Act signed in August, President Obama was to tell Congress by Friday how the administration plans to implement the $109 billion in automatic cuts mandated by the Budget Control Act.
Sequestration clock ticks louder (Recent)
“What is holding us up right now is the Republican refusal to have the top 2 percent [of earners] pay their fair share,” Zients said.
Despite Republicans’ efforts to blame Democrats and vice versa, sequestration is a bipartisan problem. It is part of the Budget Control Act of 2011, the same law that created the Joint Select Committee on Deficit Reduction. Sequestration was meant to be a last-ditch measure if the so-called supercommittee members could not agree on $1.2 trillion of what would have been targeted and deliberately planned cuts over the next 10 years.
China slowdown turns off Swan's money tap 9/8
It's easy to be beguiled by the drama of a collapse that might always be reversed. The Swiss investor Marc Faber (known as Dr Doom) identifies four mega bubbles in the last four decades, the biggest of which is the tenfold increase in the price of iron ore. He is able to produce a frightening graph making this year's collapse in the iron ore price look like the earlier collapses in the price of gold, the Nikkei and the Nasdaq.
China’s steel mills braced for slowdown (Recent)
Steel traders are also finding themselves in a desperate position. “We have to try every possible means to sell [our steel] even if we lose money. We will lose more if we don’t sell,” says a trader with a large steel trading company in Henan province.
Another reason for the slump in China’s steel markets is the unique structure of China’s state-dominated steel sector. This year Chinese mills have maintained high levels of steel production – even when running at a loss – rather than shutting down their furnaces, because many state-owned mills are incentivised to maximise revenues instead of profit.
Miners forced to take discounted prices for iron ore (Recent)
The Chinese government has ordered all steel mills in the country producing less than one million tonnes annually to close in an effort to shut unprofitable capacity.
The prospect of declining Chinese demand has hit Australian miners hard, as they have become increasingly reliant on Chinese state-owned traders to sell stock at a time when the miners are struggling to find buyers for their inventory. The AFR reported that Rio Tinto now sends nearly a third of its iron ore through Sinosteel to stockpiles in China.
Schnitzer Steel to lay off 300 people (Recent)
Schnitzer Steel Industries Inc, which makes recycled ferrous metal products, said it will reduce its workforce by about 7 percent, as falling prices hit profits.
The company, which will cut 300 jobs, expects to break even on an adjusted basis, excluding restructuring charges of about 12 cents per share, in the current quarter.
Schnitzer's gloomy forecast comes after Dahlman Rose & Co downgraded the U.S. steel sector on the belief that metal and scrap prices will decline.
Steelmakers worldwide are facing plummeting demand in Europe and China, the world's biggest steel consumer, pressurizing prices.
U.S. Treasurys Advance; TIPS Sold at Record Negative Yield (Not Too Long Ago)
"This made TIPS all the more attractive," said Brown Advisory's Mr. Graff. He prefers TIPS dating five years and out given the fact that the central bank's unprecedented easing efforts today complicate its ability to manage inflation down the line.
Conveniently, the U.S. had a $14 billion five-year TIPS sale scheduled for Thursday afternoon. The auction drew the strongest demand seen in months as buyers accepted a record-low negative 1.286% yield, in hopes that future inflation will increase the compensation over time. ==> (-1.286%)
UBS Strategist Golub: 'Earnings Recession' Might Hurt US Stocks (Recent)
Earnings at the Standard & Poor’s 500 Index’s non-financial companies fell in the second quarter and may drop again in the third. The result would be the first back-to-back declines since 2009, according to data that Golub presented Tuesday in a report.
“It’s very hard for the market to move forward when earnings aren’t progressing,” the New York-based strategist wrote in an e-mail.
The S&P 500 is now trading at 13.3 time its forward earnings estimates, meaning investors are willing to pay just over $13 for a dollar of expected earnings from S&P 500 companies.
Although that is below a median forward price-to-earnings ratio of 13.7 since 1976 - according to Morgan Stanley - it is close to the upper end of the range in the low-growth post crisis era of the last 5 years. During that time there has been a median price-to-earnings ratio of 12.9, according to Thomson Reuters data.
In fact, the recent price-to-earnings high was 13.5 in February 2011, just above current levels. If you are of the view that little has changed since then, there is no reason for the ratio to go much higher. That combined with a slowing earnings picture inevitably means lower prices.
Global Economy Faces 'Perfect Storm' (9/7)
"History suggests that whenever (there is) a crisis with too much private debt first and public debt second you have a painful process of deleveraging," said the famously apocalyptic New York University professor, a glowering fixture at such international talk-shops.
OECD Slashes UK Economic Outlook By 0.7% (Recent)
The Paris-based think tank OECD added that the global economy is slowing, with key European countries entering a recession that is likely to spread worldwide.
However the economic outlook for the UK has been slashed more than any other country in the G7 bloc, prompting fears that Britain could enter another recession, reported Sky News.
The outlook is bleak in comparison to the forecast made in May, when it predicted growth of 0.5%. The UK is predicted to be the worst performing G7 nation apart from Italy in the year.
Generation lost? (Recent)
Spain's youth unemployment rate is a staggering 53 per cent, the highest in the 17-member eurozone. Among the jobless are Valiente's boyfriend, a qualified lawyer who has never had work in his field, and two of her sisters: one a graphic designer who has never worked and the other a psychologist who recently lost her job. All of this in a middle-class, educated family - Valiente's father is a doctor.
Weak Jobs Report Shows Obama's 'Long Road' Ahead 9/7
The unemployment rate fell to 8.1 percent from 8.3 percent, but that was only because 368,000 people left the labor force. The share of working-age people who are either working or looking for work—known as the labor-force participation rate—fell to its lowest level since September 1981.
White House consults experts as it mulls tapping oil reserve 9/6
"What's clear right now is there's a shortage of gasoline and that oil product markets are tight," said Verleger, who was not attending Thursday's meeting.
Verleger said that tapping SPR crude reserves now would do little to solve a problem of falling U.S. gasoline supplies, which last week dipped below 200 million barrels, or around 10 million barrels lower than the same week of 2011.
U.S. refineries might not quickly ramp up making gasoline even if more crude were offered from the SPR, he said.
Other ideas beyond tapping reserves would also likely be discussed: give drivers a holiday from the federal fuel taxes, which could push gasoline dramatically lower for a while. In 2008 Senator John McCain, who was then running against Barack Obama for the presidency, suggested a suspension of the federal gasoline tax for the summer months, but the idea faded.
Zero Bund Yields No Deterrent to Euro Breakup Bets (Recent of Interest)
“If you buy German assets denominated in euros today, you could find yourself holding an asset in a superior currency in a breakup scenario,” said Jamie Stuttard, who helps oversee $1.6 trillion as head of international bonds at Fidelity Management and Research Co. in London. “There isn’t a lot of value in German government bonds at these yield levels, and the single best reason to own German assets is re-denomination risk.”
OMT! 9/6
Draghi pointed to spreads to German debt – and interestingly, he did concede to the FT’s Michael Steen that Bunds currently contain a break-up premium – and bonds’ bid-ask spreads, a measure of liquidity. (The bigger the difference between a bond’s bid price and offer price, the more illiquid a bond is. And euro break-up risk is liquidity crisis risk writ large).
This is a point we’ve tried to make several times in the past month, ever since Draghi began mentioning convertibility risk. The risk’s Protean nature means the ECB should retain some discretion in how it repairs policy. The collateral rules are inseparable from the OMT itself, for instance. No collateral means liquidity crisis means euro exit.
Draghi unveils ECB bond-buying plan 9/6
By focusing on the short end of the market, the ECB action could lead to a sharp steepening of the yield curve in financially stressed euro-zone countries that could aggravate attempts to boost credit flow from the core of the region, said Ed Lalanne, senior strategist at Macro Risk Advisors in New York.
“The ECB’s insistence to sterilize the bond purchases means the ECB can only buy bonds as long as demand for euro T-bills remains,” Zangana said in emailed comments. That’s because the ECB absorbs the extra liquidity put into the financial system by its bond purchases by selling T-bills.
“If demand dries up, as it did [under the ECB’s previous bond-buying program] at the start of the year, then the bond purchases would be halted,” Zangana said. “In that sense, Draghi may be overreaching when he said the ECB would ‘backstop’ the monetary union.”
Baltic index down as capesize, panamax rates dip 9/6
"After last week's continued bearish sentiment we were hoping for some glimmers of positiveness this week. This is not the case and the (panamax) market in both hemispheres is continuing to drop like a rock," ship broker Fearnleys said in its weekly note.
"We see owners underbidding and waiting up to six days in order to even secure employment for their vessels. Some owners drop anchor waiting for cargoes to come."
The 29 Ugliest Charts In The World 9/5
Business Insider compiled 29 of the worst charts that got our attention. Many prelude further difficulty in Asia and Africa, while others document just how bad the European crisis is.
Warren attacks ‘rigged’ political, economic system 9/5
Companies boosted profits without hiring this spring 9/5
One reason productivity improved in the second quarter is hiring slowed to just 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter. U.S. employers added 163,000 jobs in July, the best month of hiring in five months. The unemployment rate edged up to 8.3%. Hiring probably won't accelerate from that level unless economic growth picks up or productivity slows, economists say.
Number Of PhD Recipients Using Food Stamps Surged During Recession 9/5
The number of PhD recipients on food stamps and other forms of welfare more than tripled between 2007 and 2010 to 33,655, according to an Urban Institute analysis cited by the Chronicle of Higher Education. The number of master's degree holders on food stamps and other forms of welfare nearly tripled during that same time period to 293,029, according to the same analysis.
The boost in PhD recipients receiving food stamps is just the latest indication of how Americans are struggling in a down economy. Overall, the number of Americans on food stamps rose 43 percent over the past three years to 46.3 million Americans as of February 2012, according to the Department of Agriculture.
Europe Outlook Dims as Bank Meets 9/5
Official data on retail sales were also poor, suggesting consumers remain cautious and aren't likely to drive an economic recovery. Volumes of sales in the currency area fell 0.2% on the month in July and slid 1.7% on the year, according to the European Union's statistics agency, Eurostat. Sales were notably weak in Germany and Spain.
Moody's threatens to slash EU's 'Aaa' credit rating 9/4
Though Britain is not in the euro, it is not immune to the turmoil as Europe is the country’s biggest export market and the UK banking sector has strong links with the continent.
Chris Scicluna, head of economic research at Daiwa Capital Markets Europe, said: ‘You would not want to rule out downgrades for all these member states in due course.’ A ratings downgrade could push up borrowing costs for the Government, businesses and households as lenders worry about getting their money back.
German division over euro bank regulation 9/4
Officials are developing plans for closer banking union as part of their response to the eurozone debt crisis. Michel Barnier, the EU’s finance commissioner, wants to place all 6,000 eurozone banks under the supervision of the ECB, taking power to restructure banks away from national regulators.
Germany’s stance on Mr Barnier’s plans is likely to have significant influence on their eventual adoption. About one-third of eurozone banks are German, including some local lenders that, while having just a handful of branches and assets, are linked to politically powerful national associations.
"The unemployment data is not really telling us the true story of how many people are underemployed," says Peter Cardillo, chief market economist at Rockwell Global Capital in New York. Food stamps are "a good indication of how the income of the workforce has stagnated and more and more people are applying for food stamps."
"The economy has fewer good jobs now than it did at the start of the 21st century," Annette Bernhardt, policy co-director at the NELP, said in a statement. "Indeed, it’s important to recognize that the U.S. labor market was already in trouble before the Great Recession, the result of 30 years of growing wage inequality and shrinking numbers of good jobs."
Citigroup agrees to $590 million subprime settlement (Recent)
“Citi blindsided its investors and shareholders by not disclosing that it had all of this off-balance sheet exposure to this debt,” said Janet Tavakoli, president of Tavakoli Structured Finance. “They were just stuffing junk into these CDOs.”
In the latest lawsuit, shareholders claimed that Citigroup repackaged securities that no one would purchase into new CDOs to hide its exposure to the securities. Tavakoli said that senior management at Citigroup should have been clued to the threat posed by their CDOs once HSBC began writing down billions of its securities in 2007.
Critics say these settlements, while significant in size, fall short of addressing the underlying problem of poor corporate governance.
U.S. Companies Brace for an Exit From the Euro by Greece (Recent)
Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain (9/3)
According to official statistics, 30,000 Spaniards registered to work in Britain in the last year, and analysts say that this figure would be many multiples higher if workers without documents were counted. That is a 25 percent increase from a year earlier.
“No doubt there is a little bit of panic,” said José GarcÃa Montalvo, an economist at Pompeu Fabra University in Barcelona. “The wealthy people have already taken their money out. Now it’s the professionals and midrange people who are moving their money to Germany and London. The mood is very, very bad.”
Moody’s Reduces Its Outlook for Europe’s Credit Rating September 3
Risks of a downgrade to the European Union’s sovereign debt rating come from a “deterioration in the creditworthiness of E.U. member states,” Moody’s said. “Additionally, a weakening of the commitment of the member states to the E.U. and changes to the E.U.’s fiscal framework that led to less conservative budget management would be credit negative.”
China manufacturers face fall in demand September 2
The weakness in consumer demand in Europe and the US has prompted retailers to delay orders and extend payment terms from 60 days to 90 days, putting more pressure on manufacturers in the city. Bernie Ting, chairman of the Hong Kong Toys Council and director of a childcare products and toy company, says: “It’s a complicated year, similar in scope to 2008. In a normal year, we would have one or two factors affecting us. This year, it’s five-10 factors.”
As economy slows, China seeks subtler monetary tools (Recent)
China was forced to increase the RRR for much of the last decade as a way to sterilize the massive foreign exchange inflows created by its huge trade surpluses.
But the trade surplus has fallen sharply in recent years, and China suffered its first capital account deficit in the second quarter this year. With the reserve ratio still high at 20 percent, China must still eventually unwind it to more reasonable levels.
Moody's seeks market feedback on proposed adjustments to approach for assessing impact of country credit deterioration on structured finance transactions (Recent)
Moody's Investors Service is inviting market participants to comment on proposed adjustments to its modelling assumptions designed to account for the impact of rapid and significant country credit deterioration on structured finance transactions. The current rapid and significant deterioration in many euro area countries' government finances, macroeconomic position and banking systems will weaken the quality of structured finance transactions in these countries. Assets backing these transactions will suffer from volatile performance, reduced financing availability and heightened market value risk, while the transactions themselves will come under increasing pressure as the number of viable transaction parties falls. Moody's proposes supplementing its primary asset methodologies by using as key parameters in determining the loss distribution (1) a maximum achievable rating and (2) a minimum credit enhancement.
Draghi’s ‘convertibility’ fears set ECB impossible task (31st)
In other words, investors are reluctant to hold certain government bonds because they’re afraid the issuer could leave the euro, redenominating the debt in a new and likely much weaker currency. That fear is manifested in the extra yield that investors demand on top of other premiums to hold those bonds.
“Who (the F) is the ECB to decide the appropriate spread levels?” said Piet Lammens, fixed-income strategist at KBC Bank in Brussels.
“What are the precise determinants of a [yield] spread? This is devilishly difficult to ascertain,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based consulting firm.
Money Market Reform Fight Not Over Yet (Recent)
In a survey of its clients published last March by ICD, a provider of risk-management analytics tools, treasurers said they would withdraw up to 41% of their money fund holdings if the rules were enacted.
But money-market funds could still turn into less appealing investments if regulators take other kinds of actions or get behind a different set of rules. For example, the Financial Stability Oversight Committee (FSOC) — a supervisory body created by the Dodd-Frank law — could deem MMF asset managers systemically important financial institutions, allowing the Federal Reserve to impose new capital and liquidity requirements on funds and force the SEC (money markets’ primary regulator) to revisit the issue, says Tory Hazard, CFO and chief operating officer of ICD.
Banks’ Liquidity Hinges on Risky Assets (Recent)
Money-market funds are taking on greater risk by lending against structured finance instruments, of course, and indeed could be stuck with the securities if a bank didn’t pay back the cash it borrowed.
Banks Credit Suisse, Royal Bank of Scotland, Bank of America Merrill Lynch, Citibank, and Barclays are among the large repo borrowers that most often use structured finance securities as collateral for these short-term cash loans, Fitch says.
Arbitrage, liquidity and exit: The repo and federal funds markets before, during, and emerging from the financial crisis (November 2011 Critical Concepts)
5.3 The dynamic liquidity effect and implications for the exit strategy
Our final exercise is an investigation of the dynamic liquidity effect and the implications for draining reserve balances using reverse repurchase agreements.
One of the measures currently undergoing operational tests for draining reserves are reverse repurchase agreements with a wide set of counterparties; that is, a counterparty list that includes primary dealers as well as other entities.31 Our results allow us to evaluate how this program might affect money market interest rates. But, how does a reverse repurchase agreement with the Federal Reserve work? In order to explain this, we present a stylized exercise, shown in figure 11, of a reverse repo between the Federal Reserve and a set of extended counterparties, which includes broker-dealers and money mutual funds. Banks act as intermediaries-for these institutions, reserve balances are an asset, and deposits due to broker-dealers and money mutual funds are a liability. This repo affects the balance sheet of these actors differently. The top panel shows the starting point, where all values are roughly in line with actual levels for the institution types.32 Dealers' and mutual funds' balance sheets have been combined into one: since dealers are typically cash borrowers and funds are cash lenders, it is simpler to present a "netted" balance for these two types of institutions.
The figure illustrates both the first and second round effects of a reverse repo. The first round effects cover immediate changes in the balance sheets, while the second round effects show possible balance sheet adjustments in the aftermath of the operation. In this exercise, the Federal Reserve conducts a $500 billion reverse repo, the immediate effect of which is to drain $500 billion in reserve balances, to reduce dealer-mutual funds deposits at depository institutions by $500 billion, and to bias the composition of assets of dealers-mutual funds towards repos, as illustrated in the middle panel of the figure. Clearly, banks' balance sheets shrink with the outflow of deposits due to dealers-mutual funds and the corresponding reduction in reserve balances. In contrast, the sizes of the balance sheets of the Federal Reserve and dealers-mutual funds remain constant. Because of the reverse repo, dealers-mutual funds are short on cash and long on collateral. This bias pushes up the repo rate in the short run. The higher repo rate boosts the federal funds rate, which was already propped up by the reduction in supply of reserve balances. Over time, as shown by the bottom panel second-round effects, dealers-mutual funds adjust their balance sheet by selling their outright holdings or doing repos to increase their holdings of cash. The shift of their balance sheet composition towards cash puts some downward pressure on the repo rate. Because of leverage constraints, dealers cannot adjust their balance sheet fully, so the repo rate in the long run remains above the repo rate before the large-scale reverse repo. The reduction in the size of the balance sheet of depository institutions, assuming no change in their capital, implies a lower leverage ratio. In addition, it is possible that the "excess" room for leverage gives these institutions an opportunity to raise more deposits and increase lending or bank credit more broadly. However, depository institutions might prefer to keep leverage ratios high amid the current regulatory environment.33
Is Bernanke Buying or Selling? (31st)
Upward pressure on rates can also be achieved by using reserve-draining tools or by selling securities from the Federal Reserve’s portfolio, thus reversing the effects achieved by LSAPs. The FOMC has spent considerable effort planning and testing our exit strategy and will act decisively to execute it at the appropriate time.
"The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years," Bernanke said.
"Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum sustainable employment," Bernanke said. The Fed is charged with pursuing both price stability and full employment.
Chicago Business Barometer Falls in August (31st)
Order backlogs fell to their lowest level since September 2009, with the Institute for Supply Management-Chicago, which produces the report still better known as the Chicago PMI, describing the economy as being in a state of "becalmed stability."
Japan plans to cut state spending, could run out of money in a month (31st)
Subsidies to local governments and state-run universities will be cut by half from the originally planned amount until the bill passes parliament, the finance ministry said.
Moody's warns on Chinese banks' asset quality (Recent)
"There is also evidence of higher NPLs in the pipeline. Special-mention loans, in which a borrower currently able to make interest and principal payments faces a negative development in his payment capability, are generally on the rise. Delinquent loans, defined as any loan with principal repayment or interest payment overdue at least one day, are also rising," Hu said.
"Banks have generally attributed worsening asset quality to slowing domestic and overseas demand that has affected the manufacturing sector, SMEs and eastern coastal areas. However, we also see persistent credit tightening in the real estate sector and a slowdown of land-sale revenue for local governments as factors that will further erode banks' asset quality, and believe the deterioration trend is just beginning."
Moody’s Reduces Its Outlook for Europe’s Credit Rating September 3
Risks of a downgrade to the European Union’s sovereign debt rating come from a “deterioration in the creditworthiness of E.U. member states,” Moody’s said. “Additionally, a weakening of the commitment of the member states to the E.U. and changes to the E.U.’s fiscal framework that led to less conservative budget management would be credit negative.”
China manufacturers face fall in demand September 2
The weakness in consumer demand in Europe and the US has prompted retailers to delay orders and extend payment terms from 60 days to 90 days, putting more pressure on manufacturers in the city. Bernie Ting, chairman of the Hong Kong Toys Council and director of a childcare products and toy company, says: “It’s a complicated year, similar in scope to 2008. In a normal year, we would have one or two factors affecting us. This year, it’s five-10 factors.”
As economy slows, China seeks subtler monetary tools (Recent)
China was forced to increase the RRR for much of the last decade as a way to sterilize the massive foreign exchange inflows created by its huge trade surpluses.
But the trade surplus has fallen sharply in recent years, and China suffered its first capital account deficit in the second quarter this year. With the reserve ratio still high at 20 percent, China must still eventually unwind it to more reasonable levels.
Moody's seeks market feedback on proposed adjustments to approach for assessing impact of country credit deterioration on structured finance transactions (Recent)
Moody's Investors Service is inviting market participants to comment on proposed adjustments to its modelling assumptions designed to account for the impact of rapid and significant country credit deterioration on structured finance transactions. The current rapid and significant deterioration in many euro area countries' government finances, macroeconomic position and banking systems will weaken the quality of structured finance transactions in these countries. Assets backing these transactions will suffer from volatile performance, reduced financing availability and heightened market value risk, while the transactions themselves will come under increasing pressure as the number of viable transaction parties falls. Moody's proposes supplementing its primary asset methodologies by using as key parameters in determining the loss distribution (1) a maximum achievable rating and (2) a minimum credit enhancement.
Draghi’s ‘convertibility’ fears set ECB impossible task (31st)
In other words, investors are reluctant to hold certain government bonds because they’re afraid the issuer could leave the euro, redenominating the debt in a new and likely much weaker currency. That fear is manifested in the extra yield that investors demand on top of other premiums to hold those bonds.
“Who (the F) is the ECB to decide the appropriate spread levels?” said Piet Lammens, fixed-income strategist at KBC Bank in Brussels.
“What are the precise determinants of a [yield] spread? This is devilishly difficult to ascertain,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based consulting firm.
Money Market Reform Fight Not Over Yet (Recent)
In a survey of its clients published last March by ICD, a provider of risk-management analytics tools, treasurers said they would withdraw up to 41% of their money fund holdings if the rules were enacted.
But money-market funds could still turn into less appealing investments if regulators take other kinds of actions or get behind a different set of rules. For example, the Financial Stability Oversight Committee (FSOC) — a supervisory body created by the Dodd-Frank law — could deem MMF asset managers systemically important financial institutions, allowing the Federal Reserve to impose new capital and liquidity requirements on funds and force the SEC (money markets’ primary regulator) to revisit the issue, says Tory Hazard, CFO and chief operating officer of ICD.
Banks’ Liquidity Hinges on Risky Assets (Recent)
Money-market funds are taking on greater risk by lending against structured finance instruments, of course, and indeed could be stuck with the securities if a bank didn’t pay back the cash it borrowed.
Banks Credit Suisse, Royal Bank of Scotland, Bank of America Merrill Lynch, Citibank, and Barclays are among the large repo borrowers that most often use structured finance securities as collateral for these short-term cash loans, Fitch says.
Arbitrage, liquidity and exit: The repo and federal funds markets before, during, and emerging from the financial crisis (November 2011 Critical Concepts)
5.3 The dynamic liquidity effect and implications for the exit strategy
Our final exercise is an investigation of the dynamic liquidity effect and the implications for draining reserve balances using reverse repurchase agreements.
One of the measures currently undergoing operational tests for draining reserves are reverse repurchase agreements with a wide set of counterparties; that is, a counterparty list that includes primary dealers as well as other entities.31 Our results allow us to evaluate how this program might affect money market interest rates. But, how does a reverse repurchase agreement with the Federal Reserve work? In order to explain this, we present a stylized exercise, shown in figure 11, of a reverse repo between the Federal Reserve and a set of extended counterparties, which includes broker-dealers and money mutual funds. Banks act as intermediaries-for these institutions, reserve balances are an asset, and deposits due to broker-dealers and money mutual funds are a liability. This repo affects the balance sheet of these actors differently. The top panel shows the starting point, where all values are roughly in line with actual levels for the institution types.32 Dealers' and mutual funds' balance sheets have been combined into one: since dealers are typically cash borrowers and funds are cash lenders, it is simpler to present a "netted" balance for these two types of institutions.
The figure illustrates both the first and second round effects of a reverse repo. The first round effects cover immediate changes in the balance sheets, while the second round effects show possible balance sheet adjustments in the aftermath of the operation. In this exercise, the Federal Reserve conducts a $500 billion reverse repo, the immediate effect of which is to drain $500 billion in reserve balances, to reduce dealer-mutual funds deposits at depository institutions by $500 billion, and to bias the composition of assets of dealers-mutual funds towards repos, as illustrated in the middle panel of the figure. Clearly, banks' balance sheets shrink with the outflow of deposits due to dealers-mutual funds and the corresponding reduction in reserve balances. In contrast, the sizes of the balance sheets of the Federal Reserve and dealers-mutual funds remain constant. Because of the reverse repo, dealers-mutual funds are short on cash and long on collateral. This bias pushes up the repo rate in the short run. The higher repo rate boosts the federal funds rate, which was already propped up by the reduction in supply of reserve balances. Over time, as shown by the bottom panel second-round effects, dealers-mutual funds adjust their balance sheet by selling their outright holdings or doing repos to increase their holdings of cash. The shift of their balance sheet composition towards cash puts some downward pressure on the repo rate. Because of leverage constraints, dealers cannot adjust their balance sheet fully, so the repo rate in the long run remains above the repo rate before the large-scale reverse repo. The reduction in the size of the balance sheet of depository institutions, assuming no change in their capital, implies a lower leverage ratio. In addition, it is possible that the "excess" room for leverage gives these institutions an opportunity to raise more deposits and increase lending or bank credit more broadly. However, depository institutions might prefer to keep leverage ratios high amid the current regulatory environment.33
Is Bernanke Buying or Selling? (31st)
Upward pressure on rates can also be achieved by using reserve-draining tools or by selling securities from the Federal Reserve’s portfolio, thus reversing the effects achieved by LSAPs. The FOMC has spent considerable effort planning and testing our exit strategy and will act decisively to execute it at the appropriate time.
"The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years," Bernanke said.
"Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum sustainable employment," Bernanke said. The Fed is charged with pursuing both price stability and full employment.
Chicago Business Barometer Falls in August (31st)
Order backlogs fell to their lowest level since September 2009, with the Institute for Supply Management-Chicago, which produces the report still better known as the Chicago PMI, describing the economy as being in a state of "becalmed stability."
Japan plans to cut state spending, could run out of money in a month (31st)
Subsidies to local governments and state-run universities will be cut by half from the originally planned amount until the bill passes parliament, the finance ministry said.
Moody's warns on Chinese banks' asset quality (Recent)
"There is also evidence of higher NPLs in the pipeline. Special-mention loans, in which a borrower currently able to make interest and principal payments faces a negative development in his payment capability, are generally on the rise. Delinquent loans, defined as any loan with principal repayment or interest payment overdue at least one day, are also rising," Hu said.
"Banks have generally attributed worsening asset quality to slowing domestic and overseas demand that has affected the manufacturing sector, SMEs and eastern coastal areas. However, we also see persistent credit tightening in the real estate sector and a slowdown of land-sale revenue for local governments as factors that will further erode banks' asset quality, and believe the deterioration trend is just beginning."
Stocks Near 5-Year Highs Despite Worst Earnings Season Since 2009 (Recent of interest)
Only 58% of more than 2,300 companies reporting thus far have beat analyst estimates and 48.4% recorded higher-than-expected revenues. Both figures are the lowest since Q1 2009.
Paul Hickey from Bespoke Investment Group says the view out the windshield looks just as bad as what we see looking back on Q2 earnings. Bespoke's data show a -5.6% spread between the companies that raised guidance versus companies that warned. That's the lowest number since the bull market started — meaning the outlook in corporate America hasn't been this bad in three years.
Congress approval rating hits all time low (Recent & Amazingly Out-Of-Site)
The Gallup polling agency says approval rates hovered near 34 percent for 31 years. But approval has dropped below 20 percent every month since 2011, bottoming out at 10 percent in February and August of this year!
“That's a little scary if that's especially we put people in congress to look out for our benefit and it's surprising that they have such a low opinion,” said Liz Lasky of Westfield on Thursday afternoon.
And adding to those opinions was a December Gallup poll found telemarketers , stockbrokers and bankers score more positive ratings than Congress.
“Well, that's kind of a mind-blower when you think of how much we all can't stand those. So, I guess it's not surprising, but does the message get to who it needs to,” said Judith Fine of Northampton.
Jobless Claims In U.S. Unchanged Last Week At One-Month High (30th)
More Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a slowing economy.
“When people get nervous about the macroeconomic environment, they slow down spending,” said William Sullivan, president and chief executive officer of Agilent Technologies Inc. (A) in Santa Clara, California.
“It’s not supply and demand. It’s not a normal recession,” Sullivan said on an August 15 earnings call. “Given the issues of the euro and what’s going to happen and then you have this financial cliff in the U.S. in January, complete political disagreement in Washington, people are really nervous.”
Unemployment In Europe By Country (29th)
In June 2012, an estimated 25.1 million men and women were unemployed in the EU, according to official figures released by Eurostat, the Luxembourg-based statistical office of the European Union. A whopping 17.8 million of the total unemployed are in the eurozone, the highest level since the 17-nation group was formed in 1999.
80% of President Obama's Drought Relief Bill Is For Food Stamps (Recent)
The farm bill that President Obama was referring to, and that the Senate had passed, is proposed as an extension to current legislation which is due to expire next month. That new plan would cost taxpayers nearly $1 trillion over the next ten years, with an estimated $770 billion of that money going to fund an already out-of-control food stamp program. Yes, the vast majority of all the money budgeted to support the “Federal Agricultural Reform and Management Act” is specifically earmarked for the Supplemental Nutrition Assistance Program (SNAP), more commonly known as the food stamp program.
Food stamp program costs doubled between 2001 and 2006, and then doubled again between 2008 and 2012. Under the Obama administration, the number of food stamp recipients has also grown dramatically, up from 28.2 million in 2008 to more than 44.7 million in fiscal 2011. The proposed Senate extension will essentially lock in an $80 billion per year food stamp budget, but for appearances will, “cut spending” by a token $4.5 billion over the next decade.
EURO GOVT-Muted reaction to Italian sale, focus on ECB (30th)
"The fact that with all the speculation about what the ECB is going to do, yields are only 14 basis points lower than at the end of July suggests that investors are still demanding quite high risk premiums to hold Italian debt," ...
Re: Draghi announced Aug. 2 that the ECB might help indebted governments lower their borrowing costs by buying their bonds — but only if the countries first ask for help from the region's bailout fund and agree to take steps to reduce their deficits and debt levels. He left key details blank and said committees of top bank officials would be working on them.
It's also not clear whether the ECB will set a target interest rate — or yield — that a country's bonds would not be allowed to exceed when it launches purchase program.
See: "François Hollande has now offered support to Mario Draghi's plan to intervene in the bond markets to drive down Spain and Italy's borrowing costs.
He told the press conference in Madrid (see 14.03pm onwards) that wide sovereign debt spreads (ie, the difference between Spain's bond yields and Germany's), can be a "justification for ECB intervention".
Germany has hung itself (Aug 29th)
The idea of a pan-European solidarity in sharing burdens and debts may sound nice but in reality it means that the banks have all governments on the hook by this mechanism that will eventually spin an ever bigger wheel of public debts being imposed by banks trading credit default swaps (CDS) charging exorbitant interest rates for the re-financing of such debts while the richer states are forced to bridge ever bigger holes. Only beneficiaries are the banks who may think that they invented a financial perpetual motion machine.
As youth unemployment soars, France offers to let companies hire young people on its dime (29)
Under France’s new plan, companies that hire a person between 16 and 25 for at least a year will only have to pay as little as 25 percent of the salary. The government hopes to create 100,000 of these “contracts for the future” next year and another 50,000 in 2014. It has promised to continue paying its share of the employee’s salary for three years. $$$$
French Banks Prepare to Pull Out of Greece (AUGUST 29)
He told the press conference in Madrid (see 14.03pm onwards) that wide sovereign debt spreads (ie, the difference between Spain's bond yields and Germany's), can be a "justification for ECB intervention".
Germany has hung itself (Aug 29th)
The idea of a pan-European solidarity in sharing burdens and debts may sound nice but in reality it means that the banks have all governments on the hook by this mechanism that will eventually spin an ever bigger wheel of public debts being imposed by banks trading credit default swaps (CDS) charging exorbitant interest rates for the re-financing of such debts while the richer states are forced to bridge ever bigger holes. Only beneficiaries are the banks who may think that they invented a financial perpetual motion machine.
As youth unemployment soars, France offers to let companies hire young people on its dime (29)
Under France’s new plan, companies that hire a person between 16 and 25 for at least a year will only have to pay as little as 25 percent of the salary. The government hopes to create 100,000 of these “contracts for the future” next year and another 50,000 in 2014. It has promised to continue paying its share of the employee’s salary for three years. $$$$
French Banks Prepare to Pull Out of Greece (AUGUST 29)
Even if the report were positive, Greece’s real economy is still struggling: the government estimates growth will contract by a staggering 7 percent this year, worse than the 4.8 percent contraction forecast earlier this year by the I.M.F. With such prospects, Société Générale and Crédit Agricole determined that it would be better to cut their losses.
Trillion Dollar Bank Deposits Despite Low Rates: MRI (29th)
“As long as lending is soft, deposited money is becoming more and more expensive to banks since they have to pay interest on the increased amount of deposits, as well as deposit insurance to the FDIC,” said Dan Geller, MRI executive vice president.
Deposits at US commercial banks approaching $9 trillion (Fascinating)
Banks are already struggling to put cash to work. The rate of deposit growth exceeds that of new loan demand and credit approvals. The bottleneck is not the availability of liquidity - there is $1.77 trillion of available lending capacity waiting on the sidelines.
Insurers Waging Battle With Fed Over Regulation of Thrift Holding Companies (28th)
The proposal would subject institutions that have thrift holding companies to the same capital standards as banks at the holding company level, except for certain unique insurance activities.
An industry lawyer who asked not to be named said that between 25 and 27 insurance companies that operate thrifts could be subject to Fed oversight under the proposed capital standards. The lawyer, based in Washington, D.C. asked not to be named because he is advising several clients who are dealing with the proposal.
Construction Confidence Falls, According to Report from ABC (Recent)
"Despite data indicating that the nation is now in its fourth year of economic expansion, the nonresidential construction industry continues to struggle to establish sustained momentum," says ABC chief economist Anirban Basu. "In recent months, nonresidential construction spending levels have barely managed to edge higher, disappointing many contractors."
He adds, "Nonresidential construction firms have become unnerved by the possibility of the nation falling off a fiscal cliff-due to a number of tax increases and spending cuts that take effect at the end of the year-leading the economy back into recession in 2013. This would limit private nonresidential construction, which is among the nation's most cyclical industries."
The college-cost calamity (A little old, but still Recent; of Interest)
Long-term debt at not-for-profit universities in America has been growing at 12% a year, estimate Bain & Company, a consultancy, and Sterling Partners, a private-equity firm (see chart 1). A new report looked at the balance-sheets and cashflow statements of 1,692 universities and colleges between 2006 and 2010, and found that one-third were significantly weaker than they had been several years previously.
Education and Job Requirements: The Great Mismatch (Recent)
The McAllen-Edinburg-Mission metro area in Texas has the nation's highest education gap, at 13.9 percent. Bakersfield-Delano in California is not far behind, with 13.7 percent. El Paso has the third largest gap, at 13 percent. Unemployment rates in these areas are all in the double digits.
The education gap is smallest in Madison, Wisconsin, which actually has a negative gap, meaning there are more than enough higher-educated workers to meet demand. Honolulu and Provo-Orem, Utah, are close behind. Unemployment rates in these places are all under 6 percent.
Spanish wine bucks recession (Recent)
Wine-drinking remains a relatively cheap pastime in Spain given that nearly every year supply easily outweighs demand. Though the country’s overall production of wine has fallen over the last few years, output is still substantial. In 2011, total production was 34.3 million hectolitres, twice the amount produced in the whole of the United States. Add to that the high level of competition, not to mention 0% excess duty, and prices inevitably remain low.
And crucially, exports are healthy. Last year, over 2 billion litres of Spanish wine were sold overseas, an increase of 16.7 percent on the previous year. The price was on average 7.6 percent cheaper than in 2010, the equivalent of one euro less per litre.
The education gap is smallest in Madison, Wisconsin, which actually has a negative gap, meaning there are more than enough higher-educated workers to meet demand. Honolulu and Provo-Orem, Utah, are close behind. Unemployment rates in these places are all under 6 percent.
Spanish wine bucks recession (Recent)
Wine-drinking remains a relatively cheap pastime in Spain given that nearly every year supply easily outweighs demand. Though the country’s overall production of wine has fallen over the last few years, output is still substantial. In 2011, total production was 34.3 million hectolitres, twice the amount produced in the whole of the United States. Add to that the high level of competition, not to mention 0% excess duty, and prices inevitably remain low.
And crucially, exports are healthy. Last year, over 2 billion litres of Spanish wine were sold overseas, an increase of 16.7 percent on the previous year. The price was on average 7.6 percent cheaper than in 2010, the equivalent of one euro less per litre.
Yet the `Austrian School’ is surely right as well to argue that a rise in debt ratios across the rich world from 167pc of GDP to 314pc in just thirty years was bound to end badly. There comes a point when extra debt draws down prosperity from the future. The future arrived in 2008.
A study by Stephen Cecchetti at the Bank for International Settlements concludes that debt turns “bad” at roughly 85pc of GDP for public debt, 85pc for household debt, and 90pc corporate debt. If all three break the limit together, the system loses its shock absorbers.
But why did the credit bubble happen in the first place? You could argue that it is merely the flip-side of too much saving. The world savings rate has crept up to a modern-era high of 24pc of GDP. That is the most important single piece of information you need to know to understand the great economic drama we are living through.
There is nowhere for this money to go. The funds flood into investment -- now a world record 49pc of GDP in China -- or into asset bubbles.
The emerging powers built up $10 trillion of foreign reserves -- ie bonds -- in a decade. They flooded the global bond market. That is why spreads on 10-year Greek debt fell to a wafer-thin 26 basis points over Bunds in the bubble.
As for our debt mountain, we have barely begun the great purge. Michala Marcussen from Societe Generale says the healthy level is around 200pc of GDP for advanced economies. If so, we have 100 points to cut.
A study by Stephen Cecchetti at the Bank for International Settlements concludes that debt turns “bad” at roughly 85pc of GDP for public debt, 85pc for household debt, and 90pc corporate debt. If all three break the limit together, the system loses its shock absorbers.
But why did the credit bubble happen in the first place? You could argue that it is merely the flip-side of too much saving. The world savings rate has crept up to a modern-era high of 24pc of GDP. That is the most important single piece of information you need to know to understand the great economic drama we are living through.
There is nowhere for this money to go. The funds flood into investment -- now a world record 49pc of GDP in China -- or into asset bubbles.
The emerging powers built up $10 trillion of foreign reserves -- ie bonds -- in a decade. They flooded the global bond market. That is why spreads on 10-year Greek debt fell to a wafer-thin 26 basis points over Bunds in the bubble.
As for our debt mountain, we have barely begun the great purge. Michala Marcussen from Societe Generale says the healthy level is around 200pc of GDP for advanced economies. If so, we have 100 points to cut.
Yes, the Rich Are Different (Recent)
The economic data bear out the public’s perception that the gap has widened. Whether the metric is income or wealth, the rich have outpaced the poor in recent decades. A Pew Research Center analysis of U.S. Census Bureau data shows that incomes have risen much more sharply for the wealthiest Americans over the past 40 years, and as a result the upper-income tier of the public now takes in a much larger share of U.S. aggregate household income than it did in the past. In addition, an even larger gap in wealth (measured by assets, minus debt, accumulated over time) has emerged, particularly in the past 10 years with the collapse of the housing market
State Budget Solutions’ third annual State Debt Report shows total state debt over $4 trillion (Aug, 28th)
Last month, the California Public Employees’ Retirement System (CalPERS) stunned Wall Street with the announcement of a 1% return for its 2012 fiscal year, far short of its 7.5% return assumptions, thus requiring increased state and local contributions to make up the pension shortfall.
California once again topped the list of debt-plagued states with nearly $628 billion in debt, or more than twice the shortfalls of the next two most indebted states, New York ($300 billion) and Texas ($287 billion). New Jersey ($282 billion) and Illinois ($271 billion) rounded out the list of top five states with the highest debt.
Vermont had the least state debt ($5.8 billion), followed by North Dakota ($6.1 billion), South Dakota ($6.5 billion), Wyoming ($6.9 billion) and Nebraska ($7.8 billion).
Strategists, Economists Highlight Rising Defaults, Declines In State-Owned Firms’ Profits In China As More Signs of Trouble
“The number of stories on companies in default or with severe cash flow problems has surged since early Q2. Apart from a couple of property developers, several sectors, including steel trading, shipbuilding and solar panel manufacturing, seem to be running off the cliff all together.”
The economic slowdown doesn’t appear to be the only or even primary cause, she adds. Speculation, massive capacity expansion in shipbuilding and solar panel manufacturing and outsized commitments to complicated webs of mutual loan guarantees to underground banking are among the culprits, she writes. The Chinese government’s involvement in the economy runs the clear risk of prolonging the nonperforming loan cycle since local governments have poured millions of capital to rescue failing companies, often funding those rescue plans with fiscal revenues and state-owned investment companies. Banks then agreed to roll over the loans, she writes.
Bentleys and wine swell China inventory overhang (Recent)
As China's economic growth cooled to a three-year low, inventories swelled at consumer firms such as auto dealers, food makers, liquor companies and department stores, according to a Reuters analysis of balance sheets from 350 Chinese companies.
The bloated inventory complicates Beijing's efforts to shore up growth as it prepares for a once-a-decade government leadership transition later this year. If China pours in more stimulus money when demand is weak, it could just make the inventory overhang worse by encouraging companies to produce more goods than the market can digest.
Portugal's Lenders Begin Talks on Bailout Progress (Aug 28th)
The government already faces a shortfall in tax revenue, a potential side effect of cutbacks demanded by the bailout program, that could threaten its ability to meet its budget goals this year. Tax revenue for the first seven months of the year has fallen €2.6 billion short of projections to €17.8 billion, as unemployment hits new highs and companies shut down.
The government, which had so far insisted that it would meet budget targets, is now warning that meeting those targets is becoming harder.
"We cannot expect to recover all of the tax revenue shortfall, although some part of it can be compensated for by savings on the spending side," a senior finance ministry official said without providing official estimates of the fiscal gap.
Hungary Unexpectedly Cuts Rate As Economy Enters Recession (Aug 28)
Hungary is set to resume talks with international lenders on a credit line of about 15 billion euros ($18.8 billion) to protect the economy from euro-area contagion and to lower financing costs. International Monetary Fund and European Union officials are focusing on untangling policies that contributed to an economic contraction in the first two quarters and the downgrade of Hungary’s credit to junk.
Hungary faces a “big” debate with the IMF on whether it can finance payroll-tax cuts to protect jobs, Vas Nepe reported today, citing Prime Minister Viktor Orban.
Consumer Confidence Slumps As Consumers Look @ Fewer Jobs (Aug, 28th)
“Households continue to worry about a difficult job market, the European debt crisis, the upcoming ‘fiscal cliff,’ and the political wrangling in Washington and in the presidential campaign,” says Steven Wood ...
There was little change in how consumers viewed their current situation. For example, 34.4% of people surveyed said business conditions right now were bad, the same percentage as in July. And 40.7% of those surveyed in August described jobs as "hard to get," down slightly from 41% a month earlier.
But consumers' long-term view headed south. The percentage of respondents who expected business conditions to improve over the next six months dropped to 16.5%, from 19% in July. And 23.4% of those surveyed in August said they expected the economy to produce fewer jobs in the same upcoming period, up from 20.6%.
Nikkei hits 2-week closing low on China outlook fears (28th)
"The U.S. economy has picked up a little but that's coming from a low level, while in Europe, all the macro numbers seem to suggest the economy is not faring very well. There is some noise of stimulus in China but generally the exporters there haven't done too well. It's not exactly a healthy picture for the global economy," said Kwok Chern-Yeh, head of investment management, Japan, at Aberdeen Investment Management in Tokyo.
"If you look at the company level though, while things are slowing, there are pockets of resilience in this market where companies have done relatively well."
ECB's Asmussen: new bond-buy plan won't finance govts (Recent)
As a member of the six-member Executive Board that runs the ECB's day-to-day operations, Asmussen belongs to ECB President Mario Draghi's inner circle and is a key link man who liaises between the Italian, Weidmann, and the German government.
The ECB was hurt by last year's experience of buying Italian and Spanish bonds, only for Italy's then-prime minister, Silvio Berlusconi, to go back on the reform promises he had made to convince the ECB to step in just days after he made the commitments.
Strategists, Economists Highlight Rising Defaults, Declines In State-Owned Firms’ Profits In China As More Signs of Trouble
“The number of stories on companies in default or with severe cash flow problems has surged since early Q2. Apart from a couple of property developers, several sectors, including steel trading, shipbuilding and solar panel manufacturing, seem to be running off the cliff all together.”
The economic slowdown doesn’t appear to be the only or even primary cause, she adds. Speculation, massive capacity expansion in shipbuilding and solar panel manufacturing and outsized commitments to complicated webs of mutual loan guarantees to underground banking are among the culprits, she writes. The Chinese government’s involvement in the economy runs the clear risk of prolonging the nonperforming loan cycle since local governments have poured millions of capital to rescue failing companies, often funding those rescue plans with fiscal revenues and state-owned investment companies. Banks then agreed to roll over the loans, she writes.
Bentleys and wine swell China inventory overhang (Recent)
As China's economic growth cooled to a three-year low, inventories swelled at consumer firms such as auto dealers, food makers, liquor companies and department stores, according to a Reuters analysis of balance sheets from 350 Chinese companies.
The bloated inventory complicates Beijing's efforts to shore up growth as it prepares for a once-a-decade government leadership transition later this year. If China pours in more stimulus money when demand is weak, it could just make the inventory overhang worse by encouraging companies to produce more goods than the market can digest.
Portugal's Lenders Begin Talks on Bailout Progress (Aug 28th)
The government already faces a shortfall in tax revenue, a potential side effect of cutbacks demanded by the bailout program, that could threaten its ability to meet its budget goals this year. Tax revenue for the first seven months of the year has fallen €2.6 billion short of projections to €17.8 billion, as unemployment hits new highs and companies shut down.
The government, which had so far insisted that it would meet budget targets, is now warning that meeting those targets is becoming harder.
"We cannot expect to recover all of the tax revenue shortfall, although some part of it can be compensated for by savings on the spending side," a senior finance ministry official said without providing official estimates of the fiscal gap.
Hungary Unexpectedly Cuts Rate As Economy Enters Recession (Aug 28)
Hungary is set to resume talks with international lenders on a credit line of about 15 billion euros ($18.8 billion) to protect the economy from euro-area contagion and to lower financing costs. International Monetary Fund and European Union officials are focusing on untangling policies that contributed to an economic contraction in the first two quarters and the downgrade of Hungary’s credit to junk.
Hungary faces a “big” debate with the IMF on whether it can finance payroll-tax cuts to protect jobs, Vas Nepe reported today, citing Prime Minister Viktor Orban.
Consumer Confidence Slumps As Consumers Look @ Fewer Jobs (Aug, 28th)
“Households continue to worry about a difficult job market, the European debt crisis, the upcoming ‘fiscal cliff,’ and the political wrangling in Washington and in the presidential campaign,” says Steven Wood ...
There was little change in how consumers viewed their current situation. For example, 34.4% of people surveyed said business conditions right now were bad, the same percentage as in July. And 40.7% of those surveyed in August described jobs as "hard to get," down slightly from 41% a month earlier.
But consumers' long-term view headed south. The percentage of respondents who expected business conditions to improve over the next six months dropped to 16.5%, from 19% in July. And 23.4% of those surveyed in August said they expected the economy to produce fewer jobs in the same upcoming period, up from 20.6%.
Nikkei hits 2-week closing low on China outlook fears (28th)
"The U.S. economy has picked up a little but that's coming from a low level, while in Europe, all the macro numbers seem to suggest the economy is not faring very well. There is some noise of stimulus in China but generally the exporters there haven't done too well. It's not exactly a healthy picture for the global economy," said Kwok Chern-Yeh, head of investment management, Japan, at Aberdeen Investment Management in Tokyo.
"If you look at the company level though, while things are slowing, there are pockets of resilience in this market where companies have done relatively well."
ECB's Asmussen: new bond-buy plan won't finance govts (Recent)
As a member of the six-member Executive Board that runs the ECB's day-to-day operations, Asmussen belongs to ECB President Mario Draghi's inner circle and is a key link man who liaises between the Italian, Weidmann, and the German government.
The ECB was hurt by last year's experience of buying Italian and Spanish bonds, only for Italy's then-prime minister, Silvio Berlusconi, to go back on the reform promises he had made to convince the ECB to step in just days after he made the commitments.
One corner of the financial system does warrant close attention: bond markets. Prices of 10-year U.S. Treasury notes have risen sharply, pushing their yields—1.6% on Friday—to their lowest levels in generations. One bond-market measure watched closely by the Fed has behaved particularly oddly. Term premiums—the compensation investors demand for owning long-term securities instead of short-term ones—used to be more than one percentage point. They are now negative by some measures.
If bond markets revert to past norms and yields rise sharply, financial institutions, including the Fed, could face serious losses. Interest-rate swings shocked hedge fund Long-Term Capital Management and California's Orange County in the 1990s.
Bankrupt San Bernardino hides city budget (Aug, 27)
So how does budget of fiscal 2012-13 deal with what is expected to include 30 percent in cuts?
The city isn’t saying.
A budget prepared for City Council review and for later submission to bankruptcy court is being kept secret — at least for now. This 72-page plan for spending will go to the City Council on Tuesday, Aug. 28, in closed session.
City Attorney James Penman claims that this budget is a litigation document and thus can be kept confidential.
“The document that’s going to be considered in closed session Wednesday is a draft and the council needs to make the decision what to include in the document and what not to include,” he told PE.com reporter Imran Ghori.
Japan Cuts Economic Assessment As BNP Says Contraction Looms (Aug 27)
“Europe’s debt crisis is having the effect of a body blow to Japan’s economy,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Concerns over Japan’s economic outlook will probably build pressure on the BOJ to apply more monetary stimulus,” ...
For Spain's Jobless, Time Equals Money (August 27)
Some economists worry that the rise of such informal systems of economic exchange is pushing more of Spain's economy underground—out of the view of regulators and tax collectors, and effectively sending the country back in time developmentally.
"There has to be a change in the mentality for there to be a change in the country," she says. "We can't continue to spend resources we don't have. We have to learn to live with less."
German Business Optimism Drops For Straight Fourth Month: Ifo Survey (Aug 27)
“Enterprises are increasingly pessimistic about their business development,” said Hans-Werner Sinn, the president of Ifo. “The German economy is weakening further.” So far, the German economy was growing with the help of exports to Asia and the US, and low unemployment rates. But it may not be enough to outweigh the troubles posed by the Eurozone crisis. Many German companies, including Opel and Thyssenkrupp, have announced plans to cut the working hours due to weaker demands in the international market.
"Such a policy is for me close to state financing via the printing press," Weidmann told the weekly magazine. "In democracies, it is parliaments and not central banks that should decide on such a comprehensive pooling of risks."
America’s Per Capita Punishment (Aug 27th)
After the recession started in late 2007, it took gross domestic product until the third quarter of last year to reach its old peak – the longest it has taken for that to happen since the U.S. was coming off its war footing in the late 1940s and early 1950s. In the second quarter, GDP was just 1.7% higher than it was in the fourth quarter of 2007.
America’s Per Capita Punishment (Aug 27th)
After the recession started in late 2007, it took gross domestic product until the third quarter of last year to reach its old peak – the longest it has taken for that to happen since the U.S. was coming off its war footing in the late 1940s and early 1950s. In the second quarter, GDP was just 1.7% higher than it was in the fourth quarter of 2007.
Debt, Recession, and That Ol' Devil Denominator (Old yet Recent)
"In my narrative, the reason household debt grew to almost 100% of GDP is that stagnating incomes have not been able to support the cost of the American life style - due to decades of inflation, but probably largely driven by the costs of health care and education. Remember - contra the prevailing view of economists today - spending, and therefore GDP growth, is directly dependent on income, not on wealth.
Debt is a useful tool that develops into a problem when it becomes too burdensome to service. Looking at debt as a percentage of GDP provides a clue as to how serviceable the debt is. When you also consider that all of the GDP growth over several decades has gone to the top income earners, you can see that the debt servicing problem is made that much worse for the average person."
China worries about social fallout of soybean oil price jump (Recent)
Poor U.S. harvests could fuel Chinese food inflation and social discontent. China has already begun tapping its grain reserves to ensure price stability. The government has ordered the nation's biggest cooking oil producers twice in recent months to keep their prices in check. And it's scouring the globe for alternative supplies.
It won't be easy. More than two-thirds of cooking oil consumed in China comes from soybeans, and most of those soybeans are supplied by the U.S., according to Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultant Co. For now, Chinese consumers are bound to the fortunes of farmers in the American heartland.
Trade With China Has Cost the U.S. 2.7 Million Jobs (Recent)
So says the Economic Policy Institute in an updated study. Over the last decade, from 2001 to 2011, the United States has lost a whopping 2.7 million jobs to China alone and this estimate is conservative. The China PNTR trade agreement was signed by President Clinton on October 10th, 2000 and China entered the WTO in 2001.
The more than 2.7 million jobs lost or displaced in all sectors include 662,100 jobs from 2008 to 2011 alone—even though imports from China and the rest of the world plunged in 2009.
Fitch: rising delinquency rates pose looming threat for FHA (Recent & Of Interest)
Fitch Ratings sees a growing divergence between 90-day past due delinquency patterns for guaranteed and nonguaranteed loans as a potentially troubling signal of future losses. This may eventually force the FHA to look for opportunities to put back some defaulted loans to the banks, particularly if the agency’s funding status worsens and U.S. home prices fail to rebound quickly.”
US horse rescues overwhelmed by abandoned animals (Recent)
The owner began locking up the property last month in an effort to keep people from driving up at night and dropping off horses they can no longer afford to feed.
Horse rescue groups nationwide have been struggling to care for a growing number of animals abandoned since the Great Recession hit more than four years ago, but leaders say their work has become even more difficult and expensive this summer as drought and wildfires burned up pastures and sent hay prices skyrocketing. Many people who held on to their horses in the downturn are now letting them go because they can't find or afford feed that has more than doubled in price.
The company released only top-line results and it isn't clear from the data, for instance, just how much memory loss slowed in patients who appeared to have benefited and for how long. Moreover, despite the positive signals from combining results from both trials, the drug failed to show a statistically significant slowing of memory loss in the second study after Lilly adjusted its analysis to focus on those patients considered to have a mild form of Alzheimer's.
Also, when trials fail to meet their primary goals or endpoints, secondary analyses—as in this case, combining the data from the two trials—aren't considered conclusive but are used to generate hypotheses that require further study and validation.
Alzheimer's: A Personal Disease That Affects Families and Society (Recent & Fascinating)
The World Health Organization (WHO) estimates that 35.6 million people lived with dementia in 2010, costing $604 billion worldwide. That number is set to swell to 65.7 million in 2030, 81.1 million in 2040, and 115.4 million in 2050, with costs far outpacing that number. There is a new case of dementia every four seconds.
"The societal costs of dementia (£23 billion) almost matched those of cancer (£12 billion), heart disease (£8 billion), and stroke (£5 billion) combined. However, for every £1 million in costs arising from the disease, £129,269 was spent on cancer research, £73,153 on heart disease research, and £4,883 on dementia research."
More people are living alone — and liking it (Aug 24th)
The number of elderly singles is especially striking. According to the Census, nearly a third of people 65 and older live alone. Remarkably, their numbers include some 800,000 people with Alzheimer’s disease, suggesting a growing policy challenge. According to the Alzheimer’s Association, too many in this group have no designated caregivers to step in when help is needed.
Negative $4,019 (Aug 24)
It's true that the Bush years overall were also not great for household incomes. According to Sentier's analysis, real median household income is down about 8% from $55,470 in 2000 before the dot-com bubble burst. Some of this decline is due to the continuation of a trend of smaller family size, lower fertility rates and more Americans living alone. But some was also due to the subpar economic growth across the 2000s.
In an attempt to maintain its strict currency peg to the euro, the Danish central bank lowered its main deposit rate for banks – the certificate of deposit or CD rate – to -0.2 per cent last month. The Nationalbanken felt it had little choice. Investors flocked to Denmark in search of a haven outside the eurozone – one that has no currency risk with the euro and offers cheap protection against a break-up of the single currency. The move to negative rates is being watched closely by central banks around the world. “We have never been so popular,” laughs one Danish policy maker.
Mitt Romney, John Kerry And Italians All Like To Save Taxes (Recent)
In response, many boat owners did a Kerry, weighing anchor and setting course for more tax-friendly Mediterranean marinas. Approximately 30,000 boats fled Italy since March. Destinations include Slovenia, Croatia, Montenegro, France, Spain, Tunisia and Malta. The Italian association of marinas says the exodus will cost the Italian economy $350 million this year.
"There’s clearly a need to do something about money-market funds,” Levitt, 81, said today in a Bloomberg Radio interview with Tom Keene and Ken Prewitt. “Everything else is marked to the market. This should be marked to the market in the interest of investors. The fact that Mary Schapiro couldn’t get her three members of the commission to support this is really a national disgrace.”
“The sponsors of money-market funds simply don’t want this regulation,” Levitt said.
Beware: 'Triple Top Reversal Pattern' Almost Complete (Recent)
... below is a three-year chart of the S&P 500. Those blue circles to the right of the chart represent the rough equivalent high price points that the S&P 500 has reached since the beginning of the year; notice that the S&P 500 has reached this level three times.
According to technical analysis, a Triple Top Reversal forms over a period of three to six months. Any Triple Top Reversal that forms over a period of time greater than six months is said to be indicative of a major top.
==> See my capture from Yahoo today of a 16 year Triple Top Pattern:
"The resulting chaos is going to crush Americans."
Another member of this team, Chris Martenson, a global economic trend forecaster, former VP of a Fortune 300, and an internationally recognized expert on the dangers of exponential growth in the economy, explained their findings further:
"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail," Martenson said. "This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible."
"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."
Latvians lost 20% of their incomes during the years 2007-2010. The incomes of Lithuanians and Greeks fell 11% and those of Estonians fell nearly 6%. In the Baltic States, the decline in incomes was mostly caused by the fall in wages while in Greece by the decline in income of entrepreneurs and income from real estate.
In the European Union and in the euro area as a whole, income per person grew during the years 2007-2010, by 2% and by 1.1%, respectively.
Decline in volume of Republic's shipping traffic (Recent)
Glenn Murphy, spokesman for IMDO, said the outlook for the remainder of 2012 is flat with no significant uplift expected. “Manufacturing orders across Europe show little signs of imminent improvement as the euro zone’s debt crisis threatens some of Europe’s major economies.”
Corn Production Forecast Cut to 838 Million Tons by IGC (Aug, 23)
Farmers across the world will harvest 838 million metric tons of corn in the 2012-13 crop year, down 3 percent from 864 million tons forecast on July 26 and below last year’s output of 875 million tons, the London-based council wrote in an e-mailed report today. Corn prices surged 64 percent since mid-June on the Chicago Board of Trade, touching a record $8.49 a bushel on Aug. 10, as the worst U.S. drought in a half century cut yields.
Italians Say Goodbye To Ferraris As La Dolce Vita Expires (Old & Fascinating)
A crackdown on luxury goods combined with budget cuts that have pushed Italy deeper into its fourth recession since 2001 are souring demand for sporty cars and other symbols of the country’s carefree lifestyle. The number of secondhand high- performance cars exported from Italy nearly tripled to 13,633 vehicles in the first five months of 2012, from 4,923 a year earlier, according to auto industry group Unrae.
“Italy is one of the strongholds of supercars, and those vehicles are now disappearing from the streets,” said Giuliano Noci, associate dean of Milan Polytechnic’s business school. “This has a huge symbolic value and shows how deep the crisis is.”
China Confronts Mounting Piles of Unsold Goods (August 23)
The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.
But the main nongovernment survey of manufacturers in China showed on Thursday that inventories of finished goods rose much faster in August than in any month since the survey began in April 2004. The previous record for rising inventories, according to the HSBC/Markit survey, had been set in June. May and July also showed increases.
“Across the manufacturing industries we look at, people were expecting more sales over the summer, and it just didn’t happen ...
Politics pushes Japan towards fiscal cliff as money runs out (Aug 23)
In Japan, five months into a fiscal year that started in April, the government has made do without the bonds bill by dipping into reserves in special accounts and making technical adjustments to bond auctions, government sources said.
But Finance Minister Jun Azumi warned last month that without fresh borrowing the government will run out of money by October. That would halt benefits to unemployed and low-income earners, salaries for civil servants and transfers to rural governments, fuelling concerns that the government was losing its grip on public finances.
Japan has already been hit by a string of credit downgrades because of concerns that it was not doing enough to curb its debt burden, the world's largest at twice the value of its annual economic output.
China Economy’s Harsh Winter To Hurt Cotton, Commodities Aug 22, 2012
Cotton consumption in China, the world’s largest user, may shrink 11 percent this year as a deteriorating economy hurts demand and causes a buildup in commodities, according to Weiqiao Textile Co.
“The Chinese economy is only at the beginning of a harsh winter,” Zhang Hongxia, chairman of China’s largest cotton- textile maker, said in an interview in Hong Kong on Aug. 20. “China now is facing a situation where everything from coal to steel inventories are piling up.”
Don't blame Canada's export woes on strong C$ Wed Aug 22
Over the last decade, the Canadian dollar has climbed from around C$1.60 to the U.S. dollar, or 62 U.S. cents, to comfortably above parity against the greenback, buoyed in part by Canada's strong fiscal footing and commodity-powered economy.
On Wednesday, the currency hovered around C$0.99 to the U.S. dollar, or $1.01, and analysts expect it to maintain equal value with its U.S. counterpart for the next year at least.
Belize to Skip Payment If Lenders Don't Relent (Old & Fascinating)
"We're mystified," said A.J. Mediratta, a partner with Greylock Capital Management and the leader of a creditors' group holding about $300 million in Belize's bonds. "I'm sure every country could benefit from not paying their debt but this isn't the way to do it. They're unnecessarily turning themselves into an international pariah."
Robert Shiller On Housing Bubble: "Are We Off To The Races Again?"
He and his team of economists have just shown in a new documentary that this pyramid pattern is running rampant right now in our debt, total credit market, and money supply. And the pattern guarantees they're going to fail, says Martenson.
This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.
Report: U.S. middle class has 'worst decade in modern history' Aug, 22
Since 2001, median household income has fallen from $72,956 to $69,487 in 2010, the report said.
The median household net worth, which is the value of assets minus debt, dropped from $129,582 to $93,150 over the same 10-year period, according to Pew, which analyzed U.S. data along with its own survey of nearly 1,300 adults who consider themselves middle class.
Changes to Money Market Funds Stall
“It’s a tragedy that serious thoughtful proposals to shore up a major weakness in the financial system and protect American taxpayers from the potential need to bail out this industry can’t even receive public comment and debate,” Ms. Schapiro said in an interview.
Treasury plans securities with variable rate (Old & Fascinating)
Treasury said it will continue to study a second unconventional way to sell government debt that would offer negative yields. Investors would, in effect, pay the government for the privilege of socking their money in ultrasafe Treasurys. No decision has been made on whether to proceed with negative-yield securities.
Commerzbank to Speed Up Restructure Due To Crisis, Tougher Capital Rules ( Fascinating)
Commerzbank said late Tuesday that it will wind down financing of commercial real estate and ships, with the move coming five days before the business was scheduled to launch as part of a plan announced in March.
Analysts cautiously approved of the move, with one saying it could lead to a so-called bad bank.
Germany's second-largest lender will transfer its entire commercial real estate and ship financing business--a total volume of around EUR172 billion ($215 billion). The portfolios will go to a restructuring unit aimed at winding down non-core assets, such as the public-finance business of the bank's Eurohypo unit.
The bank, in which the German government holds a 25% stake, cited uncertain markets, the heightened sovereign debt crisis and increasing capital and liquidity requirements, especially for long-term financing, under the future Basel III regime for the decision, which the management board took after an annual strategy review Tuesday. It also pointed to "strong cyclical fluctuations, which are to be expected in the results in the future."
Iron Ore-Contract defaults as price slides, Shanghai rebar record low Aug 22
Shanghai steel futures hit a record low on Wednesday, exerting more pressure on prices of the raw material iron ore whose freefall has forced Chinese steel producers to skip contracted cargoes. Chinese mills, the world's biggest iron ore buyers, have either cancelled or deferred shipments of up to 4 million tonnes this month after iron ore prices tumbled to their lowest in more than 2-1/2 years, the latest evidence of a slowdown in the world's top steel market.
China Is Mass Producing 'Zombie Companies' And They're Eating Away At The Economy
In a report, BofA analyst Winnie Wu writes that "mismatching NPL pictures from top down and bottom up" are concealing a major risk to the Chinese economy – the proliferation of "zombie companies" being propped up by the China's banking system.
Baltic index falls as capesize slips further (Aug 20, late)
The capesize index has fallen about 90 percent this year.
"Capesize fortunes were still under tremendous pressure amid record low steel rebar prices in China and weak iron ore buying interest, not to mention the oversupply of ships which just keeps growing," analyst Morkedal said.
Shipments of iron ore account for about a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.
Chinese steel futures hit a record low on Monday, falling below 3,600 yuan ($570) on festering worries over demand in the world's second-largest economy, with iron ore remaining trapped at a 2-1/2 year trough.
China's Banks Risk Credit Crunch Wed., August 22
While the selloff in Chinese banks has made their valuations attractive, investors appear unwilling to buy, with some concerned that the banks underreport or are slow to categorize nonperforming loans. "What worries investors is no longer the results for the quarterly reports, but actually when the Chinese banks will recognize the [nonperforming loans] and give transparency to the market," said Arthur Kwong, head of Asian-Pacific equities at BNP Paribas Investment Partners in Hong Kong, whose team manages assets worth around $4.5 billion.
World shipping crisis threatens German dominance as Greeks win long game (Fascinating)
Over 100 German ship funds have already shut down as the long-simmering crisis in global container shipping finally comes to a head. A further 800 funds are threatened with insolvency, according to consultants TPW in Hamburg.
They are not alone. Britain’s oldest shipowner, Stephenson Clark, dating back to 1730, went into liquidation last week, closing the final chapter of Britain’s coal trade and the industrial revolution.
It cited “incredibly depressed” vessel rates. The firm over-invested in the boom four years ago, betting too much on the China syndrome.
Commerzbank – the world’s second-biggest provider of ship finance, and reluctant owner of a flotilla of foreclosed ships – said it is shutting down its €20bn (£15.7bn) ship funding operations entirely to “minimise risk and capital lock-up” under tougher EU banking rules.
S&P 500 Facing 25% Drop Before US Election: Janjuah (Tuesday, 21)
“I now think the correct thing to do — as I also said in April and June — is to prepare for a serious risk-off phase between August and November…over the August to November period I am looking for the S&P 500 to trade off down from around 1400…by 20 to 25 percent...to trade at or below the lows of 2011.”
Fed Studies Show Damage to Labor Market Is Reversible Aug, 20th & Total Crap
Named after British economist William Beveridge, the curve indicates there are more jobs available today than there were before the recession given the current level of unemployment.
‘Problematic’ Analysis
Fed researchers counter that analysis of that relationship in isolation is “problematic’’ because it does not consider firms’ incentives to create new positions, which also alter labor-market dynamics. Their estimate of a lower rate is based on pairing the Beveridge curve with what they call the job- creation curve, a measure of employers’ willingness to offer new positions at any given level of unemployment.
(Why wasn't there an increase in employment over the last 6 years)? Hmmm...
Number of the Week: Half of U.S. Lives in Household Getting Benefit (a little old)
The Census data show that 16% of the population lives in a household where at least one member receives Social Security and 15% receive or live with someone who gets Medicare. There is likely a lot of overlap, since Social Security and Medicare tend to go hand in hand, but those percentages also are likely to increase as the Baby Boom generation ages.
Cusack Spars With Pimco On Underwater Mortgages as Risk Recedes (late add-in)
Underwater homeowners remain a threat to housing, including those who continue to pay, according to Mortgage Resolution Partners President Steven Gluckstern, a former senior insurance executive including at the reinsurance operations at Warren Buffett’s Berkshire Hathaway Inc.
“Eventually, they all stop,” Gluckstern, also an initial member of the national finance committee for President Barack Obama’s 2008 election, said Aug. 10 on Bloomberg Radio. “There will be no recovery until this problem has been addressed.”
Commerzbank AG is Germany’s second largest bank
Waiver rule pursuant to section 2a.1 KWG
The waiver rule pursuant to section 2a.1 KWG allows subsidiary companies in a banking group to be exempted from the requirements relating to capital adequacy, large loan exposures and internal control systems at single-entity level provided that among others both the parent and the subsidiary company have their registered office in Germany.
This rule is based on the assumption that the subsidiary is closely integrated within the group structure. This is assumed to be the case if the parent company has a “controlling interest” in the subsidiary company. In addition, the company being exempted must be closely integrated into the group-wide risk management and controlling processes of the parent company.
Eurohypo AG and comdirect bank AG are fully integrated into the internal processes and risk management of Commerzbank AG as the ultimate parent company of the banking group.
This applies in particular to the methods used, risk management, monitoring of operations, management and reporting. The opportunity granted under the waiver rule pursuant to section 2a.1 KWG was used to exempt the two companies at single-entity level from the above requirements.
Pursuant to section 2a.6 KWG, parent companies within the group of companies consolidated for regulatory purposes that have their registered office in Germany are also entitled to this exemption. The opportunity this offered for Commerzbank AG as the ultimate parent company of Commerzbank Group to be exempted from the requirements at single-entity level has been utilised. In particular, Commerzbank AG is integrated in Commerzbank Group's management system and there are no legal or other obstacles to the transfer of capital to Commerzbank AG.
Interim Report H1 2012
The first half of 2012 was characterised by the continuing European government debt crisis and the
resulting uncertainty on the credit and capital markets. In this climate, Deutsche Pfandbriefbank AG has
focused on maintaining a comfortable liquidity position and on taking a risk-oriented approach to portfolio management. The Group has generated pre-tax profit of € 51 million, and has thus been profitable or two years.
39 Key Regulatory Capital Ratios (Based on German Commercial Code)
In accordance with the waiver regulation set out in Section 2 a KWG, Deutsche Pfandbriefbank AG
is exempted from the requirement to establish the equity and core capital ratios at the level of the institution.
The waiver regulation set out in Section 2 a KWG states that a credit institution or financial services
institution which has its registered offices within Germany and which is part of a regulated group of
institutions or financial holding group does not have to comply with the following regulations if these
regulations are complied with at the level of the ultimate parent company:
> Regulations regarding solvency (equity in relation to risk-weighted assets)
> Regulations regarding large loans (equity in relation to loans extended to individual borrower units)
> Regulations set out in Section 25 a (1) Clause 3 No. 1 KWG for establishing and assuring risk-bearing capacity, defining strategies, setting up processes for identifying, assessing, managing, monitoring and communicating risks.
German Savings Banks Warn ECB of Damaging ‘Stability Culture’ (Very Late & Old)
While non-standard measures are needed to fight the debt crisis, pumping increasing amounts of liquidity doesn’t tackle overindebtedness, which is the root cause of the crisis, Fahrenschon said.
“The ECB shouldn’t forget that fighting fire with fire leaves a lot of scorched earth behind,” he said.
Supervision : Les allemands ne veulent pas de la BCE (a few days old, but curious)
Transfer at European level banking supervision might actually harm 423 Savings German first retail banking network in the country, which explains the chain reactions of the German government. Out of the national supervision could lead Savings to question the structure of their capital. They have in effect "silent partnership" capital or "capital dormant", usually from the government. But this capital had not been recorded in the capital ratios that the European Banking Authority had determined in July 2011.
Buffett's Move Raises a Red Flag Aug, 20th
Some investors said the decision to end the bet indicates that one of the world's savviest investors has doubts about the state of municipal finances. If so, the move could be a warning to investors who have purchased such debt. In canceling the contracts early, Mr. Buffett probably "doesn't want this exposure anymore and is getting out while he can," said Jeff Matthews, a hedge-fund manager who personally owns Berkshire shares.
Utah data reveal unprecedented depths of recession job losses Aug, 19th
Youthful workers who stopped looking masked magnitude of unemployment
Said another way, 7.4 percent of all the jobs in the state disappeared during the two-plus years, a staggering decline not seen in modern times. As the months ground on, more and more people were pounding the streets, knocking on doors and surfing job sites instead of buying clothes, going to the movies and socking away money for retirement or their kids’ college funds.
The losses suggest that an army of unemployed was quietly building as the rest of Utah looked the other way, the latter perhaps deluded by the state’s comparatively low jobless rates during the recession, which may have been something of a mirage. Even today, three years after the official end of the recession, 81,000 people, a number roughly equivalent to the population of Ogden, are looking for work, while thousands more have given up or are underemployed.
The Bubble in Junk Bonds AUGUST 18 (late add-in)
Stephanie shrewdly avoids pinpointing when the junk-bond bubble will burst; even Nostradamus in his prime likely would have found that degree of exactitude a daunting challenge. But she's adamant that the bubble will burst, and the likely dire consequences when it does are as clear as they are chilling. She's not, in case you're wondering, talking an eternity, but something relatively imminent. Enhancing that unpleasant prospect, she says, is that "nominal junk yields are already way below where they deserve to be."
Ominously, she avers, "The very folks driving the bubble's inflation -- those most desperate for yield -- pension funds, insurance companies, and retail investors, will be hit the hardest." Her big concern for insurance companies is the possible knock-on effect that a junk-bond blowout might have. More specifically, she worries that were the insurers to suffer severe portfolio losses, it could cause serious dislocations in the derivatives market, where "they are huge counterparties and participants."
Junk-Bond Buyers Plot Escape In Debt Gap: Credit Markets (way late: Aug 14)
“Investors are right to be nervous about holding less- liquid paper,” said Michael Kessler, a Barclays credit strategist in New York, using market vernacular for bonds that are more difficult to sell when buyer appetites wane. “What’s different now is that it’s happening during a pretty significant rally.
Analysis: Australian housing, is it a bubble if it never pops? Aug, 19, 2012
Like many Western countries, the ascent of home prices was fuelled by debt. Since 1995 mortgage loans outstanding have risen from A$154 billion to A$1.2 trillion, only just shy of the country's A$1.4 trillion in annual gross domestic product (GDP).
U.S., Canada and Mexico: After the Great Recession Aug, 19, 12
“Currently, the average Canadian household is more than $40,000 richer than the average American household.
This may seem like good news for Canada. However, it was coupled with the fact that, for the first time, Canada also surpassed the U.S. in its debt to disposable household income ratio.
Sovereign Debt Meets Japanese Yen, And Releases A Triple-Whammy Of Pain! 8/ 18 (late)
Japan has a government debt-to-GDP ratio of around 215 percent. The interest cost to fund this debt is huge. Plus the yearly funding needed to maintain government services is massive. Add them up and you get a mismatch between government revenues and spending. It's called a budget deficit, and here in the U.S. we know firsthand how that works.
Because Japan is facing this triple-whammy with an already astronomical debt load, this mix of problems will likely lead to a vicious self-feeding spiral. Then higher interest rates will lead to higher funding costs and falling bond prices will lead to dumping of bonds, which leads to higher yields to entice new buyers.
I believe we are seeing the outlines of what might eventually become a Japanese government bond default as the sovereign debt problem visits Tokyo. My suspicion is that once the markets are finished attaching the euro-zone bonds, they will train their guns on Japan.
Burnout, despair in future? Aug, 18 (late arrival)
Two MIT professors, Erik Brynjolfsson and Andrew McAfee, say in their controversial new book, “Race Against the Machine,” that while automation expands overall wealth, it also creates losers who may not comprise “some small segment … like buggy whip manufacturers,” but, “in principle … a majority or even 90 percent of the population.”
Also see old post related to this book: The Rebound that Stayed Flat
"So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers.As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on I expect that this decoupling will continue, and maybe even accelerate. This doesn’t mean that companies are about to stop hiring altogether; there are still plenty of things that humans alone can do. But it means they’ll need to hire at an ever-lower rate, compared to how quickly they’re growing, making money, or buying equipment. Because America’s working age population will continue to grow for at least the next few decades, I predict that the employment ratio will not start to trend upward in the coming years. If anything, I think it’ll decrease."
China money rates up as companies pay half-year taxes Fri Aug 17, 2012 (late arrival)
The country has seen a sharp slowdown of capital inflows recently, coupled with accelerating outflows, which is beginning to undermine the country's monetary base.
Junk-Bond Sales Soar To Record In August: Credit Markets Aug, 16, 2012 (late arrival)
Concerns the slowing economy will suppress company earnings and trigger an increase in defaults “have been steamrolled by the renewed push to reach for yield,” Oleg Melentyev, a New York-based credit strategist at Bank of America Corp., said in an Aug. 14 report. Flows into credit funds “in some respect are reaching bubble levels, never before breached in history.”
Cuts virtually complete August 19
Italy's tax hunters target super-rich and their yachts off the Sardinian coast August 18
As the mega-yachts sailed by the wealthy Russians fall foul of the law, the smaller motorboats run by Italians are proving a magnet for tax police inspectors who are sent out by the Monti government to crack down on tax dodgers and raise crucial funds for Italy's battered balance sheet. "We are in a state of war" against tax evasion, Monti warned on Friday.
With owners of large motor boats who declare suspiciously low incomes coming under special scrutiny, a growing number are claiming that their boats have sunk and are putting in insurance claims, said Ugo Vittori, the head of investigative agency Eagle Keeper.
British banks faced the financial precipice 18 Aug
But in the autumn of last year some very odd things began to happen. “From time to time in the market, they [the banks] will say 'I want to do X, but don’t give up my name to Y’. That means they don’t want to deal with them anymore. If you start hearing that against a bank in the energy market, it doesn’t really matter, but if you hear it in FX [foreign exchange] or interest rate swaps, you think 'Hmm, blimey, this is really a problem’.
Nevada unemployment rises to 12 percent
Nevada’s situation echoes a trend seen nationwide in July, when 44 states saw their unemployment rate increase despite the country adding 163,000 jobs, said Bill Anderson, chief economist of the Department of Employment Training and Rehabilitation’s research and analysis bureau.
“If you look at the construction sector, Washoe lost 900 jobs,” Anderson said. “Government and the public sector lost 900 jobs as well. Employment in Washoe is flat as a whole, though you see the same downward trend in the jobless rate that’s being seen in the state.” Unemployment in Carson City rose to 12.2 percent during the same period. Las Vegas saw its unemployment rate rise from 12.2 percent in June to 12.9 percent in July.
New Wave of Adept Robots Is Changing Global Industry August 18, 2012
The Obama administration says this technological shift presents a historic opportunity for the nation to stay competitive. “The only way we are going to maintain manufacturing in the U.S. is if we have higher productivity,” said Tom Kalil, deputy director of the White House Office of Science and Technology Policy.
Government officials and industry executives argue that even if factories are automated, they still are a valuable source of jobs. If the United States does not compete for advanced manufacturing in industries like consumer electronics, it could lose product engineering and design as well. Moreover, robotics executives argue that even though blue-collar jobs will be lost, more efficient manufacturing will create skilled jobs in designing, operating and servicing the assembly lines, as well as significant numbers of other kinds of jobs in the communities where factories are.
Dwindling Social Security surplus dwarfed by future deficit 08.17.12
The projected shortfall in 2033 is $623 billion, according to the trustees’ latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security’s number crunchers because it covers the retirement years of just about everyone working today.
Add up 75 years’ worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars, or eight times the size of this year’s entire federal budget.
Baby boomers' economic anxiety
A decisive majority of 50+ voters believe the candidates have not done a good job explaining their plans to solve problems that generate the greatest anxiety. Sixty-seven percent gave the candidates poor marks for explaining their plans on Social Security, 65 percent on the budget deficit, 63 percent on Medicare and 57 percent on taxes.
How Amazon Plans To Drive A Stake Through The Heart Of Retail U.S.A.
Amazon pickers with Kiva robots as co-workers are up to three times more efficient than Joe six-pack at filling real-time orders. That makes Same Day Delivery -- a goal Amazon has been chasing since 2009 -- a viable reality. Even better, from Amazon's perspective, is that Kiva robots don't call in sick, request time off, get pregnant, join unions or hire lawyers. That's why Amazon wants more of them. Thousands of them.
U.S. August Philadelphia Business Outlook Report August 17
Summary The August Business Outlook Survey suggests that firms in the region’s manufacturing sector are continuing to experience weaker overall activity. More firms reported declines in new orders, shipments, and employment than reported increases. Prices of firms’ manufactured goods were near steady this month, although input prices edged slightly higher.
District’s Decade Has Seen Best, Worst Of Times August 17
Demographics and aging facilities bedeviled the district, with middle school, then high school enrollment riding a baby boomlet up and crowding some of the oldest schools in the district. High school campuses in particular were being overwhelmed, with some of the largest student populations in the state.
Grads Locked Out of the Housing Market August 16
The growing burden of student debt, which now tops $1 trillion, “could significantly depress demand for mortgage credit and dampen consumption,” the Treasury Department’s new Office of Financial Research wrote in July. In other words, rising student debt could eventually become a problem for the U.S. economy as a whole.
Glenn Murphy, spokesman for IMDO, said the outlook for the remainder of 2012 is flat with no significant uplift expected. “Manufacturing orders across Europe show little signs of imminent improvement as the euro zone’s debt crisis threatens some of Europe’s major economies.”
Corn Production Forecast Cut to 838 Million Tons by IGC (Aug, 23)
Farmers across the world will harvest 838 million metric tons of corn in the 2012-13 crop year, down 3 percent from 864 million tons forecast on July 26 and below last year’s output of 875 million tons, the London-based council wrote in an e-mailed report today. Corn prices surged 64 percent since mid-June on the Chicago Board of Trade, touching a record $8.49 a bushel on Aug. 10, as the worst U.S. drought in a half century cut yields.
Italians Say Goodbye To Ferraris As La Dolce Vita Expires (Old & Fascinating)
A crackdown on luxury goods combined with budget cuts that have pushed Italy deeper into its fourth recession since 2001 are souring demand for sporty cars and other symbols of the country’s carefree lifestyle. The number of secondhand high- performance cars exported from Italy nearly tripled to 13,633 vehicles in the first five months of 2012, from 4,923 a year earlier, according to auto industry group Unrae.
“Italy is one of the strongholds of supercars, and those vehicles are now disappearing from the streets,” said Giuliano Noci, associate dean of Milan Polytechnic’s business school. “This has a huge symbolic value and shows how deep the crisis is.”
China Confronts Mounting Piles of Unsold Goods (August 23)
The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.
But the main nongovernment survey of manufacturers in China showed on Thursday that inventories of finished goods rose much faster in August than in any month since the survey began in April 2004. The previous record for rising inventories, according to the HSBC/Markit survey, had been set in June. May and July also showed increases.
“Across the manufacturing industries we look at, people were expecting more sales over the summer, and it just didn’t happen ...
Politics pushes Japan towards fiscal cliff as money runs out (Aug 23)
In Japan, five months into a fiscal year that started in April, the government has made do without the bonds bill by dipping into reserves in special accounts and making technical adjustments to bond auctions, government sources said.
But Finance Minister Jun Azumi warned last month that without fresh borrowing the government will run out of money by October. That would halt benefits to unemployed and low-income earners, salaries for civil servants and transfers to rural governments, fuelling concerns that the government was losing its grip on public finances.
Japan has already been hit by a string of credit downgrades because of concerns that it was not doing enough to curb its debt burden, the world's largest at twice the value of its annual economic output.
China Economy’s Harsh Winter To Hurt Cotton, Commodities Aug 22, 2012
Cotton consumption in China, the world’s largest user, may shrink 11 percent this year as a deteriorating economy hurts demand and causes a buildup in commodities, according to Weiqiao Textile Co.
“The Chinese economy is only at the beginning of a harsh winter,” Zhang Hongxia, chairman of China’s largest cotton- textile maker, said in an interview in Hong Kong on Aug. 20. “China now is facing a situation where everything from coal to steel inventories are piling up.”
Don't blame Canada's export woes on strong C$ Wed Aug 22
Over the last decade, the Canadian dollar has climbed from around C$1.60 to the U.S. dollar, or 62 U.S. cents, to comfortably above parity against the greenback, buoyed in part by Canada's strong fiscal footing and commodity-powered economy.
On Wednesday, the currency hovered around C$0.99 to the U.S. dollar, or $1.01, and analysts expect it to maintain equal value with its U.S. counterpart for the next year at least.
Belize to Skip Payment If Lenders Don't Relent (Old & Fascinating)
"We're mystified," said A.J. Mediratta, a partner with Greylock Capital Management and the leader of a creditors' group holding about $300 million in Belize's bonds. "I'm sure every country could benefit from not paying their debt but this isn't the way to do it. They're unnecessarily turning themselves into an international pariah."
Robert Shiller On Housing Bubble: "Are We Off To The Races Again?"
He and his team of economists have just shown in a new documentary that this pyramid pattern is running rampant right now in our debt, total credit market, and money supply. And the pattern guarantees they're going to fail, says Martenson.
This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.
Report: U.S. middle class has 'worst decade in modern history' Aug, 22
Since 2001, median household income has fallen from $72,956 to $69,487 in 2010, the report said.
The median household net worth, which is the value of assets minus debt, dropped from $129,582 to $93,150 over the same 10-year period, according to Pew, which analyzed U.S. data along with its own survey of nearly 1,300 adults who consider themselves middle class.
Changes to Money Market Funds Stall
“It’s a tragedy that serious thoughtful proposals to shore up a major weakness in the financial system and protect American taxpayers from the potential need to bail out this industry can’t even receive public comment and debate,” Ms. Schapiro said in an interview.
Treasury plans securities with variable rate (Old & Fascinating)
Treasury said it will continue to study a second unconventional way to sell government debt that would offer negative yields. Investors would, in effect, pay the government for the privilege of socking their money in ultrasafe Treasurys. No decision has been made on whether to proceed with negative-yield securities.
Commerzbank to Speed Up Restructure Due To Crisis, Tougher Capital Rules ( Fascinating)
Commerzbank said late Tuesday that it will wind down financing of commercial real estate and ships, with the move coming five days before the business was scheduled to launch as part of a plan announced in March.
Analysts cautiously approved of the move, with one saying it could lead to a so-called bad bank.
Germany's second-largest lender will transfer its entire commercial real estate and ship financing business--a total volume of around EUR172 billion ($215 billion). The portfolios will go to a restructuring unit aimed at winding down non-core assets, such as the public-finance business of the bank's Eurohypo unit.
The bank, in which the German government holds a 25% stake, cited uncertain markets, the heightened sovereign debt crisis and increasing capital and liquidity requirements, especially for long-term financing, under the future Basel III regime for the decision, which the management board took after an annual strategy review Tuesday. It also pointed to "strong cyclical fluctuations, which are to be expected in the results in the future."
Iron Ore-Contract defaults as price slides, Shanghai rebar record low Aug 22
Shanghai steel futures hit a record low on Wednesday, exerting more pressure on prices of the raw material iron ore whose freefall has forced Chinese steel producers to skip contracted cargoes. Chinese mills, the world's biggest iron ore buyers, have either cancelled or deferred shipments of up to 4 million tonnes this month after iron ore prices tumbled to their lowest in more than 2-1/2 years, the latest evidence of a slowdown in the world's top steel market.
China Is Mass Producing 'Zombie Companies' And They're Eating Away At The Economy
In a report, BofA analyst Winnie Wu writes that "mismatching NPL pictures from top down and bottom up" are concealing a major risk to the Chinese economy – the proliferation of "zombie companies" being propped up by the China's banking system.
Baltic index falls as capesize slips further (Aug 20, late)
The capesize index has fallen about 90 percent this year.
"Capesize fortunes were still under tremendous pressure amid record low steel rebar prices in China and weak iron ore buying interest, not to mention the oversupply of ships which just keeps growing," analyst Morkedal said.
Shipments of iron ore account for about a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.
Chinese steel futures hit a record low on Monday, falling below 3,600 yuan ($570) on festering worries over demand in the world's second-largest economy, with iron ore remaining trapped at a 2-1/2 year trough.
China's Banks Risk Credit Crunch Wed., August 22
While the selloff in Chinese banks has made their valuations attractive, investors appear unwilling to buy, with some concerned that the banks underreport or are slow to categorize nonperforming loans. "What worries investors is no longer the results for the quarterly reports, but actually when the Chinese banks will recognize the [nonperforming loans] and give transparency to the market," said Arthur Kwong, head of Asian-Pacific equities at BNP Paribas Investment Partners in Hong Kong, whose team manages assets worth around $4.5 billion.
World shipping crisis threatens German dominance as Greeks win long game (Fascinating)
Over 100 German ship funds have already shut down as the long-simmering crisis in global container shipping finally comes to a head. A further 800 funds are threatened with insolvency, according to consultants TPW in Hamburg.
They are not alone. Britain’s oldest shipowner, Stephenson Clark, dating back to 1730, went into liquidation last week, closing the final chapter of Britain’s coal trade and the industrial revolution.
It cited “incredibly depressed” vessel rates. The firm over-invested in the boom four years ago, betting too much on the China syndrome.
Commerzbank – the world’s second-biggest provider of ship finance, and reluctant owner of a flotilla of foreclosed ships – said it is shutting down its €20bn (£15.7bn) ship funding operations entirely to “minimise risk and capital lock-up” under tougher EU banking rules.
S&P 500 Facing 25% Drop Before US Election: Janjuah (Tuesday, 21)
“I now think the correct thing to do — as I also said in April and June — is to prepare for a serious risk-off phase between August and November…over the August to November period I am looking for the S&P 500 to trade off down from around 1400…by 20 to 25 percent...to trade at or below the lows of 2011.”
Fed Studies Show Damage to Labor Market Is Reversible Aug, 20th & Total Crap
Named after British economist William Beveridge, the curve indicates there are more jobs available today than there were before the recession given the current level of unemployment.
‘Problematic’ Analysis
Fed researchers counter that analysis of that relationship in isolation is “problematic’’ because it does not consider firms’ incentives to create new positions, which also alter labor-market dynamics. Their estimate of a lower rate is based on pairing the Beveridge curve with what they call the job- creation curve, a measure of employers’ willingness to offer new positions at any given level of unemployment.
(Why wasn't there an increase in employment over the last 6 years)? Hmmm...
Number of the Week: Half of U.S. Lives in Household Getting Benefit (a little old)
The Census data show that 16% of the population lives in a household where at least one member receives Social Security and 15% receive or live with someone who gets Medicare. There is likely a lot of overlap, since Social Security and Medicare tend to go hand in hand, but those percentages also are likely to increase as the Baby Boom generation ages.
Cusack Spars With Pimco On Underwater Mortgages as Risk Recedes (late add-in)
Underwater homeowners remain a threat to housing, including those who continue to pay, according to Mortgage Resolution Partners President Steven Gluckstern, a former senior insurance executive including at the reinsurance operations at Warren Buffett’s Berkshire Hathaway Inc.
“Eventually, they all stop,” Gluckstern, also an initial member of the national finance committee for President Barack Obama’s 2008 election, said Aug. 10 on Bloomberg Radio. “There will be no recovery until this problem has been addressed.”
Commerzbank AG is Germany’s second largest bank
Waiver rule pursuant to section 2a.1 KWG
The waiver rule pursuant to section 2a.1 KWG allows subsidiary companies in a banking group to be exempted from the requirements relating to capital adequacy, large loan exposures and internal control systems at single-entity level provided that among others both the parent and the subsidiary company have their registered office in Germany.
This rule is based on the assumption that the subsidiary is closely integrated within the group structure. This is assumed to be the case if the parent company has a “controlling interest” in the subsidiary company. In addition, the company being exempted must be closely integrated into the group-wide risk management and controlling processes of the parent company.
Eurohypo AG and comdirect bank AG are fully integrated into the internal processes and risk management of Commerzbank AG as the ultimate parent company of the banking group.
This applies in particular to the methods used, risk management, monitoring of operations, management and reporting. The opportunity granted under the waiver rule pursuant to section 2a.1 KWG was used to exempt the two companies at single-entity level from the above requirements.
Pursuant to section 2a.6 KWG, parent companies within the group of companies consolidated for regulatory purposes that have their registered office in Germany are also entitled to this exemption. The opportunity this offered for Commerzbank AG as the ultimate parent company of Commerzbank Group to be exempted from the requirements at single-entity level has been utilised. In particular, Commerzbank AG is integrated in Commerzbank Group's management system and there are no legal or other obstacles to the transfer of capital to Commerzbank AG.
The first half of 2012 was characterised by the continuing European government debt crisis and the
resulting uncertainty on the credit and capital markets. In this climate, Deutsche Pfandbriefbank AG has
focused on maintaining a comfortable liquidity position and on taking a risk-oriented approach to portfolio management. The Group has generated pre-tax profit of € 51 million, and has thus been profitable or two years.
39 Key Regulatory Capital Ratios (Based on German Commercial Code)
In accordance with the waiver regulation set out in Section 2 a KWG, Deutsche Pfandbriefbank AG
is exempted from the requirement to establish the equity and core capital ratios at the level of the institution.
The waiver regulation set out in Section 2 a KWG states that a credit institution or financial services
institution which has its registered offices within Germany and which is part of a regulated group of
institutions or financial holding group does not have to comply with the following regulations if these
regulations are complied with at the level of the ultimate parent company:
> Regulations regarding solvency (equity in relation to risk-weighted assets)
> Regulations regarding large loans (equity in relation to loans extended to individual borrower units)
> Regulations set out in Section 25 a (1) Clause 3 No. 1 KWG for establishing and assuring risk-bearing capacity, defining strategies, setting up processes for identifying, assessing, managing, monitoring and communicating risks.
German Savings Banks Warn ECB of Damaging ‘Stability Culture’ (Very Late & Old)
While non-standard measures are needed to fight the debt crisis, pumping increasing amounts of liquidity doesn’t tackle overindebtedness, which is the root cause of the crisis, Fahrenschon said.
“The ECB shouldn’t forget that fighting fire with fire leaves a lot of scorched earth behind,” he said.
Supervision : Les allemands ne veulent pas de la BCE (a few days old, but curious)
Transfer at European level banking supervision might actually harm 423 Savings German first retail banking network in the country, which explains the chain reactions of the German government. Out of the national supervision could lead Savings to question the structure of their capital. They have in effect "silent partnership" capital or "capital dormant", usually from the government. But this capital had not been recorded in the capital ratios that the European Banking Authority had determined in July 2011.
Buffett's Move Raises a Red Flag Aug, 20th
Some investors said the decision to end the bet indicates that one of the world's savviest investors has doubts about the state of municipal finances. If so, the move could be a warning to investors who have purchased such debt. In canceling the contracts early, Mr. Buffett probably "doesn't want this exposure anymore and is getting out while he can," said Jeff Matthews, a hedge-fund manager who personally owns Berkshire shares.
Utah data reveal unprecedented depths of recession job losses Aug, 19th
Youthful workers who stopped looking masked magnitude of unemployment
Said another way, 7.4 percent of all the jobs in the state disappeared during the two-plus years, a staggering decline not seen in modern times. As the months ground on, more and more people were pounding the streets, knocking on doors and surfing job sites instead of buying clothes, going to the movies and socking away money for retirement or their kids’ college funds.
The losses suggest that an army of unemployed was quietly building as the rest of Utah looked the other way, the latter perhaps deluded by the state’s comparatively low jobless rates during the recession, which may have been something of a mirage. Even today, three years after the official end of the recession, 81,000 people, a number roughly equivalent to the population of Ogden, are looking for work, while thousands more have given up or are underemployed.
The Bubble in Junk Bonds AUGUST 18 (late add-in)
Stephanie shrewdly avoids pinpointing when the junk-bond bubble will burst; even Nostradamus in his prime likely would have found that degree of exactitude a daunting challenge. But she's adamant that the bubble will burst, and the likely dire consequences when it does are as clear as they are chilling. She's not, in case you're wondering, talking an eternity, but something relatively imminent. Enhancing that unpleasant prospect, she says, is that "nominal junk yields are already way below where they deserve to be."
Ominously, she avers, "The very folks driving the bubble's inflation -- those most desperate for yield -- pension funds, insurance companies, and retail investors, will be hit the hardest." Her big concern for insurance companies is the possible knock-on effect that a junk-bond blowout might have. More specifically, she worries that were the insurers to suffer severe portfolio losses, it could cause serious dislocations in the derivatives market, where "they are huge counterparties and participants."
Junk-Bond Buyers Plot Escape In Debt Gap: Credit Markets (way late: Aug 14)
“Investors are right to be nervous about holding less- liquid paper,” said Michael Kessler, a Barclays credit strategist in New York, using market vernacular for bonds that are more difficult to sell when buyer appetites wane. “What’s different now is that it’s happening during a pretty significant rally.
Analysis: Australian housing, is it a bubble if it never pops? Aug, 19, 2012
Like many Western countries, the ascent of home prices was fuelled by debt. Since 1995 mortgage loans outstanding have risen from A$154 billion to A$1.2 trillion, only just shy of the country's A$1.4 trillion in annual gross domestic product (GDP).
U.S., Canada and Mexico: After the Great Recession Aug, 19, 12
“Currently, the average Canadian household is more than $40,000 richer than the average American household.
This may seem like good news for Canada. However, it was coupled with the fact that, for the first time, Canada also surpassed the U.S. in its debt to disposable household income ratio.
Sovereign Debt Meets Japanese Yen, And Releases A Triple-Whammy Of Pain! 8/ 18 (late)
Japan has a government debt-to-GDP ratio of around 215 percent. The interest cost to fund this debt is huge. Plus the yearly funding needed to maintain government services is massive. Add them up and you get a mismatch between government revenues and spending. It's called a budget deficit, and here in the U.S. we know firsthand how that works.
Because Japan is facing this triple-whammy with an already astronomical debt load, this mix of problems will likely lead to a vicious self-feeding spiral. Then higher interest rates will lead to higher funding costs and falling bond prices will lead to dumping of bonds, which leads to higher yields to entice new buyers.
I believe we are seeing the outlines of what might eventually become a Japanese government bond default as the sovereign debt problem visits Tokyo. My suspicion is that once the markets are finished attaching the euro-zone bonds, they will train their guns on Japan.
Burnout, despair in future? Aug, 18 (late arrival)
Two MIT professors, Erik Brynjolfsson and Andrew McAfee, say in their controversial new book, “Race Against the Machine,” that while automation expands overall wealth, it also creates losers who may not comprise “some small segment … like buggy whip manufacturers,” but, “in principle … a majority or even 90 percent of the population.”
Also see old post related to this book: The Rebound that Stayed Flat
"So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers.As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on I expect that this decoupling will continue, and maybe even accelerate. This doesn’t mean that companies are about to stop hiring altogether; there are still plenty of things that humans alone can do. But it means they’ll need to hire at an ever-lower rate, compared to how quickly they’re growing, making money, or buying equipment. Because America’s working age population will continue to grow for at least the next few decades, I predict that the employment ratio will not start to trend upward in the coming years. If anything, I think it’ll decrease."
China money rates up as companies pay half-year taxes Fri Aug 17, 2012 (late arrival)
The country has seen a sharp slowdown of capital inflows recently, coupled with accelerating outflows, which is beginning to undermine the country's monetary base.
Junk-Bond Sales Soar To Record In August: Credit Markets Aug, 16, 2012 (late arrival)
Concerns the slowing economy will suppress company earnings and trigger an increase in defaults “have been steamrolled by the renewed push to reach for yield,” Oleg Melentyev, a New York-based credit strategist at Bank of America Corp., said in an Aug. 14 report. Flows into credit funds “in some respect are reaching bubble levels, never before breached in history.”
Cuts virtually complete August 19
This would be the fourth cut to pensions since 2010, when Greece signed up to the EU-IMF bailout. Pensions have been reduced by up to 40 percent since then.
Hefty cuts to salaries at public enterprises, or DEKOs as they are known, are also being lined up. Sources said that the reduction is likely to reach between 30 and 35 percent. The average annual salary at DEKOs is currently 31,000 euros but will be reduced to about 21,000, which will save the public coffers 250 million euros.
The government is also set to announce the gradual removal of 34,000 civil servants who will be placed in a labor reserve scheme ...
Italy's tax hunters target super-rich and their yachts off the Sardinian coast August 18
As the mega-yachts sailed by the wealthy Russians fall foul of the law, the smaller motorboats run by Italians are proving a magnet for tax police inspectors who are sent out by the Monti government to crack down on tax dodgers and raise crucial funds for Italy's battered balance sheet. "We are in a state of war" against tax evasion, Monti warned on Friday.
With owners of large motor boats who declare suspiciously low incomes coming under special scrutiny, a growing number are claiming that their boats have sunk and are putting in insurance claims, said Ugo Vittori, the head of investigative agency Eagle Keeper.
British banks faced the financial precipice 18 Aug
But in the autumn of last year some very odd things began to happen. “From time to time in the market, they [the banks] will say 'I want to do X, but don’t give up my name to Y’. That means they don’t want to deal with them anymore. If you start hearing that against a bank in the energy market, it doesn’t really matter, but if you hear it in FX [foreign exchange] or interest rate swaps, you think 'Hmm, blimey, this is really a problem’.
Nevada unemployment rises to 12 percent
Nevada’s situation echoes a trend seen nationwide in July, when 44 states saw their unemployment rate increase despite the country adding 163,000 jobs, said Bill Anderson, chief economist of the Department of Employment Training and Rehabilitation’s research and analysis bureau.
“If you look at the construction sector, Washoe lost 900 jobs,” Anderson said. “Government and the public sector lost 900 jobs as well. Employment in Washoe is flat as a whole, though you see the same downward trend in the jobless rate that’s being seen in the state.” Unemployment in Carson City rose to 12.2 percent during the same period. Las Vegas saw its unemployment rate rise from 12.2 percent in June to 12.9 percent in July.
New Wave of Adept Robots Is Changing Global Industry August 18, 2012
The Obama administration says this technological shift presents a historic opportunity for the nation to stay competitive. “The only way we are going to maintain manufacturing in the U.S. is if we have higher productivity,” said Tom Kalil, deputy director of the White House Office of Science and Technology Policy.
Government officials and industry executives argue that even if factories are automated, they still are a valuable source of jobs. If the United States does not compete for advanced manufacturing in industries like consumer electronics, it could lose product engineering and design as well. Moreover, robotics executives argue that even though blue-collar jobs will be lost, more efficient manufacturing will create skilled jobs in designing, operating and servicing the assembly lines, as well as significant numbers of other kinds of jobs in the communities where factories are.
Finland gets ready for possible breakup of Eurozone 8/17/12
European leaders must prepare for the possibility that the euro zone breaks up, Finland's foreign minister, Erkki Tuomioja, said in the Daily Telegraph on Friday.
Tuomioja said Finnish officials have prepared for the break up of the single currency with an "operational plan for any eventuality."
"It is not something that anybody - even the True Finns (a Eurosceptic opposition party) - are advocating in Finland, let alone the government. But we have to be prepared," Tuomioja was quoted as saying.
European leaders must prepare for the possibility that the euro zone breaks up, Finland's foreign minister, Erkki Tuomioja, said in the Daily Telegraph on Friday.
Tuomioja said Finnish officials have prepared for the break up of the single currency with an "operational plan for any eventuality."
"It is not something that anybody - even the True Finns (a Eurosceptic opposition party) - are advocating in Finland, let alone the government. But we have to be prepared," Tuomioja was quoted as saying.
Even the most-trafficked areas around the city centre are feeling the crunch. Streets are lined with empty stores, grimy windows barely hiding loose papers and forgotten inventory.
On Stadiou Street, a major thoroughfare leading to the city’s centre, 42 percent of the stores are gone. ESEE said Athens has lost 30 percent of its stores overall as successive governments have imposed waves of pay cuts, tax hikes and slashed pensions in a desperate attempt to halt a slide toward bankruptcy that doesn’t seem to be working.
Valia Aranitou, director of the Labour Institute at ESEE, said many more stores will close because of the crisis and tax hikes they could not afford with dwindling sales.
The projected shortfall in 2033 is $623 billion, according to the trustees’ latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security’s number crunchers because it covers the retirement years of just about everyone working today.
Add up 75 years’ worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars, or eight times the size of this year’s entire federal budget.
Baby boomers' economic anxiety
A decisive majority of 50+ voters believe the candidates have not done a good job explaining their plans to solve problems that generate the greatest anxiety. Sixty-seven percent gave the candidates poor marks for explaining their plans on Social Security, 65 percent on the budget deficit, 63 percent on Medicare and 57 percent on taxes.
How Amazon Plans To Drive A Stake Through The Heart Of Retail U.S.A.
Amazon pickers with Kiva robots as co-workers are up to three times more efficient than Joe six-pack at filling real-time orders. That makes Same Day Delivery -- a goal Amazon has been chasing since 2009 -- a viable reality. Even better, from Amazon's perspective, is that Kiva robots don't call in sick, request time off, get pregnant, join unions or hire lawyers. That's why Amazon wants more of them. Thousands of them.
U.S. August Philadelphia Business Outlook Report August 17
Summary The August Business Outlook Survey suggests that firms in the region’s manufacturing sector are continuing to experience weaker overall activity. More firms reported declines in new orders, shipments, and employment than reported increases. Prices of firms’ manufactured goods were near steady this month, although input prices edged slightly higher.
District’s Decade Has Seen Best, Worst Of Times August 17
Demographics and aging facilities bedeviled the district, with middle school, then high school enrollment riding a baby boomlet up and crowding some of the oldest schools in the district. High school campuses in particular were being overwhelmed, with some of the largest student populations in the state.
Grads Locked Out of the Housing Market August 16
The growing burden of student debt, which now tops $1 trillion, “could significantly depress demand for mortgage credit and dampen consumption,” the Treasury Department’s new Office of Financial Research wrote in July. In other words, rising student debt could eventually become a problem for the U.S. economy as a whole.
The HOI is a home affordability gauge, tracking median home prices across 225 metropolitan areas, and comparing them to the given area's median household income.
An "affordable" home is one for which monthly mortgage payments -- assuming a 10% downpayment and a 30-year fixed rate mortgage -- would be 28% or less of a median income-earning household's monthly income.
Job Losses Persist for the Less-Educated 8/15/12
“The economy we all have in our minds is the one we had in 2006, and it’s gone.”
The study, based on data collected by the Census Bureau and the Bureau of Labor Statistics, divided the nation’s work force of 140 million people into three groups: those who did not go to college, those with some college education or an associate degree, and those with at least a bachelor’s degree.
Here's The Truth Behind The 'Strong Dollar' Excuse For Disappointing Revenue
As figures 10-11 also show, the correlation between profits and unit output – domestic or global production, is far more potent than exchange-rate correlation. As the U.S. exchange rate and global growth are often inversely correlated, the correlation between earnings and the exchange rate is magnified beyond the exchange rate’s own causal influence.
Foreign nationals accounted for $82.5 billion, or 8.9%, of the $928 billion spent on U.S. residential real estate from April 2011 through March 2012, according a June survey from the National Association of Realtors. That was up 24% from $66.4 billion the previous year. More than 50% of sales over the past year occurred in just five states: Florida, California, Texas, Arizona and New York.
Putting more people back is not likely to happen over the short-term, especially when it comes to older Americans who have lost their jobs, because of the changing nature of the employment landscape."We're struggling to get the right people in the right place. It's a huge musical chairs where a lot of people may never find a chair that will fit them," said Hicks.
US Labor Department announces nearly $100 million in grants available for states to implement, improve short-time compensation or 'work sharing'
The department will provide technical assistance through webinars and other methods to help states achieve the purposes of the grants. The department also will collect and disseminate successful practices based on program implementation as well as outreach tools developed as a result of these grants.
U.S. Economic Recovery Is Weakest Since World War II 08/15/12
Usually, workers' pay rises as the economy picks up momentum after a recession. Not this time. Employers don't have to be generous in a weak job market because most workers don't have anywhere to go.
As a result, pay raises haven't kept up with even modest levels of inflation. Earnings for production and nonsupervisory workers – a category that covers about 80 percent of the private, nonfarm workforce – have risen just over 6.2 percent since June 2009. Consumer prices have risen nearly 7.2 percent. Adjusted for inflation, wages have fallen 0.8 percent. In the previous five recoveries _the records go back only to 1964 – real wages had gone up an average 1.5 percent at this point.
2012 gas prices head for record 8/14/12
Scott Anderson, chief economist at Bank of the West, says if prices continue to rise, they could crimp a rebound in consumer spending. The Commerce Department reported Tuesday that July consumer spending rose 0.8%, the largest gain in five months.
"The $4 threshold is when you see sticker shock and marked changes in consumer behavior and spending patterns," Anderson says.
Q2 Earnings Season Almost Over - Earnings Trends
While roughly two-thirds of companies beat earnings expectations, the beat ratio on the revenue front is far weaker - only 37.6% of the companies have beat revenue expectations. Even some of these companies with positive revenue surprises for the second quarter have guided towards lower revenue numbers in the coming quarters. This does not bode well for growth in the coming quarters.
Scott Anderson, chief economist at Bank of the West, says if prices continue to rise, they could crimp a rebound in consumer spending. The Commerce Department reported Tuesday that July consumer spending rose 0.8%, the largest gain in five months.
"The $4 threshold is when you see sticker shock and marked changes in consumer behavior and spending patterns," Anderson says.
Q2 Earnings Season Almost Over - Earnings Trends
While roughly two-thirds of companies beat earnings expectations, the beat ratio on the revenue front is far weaker - only 37.6% of the companies have beat revenue expectations. Even some of these companies with positive revenue surprises for the second quarter have guided towards lower revenue numbers in the coming quarters. This does not bode well for growth in the coming quarters.
Debt and this Great Correction …Will They Never End? August 15th
Is this slump in Japan permanent? Will the Great Correction there... and here...go on forever?
Nah...Government debt in Japan is still rising. It's at about 230% of GDP already. But it can't go up forever. And Japan's 'Forever Correction' can't continue without it.
Why Bad Politics = Even Worse Markets SEPT/OCT 2012
The longer America's interlocking economic and political challenges persist, the greater the number of companies and long-term investors that begin to worry -- and, more importantly, act on those fears. They hire fewer people and invest less in factories and equipment. As they increasingly sit on the sidelines, the country's fate will be left in the hands of tactical position players and short-term traders, further ramping up volatility and reducing future growth and job opportunities. And when day traders and company flippers start running a country's economy, watch out.
Finitely many new guests
Suppose a new guest arrives and wishes to be accommodated in the hotel. Because the hotel has infinitely many rooms, we can move the guest occupying room 1 to room 2, the guest occupying room 2 to room 3 and so on, and fit the newcomer into room 1. By repeating this procedure, it is possible to make room for any finite number of new guests (and whatever bonds they have in their portfolio) ...
Japan’s Debt: A Small Taste of the Coming Financial Implosion August 13th
Bad debt is bad debt. It is bad because it can't be repaid. The debtor can hem and haw... he can delay and obfuscate. But he can't pay. And sooner or later, the day of reckoning comes... and all hell breaks loose.
In order to keep up with Japan's debt, Japan is taking money from citizens - via a sales tax. The tax is modest. It should be no big deal. But there is only a limited amount of real purchasing power in an economy.
And it is that purchasing power that must, ultimately, be the source of debt repayment. A sales tax merely transfers money from households to the government. Japan's households are already not big spenders. The additional tax will make them spend less, leading to further economic weakness... and possibly the need for more borrowing!
In their book, Rogoff and Reinhart, argue that after government debt passes 90% or 100% of GDP it weighs so heavily on the economy that it is very difficult to avoid a major breakdown. In small countries, or those that can't borrow in their own currencies, the breakdown comes quickly. In large ones, it can take many years.
Japan has the world's third largest economy - after the US and China. It also has a printing press. In today's world, as we observed a few days ago, a printing press in the hands of debtor nation is like a bomb strapped to the back of a bank robber.
Japan's GDP Data May Dampen Futures - Economic Highlights 8/13/12
Monday morning market news gives another dampener to U.S. market futures, with Japan reporting 2nd quarter GDP at 1.4% growth, just over half of the 2.7% economists had been predicting. Worse, this is a steep drop-off from the revised 5.5% growth from the previous quarter.
When I Arrive In A Country, I Ask The Cab Driver How The Economy Is Doing Aug 13
I think it’s true that the 1 Percent or the elite are living in a world of, maybe, excessive privilege, and they don’t fully realize how much pain and suffering, how much anxiety exists out there. I think there are lots of things that we have to figure out to make sure that we don’t have a social and political backlash. - in Business Insider
Grain prices soar as drought impact deepens 8/13/12
The outlook for this year’s harvest has changed dramatically over just a few months. In the spring, U.S. corn farmers planted the most acreage in 75 years and expected a record harvest. Countries that rely on the United States as the world’s largest food exporter were hopeful the yield would replenish depleted global stockpiles.
After predicting a bumper crop of nearly 15 billion bushels of corn in June, the USDA Friday predicted a harvest of less than 11 billion bushels, 13 percent below last year's level.
"We don't have much hay, we don't have much corn, we don't have much of really anything,” Brett Crosby, a cattle rancher in Cowley, Wyo., told CNBC. “Over half of the pastures in the United States are rated poor to very poor in condition."
Is this slump in Japan permanent? Will the Great Correction there... and here...go on forever?
Nah...Government debt in Japan is still rising. It's at about 230% of GDP already. But it can't go up forever. And Japan's 'Forever Correction' can't continue without it.
Why Bad Politics = Even Worse Markets SEPT/OCT 2012
The longer America's interlocking economic and political challenges persist, the greater the number of companies and long-term investors that begin to worry -- and, more importantly, act on those fears. They hire fewer people and invest less in factories and equipment. As they increasingly sit on the sidelines, the country's fate will be left in the hands of tactical position players and short-term traders, further ramping up volatility and reducing future growth and job opportunities. And when day traders and company flippers start running a country's economy, watch out.
Finitely many new guests
Suppose a new guest arrives and wishes to be accommodated in the hotel. Because the hotel has infinitely many rooms, we can move the guest occupying room 1 to room 2, the guest occupying room 2 to room 3 and so on, and fit the newcomer into room 1. By repeating this procedure, it is possible to make room for any finite number of new guests (and whatever bonds they have in their portfolio) ...
Japan’s Debt: A Small Taste of the Coming Financial Implosion August 13th
Bad debt is bad debt. It is bad because it can't be repaid. The debtor can hem and haw... he can delay and obfuscate. But he can't pay. And sooner or later, the day of reckoning comes... and all hell breaks loose.
In order to keep up with Japan's debt, Japan is taking money from citizens - via a sales tax. The tax is modest. It should be no big deal. But there is only a limited amount of real purchasing power in an economy.
And it is that purchasing power that must, ultimately, be the source of debt repayment. A sales tax merely transfers money from households to the government. Japan's households are already not big spenders. The additional tax will make them spend less, leading to further economic weakness... and possibly the need for more borrowing!
In their book, Rogoff and Reinhart, argue that after government debt passes 90% or 100% of GDP it weighs so heavily on the economy that it is very difficult to avoid a major breakdown. In small countries, or those that can't borrow in their own currencies, the breakdown comes quickly. In large ones, it can take many years.
Japan has the world's third largest economy - after the US and China. It also has a printing press. In today's world, as we observed a few days ago, a printing press in the hands of debtor nation is like a bomb strapped to the back of a bank robber.
Japan's GDP Data May Dampen Futures - Economic Highlights 8/13/12
Monday morning market news gives another dampener to U.S. market futures, with Japan reporting 2nd quarter GDP at 1.4% growth, just over half of the 2.7% economists had been predicting. Worse, this is a steep drop-off from the revised 5.5% growth from the previous quarter.
When I Arrive In A Country, I Ask The Cab Driver How The Economy Is Doing Aug 13
I think it’s true that the 1 Percent or the elite are living in a world of, maybe, excessive privilege, and they don’t fully realize how much pain and suffering, how much anxiety exists out there. I think there are lots of things that we have to figure out to make sure that we don’t have a social and political backlash. - in Business Insider
Grain prices soar as drought impact deepens 8/13/12
The outlook for this year’s harvest has changed dramatically over just a few months. In the spring, U.S. corn farmers planted the most acreage in 75 years and expected a record harvest. Countries that rely on the United States as the world’s largest food exporter were hopeful the yield would replenish depleted global stockpiles.
After predicting a bumper crop of nearly 15 billion bushels of corn in June, the USDA Friday predicted a harvest of less than 11 billion bushels, 13 percent below last year's level.
"We don't have much hay, we don't have much corn, we don't have much of really anything,” Brett Crosby, a cattle rancher in Cowley, Wyo., told CNBC. “Over half of the pastures in the United States are rated poor to very poor in condition."
Merkel Doesn’t Deserve Sub-Zero Yields As Draghi Plan Gains Aug 12
Falling demand is hurting German companies. Munich-based BMW, the world’s biggest maker of luxury cars, reported on Aug. 1 its first drop in quarterly operating profit in almost three years and said that Europe’s debt crisis could cause “the global economic climate to cloud over further.”
Puma, Europe’s second-largest sporting-goods maker, said last month it will speed up a reorganization after second- quarter profit fell 29 percent and it cut a forecast for net sales growth. Siemens AG (SIE), the region’s largest engineering company, reported new orders fell from a year earlier last month.
Global shift in US business confounds Washington August 12, 2012
Four decades ago, 90 per cent of the company’s sales were in the US. Now, however, 90 per cent are outside the US. Yes, you read that right: Tupperware might look as American as apple pie; its headquarters are even in Orlando, near Disneyworld.
But it is not American consumers who are now driving the group’s success, but those in Indonesia or Korea or Germany. And the company is structured accordingly. It has shifted much of its production overseas and only 1,000 of its 13,600 employees are in the US.
Hermosa Beach meter maids making nearly $100K? August 10th, 2012
There are four qualifications for being a city “community service officer,” Bobko told me: “You have to be able to drive a standard transmission; you have to able to handle large animals; you have to read and interpret statutes and regulations; and you have a high school diploma or equivalent.”
Wal-Mart to add more detail in financial reports after SEC query
Regarding the quarterly report, the SEC asked the world's largest retailer to provide greater detail about the outcome of legal proceedings, such as the range of a possible loss from litigation. If no range could be provided, the SEC asked that Wal-Mart provide a reason why such an estimate could not be given.
"Furthermore, if you cannot estimate the possible loss or range of possible losses, please consider providing additional disclosure that could allow a reader to evaluate the potential magnitude of the claim," Andrew Mew, accounting branch chief of the SEC's division of corporation finance, said in the letter.
Why some stocks are sinking despite big profits August 10
U.S. companies are pulling nearly 9 cents of net income out of every dollar of revenue versus a three decade average of 7 cents or so. Yet the consensus among analysts is that this profit margin will jump to a record 9.6 cents per dollar next year, according to Goldman Sachs.
In other words, companies will do even more with less.
But lately the signs haven't been good. On Wednesday, the government reported U.S. companies squeezed more out of workers last quarter but less than average. Productivity, or output per hour worked, rose at an annual rate of 1.6 percent versus a 2.2 percent average since 1947. Larry Hatheway, chief economist at UBS, also notes that profit margins have been slipping lately, not rising as analysts expected.
"You won't be able to grow earnings much faster than revenue," he says. "Analysts will have to revise down their earnings."
Housewives With Frying Pans Protest Japan Tax Hike As Debt Soars
Japan’s debt is ballooning as its population is aging and shrinking, meaning there are only 2.4 working-age Japanese to support one senior citizen now, compared with 9.1 in 1965. If he gets this tax issue wrong, Noda could throttle consumption, reduce tax revenue, and still leave Japan deep in debt. If the tax increase is defeated, the debt problem remains unsolved.
Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading
One of the rules of analytics, disconcertingly enough, is that other things being equal, companies that don’t get written about in the media tend to outperform those that are widely covered.
Less Than Zero: Welcome to Negative Nominal Rate
Negative bond yields also reflect the possibility of another epochal event: the arrival of negative nominal central bank rates for cash deposits. Should this phenomenon become widespread, standard economics textbooks, which assume a minimum rate of zero, would have to be rewritten.
US Labor Force Statistics from the Current Population Survey August 10, 2012
They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to "make no assumption of extraordinary support from the public sector," according to the documents.
Money market fund assets rose to $2.562 trillion August 9
Total U.S. money market mutual fund assets rose $10.94 billion to $2.562 trillion for the week that ended Wednesday, the Investment Company Institute said Thursday.
E-Trade ousting its CEO; naming chairman to post 8/9/12
E-Trade has been struggling as individual consumers pull money out of the stock market. The New York company's net income dropped 16 percent in the April-June quarter as investors made far fewer trades than a year ago.
Gary Shilling: Everyone’s Still Wrong About Bonds, But They’re A Great Investment 8/9/12
Instead of going up, Shilling says, interest rates will continue to go down. And his projected move, from a 2.6% yield on the 30-year Treasury to a 2.0% yield, would deliver another very compelling return.
Commodities are headed down, Shilling says. The world is going into a recession, and China is headed for a "hard landing." As that happens, demand for commodities will continue to drop. And prices will fall. His favorite commodity short is copper.
HP braces for huge loss after $8 bln EDS writedown Aug, 8th, 2012
HP also said that it had moved faster than it previously anticipated with plans announced in May to reduce 27,000 jobs, or 8 percent of its workforce. Because of this, it raised its estimate of a third-quarter pre-tax restructuring charge to as much as $1.7 billion from its previous estimate of $1 billion.
(See story on IBM downsizing somewhere below: Re: "The direct impetus for this column is IBM’s internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.")!
The Hidden Factor Leading This “Safe” Asset to Collapse Aug 8th, 2012
In other words, the Treasury’s kept the supply of bonds depressed over the last four months, boosting prices even more.
We may not know exactly when investors will get over their fear of risk and begin selling off bonds, but it’s easier to see when the debt ceiling factor will be removed. Even with the Treasury’s interference, U.S. debt will likely hit the current limit around the end of this year.
At that point, the debt ceiling will be raised, the Treasury will increase the amount of bonds offered and prices will fall. It’s that simple.
Chinese Business Media Cautions Japanese Bond Bubble Is Ready To Burst, Anticipates 40% Yen Devaluation
Even though the yield on 10-year Japanese Government Bonds (JGB) is only 1 percent, the interest expense is expected to top 22.3 trillion yen in the fiscal year that begins next month. This is one-quarter of the general account budget. If the bond yield rises to 2 percent, the interest expense would surpass the total expected tax revenue of 42.3 trillion yen.
Asia’s Corporate Bonds Seen as Safest in World: Credit Markets August 08, 2012
The U.S. two-year interest-rate swap spread, a measure of bond market stress, increased 0.17 basis point to 19.65 basis points as of 12:02 p.m. in New York. The gauge widens when investors seek the perceived safety of government securities and narrows when they favor assets such as corporate bonds.
The Fear and Loathing of the One Percent Aug, 8, 2012
The 2012 Survey of Affluence and Wealth in America, from American Express Publishing and Harrison Group, finds that One Percenters are hoarding three times as much cash as they were two years ago. Their savings rate soared to 34 percent in the second quarter of 2012, up from 12 percent in 2007.
Higher savings would normally be good for the economy. But not now, when capital is needed to invest in growth and jobs. The One Percenters put 56 percent of their available cash into savings accounts and money markets in 2012 - that's up from 24 percent in 2007.
They're investing just 44 percent in financial markets - down from 76 percent in 2007. More One Percenters say the stock market is "a real risk" rather than a "real opportunity." That's a big switch from just last year, when 62 percent said the market was an opportunity.
BlackRock to Glenmede Seeking Safety in Corporate Bonds
Even though the global economy is slowing and credit-rating downgrades exceed upgrades, rising demand has allowed companies worldwide to sell about $2.16 trillion of bonds this year, the second-fastest pace on record based on data compiled by Bloomberg. Instead of using the proceeds to expand and hire more workers as desired by central banks that have cut interest rates to record lows, companies are mainly refinancing existing obligations or hoarding the money.
Bond Bubble Dismissed as Low Yields Echo Pimco's New Normal
“We may be in a synchronized slowdown” in global economic growth, El-Erian, who as chief executive officer of Pacific Investment Management Co. oversees $1.77 trillion, said in a June 6 telephone interview. “We could stay here for a while.”
The slowdown matches the prediction by El-Erian of Pimco in 2009 for a “new normal” in global economies characterized by a slower pace of expansion, higher unemployment and a greater role for governments in private markets following the worst financial crisis since the Great Depression.
Pimco officials point to Japan, which has been in and out of recession since the mid-1990s, as what the new normal would look like. Even though it has the world’s largest debt load at more than $11 trillion, Japan has some of the world’s lowest bond yields because of years of below-average growth.
Japanese 10-year yields fell to 2 percent in late 1997 from about 5.7 percent eight years earlier when the country’s stock and real estate markets collapsed. They haven’t closed at or above 2 percent since 2006. The U.S. 10-year yield tumbled below that level about four years after rising to 5.29 percent in June 2007.
Global “bond markets are turning Japanese,” Bill Gross, who manages the world’s biggest bond fund (PTTRX) as co-chief investment officer with El-Erian at Newport Beach, California-based Pimco, said in a June 4 Twitter posting.
“A lot of people from Warren Buffett on down would say the bond market has no value, be careful of bonds, when rates go up you’ll lose a lot of money,” James Bianco, president of the firm, said in a June 7 telephone interview. “And they’re right, but the buyer of bonds doesn’t care about value right now. The buyer of bonds is the central bank of Japan, the central bank of China.”
Fake Housing Recovery At Risk?
They have accounted for 30 percent of its new business this year and the company fears that major lenders may refuse to do business with it if it cannot continue to operate nationally.
But if Milwaukee-based MGIC settles on Freddie's terms, its risk to capital ratio -- already beyond permissible limits at 30-to-1 -- may deteriorate still further, as it has not set aside a reserve for a possible settlement.
The risk is that MGIC could fall into the same hole as other mortgage insurers caught by the housing crisis. Old Republic International Corp and Triad Guaranty Inc have stopped writing new business and are running off their old insurance, while PMI Group Inc went bankrupt last year.
MGIC Plunges as Insurer Breaches Capital Limit After Loss
“This is an extremely troubled company and its ongoing viability, obviously the markets are putting a big question mark about that,” said Rob Haines, an analyst at CreditSights Inc. “It seems like it’s inevitable that the company will ultimately end up in some kind of regulatory receivership.”
Also see: At this time we do not know when a final rule will be issued, although the final rule is not expected until, at the earliest, 2013. Under the proposed rule, because of the capital support provided by the U.S. Government, the GSEs satisfy the Dodd-Frank risk-retention requirements while they are in conservatorship.
"Furthermore, if you cannot estimate the possible loss or range of possible losses, please consider providing additional disclosure that could allow a reader to evaluate the potential magnitude of the claim," Andrew Mew, accounting branch chief of the SEC's division of corporation finance, said in the letter.
Why some stocks are sinking despite big profits August 10
U.S. companies are pulling nearly 9 cents of net income out of every dollar of revenue versus a three decade average of 7 cents or so. Yet the consensus among analysts is that this profit margin will jump to a record 9.6 cents per dollar next year, according to Goldman Sachs.
In other words, companies will do even more with less.
But lately the signs haven't been good. On Wednesday, the government reported U.S. companies squeezed more out of workers last quarter but less than average. Productivity, or output per hour worked, rose at an annual rate of 1.6 percent versus a 2.2 percent average since 1947. Larry Hatheway, chief economist at UBS, also notes that profit margins have been slipping lately, not rising as analysts expected.
"You won't be able to grow earnings much faster than revenue," he says. "Analysts will have to revise down their earnings."
Housewives With Frying Pans Protest Japan Tax Hike As Debt Soars
Japan’s debt is ballooning as its population is aging and shrinking, meaning there are only 2.4 working-age Japanese to support one senior citizen now, compared with 9.1 in 1965. If he gets this tax issue wrong, Noda could throttle consumption, reduce tax revenue, and still leave Japan deep in debt. If the tax increase is defeated, the debt problem remains unsolved.
Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading
One of the rules of analytics, disconcertingly enough, is that other things being equal, companies that don’t get written about in the media tend to outperform those that are widely covered.
Less Than Zero: Welcome to Negative Nominal Rate
Negative bond yields also reflect the possibility of another epochal event: the arrival of negative nominal central bank rates for cash deposits. Should this phenomenon become widespread, standard economics textbooks, which assume a minimum rate of zero, would have to be rewritten.
US Labor Force Statistics from the Current Population Survey August 10, 2012
==> According to the Investment Company Institute, individual investors withdrew over $130 billion from equity mutual funds in 2011, the fifth straight year of net redemptions.
Money market fund assets rose to $2.562 trillion August 9
Total U.S. money market mutual fund assets rose $10.94 billion to $2.562 trillion for the week that ended Wednesday, the Investment Company Institute said Thursday.
E-Trade ousting its CEO; naming chairman to post 8/9/12
E-Trade has been struggling as individual consumers pull money out of the stock market. The New York company's net income dropped 16 percent in the April-June quarter as investors made far fewer trades than a year ago.
Gary Shilling: Everyone’s Still Wrong About Bonds, But They’re A Great Investment 8/9/12
Instead of going up, Shilling says, interest rates will continue to go down. And his projected move, from a 2.6% yield on the 30-year Treasury to a 2.0% yield, would deliver another very compelling return.
Commodities are headed down, Shilling says. The world is going into a recession, and China is headed for a "hard landing." As that happens, demand for commodities will continue to drop. And prices will fall. His favorite commodity short is copper.
HP braces for huge loss after $8 bln EDS writedown Aug, 8th, 2012
HP also said that it had moved faster than it previously anticipated with plans announced in May to reduce 27,000 jobs, or 8 percent of its workforce. Because of this, it raised its estimate of a third-quarter pre-tax restructuring charge to as much as $1.7 billion from its previous estimate of $1 billion.
(See story on IBM downsizing somewhere below: Re: "The direct impetus for this column is IBM’s internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.")!
The Hidden Factor Leading This “Safe” Asset to Collapse Aug 8th, 2012
In other words, the Treasury’s kept the supply of bonds depressed over the last four months, boosting prices even more.
We may not know exactly when investors will get over their fear of risk and begin selling off bonds, but it’s easier to see when the debt ceiling factor will be removed. Even with the Treasury’s interference, U.S. debt will likely hit the current limit around the end of this year.
At that point, the debt ceiling will be raised, the Treasury will increase the amount of bonds offered and prices will fall. It’s that simple.
Chinese Business Media Cautions Japanese Bond Bubble Is Ready To Burst, Anticipates 40% Yen Devaluation
Even though the yield on 10-year Japanese Government Bonds (JGB) is only 1 percent, the interest expense is expected to top 22.3 trillion yen in the fiscal year that begins next month. This is one-quarter of the general account budget. If the bond yield rises to 2 percent, the interest expense would surpass the total expected tax revenue of 42.3 trillion yen.
Asia’s Corporate Bonds Seen as Safest in World: Credit Markets August 08, 2012
The U.S. two-year interest-rate swap spread, a measure of bond market stress, increased 0.17 basis point to 19.65 basis points as of 12:02 p.m. in New York. The gauge widens when investors seek the perceived safety of government securities and narrows when they favor assets such as corporate bonds.
The Fear and Loathing of the One Percent Aug, 8, 2012
The 2012 Survey of Affluence and Wealth in America, from American Express Publishing and Harrison Group, finds that One Percenters are hoarding three times as much cash as they were two years ago. Their savings rate soared to 34 percent in the second quarter of 2012, up from 12 percent in 2007.
Higher savings would normally be good for the economy. But not now, when capital is needed to invest in growth and jobs. The One Percenters put 56 percent of their available cash into savings accounts and money markets in 2012 - that's up from 24 percent in 2007.
They're investing just 44 percent in financial markets - down from 76 percent in 2007. More One Percenters say the stock market is "a real risk" rather than a "real opportunity." That's a big switch from just last year, when 62 percent said the market was an opportunity.
BlackRock to Glenmede Seeking Safety in Corporate Bonds
Even though the global economy is slowing and credit-rating downgrades exceed upgrades, rising demand has allowed companies worldwide to sell about $2.16 trillion of bonds this year, the second-fastest pace on record based on data compiled by Bloomberg. Instead of using the proceeds to expand and hire more workers as desired by central banks that have cut interest rates to record lows, companies are mainly refinancing existing obligations or hoarding the money.
Bond Bubble Dismissed as Low Yields Echo Pimco's New Normal
“We may be in a synchronized slowdown” in global economic growth, El-Erian, who as chief executive officer of Pacific Investment Management Co. oversees $1.77 trillion, said in a June 6 telephone interview. “We could stay here for a while.”
The slowdown matches the prediction by El-Erian of Pimco in 2009 for a “new normal” in global economies characterized by a slower pace of expansion, higher unemployment and a greater role for governments in private markets following the worst financial crisis since the Great Depression.
Pimco officials point to Japan, which has been in and out of recession since the mid-1990s, as what the new normal would look like. Even though it has the world’s largest debt load at more than $11 trillion, Japan has some of the world’s lowest bond yields because of years of below-average growth.
Japanese 10-year yields fell to 2 percent in late 1997 from about 5.7 percent eight years earlier when the country’s stock and real estate markets collapsed. They haven’t closed at or above 2 percent since 2006. The U.S. 10-year yield tumbled below that level about four years after rising to 5.29 percent in June 2007.
Global “bond markets are turning Japanese,” Bill Gross, who manages the world’s biggest bond fund (PTTRX) as co-chief investment officer with El-Erian at Newport Beach, California-based Pimco, said in a June 4 Twitter posting.
“A lot of people from Warren Buffett on down would say the bond market has no value, be careful of bonds, when rates go up you’ll lose a lot of money,” James Bianco, president of the firm, said in a June 7 telephone interview. “And they’re right, but the buyer of bonds doesn’t care about value right now. The buyer of bonds is the central bank of Japan, the central bank of China.”
Fake Housing Recovery At Risk?
They have accounted for 30 percent of its new business this year and the company fears that major lenders may refuse to do business with it if it cannot continue to operate nationally.
But if Milwaukee-based MGIC settles on Freddie's terms, its risk to capital ratio -- already beyond permissible limits at 30-to-1 -- may deteriorate still further, as it has not set aside a reserve for a possible settlement.
The risk is that MGIC could fall into the same hole as other mortgage insurers caught by the housing crisis. Old Republic International Corp and Triad Guaranty Inc have stopped writing new business and are running off their old insurance, while PMI Group Inc went bankrupt last year.
MGIC Plunges as Insurer Breaches Capital Limit After Loss
“This is an extremely troubled company and its ongoing viability, obviously the markets are putting a big question mark about that,” said Rob Haines, an analyst at CreditSights Inc. “It seems like it’s inevitable that the company will ultimately end up in some kind of regulatory receivership.”
Also see: At this time we do not know when a final rule will be issued, although the final rule is not expected until, at the earliest, 2013. Under the proposed rule, because of the capital support provided by the U.S. Government, the GSEs satisfy the Dodd-Frank risk-retention requirements while they are in conservatorship.
Therefore, lenders that originate loans that are sold to the GSEs while they are in conservatorship will not be required to retain risk associated with those loans.
==> From Fannie Mae 10Q
These six mortgage insurers—Triad, RMIC, PMI, Genworth, Radian and MGIC—provided a combined $72.0 billion, or 79%, of our risk in force mortgage insurance coverage of our single-family guaranty book of business as of June 30, 2012.
We do not know how long regulators will permit mortgage insurers that do not meet, or may soon fail to meet, state regulatory capital requirements to continue operating without obtaining additional capital.
Weak credit quality of US cities bigger concern than bankruptcies-Morgan Stanley Aug 7, 2012
"Structural challenges persist, even under optimistic growth scenarios," they said. "For states, tax growth is unlikely to overcome rising costs from long-term liability burdens and spending mandates while locals face constraints of state aid cuts and weaker tax bases from lower home values."
California borrowing from special fund accounts surges; audit under way
"The state has been accruing vast amounts over decades in special funds that are then coveted by the Legislature and administrations to balance the budget," said Assemblyman Jim Nielsen, R-Gerber, vice chairman of the Assembly Budget Committee. "This is a gross overtaxation of the people of California."
Both legislative houses are expected to hold hearings next month to examine the status of special fund accounts, particularly whether state departments have kept more money there than reported to lawmakers.
Expert Explains In Horrifying Detail How The Next Shock Will Shatter The Global Economy
Using complex systems analysis, he explains how within weeks of the next major economic shock, like a major bank failure or a country exiting the eurozone, contagion would quickly spread through global supply chains, causing an "irreversible global economic collapse."
Korowicz warns that in the next crisis, "neither wealth nor geography is a protection. Our evolved co-dependencies mean that we are all in this together."
AMERICAN IDLE: FIVE REASONS WE HATE THE STOCK MARKET 8/7/12
And just when it looked like the kids might get excited about their generation's new engines of wealth creation, they were prison raped by the all star team of Morgan Stanley, Second Market, Mark Zuckerberg and his swineherd of Russian VCs. So they're not coming. Every study shows they have no interest in playing. As the army of Boomer investors marches into the sunset, their banners tattered but still held proudly aloft, there is no one bringing up the rear. Their children prefer fantasy football to fantasy capitalism.
As Earnings Season Closes, Signs of More Trouble Ahead Aug 7, 2012
With about 85 percent of the S&P companies reporting, the results haven't been pretty: Just 51 percent have exceeded net profit expectations. Just 51 percent have exceeded net profit expectations, with only 40 percent or so beating on revenue.
What's even scarier is that more than 50 percent of the companies on the broad index have lowered their estimates for the third quarter, while only 21 percent have raised. Analysts have followed in kind, cutting their forecasts for S&P 1500 companies on about a 3 to 1 ratio.
US state budgets face "considerable challenges" -study Aug 7, 2012
The U.S. Congress has scheduled cuts of up to $1.2 trillion affecting states as part of last summer's deficit deal, while it is seeking savings by pulling back other federal grants. States with a heavy military presence are concerned the defense spending cuts that could lead to lay-offs.
Q2 Earnings: Revenue Weakness Stands Out - Earnings Trends 8/6/2012
The sector with the most negative surprises thus far is Basic Materials, as high profile misses from Dow Chemicals ( DOW ) and International Paper ( IP ) show. Total earnings for Basic Materials companies are down 21% and roughly a third of the Basic Materials companies came out with positive earnings surprises.
Revenue gains are hard to come by, with only 38% of the companies coming ahead of top-line expectations, with a median surprise of negative 0.5%. Total revenues are up 2.1% for the companies that have reported, which compares to top-line gains of 7.5% in the first quarter.
Refinery outages, pipeline ruptures send gasoline prices climbing:
A combination of refinery outages and oil pipeline spills in Wisconsin, Indiana and Illinois helped drive the U.S. average for a gallon of regular gasoline up 13.7 cents over the last week to $3.645 on Monday, an Energy Department survey showed.
The California average rose 6.6 cents to $3.868 a gallon, leaving the state in the rare position of having cheaper gasoline than many parts of the Midwest. ... and now the Chevron fire in LA .... and the election and inflation ... and hurricanes, market manipulation, collusion, conspiracy ... Better plan ahead and stop driving!
Low-coupon record-setting spree in US IG set to continue Fri Aug 3, 2012
"Bad news for other risk markets, generally speaking, has been good for investment-grade issuers, as investors have had little choice but to aggressively seek out product that offers incremental yield while government yields continue to plummet."
The Thomson Reuters/IFR low-coupon tables have been reset multiple times in the last month with issuers striking records almost daily right across the curve.
Gold and the Eurozone crisis
Sales of gold are not the answer to the problems of the Eurozone. Firstly, existing EU Treaties prohibit such a move, establishing that central banks of the member states remain independent of government control and are prohibited from the direct financing of governments. Secondly, the provisions of the Central Bank Gold Agreement also limit gold sales so as to protect the collective value of the region’s reserves. Finally, selling off national gold reserves would be simply insufficient to meet the need. The gold holdings of the crisis hit countries (Portugal, Spain, Greece, Ireland and Italy) represent just 3.3% of the combined outstanding debt of their central governments.
Tech Bubble Popping; buyer beware! 8/3/2012
"The domestic and Chinese demand for liquid crystal display televisions fell at a faster pace than expected," the company said Thursday about its poor results.
"A tough business climate continued as the slower demand forced production adjustment at factories for large LCDs, while prices fell for finished products and electronic devices," it said.
Rival Sony's shares also dropped in Tokyo trade, falling 8.5 percent to 882 yen after the maker of PlayStation game consoles and Bravia televisions Thursday reported a widening quarterly loss and chopped its full-year profit forecast.
ECB signals limits to its monetary firepower with new policy blueprint August 2, 2012
Significantly, Draghi indicated that such ECB purchases would not necessarily gain seniority in any debt restructuring programmes, unlike the Greek bond saga whereby the subordination of private investors at the hands of the ECB highlighted the downside of the monetary authority’s Securities Markets Programme (SMP).
BofA: Here's What QE3 Will Look Like And What It Will Mean For Markets (Jul. 26)
QE3 is expected to be less effective in boosting the U.S. economy than the previous balance sheet expansions and markets have already priced in 65 percent of QE3 according to Misra.
Moreover there are a few key differences between the economy and expectations now than during the previous rounds of quantitative easing.
The following thoughts from John Greenwood are from 2008:
Just found this tonight (July 30, 2012) and this seems critically important in regard to what may be unfolding with the systemic financial collapse in Europe and the likely possibility that central banks will begin buying equities and follow the same mis-guided path Japan’s monetary authority (remains on). A few of these stories I've just found are being spread into my new hyper-page links, so I may need to pull all the puzzle pieces together in one place. Nonetheless, in retrospect, Greenwood seems to be right on the money (with killer stuff):
The key implication of the current crisis is that it is a painful confirmation that the Eurozone is not
sustainable in its current form. The series of economic and political bets that were placed back at the start of the euro process have nearly all failed to come off.
Citi sees 90 pc chance of Greece leaving the euro (7/26/12)
The chances of Greece leaving the euro in the next 12-18 months have risen to about 90 per cent, US bank Citi said in a report on Thursday, saying Athens was most likely to quit the single currency within the next two to three quarter.
International investors dump Spain debt as liquidity drops (Jul 27, 2012 )
As Spain faces a shrinking investor base and rising bond yields, it has concentrated its fund raising at the short-end of the curve.
Over 70 percent of bonds sold this year have had a maturity of five years or less, according to Reuters data, whereas last year such paper accounted for around 50 percent.
Presenting The Good, Bad, And Nuclear Options For The Fed (07/26/2012)
The question of what assets the Fed would purchase with its intervention proceeds is also relevant. Section 14 of the Federal Reserve Act authorizes the Fed to purchase "obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof." In other words, the Fed has the statutory authority to purchase foreign currency-denominated government debt in unlimited quantities should it choose to do so.
ECB’s Nowotny Sees Some Arguments For ESM Banking License (Jul 25, 2012)
If Spain and Italy lose market access, “the liquidity hospital would need to be redesigned, in terms of size, seniority and funding,” he said.
(Aggressive selling swung the yield curve steeper as the 2-10-yr spread widened to 131 bps. Friday)
Miller Floor Statement: Federal Reserve Transparency Act (July 25, 2012)
It is noteworthy that the European Central Bank just jumped ahead of the Fed by cutting the rate it pays on bank deposits to zero—and European money markets did not die. Denmark's National Bank went even further, dropping its deposit rate to minus 20 basis points. Yet the Little Mermaid still sits in Copenhagen harbor.The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?
QE3 feels near but here’s two reasons why it’s different this time (7/ 24/2012)
Re: Rhys Jones: "Effectively, governments ensure the availability of a great deal of funding near 0.0%, while forcing the financial institutions to adjust their current and future-planned holdings in mortgages, equities and properties.
Fed Eyes Limiting Money-Market Fund Withdrawals (Jul 27, 2012)
The Federal Reserve Bank of New York said it supports limiting some types of money-market fund withdrawals in a bid to protect those funds from suffering the equivalent of a bank run.
Greyerz - Expect Frightening Wealth Destruction (July 27, 2012)
“Right now the world is on the edge. When Draghi says something it hits the wire and gold goes up and the dollar goes down. Market participants are sloshing money around from currency to currency, but, in the end, all of the currencies will experience a massive decline.”
Exotics return in hunt for yield (28 July to 3 August 2012 )
“Investors are looking for smart dislocations they can take advantage of through fairly complex instruments. We’re also seeing people look at algorithmic strategies to deliver alpha to overlay Bund portfolios and spice up the yield,” said Bracher.
2012 GDP Revisions What? (07/27/2012)
How can gross domestic product be wrong, three years after the fact?
Growth In U.S. Slows As Consumers Restrain Spending (Jul 27, 2012 )
“There’s a belt-tightening going on with my group of friends,” Offensend, 26, said. “It’s just very, very hard to save any money at all when you’re living paycheck to paycheck. It shocks me that I’m barely getting by after taxes.”
First Year Of U.S. Economic Recovery Was Weaker Than Estimated (Jul 27)
Fed Chairman Ben S. Bernanke is among those who have taken note of the disparity, saying in a March 26 speech that improving jobs numbers “seem somewhat out of sync with the overall pace of the economic expansion.”
Consumer Sentiment Hits Fresh 2012 Low (July 27)
These six mortgage insurers—Triad, RMIC, PMI, Genworth, Radian and MGIC—provided a combined $72.0 billion, or 79%, of our risk in force mortgage insurance coverage of our single-family guaranty book of business as of June 30, 2012.
We do not know how long regulators will permit mortgage insurers that do not meet, or may soon fail to meet, state regulatory capital requirements to continue operating without obtaining additional capital.
Weak credit quality of US cities bigger concern than bankruptcies-Morgan Stanley Aug 7, 2012
"Structural challenges persist, even under optimistic growth scenarios," they said. "For states, tax growth is unlikely to overcome rising costs from long-term liability burdens and spending mandates while locals face constraints of state aid cuts and weaker tax bases from lower home values."
California borrowing from special fund accounts surges; audit under way
"The state has been accruing vast amounts over decades in special funds that are then coveted by the Legislature and administrations to balance the budget," said Assemblyman Jim Nielsen, R-Gerber, vice chairman of the Assembly Budget Committee. "This is a gross overtaxation of the people of California."
Both legislative houses are expected to hold hearings next month to examine the status of special fund accounts, particularly whether state departments have kept more money there than reported to lawmakers.
Using complex systems analysis, he explains how within weeks of the next major economic shock, like a major bank failure or a country exiting the eurozone, contagion would quickly spread through global supply chains, causing an "irreversible global economic collapse."
Korowicz warns that in the next crisis, "neither wealth nor geography is a protection. Our evolved co-dependencies mean that we are all in this together."
AMERICAN IDLE: FIVE REASONS WE HATE THE STOCK MARKET 8/7/12
And just when it looked like the kids might get excited about their generation's new engines of wealth creation, they were prison raped by the all star team of Morgan Stanley, Second Market, Mark Zuckerberg and his swineherd of Russian VCs. So they're not coming. Every study shows they have no interest in playing. As the army of Boomer investors marches into the sunset, their banners tattered but still held proudly aloft, there is no one bringing up the rear. Their children prefer fantasy football to fantasy capitalism.
As Earnings Season Closes, Signs of More Trouble Ahead Aug 7, 2012
With about 85 percent of the S&P companies reporting, the results haven't been pretty: Just 51 percent have exceeded net profit expectations. Just 51 percent have exceeded net profit expectations, with only 40 percent or so beating on revenue.
What's even scarier is that more than 50 percent of the companies on the broad index have lowered their estimates for the third quarter, while only 21 percent have raised. Analysts have followed in kind, cutting their forecasts for S&P 1500 companies on about a 3 to 1 ratio.
US state budgets face "considerable challenges" -study Aug 7, 2012
The U.S. Congress has scheduled cuts of up to $1.2 trillion affecting states as part of last summer's deficit deal, while it is seeking savings by pulling back other federal grants. States with a heavy military presence are concerned the defense spending cuts that could lead to lay-offs.
Q2 Earnings: Revenue Weakness Stands Out - Earnings Trends 8/6/2012
The sector with the most negative surprises thus far is Basic Materials, as high profile misses from Dow Chemicals ( DOW ) and International Paper ( IP ) show. Total earnings for Basic Materials companies are down 21% and roughly a third of the Basic Materials companies came out with positive earnings surprises.
Revenue gains are hard to come by, with only 38% of the companies coming ahead of top-line expectations, with a median surprise of negative 0.5%. Total revenues are up 2.1% for the companies that have reported, which compares to top-line gains of 7.5% in the first quarter.
Refinery outages, pipeline ruptures send gasoline prices climbing:
A combination of refinery outages and oil pipeline spills in Wisconsin, Indiana and Illinois helped drive the U.S. average for a gallon of regular gasoline up 13.7 cents over the last week to $3.645 on Monday, an Energy Department survey showed.
The California average rose 6.6 cents to $3.868 a gallon, leaving the state in the rare position of having cheaper gasoline than many parts of the Midwest. ... and now the Chevron fire in LA .... and the election and inflation ... and hurricanes, market manipulation, collusion, conspiracy ... Better plan ahead and stop driving!
Monti Of Italy Warns That Currency Crisis Risks Europe’s Future Aug 5, 2012
Monti said Italy was effectively helping German borrowing costs as the federal government benefited from its neighbors’ rates.
“The high yields Italy has to pay right now subsidize the low ones Germany is paying,” he told Spiegel. “Without that risk, the yields on German government bonds would be somewhat higher.”
“Italy has, to all intents and purposes, been hung out to dry,” Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd., said in an e-mailed comment. “As far as Rome is concerned any external assistance would be the kiss of death. This puts Mr. Monti in an untenable situation.”
Headline or Head Fake? AUGUST 4, 2012
The unemployment rate inched up to 8.3%, from 8.2%, while our personal favorite measure of the job market -- U6, which includes folks who'd love a full-time or at least a more rewarding job, but can't find one -- rose a tad, to 15%, from 14.9%. That means, Dave explains, that one in every seven Americans is either unemployed or underemployed. "In this light," he comments, "it would be most disingenuous to consider this a robust report, headline notwithstanding."
Romney: My one page plan will create 12 million jobs (How?) 08/03/2012
In effect, therefore, Romney is essentially promising no more jobs than we currently expect to gain under proposals similar to those advanced by the Obama administration. There’s not enough in Romney’s plan to estimate how many jobs it would create. If he’s saying the net change will be 12 million jobs, that’s exactly what we’re estimating without Romney’s plan.
Unemployment Scoreboard: Aug 2012
As of 1 August 2012, the U1/U3/U6 rates equated to 4.5%/8.3%/15.% or 7.0/12.9/23.3 million people respectively. These rates and numbers are calculated as a percentage of the US Civilian Labor Force, which currently stands at 155.2 million Americans–less than half of the US population. The Jobenomics “functionally unemployed rate” equates to 35% of the US population or 110.1 million people. 110.1 million is calculated by adding the BLS’ U6 number (23.3 million) and the BLS’ Not-in-Labor-Force number (86.8 million). Dividing 110.1 million by the total US population of 314.1 million yields a functionally unemployed rate of 35%.
Understanding the functionally unemployed rate of 35% is a much better indicator of economic distress, than the much lower numbers indicated by the U3 “official” unemployment rate that is most often watched and reported.
ECB Judo August 03, 2012
"While refusing to provide explicit details of what the ECB will do, it would be unfair not to acknowledge that this is quite a departure for the ECB in terms of strategy, by laying out a roadmap for ECB action (once Spain/Italy ask for it, with conditionality) and what it will be (purchases of the front-end paper and other unspecified "outright open market operations" - a phrase TMM took to mean unsterilised balance sheet expansion), and why (to regain control of monetary policy and remove convertibility premia)."
Monti said Italy was effectively helping German borrowing costs as the federal government benefited from its neighbors’ rates.
“The high yields Italy has to pay right now subsidize the low ones Germany is paying,” he told Spiegel. “Without that risk, the yields on German government bonds would be somewhat higher.”
“Italy has, to all intents and purposes, been hung out to dry,” Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd., said in an e-mailed comment. “As far as Rome is concerned any external assistance would be the kiss of death. This puts Mr. Monti in an untenable situation.”
Headline or Head Fake? AUGUST 4, 2012
The unemployment rate inched up to 8.3%, from 8.2%, while our personal favorite measure of the job market -- U6, which includes folks who'd love a full-time or at least a more rewarding job, but can't find one -- rose a tad, to 15%, from 14.9%. That means, Dave explains, that one in every seven Americans is either unemployed or underemployed. "In this light," he comments, "it would be most disingenuous to consider this a robust report, headline notwithstanding."
Romney: My one page plan will create 12 million jobs (How?) 08/03/2012
In effect, therefore, Romney is essentially promising no more jobs than we currently expect to gain under proposals similar to those advanced by the Obama administration. There’s not enough in Romney’s plan to estimate how many jobs it would create. If he’s saying the net change will be 12 million jobs, that’s exactly what we’re estimating without Romney’s plan.
Unemployment Scoreboard: Aug 2012
As of 1 August 2012, the U1/U3/U6 rates equated to 4.5%/8.3%/15.% or 7.0/12.9/23.3 million people respectively. These rates and numbers are calculated as a percentage of the US Civilian Labor Force, which currently stands at 155.2 million Americans–less than half of the US population. The Jobenomics “functionally unemployed rate” equates to 35% of the US population or 110.1 million people. 110.1 million is calculated by adding the BLS’ U6 number (23.3 million) and the BLS’ Not-in-Labor-Force number (86.8 million). Dividing 110.1 million by the total US population of 314.1 million yields a functionally unemployed rate of 35%.
Understanding the functionally unemployed rate of 35% is a much better indicator of economic distress, than the much lower numbers indicated by the U3 “official” unemployment rate that is most often watched and reported.
ECB Judo August 03, 2012
"While refusing to provide explicit details of what the ECB will do, it would be unfair not to acknowledge that this is quite a departure for the ECB in terms of strategy, by laying out a roadmap for ECB action (once Spain/Italy ask for it, with conditionality) and what it will be (purchases of the front-end paper and other unspecified "outright open market operations" - a phrase TMM took to mean unsterilised balance sheet expansion), and why (to regain control of monetary policy and remove convertibility premia)."
Low-coupon record-setting spree in US IG set to continue Fri Aug 3, 2012
"Bad news for other risk markets, generally speaking, has been good for investment-grade issuers, as investors have had little choice but to aggressively seek out product that offers incremental yield while government yields continue to plummet."
The Thomson Reuters/IFR low-coupon tables have been reset multiple times in the last month with issuers striking records almost daily right across the curve.
Gold and the Eurozone crisis
Sales of gold are not the answer to the problems of the Eurozone. Firstly, existing EU Treaties prohibit such a move, establishing that central banks of the member states remain independent of government control and are prohibited from the direct financing of governments. Secondly, the provisions of the Central Bank Gold Agreement also limit gold sales so as to protect the collective value of the region’s reserves. Finally, selling off national gold reserves would be simply insufficient to meet the need. The gold holdings of the crisis hit countries (Portugal, Spain, Greece, Ireland and Italy) represent just 3.3% of the combined outstanding debt of their central governments.
Tech Bubble Popping; buyer beware! 8/3/2012
"The domestic and Chinese demand for liquid crystal display televisions fell at a faster pace than expected," the company said Thursday about its poor results.
"A tough business climate continued as the slower demand forced production adjustment at factories for large LCDs, while prices fell for finished products and electronic devices," it said.
Rival Sony's shares also dropped in Tokyo trade, falling 8.5 percent to 882 yen after the maker of PlayStation game consoles and Bravia televisions Thursday reported a widening quarterly loss and chopped its full-year profit forecast.
ECB signals limits to its monetary firepower with new policy blueprint August 2, 2012
Significantly, Draghi indicated that such ECB purchases would not necessarily gain seniority in any debt restructuring programmes, unlike the Greek bond saga whereby the subordination of private investors at the hands of the ECB highlighted the downside of the monetary authority’s Securities Markets Programme (SMP).
Key to the ECB’s policy justification will be signs of “financial market fragmentation” that serves to impede monetary policy transmission, Draghi said, citing the collapse in cross-border eurozone lending and non-domestic interbank deposits. But Draghi reiterated the fact that ECB action was dependent on governments making good on fiscal and structural reforms.
Monetary policy can’t address “imbalances in current accounts and fiscal deficits... so that’s why conditionality is essential”, he said. In addition to unveiling details of the ECB’s new framework for action in the coming weeks, Draghi said the ECB could implement “further non-standard measures”, interpreted as a revised collateral framework and more long-term refinancing operations (LTROs), although these instruments were only successful in inducing a two-month rally when first introduced last year. Finally, Draghi said the Governing Council had discussed the possibility of entering “uncharted waters” by taking the deposit rate into negative territory – with some analysts now expecting such action in September or October.
Markit Final Index of U.S. Manufacturing Fell to 51.4 in July 8/1/12
The European debt crisis and slower growth in China and Brazil may limit demand for U.S. goods. At the same time, American consumers are slowing their spending and businesses are tempering equipment purchases.
Losing 500,000 Jobs Seen New Reality of Europe Crisis 8/1/12
The dismissals would follow about 800,000 job losses in the industry since 2007 and add to a record unemployment rate of 11.2 percent in the 17-nation euro area. With auto demand already hampered by 17.8 million jobless, the 13-member Stoxx 600 Automobiles & Parts Index has dropped 14 percent over the past 12 months, led by Peugeot’s 72 percent plunge.
“It’s becoming increasingly apparent with the declines in vehicle sales in the region that production and staffing levels at certain manufacturers are just well beyond where they need to be,” said Ian Fletcher, an analyst at IHS Automotive in London. With nearly 30 percent of European auto factory potential unused, “excess capacity is the main issue at hand. The lower sales are just killing these companies.”
Jobs Report Preview: Here’s What Economists Expect
Jobless claims have been erraticthroughout the last few weeks for many many years -- largely partly due to temporary (and permanent) layoffs in the automotive all most every industry around the globe. It’s tough to glean (for idiots) anything fundamental from that data heading into Friday’s report ... but the WSJ will bullshit readers ...
Facebook shares dive towards $5.00 on Dumbass Model
Facebook (FB.O) shares crumbled again on Thursday, sending the once-feverishly sought-after name below $20 for the first time as investors scrambled to get out of the way of a potential share deluge in coming weeks.
Pimco’s El-Erian Says World In Serious, Slowdown 8/2/12
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
His forecast highlights the troubles the global economy is facing as the euro area struggles to contain its debt crisis and growth in the U.S. and China slows
Oil Drops As Draghi Stops Short Of Detailing Bond Plan 8/2/12
“The euro is irreversible,” Draghi said at the Frankfurt press conference. The euro-area economy will “recover only very gradually” and growth momentum will be “further dampened by a number of factors,” he said.
The euro declined after Draghi’s comments. The 17-nation currency dropped as much as 0.7 percent against the dollar to $1.2134. A weaker euro and stronger dollar decrease oil’s appeal as an investment alternative.
Consumer Comfort In U.S. Falls On Concern Over Growth: Economy 8/2/12
A rebound in gasoline prices and rising food costs caused by drought in parts of the Midwest may curb the household spending that accounts for about 70 percent of the economy.
TREASURIES-U.S. yields droop after ECB's Draghi disappoints 8/2/12
After ratcheting up expectations for further ECB purchases of Italian and Spanish bonds last week by saying he would do whatever it took to preserve the euro, what the ECB offered on Thursday did not satisfy the markets.
European banks’ capital needs in the spotlight
And the clock is ticking. As we have reported, if Canadian ratings agency DBRS becomes the fourth ratings agency to downgrade Spain to a BBB-rated equivalent, a 5% increase in the haircut the European Central Bank demands for Spanish government bonds will be applied across the board, affecting some €250 billion of bonds pledged by Spanish banks to the monetary authority – as well as other banks holding Spanish government debt. What’s more, without a third round of the ECB long-term refinancing operation, Italian banks might deleverage by up to €444 billion during the next two years, intensifying the negative sovereign-bank feedback loop. And yet fears are growing that in Italy, as in Spain, the real rate of government debt interest payments will leap above the real rate of growth, exacerbating the economy’s already high debt-to-GDP ratio at 120%.
European Bank Regulator Imperiled By German Zombie Banks ( Jul 29, 2012)
“Giving up national rights will be a big fight, but the politicians now realize there might be no other way to resolve the banking problem,” said Dirk Schoenmaker, dean of the Duisenberg School of Finance in Amsterdam. “So they might eventually get there kicking and screaming.”
The screaming by German banks was heard quickly after EU President Herman Van Rompuy released a 10-year road map in June calling for common deposit insurance.
“More integration in Europe can’t purely be built on a redistribution of funds at the cost of German taxpayers and savers,” the association of German savings banks said in a statement the same day.
Markit Final Index of U.S. Manufacturing Fell to 51.4 in July 8/1/12
The European debt crisis and slower growth in China and Brazil may limit demand for U.S. goods. At the same time, American consumers are slowing their spending and businesses are tempering equipment purchases.
Losing 500,000 Jobs Seen New Reality of Europe Crisis 8/1/12
The dismissals would follow about 800,000 job losses in the industry since 2007 and add to a record unemployment rate of 11.2 percent in the 17-nation euro area. With auto demand already hampered by 17.8 million jobless, the 13-member Stoxx 600 Automobiles & Parts Index has dropped 14 percent over the past 12 months, led by Peugeot’s 72 percent plunge.
“It’s becoming increasingly apparent with the declines in vehicle sales in the region that production and staffing levels at certain manufacturers are just well beyond where they need to be,” said Ian Fletcher, an analyst at IHS Automotive in London. With nearly 30 percent of European auto factory potential unused, “excess capacity is the main issue at hand. The lower sales are just killing these companies.”
Jobs Report Preview: Here’s What Economists Expect
Jobless claims have been erratic
Facebook shares dive towards $5.00 on Dumbass Model
Facebook (FB.O) shares crumbled again on Thursday, sending the once-feverishly sought-after name below $20 for the first time as investors scrambled to get out of the way of a potential share deluge in coming weeks.
Pimco’s El-Erian Says World In Serious, Slowdown 8/2/12
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
His forecast highlights the troubles the global economy is facing as the euro area struggles to contain its debt crisis and growth in the U.S. and China slows
Oil Drops As Draghi Stops Short Of Detailing Bond Plan 8/2/12
“The euro is irreversible,” Draghi said at the Frankfurt press conference. The euro-area economy will “recover only very gradually” and growth momentum will be “further dampened by a number of factors,” he said.
The euro declined after Draghi’s comments. The 17-nation currency dropped as much as 0.7 percent against the dollar to $1.2134. A weaker euro and stronger dollar decrease oil’s appeal as an investment alternative.
Consumer Comfort In U.S. Falls On Concern Over Growth: Economy 8/2/12
A rebound in gasoline prices and rising food costs caused by drought in parts of the Midwest may curb the household spending that accounts for about 70 percent of the economy.
TREASURIES-U.S. yields droop after ECB's Draghi disappoints 8/2/12
After ratcheting up expectations for further ECB purchases of Italian and Spanish bonds last week by saying he would do whatever it took to preserve the euro, what the ECB offered on Thursday did not satisfy the markets.
GM profits slip 41% as European struggles take their toll 8/2/12
On Wednesday, GM and Ford announced that sales had slipped in July; GM deliveries fell 6.4% and Ford 3.8%, according to statements. Chrysler increased deliveries by 13%.
What garbage can tell us about the direction of the economy — in 1 chart
It turns out that what we throw out or, more accurately, how much we throw out, tells us a lot about the general economic direction of the country.
At least, that is, according to calculations by economist Michael McDonough, who has produced an absolutely fascinating chart that shows the remarkable correlation between carloads of waste (as calculated by the American Association of Railroads) and the U.S. gross domestic product.
Get A Job: The Craigslist Experiment
As if 653 responses in one day wasn’t enough already to knock me down the proverbial flight of stairs, I decided to sift through each and every application and record some basic statistical data — just to see what I was up against. I collected general information in two basic areas: Experience and Educational Background.
Overcapacity of Autos in Europe?
The president and chief executive of Ford Motor Co.'s (F) European unit, John Fleming, said Wednesday the European auto industry still faces overcapacity of 35%, which effectively leads to growth of incentives and risks a devaluation of individual brands. "This isn't a sustainable basis," Fleming said at the Automotive News Europe industry conference in Bilbao ...
Spain & Jobless American Recovery
Fed Seen Forgoing New Bond Buying Program Until September Jul 31, 2012
Bernanke testified on July 17 that the prospect for more stimulus hinges on job creation and the outlook for inflation.
“It’s very important that we see sustained progress in the labor market and avoid deflation risk,” he said. “Those are the things we’ll be looking at as the committee meets later this month and later this summer.”
Financial sector reform: Whale watching (30 July 2012)
On Wednesday, GM and Ford announced that sales had slipped in July; GM deliveries fell 6.4% and Ford 3.8%, according to statements. Chrysler increased deliveries by 13%.
What garbage can tell us about the direction of the economy — in 1 chart
It turns out that what we throw out or, more accurately, how much we throw out, tells us a lot about the general economic direction of the country.
At least, that is, according to calculations by economist Michael McDonough, who has produced an absolutely fascinating chart that shows the remarkable correlation between carloads of waste (as calculated by the American Association of Railroads) and the U.S. gross domestic product.
Get A Job: The Craigslist Experiment
As if 653 responses in one day wasn’t enough already to knock me down the proverbial flight of stairs, I decided to sift through each and every application and record some basic statistical data — just to see what I was up against. I collected general information in two basic areas: Experience and Educational Background.
Overcapacity of Autos in Europe?
The president and chief executive of Ford Motor Co.'s (F) European unit, John Fleming, said Wednesday the European auto industry still faces overcapacity of 35%, which effectively leads to growth of incentives and risks a devaluation of individual brands. "This isn't a sustainable basis," Fleming said at the Automotive News Europe industry conference in Bilbao ...
Fiat Losses in Europe Widen as Debt Crisis Hits Demand July 31, 2012
Overcapacity in western Europe may more than double to about 2 million vehicles in 2012, according to IHS Automotive. Marchionne, who currently holds the rotating ACEA presidency, has been urging manufacturers to take action to scale back vehicle production.
Spain & Jobless American Recovery
Fed Seen Forgoing New Bond Buying Program Until September Jul 31, 2012
Bernanke testified on July 17 that the prospect for more stimulus hinges on job creation and the outlook for inflation.
“It’s very important that we see sustained progress in the labor market and avoid deflation risk,” he said. “Those are the things we’ll be looking at as the committee meets later this month and later this summer.”
Financial sector reform: Whale watching (30 July 2012)
The current BIS effort is focused on identifying systemically important financial institutions whose failure might threaten the global financial system. But crises (including 2008) have been triggered by problems in rather modest-sized institutions. The danger lies not so much in an individual institution being 'systemically important'. Rather, the financial system as a whole develops ways of doing business which make it collectively vulnerable, so the demise of even a modest-sized institution triggers system-wide contagion.
U.S. Treasuries Decline On Speculation ECB To Buy Bonds (Jul 30, 2012)
The Fed’s favored bond-market gauge of inflation expectations was at 2.39 percent last week, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by buying Treasuries and mortgage- related bonds, a policy known as quantitative easing. The five- year, five-year forward break-even rate shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.
The Fed’s favored bond-market gauge of inflation expectations was at 2.39 percent last week, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by buying Treasuries and mortgage- related bonds, a policy known as quantitative easing. The five- year, five-year forward break-even rate shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.
Only Mario Draghi's ECB can avert global calamity before the year is out 7/29/
Nomura says the combined needs of Spain and Italy amount to €1.1 trillion over three years. The money does not exist. Any attempt to raise such sums on the open market would expose the bluff behind the bail-out machinery.
Mr Cailloux expects the two countries to require sovereign rescues “within weeks”. Citigroup’s Willem Buiter thinks both will be in full EU-IMF Troika rescues by the end of the year.
Nomura says the combined needs of Spain and Italy amount to €1.1 trillion over three years. The money does not exist. Any attempt to raise such sums on the open market would expose the bluff behind the bail-out machinery.
Mr Cailloux expects the two countries to require sovereign rescues “within weeks”. Citigroup’s Willem Buiter thinks both will be in full EU-IMF Troika rescues by the end of the year.
France’s central bank, the most heavily exposed, may need to be recapitalised because of the scale of its potential losses.
Geithner envoy ‘assured Athens of US support on return to drachma (7/29/12)
In fact, Washington sources told The Slog last night BST that Collyns – a confidante of both Geithner and Stournas – was on a specific mission to impress on Greek Finance bosses the US Treasury’s sincerity in offering Greece “almost unqualified support in the event of a return to the drachma”. The White House is betting on the strong likelihood of Greece becoming formally insolvent before any more bailout monies are available from Berlin-am-Brussels.
In fact, Washington sources told The Slog last night BST that Collyns – a confidante of both Geithner and Stournas – was on a specific mission to impress on Greek Finance bosses the US Treasury’s sincerity in offering Greece “almost unqualified support in the event of a return to the drachma”. The White House is betting on the strong likelihood of Greece becoming formally insolvent before any more bailout monies are available from Berlin-am-Brussels.
European banks’ capital needs in the spotlight
And the clock is ticking. As we have reported, if Canadian ratings agency DBRS becomes the fourth ratings agency to downgrade Spain to a BBB-rated equivalent, a 5% increase in the haircut the European Central Bank demands for Spanish government bonds will be applied across the board, affecting some €250 billion of bonds pledged by Spanish banks to the monetary authority – as well as other banks holding Spanish government debt. What’s more, without a third round of the ECB long-term refinancing operation, Italian banks might deleverage by up to €444 billion during the next two years, intensifying the negative sovereign-bank feedback loop. And yet fears are growing that in Italy, as in Spain, the real rate of government debt interest payments will leap above the real rate of growth, exacerbating the economy’s already high debt-to-GDP ratio at 120%.
European Bank Regulator Imperiled By German Zombie Banks ( Jul 29, 2012)
“Giving up national rights will be a big fight, but the politicians now realize there might be no other way to resolve the banking problem,” said Dirk Schoenmaker, dean of the Duisenberg School of Finance in Amsterdam. “So they might eventually get there kicking and screaming.”
The screaming by German banks was heard quickly after EU President Herman Van Rompuy released a 10-year road map in June calling for common deposit insurance.
“More integration in Europe can’t purely be built on a redistribution of funds at the cost of German taxpayers and savers,” the association of German savings banks said in a statement the same day.
BofA: Here's What QE3 Will Look Like And What It Will Mean For Markets (Jul. 26)
QE3 is expected to be less effective in boosting the U.S. economy than the previous balance sheet expansions and markets have already priced in 65 percent of QE3 according to Misra.
Moreover there are a few key differences between the economy and expectations now than during the previous rounds of quantitative easing.
The following thoughts from John Greenwood are from 2008:
Just found this tonight (July 30, 2012) and this seems critically important in regard to what may be unfolding with the systemic financial collapse in Europe and the likely possibility that central banks will begin buying equities and follow the same mis-guided path Japan’s monetary authority (remains on). A few of these stories I've just found are being spread into my new hyper-page links, so I may need to pull all the puzzle pieces together in one place. Nonetheless, in retrospect, Greenwood seems to be right on the money (with killer stuff):
The Costs and Implications of PBC Sterilization (Spring/Summer 2008)
John Greenwood
Distortions Created by Sterilization
First, by keeping the undervalued currency cheap, sterilization tends to encourage over-expansion of the export sector, while inflation (or real exchange rate adjustment) in the pegging country—China—is delayed. As a corollary, numerous domestic sectors such as housing, health care, education, entertainment, and other non-export-related infrastructure investment are restricted below their
optimum size. Corresponding but converse misallocations will occur in the economies of China’s trading partners.
Second, parallel to these real-sector distortions, there are significant financial-sector distortions. Sterilization distorts interest rates and the asset portfolio of Chinese commercial banks. Instead of lending to normal commercial customers such as firms and individuals, the banks are compelled (by higher reserve requirements) or induced (by purchase of PBC sterilization bills) to lend money back to the central bank. The absorption by the PBC of these excess RMB (created from the PBC’s intervention operations) implies some distortion of interest rates, typically keeping them at higher levels than would otherwise be the case.3 This outcome is part of the process that prevents the expansion of bank lending and money growth, and thereby appears to delay or prevent any upturn in inflation.
Third, the central bank balance sheet expands massively as it absorbs funds from the banks and invests the proceeds in foreign exchange reserves. In China’s current circumstances, the accumulation of foreign exchange assets by the central bank is taking the place of increased domestic spending by Chinese firms and households, which would in turn give rise to greater imports, reducing the over-all payments imbalance. Alternatively, in contrast to the case where the RMB is allowed to appreciate and Chinese firms and individuals are free to buy assets abroad, the official stockpile of foreign exchange reserves is replacing the acquisition of a more diversified, higher return portfolio of foreign assets (such as businesses, factories, real estate, and natural resources) by the Chinese commercial sector.
Fourth, overseas the accumulation of large volumes of U.S. Treasuries by China and other countries with rapidly growing foreign exchange reserves has reduced the yield on U.S. Treasuries and similar assets below what they would otherwise be. This result, of course, is part of the explanation for Greenspan’s conundrum concerning “the broadly unanticipated behavior of world bond markets”—that is, the unexpectedly low yields in bond markets in recent years. Ben Bernanke and others have referred to this phenomenon as a “global savings glut.”
John Greenwood
Distortions Created by Sterilization
First, by keeping the undervalued currency cheap, sterilization tends to encourage over-expansion of the export sector, while inflation (or real exchange rate adjustment) in the pegging country—China—is delayed. As a corollary, numerous domestic sectors such as housing, health care, education, entertainment, and other non-export-related infrastructure investment are restricted below their
optimum size. Corresponding but converse misallocations will occur in the economies of China’s trading partners.
Second, parallel to these real-sector distortions, there are significant financial-sector distortions. Sterilization distorts interest rates and the asset portfolio of Chinese commercial banks. Instead of lending to normal commercial customers such as firms and individuals, the banks are compelled (by higher reserve requirements) or induced (by purchase of PBC sterilization bills) to lend money back to the central bank. The absorption by the PBC of these excess RMB (created from the PBC’s intervention operations) implies some distortion of interest rates, typically keeping them at higher levels than would otherwise be the case.3 This outcome is part of the process that prevents the expansion of bank lending and money growth, and thereby appears to delay or prevent any upturn in inflation.
Third, the central bank balance sheet expands massively as it absorbs funds from the banks and invests the proceeds in foreign exchange reserves. In China’s current circumstances, the accumulation of foreign exchange assets by the central bank is taking the place of increased domestic spending by Chinese firms and households, which would in turn give rise to greater imports, reducing the over-all payments imbalance. Alternatively, in contrast to the case where the RMB is allowed to appreciate and Chinese firms and individuals are free to buy assets abroad, the official stockpile of foreign exchange reserves is replacing the acquisition of a more diversified, higher return portfolio of foreign assets (such as businesses, factories, real estate, and natural resources) by the Chinese commercial sector.
Fourth, overseas the accumulation of large volumes of U.S. Treasuries by China and other countries with rapidly growing foreign exchange reserves has reduced the yield on U.S. Treasuries and similar assets below what they would otherwise be. This result, of course, is part of the explanation for Greenspan’s conundrum concerning “the broadly unanticipated behavior of world bond markets”—that is, the unexpectedly low yields in bond markets in recent years. Ben Bernanke and others have referred to this phenomenon as a “global savings glut.”
sustainable in its current form. The series of economic and political bets that were placed back at the start of the euro process have nearly all failed to come off.
Citi sees 90 pc chance of Greece leaving the euro (7/26/12)
The chances of Greece leaving the euro in the next 12-18 months have risen to about 90 per cent, US bank Citi said in a report on Thursday, saying Athens was most likely to quit the single currency within the next two to three quarter.
International investors dump Spain debt as liquidity drops (Jul 27, 2012 )
As Spain faces a shrinking investor base and rising bond yields, it has concentrated its fund raising at the short-end of the curve.
Over 70 percent of bonds sold this year have had a maturity of five years or less, according to Reuters data, whereas last year such paper accounted for around 50 percent.
Presenting The Good, Bad, And Nuclear Options For The Fed (07/26/2012)
The question of what assets the Fed would purchase with its intervention proceeds is also relevant. Section 14 of the Federal Reserve Act authorizes the Fed to purchase "obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof." In other words, the Fed has the statutory authority to purchase foreign currency-denominated government debt in unlimited quantities should it choose to do so.
ECB’s Nowotny Sees Some Arguments For ESM Banking License (Jul 25, 2012)
If Spain and Italy lose market access, “the liquidity hospital would need to be redesigned, in terms of size, seniority and funding,” he said.
(Aggressive selling swung the yield curve steeper as the 2-10-yr spread widened to 131 bps. Friday)
Miller Floor Statement: Federal Reserve Transparency Act (July 25, 2012)
It is noteworthy that the European Central Bank just jumped ahead of the Fed by cutting the rate it pays on bank deposits to zero—and European money markets did not die. Denmark's National Bank went even further, dropping its deposit rate to minus 20 basis points. Yet the Little Mermaid still sits in Copenhagen harbor.The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?
QE3 feels near but here’s two reasons why it’s different this time (7/ 24/2012)
Re: Rhys Jones: "Effectively, governments ensure the availability of a great deal of funding near 0.0%, while forcing the financial institutions to adjust their current and future-planned holdings in mortgages, equities and properties.
This "unintended consequence" will mis-allocate risks by causing seriously-adjusting equities markets in both properties and securities. Furthermore, those (EU) who face renewal for their mortgages or business financing needs will be forced to scour the globe for alternates.
Global capital faced with the choice of maybe good equity values, versus guaranteed lending rates, which rise very quickly to high-single or double-digit rates, will force portfolio managers to re-arrange their structures, as they become the "lender of first resort", as they seek "guaranteed" rising returns." (chaos?)
About Those Excess Reserves At the Fed (23 JULY )
It is more a matter of the Fed taking extreme measures to cover up the rottenness of the assets on the Banks' balance sheets and their real insolvency, whilst providing them the equivalent of monetary food stamps.
The best argument against Blinder's plan is that since the market is already willing to buy short term Treasuries at negative interest rates, why would not paying interest on excess reserves, or even charging a modest amount, cause the banks to reduce their reserves? Especially when they have access to the gaming tables thanks to the repeal of Glass-Steagall. Easy money chases beta.
Fed's operation twist is distorting the treasury market (MAY 17, 2012) **
The question now is whether these yields will reverse direction once Operation Twist ends this summer. Given the global economic backdrop, the Fed will likely not want to end the program, but the central bank will soon run out of two-year treasuries to sell. The next step will be sterilized purchases.
Re: "Convert Operation Twist into sterilized asset purchases. That essentially accomplishes the same thing, except rather than swapping 2-year notes into long dated treasuries, the Fed would essentially be swapping short term (possibly overnight) repo loans into long-term treasuries."
Re: " ... the Fed put in place this "novel" approach in 2009. The central bank set up arrangements for tri-party repo with multiple institutions. This was designed to safely lend securities to a broader number of institutions, some of whom may not have stellar credits."
The Economics Nobel Goes to Attackers of the Phillips Curve (10/10/2011) **
Yet Sargent’s prize remains pertinent. Just last month, the president of the Chicago Federal Reserve, Charles Evans, strongly implied that the Fed should fight unemployment with a gusto worthy of the Phillips curve; the president’s former top economist, Christina Romer, has been extolling its virtues lately; and it very much seems to be part of Fed Chairman Ben Bernanke’s toolkit through the Quantitative Easings and Operation Twists.
In the Gospel of Christianity, it is asked, “How many times should I forgive my brother? Seven times?” Jesus’s response is no, “seventy times seven times.” If the Phillips curve is a sin (and you can bet it is), the structure of experience suggests that in the eons ahead of us, many dozens of prizes are yet to be awarded for meritorious service in striving to hack it down.
Should The Federal Reserve Cut Interest Rates To Zero? (July 24th, 2012)
In early October of that year, Congress gave the Fed authority to pay interest on reserves, which it promptly started doing. When the Fed trimmed the federal funds rate to its current 0-25 basis-point range in December 2008, it also lowered the interest rate on reserves to 25 basis points, where it has been ever since.
Large Excess Reserves in the U.S.: A View from the Cross-Section of Banks (June 1, 2011)
"We see the research provided in this paper as an initial empirical inquiry
into a situation that is radically new for the U.S. banking system. As we have
discussed, the fact that banks are holding large quantities of excess reserves raises new and potentially important questions for policymakers."
Global capital faced with the choice of maybe good equity values, versus guaranteed lending rates, which rise very quickly to high-single or double-digit rates, will force portfolio managers to re-arrange their structures, as they become the "lender of first resort", as they seek "guaranteed" rising returns." (chaos?)
About Those Excess Reserves At the Fed (23 JULY )
It is more a matter of the Fed taking extreme measures to cover up the rottenness of the assets on the Banks' balance sheets and their real insolvency, whilst providing them the equivalent of monetary food stamps.
The best argument against Blinder's plan is that since the market is already willing to buy short term Treasuries at negative interest rates, why would not paying interest on excess reserves, or even charging a modest amount, cause the banks to reduce their reserves? Especially when they have access to the gaming tables thanks to the repeal of Glass-Steagall. Easy money chases beta.
Fed's operation twist is distorting the treasury market (MAY 17, 2012) **
The question now is whether these yields will reverse direction once Operation Twist ends this summer. Given the global economic backdrop, the Fed will likely not want to end the program, but the central bank will soon run out of two-year treasuries to sell. The next step will be sterilized purchases.
Re: "Convert Operation Twist into sterilized asset purchases. That essentially accomplishes the same thing, except rather than swapping 2-year notes into long dated treasuries, the Fed would essentially be swapping short term (possibly overnight) repo loans into long-term treasuries."
Re: " ... the Fed put in place this "novel" approach in 2009. The central bank set up arrangements for tri-party repo with multiple institutions. This was designed to safely lend securities to a broader number of institutions, some of whom may not have stellar credits."
The Economics Nobel Goes to Attackers of the Phillips Curve (10/10/2011) **
Yet Sargent’s prize remains pertinent. Just last month, the president of the Chicago Federal Reserve, Charles Evans, strongly implied that the Fed should fight unemployment with a gusto worthy of the Phillips curve; the president’s former top economist, Christina Romer, has been extolling its virtues lately; and it very much seems to be part of Fed Chairman Ben Bernanke’s toolkit through the Quantitative Easings and Operation Twists.
In the Gospel of Christianity, it is asked, “How many times should I forgive my brother? Seven times?” Jesus’s response is no, “seventy times seven times.” If the Phillips curve is a sin (and you can bet it is), the structure of experience suggests that in the eons ahead of us, many dozens of prizes are yet to be awarded for meritorious service in striving to hack it down.
Should The Federal Reserve Cut Interest Rates To Zero? (July 24th, 2012)
In early October of that year, Congress gave the Fed authority to pay interest on reserves, which it promptly started doing. When the Fed trimmed the federal funds rate to its current 0-25 basis-point range in December 2008, it also lowered the interest rate on reserves to 25 basis points, where it has been ever since.
Large Excess Reserves in the U.S.: A View from the Cross-Section of Banks (June 1, 2011)
"We see the research provided in this paper as an initial empirical inquiry
into a situation that is radically new for the U.S. banking system. As we have
discussed, the fact that banks are holding large quantities of excess reserves raises new and potentially important questions for policymakers."
Fed Eyes Limiting Money-Market Fund Withdrawals (Jul 27, 2012)
The Federal Reserve Bank of New York said it supports limiting some types of money-market fund withdrawals in a bid to protect those funds from suffering the equivalent of a bank run.
Greyerz - Expect Frightening Wealth Destruction (July 27, 2012)
“Right now the world is on the edge. When Draghi says something it hits the wire and gold goes up and the dollar goes down. Market participants are sloshing money around from currency to currency, but, in the end, all of the currencies will experience a massive decline.”
Exotics return in hunt for yield (28 July to 3 August 2012 )
“Investors are looking for smart dislocations they can take advantage of through fairly complex instruments. We’re also seeing people look at algorithmic strategies to deliver alpha to overlay Bund portfolios and spice up the yield,” said Bracher.
2012 GDP Revisions What? (07/27/2012)
How can gross domestic product be wrong, three years after the fact?
Growth In U.S. Slows As Consumers Restrain Spending (Jul 27, 2012 )
“There’s a belt-tightening going on with my group of friends,” Offensend, 26, said. “It’s just very, very hard to save any money at all when you’re living paycheck to paycheck. It shocks me that I’m barely getting by after taxes.”
First Year Of U.S. Economic Recovery Was Weaker Than Estimated (Jul 27)
Fed Chairman Ben S. Bernanke is among those who have taken note of the disparity, saying in a March 26 speech that improving jobs numbers “seem somewhat out of sync with the overall pace of the economic expansion.”
Consumer Sentiment Hits Fresh 2012 Low (July 27)
"While consumers do not anticipate an economy-wide recessionary decline, they do not expect a pace of economic growth that could satisfactorily revive job and income prospects," survey director Richard Curtin said in a statement. "Moreover, consumers have become increasingly convinced that current economic policies are incapable of solving the underlying problems facing the economy."
US Quarterly Earnings Seen Falling, First Time in 3 Yrs (Jul 26, 2012)
Third-quarter earnings of Standard & Poor's 500 companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday.
US Quarterly Earnings Seen Falling, First Time in 3 Yrs (Jul 26, 2012)
Third-quarter earnings of Standard & Poor's 500 companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday.
TARP Was Even Worse Than You Think: “An Abysmal Failure,” Barofsky Says
Half of recent college grads underemployed or jobless, analysis says
"You can make more money on average if you go to college, but it's not true for everybody," says Harvard economist Richard Freeman, noting the growing risk of a debt bubble with total U.S. student loan debt surpassing $1 trillion. "If you're not sure what you're going to be doing, it probably bodes well to take some job, if you can get one, and get a sense first of what you want from college."
Treasury Yields Drop to Records as Europe Spurs Haven Bid (July 23, 2012)
The Federal Reserve today purchased $4.779 billion of Treasuries due from July 2018 to June 2019 as part of a program known as Operation Twist, in which it swaps short-term bonds in its holdings for longer maturities to push long-term borrowing costs lower.
The Federal Reserve plans to buy as much as $2 billion of Treasuries due from February 2036 to May 2042 today as part of a program known as Operation Twist. The central bank is swapping short-term Treasuries in its holdings for longer maturities to support the economy by putting downward pressure on long-term borrowing costs.The central bank bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing, seeking to cap borrowing costs and stimulate the economy.
WHY WE’RE SCREWED (July 23rd, 2012)
Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.And since they’ve bought the politicians, the policy-makers, and the courts, no one will stop it. Few will even discuss it, since most university administrations have similarly been bought off—in many cases, the universities are even headed by corporate “leaders”–and their professors are on Wall Street’s payrolls.
Wal-Mart heirs worth as much as bottom 41.5% of American families (7/18/12)
The Waltons' value -- $89.5 billion in 2010 – is equal to the worth of the 41.5% of families at the lower end of the income ladder, according to an analysis by Josh Bivens of the Economic Policy Institute. That comes out to 48.8 million households.
Federal Government's Debt Jumps More Than $1T for 5th Straight Fiscal Year (July 23, 2012)
By the end of the third quarter of fiscal 2012, the new debt accumulated in this fiscal year by the federal government had already exceeded $1 trillion, making this fiscal year the fifth straight in which the federal government has increased its debt by more than a trillion dollars, according to official debt numbers published by the U.S. Treasury.
Fed's Raskin: No government backstop for banks that do prop trading (7/23)
"Much of this so-called liquidity, especially in opaque over-the-counter markets, is potentially illusory and destabilizing, especially during adverse market conditions, which does not benefit the public."
Workers on Disability Set Another Record in July; Exceed Population of 39 States (7/23/12)
When President Barack Obama took office in January 2009, there were 142,187,000 people actually working and 7,442,377 workers collecting disability—a ratio of about 19 to 1.
In June, there were 142,415,000 people actually working and 8,733,461 workers claiming disability—a ratio of about 16 to 1.
In July, in addition to the 8,753,935 workers who received federal disability insurance payments, there were also 165,564 spouses of disabled workers and 1,850,653 children of disabled workers who received payments. That brought the total number of disability beneficiaries to 10,770,152.
A Closer Look at Middle-Class Decline (July 23, 2012,)
In addition to the slow growth in overall size of the pie, the share that has been going to anyone but the richest Americans has been declining. ... In the simplest terms, the relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards.
McDonald's Rare Profit Miss Signals Slower Growth Ahead (7/23/2012)
McDonald’s faced a “slowing global economy” and “persistent headwinds” in the quarter, the company says.
Treasury Yields Hit New Lows—and May Keep Falling (Monday, 23 Jul 2012 )
“The next big move is lower, not higher,” said David Ader, chief Treasury strategist at CRT Capital. “I’m thinking 1.15 percent 10-year notes,” he said.
The 10-year yield Monday fell to 1.398 percent, the first time ever below 1.40 percent. It was at 1.436 percent later in the afternoon.
The 30-year bond yield Monday, also hit a record, falling to 2.477 percent, breaking a December, 2008 low. The five-year fell to 0.538 percent, also a record.
US 10-Year Yields Sink to Record Low on Spain (Monday, 23 Jul 2012)
The 10-year yield was at 1.4415 percent, after dropping as low as 1.4365 percent earlier in the Asian session. That was its lowest level since the early 1800's, according to data compiled by Reuters.
Construction employment in “free fall” again in South Florida
It has been five years and two months since Broward’s construction industry added a job, according to federal payroll statistics. Miami-Dade last added a construction job 57 months ago, in September 2007.
Even worse, after seeming to approach a plateau in late 2011, employment losses in construction began picking up steam again this year. In June, construction easily led job losses in both Broward and Miami-Dade compared to the prior year.
US Housing Inventory Requiring Deleveraging: 30 Million (July 23rd)
Several folks have been offsides with the inventory issue. The confirmation bias is rampant, with folks obsessing on inventory but ignoring everything else. The inventory I see that has to be de-levered before the housing market has a shot at a “durable” recovery stands at about 30 MILLION units.
Summer 2012 Homebuilding/Construction (July 22, 2012)
The report notes historically low mortgage rates, but tightened credit standards (income to loan ratio, down payment requirements) are all seen as “notable impediments” to the housing industry’s recovery. The report also predicts that the European problems may, of course, lead to an American downturn. Builders are cautioned to be mindful of the importance of maintaining liquidity.
£13tn: hoard hidden from taxman by global elite (Saturday 21 July 2012)
"The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments," the report says.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry's calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
Coming: The End of Fiat Money (July 21, 2012)
Pomboy: That the Fed will be a presence in the Treasury market for a long, long, long time. Some believe that, with another round of quantitative easing, we move forward, emerge from the morass, and the need for further intervention will dissipate. But the Fed is really the only natural buyer of Treasuries anymore. It will have to continue to monetize Treasury issuance at the same time all the other major developed economies—from the Bank of Japan to the Bank of England to the European Central Bank—are doing the same. Pursue that to its natural conclusion, and you see the inevitable demise of fiat money. To look at our policies and not be concerned about the risks to our currency would be dangerously naive.
U.K.’S Widening Deficit Casts Doubt On Fiscal Goals: Economy (Jul 20, 2012)
“It is clear that the recession is leading to a worsening of the U.K.’s underlying fiscal position,” said James Knightley, an economist at ING Bank in London. It “raises more question marks over the effectiveness of the government’s austerity measures.”
American Pie in the Sky (Jul. 20, 2012)
A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the US (still the world’s largest economy) starts to sneeze again, the rest of the world – its immunity already weakened by Europe’s malaise and emerging countries’ slowdown – will catch pneumonia.
‘The Formula That Killed Wall Street’? The Gaussian Copula and the Material Cultures of Modelling
Extracting reliable estimates of a large set of partial derivatives such as a deltas from a Monte Carlo copula model was vastly more time-consuming than using the model to price or to rate a CDO tranche. In a situation in which the IT departments of many big banks were struggling to meet the computational demands of the overnight runs – ‘some days,
everything is finished at 8 in the morning, some days it’s finished at midday because it
had to be rerun’, an interviewee told the first author in early 2007 – the huge added load
of millions of Monte Carlo scenarios was unwelcome. The requisite computer runs
sometimes even had to be done over weekends: an interviewee told the first author of one
bank at which the Monte Carlo calculation of deltas took over forty hours.
Falling Interest Rates Destroy Capital
"Even in 2007, Bear shows a profit. And they show robust growth in shareholder equity, with only a minor setback in 2007.
And yet, by early 2008 Bear experienced what I will call Sudden Capital Death Syndrome. JP Morgan bought them on Mar 16, for just over $1B. But the deal hinged on the Fed taking on $29B of Bear’s liabilities, so the real enterprise value was closer to $-19B.
Obviously, Bear’s reported “profit” was not real. And neither was their “shareholder’s equity”. I think it something much more serious than just a simple case of fraud. Simple fraud could not explain why almost the entire banking industry ran out of capital at the same time, after years of reporting good earnings and paying dividends and bonuses to management. I place the blame for Sudden Capital Death Syndrome on falling interest rates."
Not your father’s IBM
The direct impetus for this column is IBM’s internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.
“Companies get confused,” Jobs told me. “When they start getting bigger they want to replicate their initial success. And a lot of them think well somehow there is some magic in the process of how that success was created so they start to try to institutionalize process across the company. And before very long people get very confused that the process is the content. And that’s ultimately the downfall of IBM. IBM has the best process people in the world. They just forgot about the content.”
S&P 500 Companies Post Record Level of Underfunding for Pensions -Report
Mr. Silverblatt added it may be too late for many baby boomers to safely build up assets outside of working longer or living more frugally in retirement.
Pension return rates declined for the 11th straight year, dropping to an estimated 7.6% in 2011 from 7.73% in 2010. Meanwhile, discount rates declined for the third consecutive year, falling to 4.71% in 2011 from 5.31% in the previous year.
Lost Generation' of Homeowners May Just Be on Hold
Yale economist Robert Shiller floated the idea of a “lost generation” of homeowners in interviews with Reuters and Yahoo Finance. He thinks there is a chance that home prices in the suburbs may never rebound in our lifetimes.
Banks behave badly redux: Is it killing confidence?
"The bigger problem, which I think investors are focusing on, is confidence in the financial system is eroding," he said. "There have been a litany of failures and confidence-reducing events recently which should cause anyone with a stock certificate and a heartbeat to think hard about what to do with their stocks," he said.
Assault on Pell Grants has serious implications
A recent study by Complete College America, with funding from Bill and Melinda Gates, found these numbers to be nothing short of scandalous. According to a report by The New York Times covering the study, "In Texas, for example, of every 100 students who enrolled in a public college, 79 started at a community college, and only 2 of them earned a two-year degree on time; even after four years, only 7 of them graduated. Of the 21 of those 100 who enrolled at a four-year college, 5 graduated on time; after eight years, only 13 had earned a degree."
George Osborne 'to fight for bankers' bonuses' in Europe
Bank chief executives have been lobbying officials and politicians to water down or quash the European Parliament initiative to set a maximum ratio of bonus to salary, as part of a draft law on capital rules for financial institutions.
Peter Sands, Standard Chartered’s chief executive, last week reportedly pleaded with David Cameron to oppose the measures, fearing they would drive business to other financial centres such as Hong Kong or New York.
The Real Libor Scandal
But the banks did not fix the Libor rate with their customers in mind. Instead, the fixed Libor rate enabled them to improve their balance sheets, as well as help to perpetuate the regime of low interest rates. The last thing the banks want is a rise in interest rates that would drive down the values of their holdings and reveal large losses masked by rigged interest rates.
New CPS Budget: Teachers Boo New Spending Plan During Public Hearing
"The board recently announced an 85 percent cut in capital spending, and that happens at the same time that we have schools without playgrounds, that we have schools that are scheduled to meet this summer with no air conditioning, that we have 160 schools without libraries.
RealtyTrac, CoreLogic Confirm Housing Bear Thesis: 85-90% of REO Being Held Off Market, Meaning “Tight” Inventories Are Bogus
As of April 2012, 390,000 repossessed homes sat in limbo, while about 39,000 were actually listed for sale, said Sam Khater, senior economist at CoreLogic.
Daren Blomquist, vice president of RealtyTrac, said that he was surprised by his company’s finding, especially since a similar analysis in 2009 found that banks were attempting to sell nearly twice as much of their REO inventory back then.
Americans Sees Biggest Home Equity Jump In 60 Years: Mortgages
Residential mortgage debt peaked in 2007 at $10.6 trillion, doubling in six years, according to Fed data. Since then, it has fallen 7 percent as the value of all residential property has dropped 23 percent.
“People are looking around them and seeing people they know getting their salaries cut or losing their jobs,” said Miller, a former examiner with the Federal Reserve Bank of Philadelphia. “If you want security, you can put your money in a savings bank for half a percentage point, or you can pay down your mortgage.”
“Paying down mortgage debt is bad for economic growth -- putting your money into your house usually means you’re spending less,” said FBR’s Miller. “It’s good for our economic health in the long run, though, because it improves household balance sheets.”
==> Great stuff here, well worth an hour of your time, in the video from Hedges:
Hedges: "The psychosis of permanent war creates an environment in which people clamour for their own enslavement"
Covered Bond Roundtable 2012: Part 1
Jens Tolckmitt, Chief Executive, VDP: Well from an investor’s perspective, certainly unsecured funding is getting riskier, and they will demand a higher risk premium for that. And for an issuer, at the end of the day, it’s always about the funding mix and the cost of the funding mix. It doesn’t help if a certain issuer can fund itself cheaply on, say, 50% of the balance sheet and the other 50% is expensive. The funding mix is decisive and investors will ask for higher premiums.
Analysis: Euro zone fragmenting faster than EU can actFrench president: zero growth so far this year
Among Hollande’s proposals is a special new job contract under which employers would get tax breaks if they hire a young person and keep an older employee at the same time, instead of choosing one or the other.
More Schools Are Not Poor, Not Rich, Just Squeezed
“It appears like our families are doing better financially, but they’re not,” she said. “They all feel the crunch.”
Nevertheless, parents sent out an urgent call for help. As word spread, hundreds of neighbors and community members donated, in amounts from $5 to $1,000. So far they have raised $48,000.
While impressive, it’s barely enough to save one teacher. And the parents at P.S. 9 know it’s not sustainable. Typically, the largest fund-raising event of the year is a silent auction that raises $20,000, roughly half of the parent-teacher organization’s total budget.
It’s the Obama Way… 3 Million Kids Now Get Free Lunches All Year Long
Disability Ranks Outpace New Jobs In Obama Recovery
The economy created just 80,000 jobs in June, the Bureau of Labor Statistics reported Friday. But that same month, 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program, according to the Social Security Administration.
The disability ranks have outpaced job growth throughout President Obama's recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.
Drilling for gas in cemeteries is new facet of fracking debate
Whether to drill for that gas is causing soul-searching as cemeteries -- including veterans' final resting places in Colorado and Mississippi -- join parks, playgrounds, churches and residential backyards among the ranks of places targeted in the nation's shale drilling boom.
Automated Job Rejection
No human involved, it's automatic, guaranteed rejection. It's so bad, an HR executive applied for his own job and was rejected.
A Philadelphia-area human-resources executive told Mr. Cappelli that he applied anonymously for a job in his own company as an experiment. He didn't make it through the screening process.
Life expectancy falls in many parts of U.S.: Why?
A recently published study in the journal found that life expectancy for women fell significantly in 702 of the nation's more than 3,100 counties. For men, life expectancy dropped in 251 counties. In 158 counties, life expectancy dropped for both men and women.
The largest declines - by nearly two years - were in Mississippi's Madison County, near Jackson, and eastern Oklahoma's Hughes and Okfuskee Counties, for women. Kentucky's Perry County in Appalachia and Mississippi's Madison had the biggest drops for men.
Due To U.S. Obesity, Global Population Is 17 Million Tons Overweight
Although the United States represents just 5 percent of the global population, it contributes to almost one-third of the world’s weight due to obesity, researchers from the London School of Hygiene and Tropical Medicine concluded in a study released today.
Why our food is making us fat
"Corn became the engine for the massive surge in the quantities of cheaper food being supplied to American supermarkets: everything from cereals, to biscuits and flour found new uses for corn. As a result of Butz's free-market reforms, American farmers, almost overnight, went from parochial small-holders to multimillionaire businessmen with a global market."
If it could be proved that at that some point the food industry became aware of the long-term, detrimental effects their products were having on the public, and continued to develop and sell them, the scandal would rival that of what happened to the tobacco industry.
Eventually, the point will be reached when the cost to the NHS of obesity, which is now £5bn a year, outweighs the revenue from the UK snacks and confectionery market, which is currently approximately £8bn a year.
Headlines Blare Americans Lose 40% of Their Wealth Yet Income Decline is the Real Horror Story
One of the more shocking notes in the Federal Reserve's report are baby boomers. In a matter of 3 years, the population between ages 55-64 increased 11%. By age, retirees, minus the uber-rich, did better than working people.
Every age group less than 55 saw decreases in median income of between 9.1 and 10.5 percent, while families headed by a person between 65 and 74 or 75 or more saw increases at the median.
Solving the Struggle of Older Workers
In San Diego County, California, the unemployment rate among 55 to 65-year-olds has risen faster than that of any other group, except ages 24 and younger, and was 10.3 percent in 2010. Cost of living expenses there are also among the fastest rising in the nation, creating a double whammy. Older adults who lose a job or cannot find one can wind up economically stranded: they are too young to receive Medicare and too young to receive Social Security, and they are more likely to exhaust unemployment benefits.
Gov't report: Health cost relief only temporary
By 2021, health care will account for nearly 20 percent of the U.S. economy, the report found, up from under 14 percent in 2000. Controlling costs is one of the keys to solving federal budget woes, but that probably can't be done without major changes to Medicare and Medicaid.
Heart Attack Grill Lives Up To Its Name, Again
Only in America would two customers in two months collapse at the Heart Attack Grill while eating a “double bypass burger”.On Saturday, a woman in her 40s collapsed and was found unconscious at the restaurant after eating one of the 10,000-calorie burgers, smoking a cigarette, and drinking a margarita. Sounds like Peg Bundy has really taken a turn for the worse, huh?
Medical Records Could Yield Answers On Fracking
"Because we have 10 years of health data, but the drilling has mainly been for the past five years, we have a period with information on asthma patients and controls before drilling, [as well as] a period after drilling," he says.
Headlines Blare Americans Lose 40% of Their Wealth Yet Income Decline is the Real Horror Story
OT: The Origin of the Name "Moby Dick"
"By July 1846 even the Knickerbocker Magazine had forgotten its earlier version [of Reynold's article], reminding its readers of 'the sketch of "Mocha Dick, of the Pacific", published in the Knickerbocker many years ago...'. That account may well have led Melville to look up the earlier issue, in the very month he rediscovered his lost buddy of the Acushnet and fellow deserter on the Marquesas, Richard Tobias Greene, and began 'The Story of Toby' [the sequel to Typee]. May not 'Toby Dick' then have elided with 'Mocha Dick' to form that one euphonious compound, 'Moby Dick'?"
* "Mocha Dick survived many skirmishes (by some accounts at least 100) with whalers before he was eventually killed. "
An Upside to China’s Air Pollution: More Snowfall in the Sierra Nevada
Industrial pollution, bacteria, heavy metals, dust and other aerosols flow freely from Asia to California. Research suggests that as much as one-third of the airborne lead in the San Francisco Bay Area wafted over from Asia.
Raindrops and snowflakes cannot fall out of a cloud unless there is a floating seed husk, piece of pollen, speck of dust or other aerosol that they can cling to and grow around.
“In order for water to condense out of the water vapor and into a droplet, it has to have a surface to condense on,” said Doug Collins, a chemist at the University of California who is involved with the Sierra studies. “Aerosols provide that surface.”
REPORTER'S NOTEBOOK
All rivers contain phages. There’s nothing special about Ganga. Hankin found phages in the Yamuna at Agra. Bhargava reported he had found this Mysterious Factor X at Varanasi and Allahabad. So the theory they are somehow unique to Himalayan waters or to below-normal temperatures is a red herring. Because bacteriophages exist throughout the entire river, damming or diverting the flow of the Himalayan Ganga at Tehri or Haridwar will probably have no impact on their presence, and therefore on the ability of Ganga to purify itself.
But any radical alteration in the state of the river, such as massive chemical pollution, or a complete breakdown of oxygen due to algae or other vegetal growth could have very negative consequences. The persistence of bacteriophages is undoubtedly affected by temperature and direct sunlight. It’s reasonable to assume that a significant increase in salinity or another chemical change could also be disruptive. The trouble is we just don’t know how or what.
Q&A: Subir Bhattacharjee on the Geopolitics of Oil and Alberta’s Tar Sands
Until oil went to about $US 36 a barrel, there was very little interest in Alberta’s oil sands.
So, if you take that argument the other way, you basically say that the cost of water and the cost of energy to produce a barrel of oil has a strong correlation with the current price of oil. So, what you are seeing is that the price of oil reflects the price of the other commodities that have been used to produce that oil.
Can Environmental Protection save Millions?
A similar switch (from AlCl3 to Beta) is
found in the production of ibuprofen (an
anti-inflammatory drug).
This resulted in a 35 million pound a year
reduction in waste as well as reduction in
the cost of plant infrastructure and plant
operation.
Before the switch, for every 30 million
pounds of ibuprofen produced, 45 million
pounds of waste was created, which was
dumped in landfills.http://www.infowars.com/the-real-libor-scandal/
Half of recent college grads underemployed or jobless, analysis says
"You can make more money on average if you go to college, but it's not true for everybody," says Harvard economist Richard Freeman, noting the growing risk of a debt bubble with total U.S. student loan debt surpassing $1 trillion. "If you're not sure what you're going to be doing, it probably bodes well to take some job, if you can get one, and get a sense first of what you want from college."
More new-home buyers paying cash (Trust Fund Babies Fuel Recovery?)
According to the National Association of Realtors’ 2011 Profile of Buyers and Sellers, 87% of all existing-home buyers financed their purchase. Whether or not the other 13% paid cash or the sellers financed the deal is unknown because owner financing is typically a private matter and the loan is not usually recorded, even though it absolutely should be.
According to the National Association of Realtors’ 2011 Profile of Buyers and Sellers, 87% of all existing-home buyers financed their purchase. Whether or not the other 13% paid cash or the sellers financed the deal is unknown because owner financing is typically a private matter and the loan is not usually recorded, even though it absolutely should be.
Facebook posts loss in first earnings after IPO (7/26/2012)
Facebook reported a loss of $157 million Thursday in its first earnings after its public offering, as reserves set aside for stock grants offset results largely in line with expectations.
Starbucks 3Q Earnings Miss Estimates, Cuts 4Q Profit View (7/26/2012)
Amazon's 2Q Profits Plummet 96%, Trail Expectations (7/26/2012)
IMF Says China Downside Risks Significant (7/25/2012)
The International Monetary Fund said China’s slowing economy faces significant downside risks and relies too much on investment, urging leaders to boost consumption and channel citizens’ savings away from housing.
One-Third Of Colleges, Universities In ‘Real Financial Trouble’ (July 24, 2012)
The reason for the crisis, they say, is due to the equity ratio being down, the expense ratio rising and the lack of endowments for schools.The economic crisis didn’t help matters for higher education as many families have been unable to afford to send their kids to college. Student loan debt has also topped $1 trillion in the U.S.
German Ifo Business Confidence May Drop For A Third Month (Jul 24) “German executives have had a serious crisis wake-up call,” said Carsten Brzeski, an economist at ING Group in Brussels. “While the domestic economy will help to offset some drop off in exports for the time being, there is now a real fear the euro area will implode.”
UPS earnings miss; outlook is cut (Jul. 24, 2012)
The delivery giant said export volumes from Asia fell more than expected in the three months ended June 30."Economies around the world are showing signs of weakening," chief executive officer Scott Davis said on an earnings call. "Our customers are increasingly nervous."
Apple's third-quarter earnings miss expectations, stock falls (7/24/2012 )
The global economic slowdown has caught up with Apple (AAPL), which Tuesday reported third-quarter financial results that fell short of Wall Street's expectations. Shares fell more than 5 percent to $570.81 in late trade.
The $12 trillion misunderstanding: Whose budget blunder? ( July 24)
Facebook reported a loss of $157 million Thursday in its first earnings after its public offering, as reserves set aside for stock grants offset results largely in line with expectations.
Starbucks 3Q Earnings Miss Estimates, Cuts 4Q Profit View (7/26/2012)
Amazon's 2Q Profits Plummet 96%, Trail Expectations (7/26/2012)
IMF Says China Downside Risks Significant (7/25/2012)
The International Monetary Fund said China’s slowing economy faces significant downside risks and relies too much on investment, urging leaders to boost consumption and channel citizens’ savings away from housing.
One-Third Of Colleges, Universities In ‘Real Financial Trouble’ (July 24, 2012)
The reason for the crisis, they say, is due to the equity ratio being down, the expense ratio rising and the lack of endowments for schools.The economic crisis didn’t help matters for higher education as many families have been unable to afford to send their kids to college. Student loan debt has also topped $1 trillion in the U.S.
German Ifo Business Confidence May Drop For A Third Month (Jul 24) “German executives have had a serious crisis wake-up call,” said Carsten Brzeski, an economist at ING Group in Brussels. “While the domestic economy will help to offset some drop off in exports for the time being, there is now a real fear the euro area will implode.”
UPS earnings miss; outlook is cut (Jul. 24, 2012)
The delivery giant said export volumes from Asia fell more than expected in the three months ended June 30."Economies around the world are showing signs of weakening," chief executive officer Scott Davis said on an earnings call. "Our customers are increasingly nervous."
Apple's third-quarter earnings miss expectations, stock falls (7/24/2012 )
The global economic slowdown has caught up with Apple (AAPL), which Tuesday reported third-quarter financial results that fell short of Wall Street's expectations. Shares fell more than 5 percent to $570.81 in late trade.
The $12 trillion misunderstanding: Whose budget blunder? ( July 24)
It ranks among the biggest forecasting errors ever. Back in 2001, the Congressional Budget Office projected federal budget surpluses of $5.6 trillion for 2002-2011. Instead we got $6.1 trillion of deficits — a swing of $11.7 trillion. Naturally, political recriminations followed. Who or what caused the change?
Treasury Yields Drop to Records as Europe Spurs Haven Bid (July 23, 2012)
The Federal Reserve today purchased $4.779 billion of Treasuries due from July 2018 to June 2019 as part of a program known as Operation Twist, in which it swaps short-term bonds in its holdings for longer maturities to push long-term borrowing costs lower.
The central bank bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing, seeking to stimulate the economy.
Excessive Fed buying of Treasuries may reduce liquidity by leaving less for private investors to buy, said Nathan Sheets, global head of international economics at Citigroup Inc. Central bank Chairman Ben S. Bernanke instead may favor buying mortgage- backed securities or using new tools for easing, he said.
Treasury Yield Is Three Basis Points From Low On Europe (Jul 23, 2012)The Federal Reserve plans to buy as much as $2 billion of Treasuries due from February 2036 to May 2042 today as part of a program known as Operation Twist. The central bank is swapping short-term Treasuries in its holdings for longer maturities to support the economy by putting downward pressure on long-term borrowing costs.The central bank bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing, seeking to cap borrowing costs and stimulate the economy.
WHY WE’RE SCREWED (July 23rd, 2012)
Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.And since they’ve bought the politicians, the policy-makers, and the courts, no one will stop it. Few will even discuss it, since most university administrations have similarly been bought off—in many cases, the universities are even headed by corporate “leaders”–and their professors are on Wall Street’s payrolls.
Wal-Mart heirs worth as much as bottom 41.5% of American families (7/18/12)
The Waltons' value -- $89.5 billion in 2010 – is equal to the worth of the 41.5% of families at the lower end of the income ladder, according to an analysis by Josh Bivens of the Economic Policy Institute. That comes out to 48.8 million households.
Federal Government's Debt Jumps More Than $1T for 5th Straight Fiscal Year (July 23, 2012)
By the end of the third quarter of fiscal 2012, the new debt accumulated in this fiscal year by the federal government had already exceeded $1 trillion, making this fiscal year the fifth straight in which the federal government has increased its debt by more than a trillion dollars, according to official debt numbers published by the U.S. Treasury.
Fed's Raskin: No government backstop for banks that do prop trading (7/23)
"Much of this so-called liquidity, especially in opaque over-the-counter markets, is potentially illusory and destabilizing, especially during adverse market conditions, which does not benefit the public."
Workers on Disability Set Another Record in July; Exceed Population of 39 States (7/23/12)
When President Barack Obama took office in January 2009, there were 142,187,000 people actually working and 7,442,377 workers collecting disability—a ratio of about 19 to 1.
In June, there were 142,415,000 people actually working and 8,733,461 workers claiming disability—a ratio of about 16 to 1.
In July, in addition to the 8,753,935 workers who received federal disability insurance payments, there were also 165,564 spouses of disabled workers and 1,850,653 children of disabled workers who received payments. That brought the total number of disability beneficiaries to 10,770,152.
A Closer Look at Middle-Class Decline (July 23, 2012,)
In addition to the slow growth in overall size of the pie, the share that has been going to anyone but the richest Americans has been declining. ... In the simplest terms, the relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards.
McDonald's Rare Profit Miss Signals Slower Growth Ahead (7/23/2012)
McDonald’s faced a “slowing global economy” and “persistent headwinds” in the quarter, the company says.
Treasury Yields Hit New Lows—and May Keep Falling (Monday, 23 Jul 2012 )
“The next big move is lower, not higher,” said David Ader, chief Treasury strategist at CRT Capital. “I’m thinking 1.15 percent 10-year notes,” he said.
The 10-year yield Monday fell to 1.398 percent, the first time ever below 1.40 percent. It was at 1.436 percent later in the afternoon.
The 30-year bond yield Monday, also hit a record, falling to 2.477 percent, breaking a December, 2008 low. The five-year fell to 0.538 percent, also a record.
US 10-Year Yields Sink to Record Low on Spain (Monday, 23 Jul 2012)
The 10-year yield was at 1.4415 percent, after dropping as low as 1.4365 percent earlier in the Asian session. That was its lowest level since the early 1800's, according to data compiled by Reuters.
Construction employment in “free fall” again in South Florida
It has been five years and two months since Broward’s construction industry added a job, according to federal payroll statistics. Miami-Dade last added a construction job 57 months ago, in September 2007.
Even worse, after seeming to approach a plateau in late 2011, employment losses in construction began picking up steam again this year. In June, construction easily led job losses in both Broward and Miami-Dade compared to the prior year.
US Housing Inventory Requiring Deleveraging: 30 Million (July 23rd)
Several folks have been offsides with the inventory issue. The confirmation bias is rampant, with folks obsessing on inventory but ignoring everything else. The inventory I see that has to be de-levered before the housing market has a shot at a “durable” recovery stands at about 30 MILLION units.
Summer 2012 Homebuilding/Construction (July 22, 2012)
The report notes historically low mortgage rates, but tightened credit standards (income to loan ratio, down payment requirements) are all seen as “notable impediments” to the housing industry’s recovery. The report also predicts that the European problems may, of course, lead to an American downturn. Builders are cautioned to be mindful of the importance of maintaining liquidity.
£13tn: hoard hidden from taxman by global elite (Saturday 21 July 2012)
"The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments," the report says.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry's calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
Coming: The End of Fiat Money (July 21, 2012)
Pomboy: That the Fed will be a presence in the Treasury market for a long, long, long time. Some believe that, with another round of quantitative easing, we move forward, emerge from the morass, and the need for further intervention will dissipate. But the Fed is really the only natural buyer of Treasuries anymore. It will have to continue to monetize Treasury issuance at the same time all the other major developed economies—from the Bank of Japan to the Bank of England to the European Central Bank—are doing the same. Pursue that to its natural conclusion, and you see the inevitable demise of fiat money. To look at our policies and not be concerned about the risks to our currency would be dangerously naive.
Faber: '100% Chance' of Global Recession (24 May 2012)
“There are more and more stocks that are breaking down — economic sensitive stocks and companies that cater to the high end. That suggests to me the economy is likely to weaken and the huge asset run is likely to come to an end with significant asset deflation.”
Where Faber sees a global recession, Wiedemer sees much more widespread economic destruction.
“There are more and more stocks that are breaking down — economic sensitive stocks and companies that cater to the high end. That suggests to me the economy is likely to weaken and the huge asset run is likely to come to an end with significant asset deflation.”
Where Faber sees a global recession, Wiedemer sees much more widespread economic destruction.
In a recent interview for his newest book Aftershock, Wiedemer says, “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”
U.K.’S Widening Deficit Casts Doubt On Fiscal Goals: Economy (Jul 20, 2012)
“It is clear that the recession is leading to a worsening of the U.K.’s underlying fiscal position,” said James Knightley, an economist at ING Bank in London. It “raises more question marks over the effectiveness of the government’s austerity measures.”
American Pie in the Sky (Jul. 20, 2012)
A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the US (still the world’s largest economy) starts to sneeze again, the rest of the world – its immunity already weakened by Europe’s malaise and emerging countries’ slowdown – will catch pneumonia.
‘The Formula That Killed Wall Street’? The Gaussian Copula and the Material Cultures of Modelling
Extracting reliable estimates of a large set of partial derivatives such as a deltas from a Monte Carlo copula model was vastly more time-consuming than using the model to price or to rate a CDO tranche. In a situation in which the IT departments of many big banks were struggling to meet the computational demands of the overnight runs – ‘some days,
everything is finished at 8 in the morning, some days it’s finished at midday because it
had to be rerun’, an interviewee told the first author in early 2007 – the huge added load
of millions of Monte Carlo scenarios was unwelcome. The requisite computer runs
sometimes even had to be done over weekends: an interviewee told the first author of one
bank at which the Monte Carlo calculation of deltas took over forty hours.
Falling Interest Rates Destroy Capital
"Even in 2007, Bear shows a profit. And they show robust growth in shareholder equity, with only a minor setback in 2007.
And yet, by early 2008 Bear experienced what I will call Sudden Capital Death Syndrome. JP Morgan bought them on Mar 16, for just over $1B. But the deal hinged on the Fed taking on $29B of Bear’s liabilities, so the real enterprise value was closer to $-19B.
Obviously, Bear’s reported “profit” was not real. And neither was their “shareholder’s equity”. I think it something much more serious than just a simple case of fraud. Simple fraud could not explain why almost the entire banking industry ran out of capital at the same time, after years of reporting good earnings and paying dividends and bonuses to management. I place the blame for Sudden Capital Death Syndrome on falling interest rates."
Not your father’s IBM
The direct impetus for this column is IBM’s internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.
“Companies get confused,” Jobs told me. “When they start getting bigger they want to replicate their initial success. And a lot of them think well somehow there is some magic in the process of how that success was created so they start to try to institutionalize process across the company. And before very long people get very confused that the process is the content. And that’s ultimately the downfall of IBM. IBM has the best process people in the world. They just forgot about the content.”
S&P 500 Companies Post Record Level of Underfunding for Pensions -Report
Mr. Silverblatt added it may be too late for many baby boomers to safely build up assets outside of working longer or living more frugally in retirement.
Pension return rates declined for the 11th straight year, dropping to an estimated 7.6% in 2011 from 7.73% in 2010. Meanwhile, discount rates declined for the third consecutive year, falling to 4.71% in 2011 from 5.31% in the previous year.
Lost Generation' of Homeowners May Just Be on Hold
Yale economist Robert Shiller floated the idea of a “lost generation” of homeowners in interviews with Reuters and Yahoo Finance. He thinks there is a chance that home prices in the suburbs may never rebound in our lifetimes.
PIMCO's Bill Gross: U.S. 'Approaching Recession'
Gross' pessimistic forecast echoes those of Nouriel Roubini, an economics professor at NYU who has earned the nickname "Dr. Doom" for his bearish but often prescient predictions. Roubini wrote on Twitter yesterday that the U.S. economy is "at stall speed" and that it could grow at an annualized rate of "well below 1 percent" between July and September.
Wishful Thinking, Technology, and the Fate of the Nation
[We now live in] this weird, peculiar period in American history when the delusional thinking has risen to astronomical levels — predictably, really — in response to the stress levels that our society feels. And it is expressing itself as sort of “waiting for Santa Claus and the Tooth Fairy” to deliver a set of rescue remedies to us so that we can continue running Wal-Mart, Walt Disney World, Suburbia, the U.S. Army, and the Interstate Highway System by other means.
Gross' pessimistic forecast echoes those of Nouriel Roubini, an economics professor at NYU who has earned the nickname "Dr. Doom" for his bearish but often prescient predictions. Roubini wrote on Twitter yesterday that the U.S. economy is "at stall speed" and that it could grow at an annualized rate of "well below 1 percent" between July and September.
Wishful Thinking, Technology, and the Fate of the Nation
[We now live in] this weird, peculiar period in American history when the delusional thinking has risen to astronomical levels — predictably, really — in response to the stress levels that our society feels. And it is expressing itself as sort of “waiting for Santa Claus and the Tooth Fairy” to deliver a set of rescue remedies to us so that we can continue running Wal-Mart, Walt Disney World, Suburbia, the U.S. Army, and the Interstate Highway System by other means.
A global slowdown
If gridlock is such that all projected tax rises and spending cuts take effect, America's economy could take a hit equal to 4% of GDP, enough to seriously harm the world economy.
World economy heads for another perfect storm
To the all too familiar economic threats posed by the eurozone must now be added the approaching “fiscal cliff” in the US, whose own nascent recovery is in any case fast losing momentum, and the evident slowdown in emerging markets.All three cornerstones of the world economy seem now to be heading into the sand.
Largest Public Pension Fund Earns Dismal 1 Percent
The nation's largest public pension fund collected a dismal 1 percent annual return on its investments, a figure far short of projections that will likely bring pressure on California's state and local governments to contribute more money, officials said Monday.
WARNING: Pending Bankruptcy: Plan Ahead Today!
Edward Jones vision of 20,000 brokers a tall order (is retarded)
"Our industry tends to disparage investors with $100,000, but we think that's a pretty attractive opportunity," Weddle said. Even among brokers with at least 10 years in service at Edward Jones, the average household had $187,000 in assets.
But, with such small accounts, reaching the goal of $1 trillion in client assets means the firm needs to bring in a lot of new clients and convince existing ones to do more business.
Edward Jones hopes to tap into trillions of dollars from 79 million Baby Boomers heading into retirement age who may want help managing money from pension and workplace savings.
The firm estimates 40 million Boomer households fit the profile of its core customer: a conservative, long-term investor who wants to work with a trusted adviser. Capturing a fraction of that group would help the firm meet its goals, Weddle said. (Which is total bullshit that few people will fall for).
New crop of super-sized, luxury homes defy struggling U.S. economy
“They think they need it because the people they compare themselves with are upscaling or expanding,” Juliet Schor, a Boston University sociologist and the author of “The Overspent American: Why We Want What We Don’t Need,” wrote in an e-mail. “There’s so much money at the top, they have to spend it in some way.”
If gridlock is such that all projected tax rises and spending cuts take effect, America's economy could take a hit equal to 4% of GDP, enough to seriously harm the world economy.
World economy heads for another perfect storm
To the all too familiar economic threats posed by the eurozone must now be added the approaching “fiscal cliff” in the US, whose own nascent recovery is in any case fast losing momentum, and the evident slowdown in emerging markets.All three cornerstones of the world economy seem now to be heading into the sand.
Largest Public Pension Fund Earns Dismal 1 Percent
The nation's largest public pension fund collected a dismal 1 percent annual return on its investments, a figure far short of projections that will likely bring pressure on California's state and local governments to contribute more money, officials said Monday.
WARNING: Pending Bankruptcy: Plan Ahead Today!
Edward Jones vision of 20,000 brokers a tall order (is retarded)
"Our industry tends to disparage investors with $100,000, but we think that's a pretty attractive opportunity," Weddle said. Even among brokers with at least 10 years in service at Edward Jones, the average household had $187,000 in assets.
But, with such small accounts, reaching the goal of $1 trillion in client assets means the firm needs to bring in a lot of new clients and convince existing ones to do more business.
Edward Jones hopes to tap into trillions of dollars from 79 million Baby Boomers heading into retirement age who may want help managing money from pension and workplace savings.
The firm estimates 40 million Boomer households fit the profile of its core customer: a conservative, long-term investor who wants to work with a trusted adviser. Capturing a fraction of that group would help the firm meet its goals, Weddle said. (Which is total bullshit that few people will fall for).
New crop of super-sized, luxury homes defy struggling U.S. economy
“They think they need it because the people they compare themselves with are upscaling or expanding,” Juliet Schor, a Boston University sociologist and the author of “The Overspent American: Why We Want What We Don’t Need,” wrote in an e-mail. “There’s so much money at the top, they have to spend it in some way.”
Banks behave badly redux: Is it killing confidence?
"The bigger problem, which I think investors are focusing on, is confidence in the financial system is eroding," he said. "There have been a litany of failures and confidence-reducing events recently which should cause anyone with a stock certificate and a heartbeat to think hard about what to do with their stocks," he said.
Assault on Pell Grants has serious implications
A recent study by Complete College America, with funding from Bill and Melinda Gates, found these numbers to be nothing short of scandalous. According to a report by The New York Times covering the study, "In Texas, for example, of every 100 students who enrolled in a public college, 79 started at a community college, and only 2 of them earned a two-year degree on time; even after four years, only 7 of them graduated. Of the 21 of those 100 who enrolled at a four-year college, 5 graduated on time; after eight years, only 13 had earned a degree."
George Osborne 'to fight for bankers' bonuses' in Europe
Bank chief executives have been lobbying officials and politicians to water down or quash the European Parliament initiative to set a maximum ratio of bonus to salary, as part of a draft law on capital rules for financial institutions.
Peter Sands, Standard Chartered’s chief executive, last week reportedly pleaded with David Cameron to oppose the measures, fearing they would drive business to other financial centres such as Hong Kong or New York.
The Real Libor Scandal
But the banks did not fix the Libor rate with their customers in mind. Instead, the fixed Libor rate enabled them to improve their balance sheets, as well as help to perpetuate the regime of low interest rates. The last thing the banks want is a rise in interest rates that would drive down the values of their holdings and reveal large losses masked by rigged interest rates.
New CPS Budget: Teachers Boo New Spending Plan During Public Hearing
"The board recently announced an 85 percent cut in capital spending, and that happens at the same time that we have schools without playgrounds, that we have schools that are scheduled to meet this summer with no air conditioning, that we have 160 schools without libraries.
RealtyTrac, CoreLogic Confirm Housing Bear Thesis: 85-90% of REO Being Held Off Market, Meaning “Tight” Inventories Are Bogus
As of April 2012, 390,000 repossessed homes sat in limbo, while about 39,000 were actually listed for sale, said Sam Khater, senior economist at CoreLogic.
Daren Blomquist, vice president of RealtyTrac, said that he was surprised by his company’s finding, especially since a similar analysis in 2009 found that banks were attempting to sell nearly twice as much of their REO inventory back then.
Americans Sees Biggest Home Equity Jump In 60 Years: Mortgages
Residential mortgage debt peaked in 2007 at $10.6 trillion, doubling in six years, according to Fed data. Since then, it has fallen 7 percent as the value of all residential property has dropped 23 percent.
“People are looking around them and seeing people they know getting their salaries cut or losing their jobs,” said Miller, a former examiner with the Federal Reserve Bank of Philadelphia. “If you want security, you can put your money in a savings bank for half a percentage point, or you can pay down your mortgage.”
“Paying down mortgage debt is bad for economic growth -- putting your money into your house usually means you’re spending less,” said FBR’s Miller. “It’s good for our economic health in the long run, though, because it improves household balance sheets.”
* However, as home values continue to stagnate, and as homes increase in age and need more repairs, and as a tsunami of older people look to sell, inventories will increase and prices will decline in an economic death spiral. The lack of consumer activity and tighter lending will result in a liquidity freeze that will result in an unacknowledged double dip recession and then a Super Tsunami Global Depression that will catch the crew of the Titanic totally off guard. Lifeboats will be in short supply, so plan ahead.
Fed Draws Lawmaker Scrutiny After Release of Libor Papers
“They said ‘You shouldn’t be doing that,’ but it doesn’t appear that they acted in a decisive way to put an end to it, and certainly not to hold accountable to sanction the people who had manipulated Libor,” Miller said in an interview yesterday. “I’d like to know, if they had this knowledge, what did they do with the knowledge.”
UK's long-run budget outlook remains "unsustainable"
"On current policy we would expect the budget deficit to widen sufficiently over the long term to put public sector net debt on a continuously rising trajectory as a share of national income. This is clearly
unsustainable," the OBR said.
New Crash will be worse than 2008 says economist
He points out that today’s “safe haven” investments — the U.S. dollar and Treasurys — are anything but safe. “There are a lot of people who don’t understand what is going on. Look at how many people are buying the dollar. Look at people buying Treasurys. That makes no sense either. The risk lies in the dollar. The risk lies in Treasurys and other currencies being printed into oblivion.”
A noted economist agrees with Schiff that a much worse stock market crash is coming. And unlike Schiff, he has given very specific details about just how bad it will get.
“The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”
CALIFORNIA'S FORECLOSURE RATE LEADS NATION IN JUNE
Warren Buffett: US Economic Growth Slowing, Europe Slipping 'Pretty Fast'
Moody's downgrades Italy by two notches, might cut more
"Italy's government debt rating could be downgraded further in the event there is additional material deterioration in the country's economic prospects or difficulties in implementing reform," the agency warned.
"Should Italy's access to public debt markets become more constrained and the country were to require external assistance, then Italy's sovereign rating could transition to
substantially lower rating levels."
Spain Deepens Austerity Under European Pressure
Rajoy, of the center-right People's Party, proposed a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent, and outlined cuts in unemployment ...
France, Germany tax evasion inquiries target Swiss bank clients
Fed Draws Lawmaker Scrutiny After Release of Libor Papers
“They said ‘You shouldn’t be doing that,’ but it doesn’t appear that they acted in a decisive way to put an end to it, and certainly not to hold accountable to sanction the people who had manipulated Libor,” Miller said in an interview yesterday. “I’d like to know, if they had this knowledge, what did they do with the knowledge.”
UK's long-run budget outlook remains "unsustainable"
"On current policy we would expect the budget deficit to widen sufficiently over the long term to put public sector net debt on a continuously rising trajectory as a share of national income. This is clearly
unsustainable," the OBR said.
New Crash will be worse than 2008 says economist
He points out that today’s “safe haven” investments — the U.S. dollar and Treasurys — are anything but safe. “There are a lot of people who don’t understand what is going on. Look at how many people are buying the dollar. Look at people buying Treasurys. That makes no sense either. The risk lies in the dollar. The risk lies in Treasurys and other currencies being printed into oblivion.”
A noted economist agrees with Schiff that a much worse stock market crash is coming. And unlike Schiff, he has given very specific details about just how bad it will get.
“The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”
CALIFORNIA'S FORECLOSURE RATE LEADS NATION IN JUNE
Warren Buffett: US Economic Growth Slowing, Europe Slipping 'Pretty Fast'
Moody's downgrades Italy by two notches, might cut more
"Italy's government debt rating could be downgraded further in the event there is additional material deterioration in the country's economic prospects or difficulties in implementing reform," the agency warned.
"Should Italy's access to public debt markets become more constrained and the country were to require external assistance, then Italy's sovereign rating could transition to
substantially lower rating levels."
Spain Deepens Austerity Under European Pressure
Rajoy, of the center-right People's Party, proposed a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent, and outlined cuts in unemployment ...
France, Germany tax evasion inquiries target Swiss bank clients
Federal Reserve posted record profit of $78.4 billion last year
The profit, which is paid to the U.S. Treasury, is a 65% increase over last year's payment of $47.4 billion, which was also a record. As the Fed's balance sheet has more than doubled to about $2.4 trillion since the 2008 financial crisis, it has pumped about $125 billion back into the government's coffers.... (yah, right).
U.S. Corn Growers Farming in Hell as Heat Spreads: Commodities
Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show. Prices surged 37 percent in three weeks, and Rabobank International said June 28 that corn may rise 9.9 percent more by December to near a record $8 a bushel. Warning: Better stock up on butter for the long ugly winter...
The profit, which is paid to the U.S. Treasury, is a 65% increase over last year's payment of $47.4 billion, which was also a record. As the Fed's balance sheet has more than doubled to about $2.4 trillion since the 2008 financial crisis, it has pumped about $125 billion back into the government's coffers.... (yah, right).
U.S. Corn Growers Farming in Hell as Heat Spreads: Commodities
Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show. Prices surged 37 percent in three weeks, and Rabobank International said June 28 that corn may rise 9.9 percent more by December to near a record $8 a bushel. Warning: Better stock up on butter for the long ugly winter...
==> Great stuff here, well worth an hour of your time, in the video from Hedges:
Hedges: "The psychosis of permanent war creates an environment in which people clamour for their own enslavement"
Covered Bond Roundtable 2012: Part 1
Jens Tolckmitt, Chief Executive, VDP: Well from an investor’s perspective, certainly unsecured funding is getting riskier, and they will demand a higher risk premium for that. And for an issuer, at the end of the day, it’s always about the funding mix and the cost of the funding mix. It doesn’t help if a certain issuer can fund itself cheaply on, say, 50% of the balance sheet and the other 50% is expensive. The funding mix is decisive and investors will ask for higher premiums.
Analysis: Euro zone fragmenting faster than EU can actFrench president: zero growth so far this year
Among Hollande’s proposals is a special new job contract under which employers would get tax breaks if they hire a young person and keep an older employee at the same time, instead of choosing one or the other.
More Schools Are Not Poor, Not Rich, Just Squeezed
“It appears like our families are doing better financially, but they’re not,” she said. “They all feel the crunch.”
Nevertheless, parents sent out an urgent call for help. As word spread, hundreds of neighbors and community members donated, in amounts from $5 to $1,000. So far they have raised $48,000.
While impressive, it’s barely enough to save one teacher. And the parents at P.S. 9 know it’s not sustainable. Typically, the largest fund-raising event of the year is a silent auction that raises $20,000, roughly half of the parent-teacher organization’s total budget.
It’s the Obama Way… 3 Million Kids Now Get Free Lunches All Year Long
Disability Ranks Outpace New Jobs In Obama Recovery
The economy created just 80,000 jobs in June, the Bureau of Labor Statistics reported Friday. But that same month, 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program, according to the Social Security Administration.
The disability ranks have outpaced job growth throughout President Obama's recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.
Americans caught by rental, credit squeeze
In the 12 months ended in May, rents rose 14 per cent in San Francisco and 11 per cent in San Jose, Calif., according to Zillow. Last year in Minneapolis, they spiked 11 per cent even as home values sank 8 per cent.
Only a few years ago, landlords in cities like San Francisco and New York were tossing in a month or two of free rent, sometimes with parking, to lure tenants into signing leases.Today, applicants are showing up at apartment viewings with copies of their unblemished credit reports and letters of recommendation from bosses and prominent friends, in the hopes of snatching up a place to rent.
In the 12 months ended in May, rents rose 14 per cent in San Francisco and 11 per cent in San Jose, Calif., according to Zillow. Last year in Minneapolis, they spiked 11 per cent even as home values sank 8 per cent.
Only a few years ago, landlords in cities like San Francisco and New York were tossing in a month or two of free rent, sometimes with parking, to lure tenants into signing leases.Today, applicants are showing up at apartment viewings with copies of their unblemished credit reports and letters of recommendation from bosses and prominent friends, in the hopes of snatching up a place to rent.
I wonder if divorced women are causing the spike in rentals?
Baby Boomers Divorce Rate Skyrocketing
In two thirds of these cases, the woman is the one who said it was time to end the marriage.
Dr. Foster added, “Women 50 and over have more money than their mothers did, and not just that they have more money, but they have jobs or careers, the ability to earn more money, and that is trans-formative.” {warning, that's not a trend}
In two thirds of these cases, the woman is the one who said it was time to end the marriage.
Dr. Foster added, “Women 50 and over have more money than their mothers did, and not just that they have more money, but they have jobs or careers, the ability to earn more money, and that is trans-formative.” {warning, that's not a trend}
Drilling for gas in cemeteries is new facet of fracking debate
Whether to drill for that gas is causing soul-searching as cemeteries -- including veterans' final resting places in Colorado and Mississippi -- join parks, playgrounds, churches and residential backyards among the ranks of places targeted in the nation's shale drilling boom.
Automated Job Rejection
No human involved, it's automatic, guaranteed rejection. It's so bad, an HR executive applied for his own job and was rejected.
A Philadelphia-area human-resources executive told Mr. Cappelli that he applied anonymously for a job in his own company as an experiment. He didn't make it through the screening process.
Life expectancy falls in many parts of U.S.: Why?
A recently published study in the journal found that life expectancy for women fell significantly in 702 of the nation's more than 3,100 counties. For men, life expectancy dropped in 251 counties. In 158 counties, life expectancy dropped for both men and women.
The largest declines - by nearly two years - were in Mississippi's Madison County, near Jackson, and eastern Oklahoma's Hughes and Okfuskee Counties, for women. Kentucky's Perry County in Appalachia and Mississippi's Madison had the biggest drops for men.
Due To U.S. Obesity, Global Population Is 17 Million Tons Overweight
Although the United States represents just 5 percent of the global population, it contributes to almost one-third of the world’s weight due to obesity, researchers from the London School of Hygiene and Tropical Medicine concluded in a study released today.
Why our food is making us fat
"Corn became the engine for the massive surge in the quantities of cheaper food being supplied to American supermarkets: everything from cereals, to biscuits and flour found new uses for corn. As a result of Butz's free-market reforms, American farmers, almost overnight, went from parochial small-holders to multimillionaire businessmen with a global market."
If it could be proved that at that some point the food industry became aware of the long-term, detrimental effects their products were having on the public, and continued to develop and sell them, the scandal would rival that of what happened to the tobacco industry.
Eventually, the point will be reached when the cost to the NHS of obesity, which is now £5bn a year, outweighs the revenue from the UK snacks and confectionery market, which is currently approximately £8bn a year.
Headlines Blare Americans Lose 40% of Their Wealth Yet Income Decline is the Real Horror Story
One of the more shocking notes in the Federal Reserve's report are baby boomers. In a matter of 3 years, the population between ages 55-64 increased 11%. By age, retirees, minus the uber-rich, did better than working people.
Every age group less than 55 saw decreases in median income of between 9.1 and 10.5 percent, while families headed by a person between 65 and 74 or 75 or more saw increases at the median.
Solving the Struggle of Older Workers
In San Diego County, California, the unemployment rate among 55 to 65-year-olds has risen faster than that of any other group, except ages 24 and younger, and was 10.3 percent in 2010. Cost of living expenses there are also among the fastest rising in the nation, creating a double whammy. Older adults who lose a job or cannot find one can wind up economically stranded: they are too young to receive Medicare and too young to receive Social Security, and they are more likely to exhaust unemployment benefits.
Gov't report: Health cost relief only temporary
By 2021, health care will account for nearly 20 percent of the U.S. economy, the report found, up from under 14 percent in 2000. Controlling costs is one of the keys to solving federal budget woes, but that probably can't be done without major changes to Medicare and Medicaid.
==> By 2021, Moore's Law of unlimited chip growth will totally melt into a pile of dogshit -- and technology will crash into a massive tsunami wall of aging and ailing old people -- who wont give a F about new tech toys. The Baby Boom Explosion is not an economic phase of great opportunity -- it's a period of economic shock that few are prepared for (today). The baby Boom Implosion is the Mother of all Economic Black Holes ...
Most U.S. school districts reject 'pink slime' for lunch programs
The filler is made of fatty bits of beef that are heated to remove much of the fat, then treated with a puff of ammonia to kill bacteria.
In response to the public outcry over its use, the USDA said in March said that it would for the first time offer schools the choice to purchase beef without the filler for the 2012-2013 school year. The department has continued to affirm that lean finely textured beef is a safe, affordable and nutritious product that reduces overall fat content.
Because schools were not given a choice last year, all states may have previously received beef with the product.
Most U.S. school districts reject 'pink slime' for lunch programs
The filler is made of fatty bits of beef that are heated to remove much of the fat, then treated with a puff of ammonia to kill bacteria.
In response to the public outcry over its use, the USDA said in March said that it would for the first time offer schools the choice to purchase beef without the filler for the 2012-2013 school year. The department has continued to affirm that lean finely textured beef is a safe, affordable and nutritious product that reduces overall fat content.
Because schools were not given a choice last year, all states may have previously received beef with the product.
For example, from 1980 to 2000, the time Americans spent sitting increased by only 8%, while exercise rates stayed the same. The result? Obesity doubled. (The prevalence of processed foods likely plays a role here too, but you get the gist.)
Only in America would two customers in two months collapse at the Heart Attack Grill while eating a “double bypass burger”.On Saturday, a woman in her 40s collapsed and was found unconscious at the restaurant after eating one of the 10,000-calorie burgers, smoking a cigarette, and drinking a margarita. Sounds like Peg Bundy has really taken a turn for the worse, huh?
Medical Records Could Yield Answers On Fracking
"Because we have 10 years of health data, but the drilling has mainly been for the past five years, we have a period with information on asthma patients and controls before drilling, [as well as] a period after drilling," he says.
Father of Treasury Floaters Says Now Worst Time for Sales
"In an environment with historically low interest rates, the Treasury should avoid floating-rate debt as it introduces risk,” Harvey, a finance professor at Duke University’s Fuqua School of Business in Durham, North Carolina, said in a telephone interview April 17. “If interest rates go up, it puts the government at risk because they will need to come up with a lot of extra revenue to pay the interest bill.”
"In an environment with historically low interest rates, the Treasury should avoid floating-rate debt as it introduces risk,” Harvey, a finance professor at Duke University’s Fuqua School of Business in Durham, North Carolina, said in a telephone interview April 17. “If interest rates go up, it puts the government at risk because they will need to come up with a lot of extra revenue to pay the interest bill.”
Spain unveils new austerity under European pressure
"We are living in a crucial moment that will determine the future of our families, our youth, our social welfare and all our hopes," Rajoy said. "That is the reality. We have to get out of this mess and we have to do it as soon as possible."
"We are living in a crucial moment that will determine the future of our families, our youth, our social welfare and all our hopes," Rajoy said. "That is the reality. We have to get out of this mess and we have to do it as soon as possible."
I think the Fed will respond to the government acting in a fiscally responsible manner, which is inherently deflationary, by fighting that deflation with the only tool it has left; and that is outright monetization of debt. They will call it something else, of course, but that will be the actual outcome.
Cuts in services are coming, some Wichita city officials warn
“It’s pretty grim,” Vice Mayor Janet Miller said this week. “People don’t want a tax increase, and I understand that, but people need to understand that the alternative is cutting services to taxpayers ... and it’s coming, no question about it.”
“It’s pretty grim,” Vice Mayor Janet Miller said this week. “People don’t want a tax increase, and I understand that, but people need to understand that the alternative is cutting services to taxpayers ... and it’s coming, no question about it.”
This artificially low sensitivity [the two-year smoothing] of US pension liabilities to market rates is set to decline even further under new rules being proposed by Congress as part of the Transportation Spending bill passed by the Senate in March (S. 1813) and now being considered by the House. Buried on page 1472 of the bill are new rules on “Pension Funding Stabilization” that effectively put a corridor on the discount rate used to value pension liabilities. The upper bound of this corridor is equal to a rolling 25-year average of the IRS published corporate bond yield scaled up by a factor (110% for 2012, 115% for 2013, trending up to 130% for 2016 and beyond); the lower bound equals a rolling 25-year average of the IRS published corporate bond yield scaled down by a factor (90% for 2012, 85% for 2013 and trending down to 70% for 2016 and beyond). The 25-year average greatly increases the smoothing effect, further reducing the reported sensitivity of pension fund liabilities to changes in market interest rates.
No more winter fuel payments for you! Government told to cut benefits for middle-class pensioners who don't need them
What many see as particularly unfair is that even those living abroad in warmer countries like Spain are entitled to the winter fuel allowance. In the 2010-11 winter, 72,840 people living abroad claimed winter fuel payments at a total cost of £15.6million.
As Costs Soar, Taxpayers Target Pensions of Cops and Firefighters
The city had a $115 million deficit in the latest fiscal year, San Jose's 10th year in a row in the red. Pensions were the biggest drain, says the mayor's office. Of the $79 million in increased costs, retirement expenditures accounted for $58 million.
What many see as particularly unfair is that even those living abroad in warmer countries like Spain are entitled to the winter fuel allowance. In the 2010-11 winter, 72,840 people living abroad claimed winter fuel payments at a total cost of £15.6million.
As Costs Soar, Taxpayers Target Pensions of Cops and Firefighters
The city had a $115 million deficit in the latest fiscal year, San Jose's 10th year in a row in the red. Pensions were the biggest drain, says the mayor's office. Of the $79 million in increased costs, retirement expenditures accounted for $58 million.
Realtors Push Back Against Zillow and MLS Listing Syndicators |
The aggregators take the intellectual property of individual Realtors, mix it with other content, re-brand the property as their own, and then sell related advertising rights back to the Realtors who they took the property from in the first place. And in the process they create substantial confusion in the public marketplace of real estate buyers and sellers. Realtors have begun to realize that this is harming the real estate industry, and a "real estate syndication war" is heating up.
The aggregators take the intellectual property of individual Realtors, mix it with other content, re-brand the property as their own, and then sell related advertising rights back to the Realtors who they took the property from in the first place. And in the process they create substantial confusion in the public marketplace of real estate buyers and sellers. Realtors have begun to realize that this is harming the real estate industry, and a "real estate syndication war" is heating up.
Pennsylvania Readies Bond Sale For Jobless-Benefit Loans
“There is a lot of appetite for these transactions,” said Chris Mauro, head of U.S. municipal strategy at RBC Capital Markets in New York. “There’s no reason to believe that these deals wouldn’t get a very favorable reception.”
Debt sold to repay loans for jobless benefits is typically structured as revenue bonds backed by assessments on employers. Investors who favor such securities like the “clearly laid out” structure, Mauro said. (hmmm....)
“There is a lot of appetite for these transactions,” said Chris Mauro, head of U.S. municipal strategy at RBC Capital Markets in New York. “There’s no reason to believe that these deals wouldn’t get a very favorable reception.”
Debt sold to repay loans for jobless benefits is typically structured as revenue bonds backed by assessments on employers. Investors who favor such securities like the “clearly laid out” structure, Mauro said. (hmmm....)
CBO: Massive rise in U.S. debt crashes our economic forecasting model in 2035
CBO’s model cannot reliably estimate GNP after debt reaches that amount, in the agency’s judgment: The assumptions about private saving and capital inflows incorporated in CBO’s model are based on historical experience, and if interest rates and the debt-to-GDP ratio rose to levels well outside of that experience, those assumptions might no longer be valid. In 2035, GNP would be 21 percent below the benchmark under the assumptions leading to the most negative effect on GNP; beyond 2035, the negative effect on GNP would grow under those assumptions as debt continued to increase relative to the size of the economy.
CBO’s model cannot reliably estimate GNP after debt reaches that amount, in the agency’s judgment: The assumptions about private saving and capital inflows incorporated in CBO’s model are based on historical experience, and if interest rates and the debt-to-GDP ratio rose to levels well outside of that experience, those assumptions might no longer be valid. In 2035, GNP would be 21 percent below the benchmark under the assumptions leading to the most negative effect on GNP; beyond 2035, the negative effect on GNP would grow under those assumptions as debt continued to increase relative to the size of the economy.
"By July 1846 even the Knickerbocker Magazine had forgotten its earlier version [of Reynold's article], reminding its readers of 'the sketch of "Mocha Dick, of the Pacific", published in the Knickerbocker many years ago...'. That account may well have led Melville to look up the earlier issue, in the very month he rediscovered his lost buddy of the Acushnet and fellow deserter on the Marquesas, Richard Tobias Greene, and began 'The Story of Toby' [the sequel to Typee]. May not 'Toby Dick' then have elided with 'Mocha Dick' to form that one euphonious compound, 'Moby Dick'?"
* "Mocha Dick survived many skirmishes (by some accounts at least 100) with whalers before he was eventually killed. "
An Upside to China’s Air Pollution: More Snowfall in the Sierra Nevada
Industrial pollution, bacteria, heavy metals, dust and other aerosols flow freely from Asia to California. Research suggests that as much as one-third of the airborne lead in the San Francisco Bay Area wafted over from Asia.
Raindrops and snowflakes cannot fall out of a cloud unless there is a floating seed husk, piece of pollen, speck of dust or other aerosol that they can cling to and grow around.
“In order for water to condense out of the water vapor and into a droplet, it has to have a surface to condense on,” said Doug Collins, a chemist at the University of California who is involved with the Sierra studies. “Aerosols provide that surface.”
REPORTER'S NOTEBOOK
All rivers contain phages. There’s nothing special about Ganga. Hankin found phages in the Yamuna at Agra. Bhargava reported he had found this Mysterious Factor X at Varanasi and Allahabad. So the theory they are somehow unique to Himalayan waters or to below-normal temperatures is a red herring. Because bacteriophages exist throughout the entire river, damming or diverting the flow of the Himalayan Ganga at Tehri or Haridwar will probably have no impact on their presence, and therefore on the ability of Ganga to purify itself.
But any radical alteration in the state of the river, such as massive chemical pollution, or a complete breakdown of oxygen due to algae or other vegetal growth could have very negative consequences. The persistence of bacteriophages is undoubtedly affected by temperature and direct sunlight. It’s reasonable to assume that a significant increase in salinity or another chemical change could also be disruptive. The trouble is we just don’t know how or what.
Q&A: Subir Bhattacharjee on the Geopolitics of Oil and Alberta’s Tar Sands
Until oil went to about $US 36 a barrel, there was very little interest in Alberta’s oil sands.
So, if you take that argument the other way, you basically say that the cost of water and the cost of energy to produce a barrel of oil has a strong correlation with the current price of oil. So, what you are seeing is that the price of oil reflects the price of the other commodities that have been used to produce that oil.
Can Environmental Protection save Millions?
A similar switch (from AlCl3 to Beta) is
found in the production of ibuprofen (an
anti-inflammatory drug).
This resulted in a 35 million pound a year
reduction in waste as well as reduction in
the cost of plant infrastructure and plant
operation.
Before the switch, for every 30 million
pounds of ibuprofen produced, 45 million
pounds of waste was created, which was
dumped in landfills.http://www.infowars.com/the-real-libor-scandal/