"If you're going to panic, do it fast and beat the crowd." ~ Jesse Livermore

Tuesday, April 16, 2013

Draghi: governments need to solve debt crisis as ECB cannot

Draghi urges governments to solve debt crisis, says ECB cannot
AMSTERDAM (Reuters) - European Central Bank President Mario Draghi on Monday put pressure on governments to push ahead with plans for closer European integration to address the euro zone crisis' core problems. He said that was not ... to take, the ...

Euro-zone Debt Crisis is Back
The Market Oracle
The decimation of the Cypriot financial industry in the wake of its debt crisis will shave 12.5% to 15% from the tiny nation's economy over the next couple of years. You can bet an impoverished Cyprus will need to beg the EU and IMF for table scraps ...

EU 'making progress' in response to crisis
Irish Times
A two-year slump, 19 million unemployed and five countries on emergency aid are no reason to take bold, immediate action to spur economic growth, according to European officials set to defend their handling of the debt crisis in Washington this week ...

Irish Times

Weak mining stocks drive down European markets
Economic Times
Lingering worries over the euro zone's sovereign debt crisis have prompted some traders to sell shares to book profits on the rise in stocks since the start of the year. This has led some strategists and traders to back "defensive" sectors such as ...

Economic Times

Henkel CEO Sees Worsening Conditions in Euro Region This Year
... and Persil detergent, said the economic situation in the euro zone may worsen this year. “We do not expect the euro zone to undergo any tangible improvement in the current year,” Chief Executive Officer Kasper Rorsted told shareholders at the ...

Europe's austerity era could be coming to an end
"The euro zone policymaking agenda of 2013 is not the one of 2011, or even of 2012 for that matter. Deficit sinners are being cut more fiscal slack; maturities of bail-out loans are being extended; and, most importantly, the crisis has spread to the ...

Study on Wealth Fuels Euro-Crisis Debate in Germany
New York Times
The German media reaction seems to be inflaming the debate about who should pick up the tab for the euro crisis. The E.C.B. study suggested that countries like Greece that have been receiving handouts in fact have hidden stashes of property wealth.

Withering euro zone and strengthening krona drag on Sweden's GDP
At the same time, the krona's value has surged as the country has emerged from the European debt crisis relatively unscathed, strenthening nearly 8% against a basket of currencies monitored by Bloomberg. The worse-then-expected economic growth could ...

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Tuesday, March 26, 2013

France is becoming another Greece

Forget Spain and Italy. It’s France that’s Greece-ifying before our very eyes – Quartz: " . .  . France . . . its economy is decaying . . . rapidly. Markit’s preliminary March purchasing managers’ index—which measures monthly changes in private-sector output—came in at 42.1 (pdf), down from 43.1 in February. (Anything lower than 50 reflects a drop in output.) That’s the fastest slowdown in business activity France has seen since March 2009. And Jack Kennedy, economist at Markit, says this likely augurs a larger crumbling of the French economy. . . . To frame it in another horrifying perspective, the PMI of the euro zone’s second-largest economy was lower than that of Spain and Italy—and almost down to Greek levels (video), as Reuters’ Jamie McGeever explains. What’s most worrying is when you look at how France’s data stacked up against the euro zone’s as a whole, which were also published today. While the euro zone’s PMI (blue line) and its GDP growth (orange line) have moved pretty closely in sync, France’s PMI has become unhinged in the last couple of years. And that’s bad because, as PMI reflects business confidence, it’s typically a leading indicator of GDP growth . . . " (read more at link above)

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Saturday, March 23, 2013

Stopping Employers from Hiring

"For many small businesses, simply keeping up to speed with changing regulations is challenging. Elizabeth Milito, Senior Executive Counsel of the NFIB, says, “Our members want to comply with the law. They don’t want to discriminate against applicants or employees, but they struggle to decipher confusing and sometimes contradictory laws.” She points out that small firms typically don’t have HR execs or in-house counsels available to wade through the legalese. In the past year, one of the more vexing issues has been conflicting signals on the use of background checks and the hiring of criminals. A year ago, the EEOC determined that policies that preclude hiring people with criminal records have a “disparate racial impact,” since African American men are seven times more likely than whites to have been in jail. The agency urged employers, instead of ruling out such hires, to take into account the "nature of the crime, the time elapsed, and the nature of the job” in deciding whether or not to take on an individual. In other words, firms will be required to perform extensive research, which could prove costly. . . Worse, some businesses are prohibited to hire ex-cons by law; complying with the EEOC mandate could expose them to prosecution elsewhere. As Newsmax reports, this problem was exposed when the EEOC “took action against G4S Secure Solutions, which provides guards for nuclear power plants…for refusing to hire a twice-convicted thief as a security guard – even though Pennsylvania state law forbids hiring people with felony convictions…” Read more at http://www.thefiscaltimes.com/Columns/2013/03/13/How-Obamas-White-House-Stops%20Employers-from-Hiring.aspx#mzR3OA27gICOzUrx.99

Raghuram Rajan: From financial crisis prophet to next RBI chief?
Economic Times
NEW DELHI: The man widely expected to be next RBI favours clipping the autocratic power of the role and giving more say to a monetary policy committee. Raghuram Rajan, who in 2005 predicted the global financial crisis, also believes that inflation of ...

Responding to Financial Crisis, Britain Overhauls Its Regulators ...
Britain, unlike other economic powers, is responding to the financial crisis by creating two new agencies, one to oversee institutions and another to watch for ...

Bespoke Investment Group - Think BIG - Relive the Financial Crisis ...
The bull market turned four this weekend, and in honor of the anniversary what better way is there to relive the events of the Financial Crisis than by having a ...

Geithner to write book on financial crisis
(New York Times) Timothy F. Geithner, the former Treasury secretary who managed the Obama administration's response to the global financial crisis of 2008 ...

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Thursday, March 21, 2013

February Unemployment Rate Didn't Really Decline

RealClearMarkets - February's Unemployment Rate Didn't Really Decline: "When the unemployment rates for the past two months are calculated out to two decimal places, the results are 7.92 for January and 7.74 for February. The monthly decline is 0.18, which is within the BLS error range. (The BLS uses a 90 percent confidence interval for monthly changes.) Dare it be uttered? It appears that the so-called drop in the February unemployment rate fails the BLS test of statistical significance. In the language of statisticians, the 0.18 recorded change cannot be said to be different from zero. Or more plainly, it can't be said that the unemployment rate declined last month. One might wonder why BLS has historically reported monthly changes in unemployment rate confidence intervals out to two digits, yet rounded the reported unemployment rate to one digit, and then called monthly changes of 0.2 point significant (saying the jobless rate went up or down) based on the figures rounded to one digit. As the result of this practice, as happened last month, some month-to-month changes that are not statistically significant become significant and possibly misleading."

Spaniards denounce EU's handling of financial crisis
Press TV
Thousands of people have taken to the streets of Spain to protest against European Union leaders' handling of the financial crisis and the austerity measures imposed by the government. The Spaniards took part in a march organized by Indignados protest ...

Press TV

Why today's Cyprus bailout could be the start of the next financial crisis
Washington Post (blog)
For the past six months, the global financial markets have become increasingly complacent, convinced that the euro-zone crisis is, for practical purposes, over. Cyprus is the test of whether that is correct, or whether the complacency was instead ...

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Tuesday, March 19, 2013

China will have to act avert financial crisis

China will have to act avert financial crisis, Nomura says
“We believe China faces rising risks of a systemic financial crisis and that the government needs to take action quickly to contain such risks.“ The cautious assessment from Nomura came as China re-appointed Zhou Xiaochuan, 65, as governor of its ...


Financial crisis forces households to cut spending by £3000 a year
Mr Lloyd said: “The squeeze on incomes and collapse in consumer confidence has led households to slash their spending during the financial crisis, with a devastating impact on the wider economy. “The longer the squeeze goes on, the longer this spending ...


China Fills Out Economic Team With Lou as Financial Risks Mount
The world's second-biggest economy faces a rising risk of a financial crisis because of excessive credit, elevated property prices, declines in the labor force and limited productivity gains, Nomura said in a report on March 15. A slowdown in “reform ...

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Saturday, March 16, 2013

Wary of Borrowing as Student Loan Debt Balloons (video)

Video - Young People Grow Wary of Borrowing as Student Loan Debt Balloons - WSJ.com: "Young people are racking up larger amounts of student debt than ever before, but fresh data suggest they are becoming warier of borrowing in general: Total debt among young adults dropped in the last decade to the lowest level in 15 years. A typical young U.S. household—defined as one led by someone under age 35—had $15,000 in total debt in 2010, down from $18,000 in 2001 and the lowest since 1995, according to a recent Pew Research Center report and government data. Total debt includes mortgage loans, credit cards, auto lending, student loans and other consumer borrowing."

Cheers Are Few as Dow Jones Average Hits Milestone - NYTimes.com: "Robert J. Shiller, a professor of economics at Yale, has built a model for gauging whether stocks are cheap or expensive. Right now, stock valuations are above historical averages, but well below the stratospheric highs they have reached in bubbles, he said. According to his model, stocks are signaling that they can return about 3 to 4 percent a year. “That’s not horrible,” he said, though he was quick to add that the stock market had a mind of its own. The stock market’s volatility has scared retail investors for several years. A total of $556 billion has been taken out of mutual funds focused on American stocks since October 2007, according to the Investment Company Institute. That is an enormous pot of money that largely missed out on the market’s recovery. But recent figures show a sudden change of mind among retail investors. Over $55.1 billion flowed into equity funds in January and February, according to TrimTabs Investment Research, the highest two-month figure in the data company’s records."

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Thursday, March 14, 2013

Profiting from a Rigged Financial System

Yes, the Financial System Is Rigged. Why Shouldn't You Profit From That Knowledge? - Businessweek: " . . . Now, we see housing ascendant again. Corporate profits are breaking records, thanks in no small part to a Federal Reserve—the wealthiest bank in the world—hell-bent on seeing both things happen. “At least the first part of this rally is a rock solid foundation,” remarked financial blogger Barry Ritholtz. “The second half, the argument goes, is built on inorganic matter, primarily Fed liquidity and generosity.” By his estimate, the Dow would be 20 percent to 30 percent lower, absent the Fed’s finger on the scale. “You cannot,” he said, “understate its impact on corporate earnings.”. . . ."

Big Banks and Derivatives: Why Another Financial Crisis Is Inevitable - Forbes: " . . . . Bad as these scandals are and vast as the money involved in them is by any normal standard, they are mere blips on the screen, compared to the risk that is still staring us in the face: the lack of transparency in derivative trading that now totals in notional amount more than $700 trillion. That is more than ten times the size of the entire world economy. Yet incredibly, we have little information about it or its implications for the financial strength of any of the big banks. Moreover the derivatives market is steadily growing. “The total notional value, or face value, of the global derivatives market when the housing bubble popped in 2007 stood at around $500 trillion… The Over-The-Counter derivatives market alone had grown to a notional value of at least $648 trillion as of the end of 2011… the market is likely worth closer to $707 trillion and perhaps more,” writes analyst Jenny Walsh in The Paper Boat. “The market has grown so unfathomably vast, the global economy is at risk of massive damage should even a small percentage of contracts go sour. Its size and potential influence are difficult just to comprehend, let alone assess.”. . . .

Dow passes intraday record; markets undaunted by Washington gridlock - The Washington Post: " . . . The Dow’s record high confirmed that the ongoing political paralysis in Washington has failed to spook the markets much in the past year. As lawmakers and President Obama lurch from one fiscal deadline to the next — from the debt-ceiling crisis in 2011 to the fiscal cliff to the steep budget cuts triggered last week — the markets have soldiered on with hardly a bump. “The stock market and the American public are looking at the political theater with a jaundiced eye,” said Ted Weisberg from the New York Stock Exchange, where he has been a trader on the floor for more than four decades. The markets hardly reacted on March 1, when severe domestic and defense cuts went into effect. The Dow Jones Industrial even rose 0.25 percent that day. A popular index for gauging fear in the markets called the CBOE Volatility Index, or the VIX, dropped nearly one percent. Wall Street’s reactions have developed into a pattern of near-indifference followed by optimism when a political resolution is found. In the days building up to the fiscal cliff at the end of last year, the markets were sanguine. But when a compromise was reached on New Year’s Day, the Dow surged more than 308 points, or 2.35 percent. The S&P 500 jumped 36.25 points, or 2.54 percent. Many on Wall Street feel they’ve seen this movie before, even dismissing the dire warnings of politicians as all theater. “My sense is that our president and the White House are crying wolf,” Weisberg said of President Obama’s warnings about the sequester last week. Yu-Dee Chang, chief trader at Ace Investment Strategists in Vienna, said the impact of the sequester is being felt more strongly in Washington than on Wall Street.

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Tuesday, March 12, 2013

Pimco's Gross on Irrational Exuberance Now

Pimco's Gross: Irrational Exuberance, the Sequel | Fox Business: "Pimco’s Bill Gross says investors who believe double-digit market returns will continue are irrationally exuberant and warns they better lower expectations on all asset classes. Gross again takes characteristically pointed jabs at the Federal Reserve’s easy money policies in his latest investment letter. PIMCO’s Gross warns investors that, on a scale of one to ten, markets are now a six for “asset price irrationality," which is “moving in an upward direction,” as the markets are in shouting distance of record highs set in October 2007. . . ."

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Saturday, March 9, 2013

Grand Bargain Doubtful, Opportunity in Uncertainty

Why Won't Americans Listen to Alan Simpson and Erskine Bowles? - Businessweek: " . . . The fate of the grand bargain will likely be determined over the next six to eight weeks, as sequestration hits and funding for the government runs out on March 27. If Congress muddles through with still more short-term fixes, the chance for major reform may vanish for years. Washington will move on to immigration, gun control, and the next election. Simpson-Bowles will be forgotten. If, however, the economy stalls, health-care inflation picks up again, or any number of other scenarios unfold, the plan may be resurrected—or as Simpson once put it, the “cadaver will rise from the crypt.” “Nobody knows when, but at some point the markets will force us to deal with this,” says Bowles. “And when they do, there’s just not that many other solutions.” In that event, Simpson and Bowles will win Washington’s standard consolation prize—having failed to fix the problem, they’ll at least be able to say they were right."

Buffett sees opportunity in uncertainty - FT.com: "What was clear is that 82-year-old Warren Buffett remains an optimist. Declaring that “opportunities abound in America”, he took fellow chief executives to task for using “uncertainty” as a reason not to invest. Providing the perspective of a man who made his first stock purchase in 1942, “when the US was suffering major losses throughout the Pacific war zone”, he said that “America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them.” So Mr Buffett said that he and his vice-Chairman Charlie Munger would continue to invest large sums, both in the existing businesses of the conglomerate that sells everything from lollipops to jet propelled planes, as well as in stocks and large acquisitions similar to the recent $28bn purchase of Heinz with partner 3G Capital."

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Thursday, March 7, 2013

Ben Bernanke, the Balance Sheet, and the Future

RealClearMarkets - Ben's Balance Sheet Blues: " . . . . Bernanke is banking on the hope that his policies will jump start the economy which will then be able to motor along on its own. However, the current era of cheap money and fiscal stimulus will never create an economy that is capable of standing on its own legs. Instead, it is propping up a parasitic economy that is completely dependent on the very supports the Fed believes it can one day remove. But if the Fed does not remove them on its own, the markets eventually will. Bernanke also defended himself against some members of Congress, particularly economically savvy New Jersey representative Scott Garrett, who pointed out the hypocrisy of Bernanke's claims that Fed policies are responsible for the recent rise in home prices (while simultaneously absolving the Fed of any responsibility for rising home prices during the real estate bubble). To justify this claim, Bernanke made the self-serving distinction that while the Fed is currently purchasing mortgage-backed securities (in order to lower mortgages rates and boost home prices), no such actions existed prior to the 2008 financial crisis. As a result, he claims the Fed could not have been responsible for the bubble. On this point he is dead wrong. Fed policy during the mid-years of the last decade had an enormous effect on mortgage rates and home prices. By holding short-term rates too low for too long, the Fed was responsible for the proliferation of Adjustable Rate Mortgages and the popularity of the ultra-low teaser rates without which the housing bubble never could have been inflated so large in the first place. In other words, the Fed broke it then, but it sure can't fix it now." (author--Peter Schiff is the CEO of Euro Pacific Capital, read full article at link above) 

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Tuesday, March 5, 2013

Time to Take Profits per PIMCO’s El-Erian

Equity Prices Are Artificially High — It’s Time to Take Profits: PIMCO’s El-Erian | Daily Ticker - Yahoo! Finance: " . . . El-Erian explains that central banks have been compelled to undertake unconventional measures, things they haven’t done before, because other policymakers are not stepping up to take responsibility on the fiscal side. But central bank activism can be risky. For example, the more liquidity a central bank injects into the financial system, the more likely that nation's currency will drop in value against other currencies. Imports become more expensive in that nation while exports become cheaper. Other nations may take up similar policies in response. Can this result in beggar-thy-neighbor policies and a "race to the bottom"? El-Erian says yes, but “it can also work.” Here’s how. El-Erian asserts that by putting a lot of liquidity into the system and pushing up asset prices, central banks can make us all feel better and this can trigger “wealth effects” – we feel richer and therefore spend more. It can also trigger “animal spirits” – we get all excited and invest more. The hitch, El-Erian says, is that in the process, central banks may “break” something. A currency war would fall into this camp. So it’s “high-risk, high-reward and no one can tell for sure which way it’s going to tip,” he says. El-Erian says the U.S. economy can go from supported growth to genuine growth, but Congress has to first become less dysfunctional. “The key issue is for politicians to exploit the window being bought for them by central banks,” he notes. In terms of equity markets, El-Erian says investors are split into two camps. One camp believes that everything will go higher and central banks will succeed in their efforts. The other camp believes asset prices are going to come down to meet the fundamentals. El-Erian puts himself in the second camp. “We think that prices are artificially high, that maintaining them here is going to be hard as central banks become less effective, and that it’s time to book some profits and to wait for some better entry points,” he explains. He clarifies that this is not a “Lehman moment." But “prices that have gotten way ahead of what policy can deliver," he declares. . . ."

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Saturday, March 2, 2013

No exit from the Fed's madness

No way out--and no exit from the Fed's madness--

TCW.com - And All Our Yesterdays: " . . . The Fed has dutifully sat by the patient’s side for over four years. But when Mr. Bernanke originally administered his concoction of zero rates and quantitative ease, the Fed was confident that these truly extraordinary monetary actions were emergency measures from which “exit” was a year, at most two, away. The Fed had diagnosed the “patient” as suffering from a shortage of aggregate demand and concluded that the doctor needed to “manufacture” consumption so as to get the patient back on the playground. The Fed commanded short rates be zeroed out and quantitative easing initiated. To what end? According to the Fed’s essentially Keynesian logic, the negative rate environment facilitated by these policies foster an intertemporal shift away from savings and towards consumption. In so doing, consumer demand is lifted and realtime economic growth is enhanced. Additionally, the never-this-low in recorded history level of mortgage rates is intended to spur a “wealth” effect by pumping up the housing market. According to theory, if you get enough people spending and enough people feeling wealthy, the demand side of the economy will throw a party, inducing businesses to hire, leading us to a sustained prosperity. . . . So now we live one of the great economic experiments of all time. . . . we may well come to see that much of what is called “stimulus” today is merely a convenient term for redistributing wealth and resources according to the priorities of the Fed and the national government. If so, then we will find that the reconfigured economy of tomorrow will be inefficiently constructed. Perceived stability today just might be setting us all up for a sucker punch of stagflation tomorrow. And tomorrow does eventually come."

Fed Signals Possible Slowing of QE Amid Debate Over Risks - Bloomberg: "At the December meeting, Fed officials were “approximately evenly divided” between those favoring a mid-2013 end to purchases and those advocating a later date, according to minutes from the gathering. Chairman Ben S. Bernanke has pledged to buy bonds until there’s a “substantial” improvement in a labor market burdened by 7.9 percent unemployment. The minutes released yesterday didn’t indicate a discussion about when to end quantitative easing. “They’re changing the debate toward when to scale it down rather than debating the point where it suddenly ends,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “With the economy looking more solid than they feared a few months ago, financial-sector risks take on more importance.”"

SCHILLER: A history of the national debt - Washington Times: " . . . .The CBO says the current debt trajectory will shave 1.7 percent off GDP by 2022. The U.S. Senate hasn’t passed a budget in four years. Congress sidesteps fiscal responsibilities by passing continuing resolutions that provide “temporary” and “emergency” funding for Uncle Sam. Without those budget Band-Aids, the government would have to shut down, as it did on 17 occasions from 1976 to 1996. . . . The public is fed up with soaring debt and Congress‘ inability to exercise fiscal restraint. People have near-zero confidence in Congress, which spills over into their perceptions of the economy. They see runaway deficits, soaring debt and a complete lack of fiscal leadership. These perceptions restrain investment spending, deter consumer purchases, constrain bank lending and slow foreign investment. The end result is slower economic growth and persistently high unemployment. When economists such as Paul Krugman claim that the United States still can afford larger deficits and debt, they fail to understand the psychology of market participants and the consequences for market behavior. The markets are saying, “Enough is enough.”" Read more: http://www.washingtontimes.com/news/2013/feb/19/a-history-of-the-national-debt/#ixzz2LSubfDjd 

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Thursday, February 28, 2013

Jobs, factory, inflation data favor easy Fed policy

Jobs, factory, inflation data favor easy Fed policy | Reuters: "More Americans filed new claims for jobless aid last week, factory activity slowed in February and consumer prices were flat in January, supporting the argument for the Federal Reserve to maintain its very accommodative monetary policy stance. The reports come after signs of divisions at the Fed over its bond buying program aimed at stimulating the sluggish economic recovery. "If the Fed is looking for evidence to keep their foot to the floor on policy, they are still getting it," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan. Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 362,000, unwinding the bulk of the prior week's decline, the Labor Department said. It said in a second report that consumer prices were flat for a second consecutive month in January as gasoline prices fell and food costs were unchanged after several months of gains."

There's a Feeling of Instability Bubbling Up - WSJ.com: " . . . these days to win a currency war. So long as global consumer-price inflation is low, estimates of spare capacity are high and central banks are willing to "look through" short-term inflation spikes, every country has access to the chief weapon needed to fight the war—ultraloose domestic monetary policy. Indeed, the yen's previous rise partly reflects the Bank of Japan's reluctance to expand its balance sheet as much as the Fed, BOE, or the European Central Bank. At the same time, the global prohibition on competitive devaluations appears asymmetric; countries that have intervened to prevent their currencies rising, such as Switzerland, have so far escaped censure. Goldman Sachs GS -0.60% argues this de-facto global stand-off over currencies represents an unofficial Global Exchange Rate Mechanism. But if the price of avoiding currency wars is even looser monetary policy, this brings risks of a different kind. How policy makers respond to possible new asset-price bubbles will be crucial in determining whether the rest of this decade is a replay of the '70s, the Noughties or something more benign. . . ."

TCW.com - And All Our Yesterdays: "Further, if money is essentially a measure, a unit of exchange, then how can Fed money printing (credit creation) truly and sustainably create wealth? Isn’t true wealth a function of the ability of a business or employee to provide or invent a good or service that has value to another? In that event, pumping up home prices may have some perverse second-order effects. For instance, say you are a renter. The Fed’s policies are helping to drive up not just the price of homes but also of rents. A “typical” young couple has to shell out more for rent today and has a bigger lifetime “nut” to pay in the form of future mortgage payments for that home they aspire to purchase. Do these policies make the couple wealthier – or simply transfer existing wealth? Is there not a fundamental distinction between rising home prices driven by the higher wages of a growing economy versus higher prices resulting from mortgage “price fixing” courtesy of the Fed’s QE?"

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Tuesday, February 26, 2013

Bill Gross: Be very afraid of the markets

Bill Gross: Be very afraid of the markets - The Buzz - Investment and Stock Market News: "Bond guru and Pimco (PTTRX) managing director Bill Gross isn't buying into the bull market. In fact, he's warning investors to be afraid, be very afraid, of how inflation and the flood of cheap money will affect all investments. Investors should be prepared to accept "lower returns on bonds, stocks, real estate and derivative strategies," Gross wrote in his monthly letter entitled "Credit Supernova!" Championing something of a bunker mentality, Gross told investors to buy Treasuries with shorter durations and buy gold or other investments that "you can sink your teeth into." Go outside of the U.S., he says. Buy currencies from countries "with less hyberbolic credit systems" including Australia, Brazil, Mexico or Canada. The U.S. won't fit that bill. He doesn't suggest totally eschewing stocks, but says investors should look to global stocks with stable cash flows. Gross has been warning investors about the potential downsides of the Federal Reserve's bond buying strategy for months, but the tone of this month's letter was decidedly more fearful. While the letter's title obliquely references the band Oasis, Gross opted to lead his monthly missive with an ominous T.S. Eliot quote rather than his usual song lyric: "This is the way the world ends... Not with a bang but a whimper. . . . "

It’s Time to Go 'Risk Off': "Insiders Are Bearish: Corporate insiders are selling stock at the fastest clip since late July 2011, according to some reports. The S&P 500 crashed 15% in a matter of weeks soon after that point — and it took the index about seven months to claw back those losses before moving higher. Sure, insiders might just be trying to take a little bit of profit while their company stock is at multiyear highs … but it could be more than that. Valuations Are High: And whether you’re an insider or not, it’s worth looking at your own portfolio and considering how your stocks are valued vs. historical norms. The S&P 500 has a trailing 12-month price-to-earnings ratio of 17.9 as of this writing vs. 15.1 a year ago; the Nasdaq-100 has a P/E of 16.6 vs. 11.1 a year ago; the Dow Industrials have a P/E of 15.4 vs. 14.4 a year ago. These figures are high not only compared to recent valuations, but also to historical norms. . . ."

Insiders now aggressively bearish - Mark Hulbert - MarketWatch: "This is worrisome because corporate insiders — officers, directors and the largest shareholders — presumably know more about their companies’ prospects than the rest of us do. If they were confident that the shares of their companies would soon be trading markedly higher, they wouldn’t be selling them now. Yet selling they are — at an alarming pace. Consider an insider indicator calculated by the Vickers Weekly Insider Report, published by Argus Research. The indicator is a ratio of all shares that insiders have recently sold in the open market to the number that they have purchased. For the week that ended last Friday, this sell-to-buy ratio for NYSE-listed shares listed stood at 9.20-to-1. That means insiders of these companies, on average, were selling more than nine shares of their firms’ stock for every one that they were buying."

Virginia in the Vanguard - The New York Sun: " . . . This is why, when the Constitution was written, it prohibited the states from coining money or emitting paper money or making “any Thing but gold and silver Coin a Tender in Payment of Debts.” This means that Virginia can’t make its own coins, but it can make gold and silver coins legal tender within the state. More than a dozen states are exploring doing just that, spurred, at least in part, by the American Principles Project and also by the collapse in the value of the fiat dollars being issued by the Federal Reserve. It’s unclear at the moment whether the measure in Virginia will clear the state’s senate. . . . "

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Saturday, February 23, 2013

Generational Theft Needs To Be Arrested

Canada, Druckenmiller and Warsh: Generational Theft Needs to Be Arrested - WSJ.com: " . . . The Federal Reserve's policies reinforce this short-term orientation. To offset weak economic conditions, the Fed's principal policy objectives appear to be twofold: suppress interest rates and raise stock prices. As a result Congress may be missing market signals and failing to see the costs of its spending addiction in time to undertake real reforms. Ultimately, economic fundamentals—not the promises of central banks—will determine the prices of stocks and bonds. But the deeper failing is one of essential fairness. The benefits of rising stock prices accrue to those who have already amassed wealth at the expense of those who are struggling to save. And failing to deal with runaway spending will burden the country's children with higher interest rates and a debt bomb that will come due in their lifetimes. Third, too many politicians appear more eager to divide the spoils of electoral victory among their own than to increase the size of the economic pie for all. The grab-bag of special tax favors under the guise of the recent fiscal-cliff deal is only the latest example. Crony capitalism and corporate welfare aren't just expenses we cannot afford. They are an anathema to economic growth. They deny opportunities to aspiring people and companies who seek to better their lot. They ration opportunity based on things other than merit and hard work. They further ensure that poor children—who already are disadvantaged by failing schools, inadequate health care and little access to necessary resources—will never get the chance to break the cycle of generational poverty through education. . . . "

Fed Easy Credit Becomes Inside Debate Focusing on Escape - Bloomberg: " . . . . Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co.; Jim Rogers, chairman of Rogers Holdings; Wells Capital Management Inc. and Goldman Sachs Group Inc. all have voiced concern about long-term bonds. The Jan. 3 release of the minutes from the FOMC’s Dec. 11-12 meeting illustrates investors’ sensitivity, Cohen said. Central bankers discussed possibly curtailing or halting their asset purchases this year. That surprised analysts and traders, sending the Standard & Poor’s 500 Index down 0.2 percent and pushing up yields on the benchmark 10-year Treasury note0.07 percentage point that day. James Bullard, president of the Federal Reserve Bank of St. Louis, says the “communication challenge” the central bank faces with the end of QE3 is comparable to all periods of easing. . . . Even though Bernanke said Dec. 12 that the transition to economic thresholds “doesn’t change our mid-2015 expectation,” money-market-derivatives traders since have accelerated their time frame for policy tightening. Forward markets for overnight index swaps, whose rates show what traders expect the federal-funds effective rate will average over the life of the contract, signal a quarter percentage-point advance around February or March of 2015, according to data compiled by Bloomberg as of Feb. 5. In December, these traders were pricing in a rate increase about June 2015. “There is no doubt that when the Fed pulls back you will see a big shoot upward in Treasury yields,” said Karl Haeling, head of strategic-debt distribution in New York at Landesbank Baden-Wuerttemberg, one of Germany’s largest banks. “There are a lot of people who think the only reason rates are here is because the Fed put them here. Nobody wants to be the last man standing.”

The 5 biggest investor mistakes of 2013 - Mark Hulbert - MarketWatch: " . . . . Mistake #4: Paying too much attention to politics. The panelists were united that good-quality companies are able to adapt to whatever the political environment may be in Washington. Finding and investing in them should be our focus, rather than trying to predict the outcome of our inscrutable political process. As one panelist put it: “Don’t let a politician tell you what to do in your portfolio.” Mistake #5: Being a dumb trader. . . ."

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Thursday, February 21, 2013

When Bonds Went Truly Bad

No One Remembers When Bonds Went Truly Bad - Businessweek: "All this consternation and kvetching—“headline risk,” traders call it—over a comeuppance in the bond market. Makes you wonder if investors and Wall Street, with its battalions of freshly hatched MBAs, have enough of a frame of reference for when a bond bear last truly happened: in 1994. . . .Today, according to the Leuthold Group, if corresponding interest rates were to shoot up a mere point from where they are now over 12 months, a T-bond maturing in February 2031 would sustain a total hit of between 6 percent and 11 percent (your yield gets subsumed by the bond’s plunging price)."

FINRA Offers Regulatory Road Map for 2013 | BakerHostetler - JDSupra: " . . . FINRA has identified algorithmic trading, high-frequency trading abuses and alternative trading systems as areas that will be carefully monitored to protect individual investors, as well as the integrity of the markets as a whole. The purpose of increased scrutiny of these systems seems to be a fear that these automated, computer-based systems may not be adequately equipped or capable of reacting to a market event without serious market disruption. 1. Algorithmic Trading - The move toward algorithmic trading in the securities industry continues to be an area of concern for FINRA. Algorithmic trading refers to the practice of designing an algorithm that is capable of executing pre-programmed trading instructions automatically and without human involvement. The ease of use and market risk factors associated with algorithmic trading make this practice appealing to market participants. However, automated trading raises significant concerns due to the perceived lack of a human fail-safe. . . ."

Asian Currencies Tumble. Yes, This Is A Global Currency War. - Forbes: "Market participants naturally suspect that the People’s Bank of China, the central bank, was behind the surprising accumulation of greenbacks.  Traders also believe that recent dollar purchases by China’s state banks are really on behalf of the central bank. Since early December, the meddling of the People’s Bank in the currency market has been evident but not, in the words of Reuters, “overwhelming.”  Stephen Green, the well-known analyst from Standard Chartered, estimates that the intervention last quarter was “to the net tune of $34 billion.” Central bank operations do not have to be large to be effective, however.  Traders, despite strong corporate demand for the renminbi, saw the signals from Beijing and have reined themselves in."

The Dow at 14,000: not as good as gold - NYPOST.com: " . . . . if you take one share of each of the stocks in the Dow index, their combined value as measured in gold is lower than it used to be. The price in paper money may be going up, but the real value is slumping. At about 14,000, the Dow Jones Industrial Average stands at nearly twice the 7,949 at which it stood on the day in January 2009 when President Obama first took the oath of office. But value of the stocks in the index has drifted downward; a portfolio of one share of each stock is worth only 8.3 ounces of gold, down from 9.3 ounces on Jan. 20, 2009. . . . In other words, it wasn’t the price of gasoline that was going up. It was the value of the United States dollar that was going down. This is the part of the policy partnership of Barack Obama and Federal Reserve chief Ben Bernankethat no one likes to talk about. What it means is that there’s little joy on the street — Wall Street or (especially) Main Street — even in a week when the Dow Jones Industrial Average touches a historic high of 14,000. Track the Dow in terms of gold, and you see what a collapse it’s been: The index was valued at 41.3 ounces of gold as recently as 2000. . . ."

The Fed’s Worst Fear - The New York Sun: " . . . Even now, in the absence of any shred of White House fiscal responsibility, the Fed faces a cruel dilemma. It can reduce market support, let bond prices fall and suffer the unhappy consequences. Or it can keep on its present course of trying to satisfy the beast by buying up further trillions of dollars in Treasury paper. The latter is the current course preferred by Chairman Ben Bernanke and Board of Governors bureaucrats notwithstanding the worries of regional Fed presidents..That course inevitably leads to inflation. Over the last four years, the damage to the dollar has been partly meliorated by global investors fleeing weak currencies elsewhere for the relative safety of the dollar. But there has to be a limit to how long that will be true. We already are seeing signs of renewed asset inflation not unlike the run-up that occurred in the first half of last decade. Stocks and farmland are up and housing prices are recovering from their slump. The wealth illusion from asset price inflation makes it insidious. Brendan Brown, London-based economist for Mitsubishi Securities, reminds us that asset inflation is usually followed by asset deflation, and that’s no fun, as the events of 2007 and 2008 testified. More seriously, asset inflation often presages a general rise in the prices of goods and services. Inflation can ultimately destroy the bond market, as it did in 1960s Britain when the socialist Labour Party was trying to save its sinking boat. No one wants to commit to an investment that might be worthless in 30 or even 10 years. Yet, through history, governments have inflated away their debts by cheapening the currency. That process is well underway in the Fed’s abdication to irresponsible government. If Fed policies continue, another huge tax, inflation, will weigh down the American people. The politicians will try to escape public censure, as they always do, by blaming it all on “price gouging” by producers, retailers and landlords. A substantial cohort of the press will buy into that phony rationale and spread it as gospel. The Fed’s dilemma is in fact everyone’s dilemma, given the universality of the dollar. . . . "

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Tuesday, February 19, 2013

Krugman: expansionary monetary policy, with currency depreciation as a byproduct

Feb. 15 (Bloomberg) -- Paul Krugman, Princeton University Professor of Economics, compares the United States economy to Japan in the 1990's. He speaks on Bloomberg Television's "Bloomberg Surveillance."


"what Japan, the US, and the UK are doing is in fact trying to pursue expansionary monetary policy, with currency depreciation as a byproduct"--Paul Krugman, NYTimes.com 

"At this point, then, we have private demand still severely depressed by the aftermath of the housing-and-debt bubble, while government spending is barely higher than it was at the height of that bubble. Of course the economy is still weak"--Paul Krugman, NYTimes.com 

"for those who still think that even more austerity is somehow the road to recovery, the question has to be, what category of spending, exactly, do you expect to rise? Business investment in the face of slack demand? Consumer spending when debt levels are still high and wealth has been savaged by the housing bust? What?"--Paul Krugman, NYTimes.com

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Saturday, February 16, 2013

Goldman Sachs braces for bond market blow up

Goldman Sachs braces for bond market blow up - The Term Sheet: Fortune's deals blogTerm Sheet: "Cohn told Bloomberg, "At some point, interest rates will go higher again, and all of the money that has piled into fixed income over the past three years, some of it will come out." Cohn, perhaps tellingly, noted that a bond crash would be "interesting" for Goldman. In December, Goldman's CEO Lloyd Blankfein said at a conference sponsored by New York Times that the risk of a bond market crash was growing and that investors appeared unprepared. What's more, Blankfein said Goldman was advising clients to increase their borrowing to take advantage of low rates. MORE: The old Goldman Sachs is back Goldman (GS) is taking its own advice. This month alone, Goldman has borrowed $8 billion from the bond market, including a three-part $6 billion debt offering, which was the firm's largest ever. Some of that is refinancing. But the borrowing is up from $5.2 billion in January a year ago. And Goldman has been swapping out some of its 3-year bonds for debt that it won't have to pay back until 2023."

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Thursday, February 14, 2013

John Taylor: Fed Policy Is a Drag on the Economy

John Taylor: Fed Policy Is a Drag on the Economy - WSJ.com: "Research presented at the annual meeting of the American Economic Association this month by Eric Swanson and John Williams of the San Francisco Fed is consistent with this view of credit markets. It shows that during periods of forward guidance, the long-term interest rate does not adjust to events that shift supply or demand as it does in normal periods. In addition, while credit to corporate businesses is up 12% over the past two years, credit has declined to noncorporate businesses where the low rate is more likely to be a disincentive for lenders. Peter Fisher, head of fixed income at the global investment-management firm BlackRock and a former Fed and Treasury official, wrote in September: "[A]s they approach zero, lower rates . . . run the significant risk of perversely discouraging the lending and investment we need." Ironically, the harmful effects of these interventions lead policy makers to expand them, which further increases their harmful effects. No one should want a continuation of this vicious circle. If the economy surprises a bit on the upside this year, we can hope that it results in fewer interventions by the Fed—perhaps a halt to asset purchases. This will bolster growth and help put the economy on a sustained recovery path."

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Tuesday, February 12, 2013

Shale Gas Will Fuel US Manufacturing Boom

Shale Gas Will Fuel a U.S. Manufacturing Boom | MIT Technology Review: "Now the ability to access natural gas trapped in shale rock formations, using technologies such as hydraulic fracturing and horizontal drilling, has lowered American prices to a fraction of those in other countries (see “King Natural Gas”). Over the last 18 months, these low prices have prompted plans for the construction of new chemical plants to produce ethylene, ammonia for fertilizer, and diesel fuels. Dow Chemical, for example, plans to spend $4 billion to expand its U.S. chemicals production, including a new plant in Freeport, Texas, that’s due to open in 2017. The plant will make ethylene from the ethane found in many sources of natural gas. (The last such plant to be built in the U.S. was completed in 2001.)"

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Saturday, February 9, 2013

Dr Doom: Clouds Ahead

The Economic Fundamentals of 2013 by Nouriel Roubini - Project Syndicate: "several risks lie ahead. First, America’s mini-deal on taxes has not steered it fully away from the fiscal cliff. Sooner or later, another ugly fight will take place on the debt ceiling, the delayed sequester of spending, and a congressional “continuing spending resolution” (an agreement to allow the government to continue functioning in the absence of an appropriations law). Markets may become spooked by another fiscal cliffhanger. And even the current mini-deal implies a significant amount of drag – about 1.4% of GDP – on an economy that has grown at barely a 2% rate over the last few quarters. CommentsSecond, while the ECB’s actions have reduced tail risks in the eurozone – a Greek exit and/or loss of market access for Italy and Spain – the monetary union’s fundamental problems have not been resolved. Together with political uncertainty, they will re-emerge with full force in the second half of the year. . . "

U.S. New-Home Sales Drop Blemishes Best Year Since 2009 - Bloomberg: "Purchases of new U.S. homes unexpectedly decreased in December, a temporary blemish as the industry wrapped up its best year since 2009 to emerge as a bright spot for the economy. The 7.3 percent drop in December sales to a 369,000 annual pace followed the prior month’s 398,000 rate that was faster than previously estimated, Commerce Department figures showed today in Washington. Builders sold 367,000 homes in 2012, the most in three years and the first annual increase in seven."

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Thursday, February 7, 2013

Expansionary Policy

Grand Mal Economics by J. Bradford DeLong - Project Syndicate: In the worst case, have the government step in, borrow money, and buy stuff, thereby rebalancing the economy as the private sector deleverages. CommentsView/Create comment on this paragraphThere are many subtleties in how governments and central banks should attempt to accomplish these steps. And, indeed, the North Atlantic region’s governments and central banks have tried to some degree. But it is clear that they have not tried enough: the “stop” signal of unanchored inflation expectations, accelerating price growth, and spiking long-term interest rates – all of which tell us that we have reached the structural and expectational limits of expansionary policy – has not yet been flashed. CommentsView/Create comment on this paragraphSo we remain far short of full employment for the third reason. The issue is not that governments and central banks cannot restore employment, or do not know how; it is that governments and central banks will not take expansionary policy steps on a large enough scale to restore full employment rapidly. Read more at http://www.project-syndicate.org/commentary/the-unreached-limits-of-expansionary-economic-policy-by-j--bradford-delong#FgxGbUloIrTPdklh.99

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Tuesday, February 5, 2013

Feds bungled foreclosure crisis

9 ways feds bungled foreclosure crisis- MSN Money: "1. No one's getting much. Only $3.3 billion is actually going to people who have been in foreclosure. The government tried unsuccessfully to review a small portion of 3.8 million foreclosed homes, The New York Times reports. But no one knows how many of those borrowers were harmed, so all 3.8 million will get the money regardless if they were wronged. That comes to $868 per home, writes columnist Joe Nocera. 2. Skewered by fees. The government got banks to hire expensive consultants to review every foreclosure from 2009 and 2010, Nocera reports. It was so slow and tedious that the consultant fees, sometimes coming in at $250 an hour, eventually topped $1 billion. "The feds and the banks finally threw up their hands," Nocera writes. "The settlement made the whole thing go away.". . . . Some banks spent much more on consultants than they did on actually helping those homeowners they abused. A now-bankrupt mortgage servicer called ResCap spent $250 million to review its loans. It will probably only pay $35 million to $60 million to homeowners who were harmed, reports American Banker. "This is Kafkaesque," an industry source told American Banker. "The reviews don't provide any closure [to borrowers], and their cost is going to be orders of magnitude beyond what banks pay out.""

RealClearMarkets - Uncle Sam's 'F' Rated Bonds: "That interest rate risk makes long-term U.S. Treasury securities lousy investments -- they have no place in most retirement portfolios. For rating agencies, Washington's monopoly on printing dollars makes it difficult assigning a conventional rating between AAA and D on its bonds. Those can't default but investors' capital is still at risk. Perhaps a special grade: "F" -- flee now before you get stuck."

Techno-pessimism: When will the good times return? | The Economist: " . . . As of 2005, however, something seemed to go wrong. Productivity in manufacturing slipped a bit and dropped substantially for the economy as a whole. The 2000s were also a trying period in terms of employment and wage growth. This has led some thinkers, including Mr Gordon, to conclude that the boost from IT has run its course. . . . The unknown is the unknown. So while I'm optimistic about the prospects for innovation and economic growth, it's worth acknowledging that there's no telling how it all will end up until well after the fact.

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Saturday, February 2, 2013

Managing Risk and Minimizing Losses

The Dangerous Fallacy in JPMorgan’s ‘Whale’ Report: "While the JPMorgan Chase report said what investors and regulators needed to hear – it provided a detailed analysis of what went on and outlined strategies to address it – the document would have been more convincing had its authors simply acknowledged that ultimately, not every risk can be anticipated and removed. Perhaps they know better – after all, they’re in the business of risk transfer – or perhaps it isn’t politically acceptable to say that, just as one day we’ll die, one day every organization will find that, despite careful planning, something goes awry. . . . It’s called career risk, and in this case, it’s related to compensation. Managers needed to do a better job of telling the team that they would still be “properly compensated” for safeguarding the bank’s well being and minimizing losses, even if they negatively affected the company’s overall profits. The traders need to understand that, in many circumstances, managing risk and minimizing losses can be of as much value to the firm as capturing profits."

Thursday, January 31, 2013

Euro Currency Crisis Fades, Growth Worsens

As Europe’s Currency Crisis Fades, Growth Worsens - Businessweek: "But the indicators on Europe’s real economy are, if anything, worse than ever. Factory and services output contracted in December for a 17th consecutive month, and unemployment is at 11.8 percent and rising in many countries. The ECB lowered its growth forecast last month and now predicts the euro-zone economy will shrink 0.3 percent this year. "

Punishing austerity or votes? Why the euro zone bond rally cannot last - The Globe and Mail: "Bond yields are still falling, as if the euro crisis has been magically cured. The euro is soaring against the dollar, and an upbeat Mr. Draghi this week talked about the coming “normalization” of financial markets, even if he predicted only a weak economic recovery in the second half of this year. But guess what? The recession isn’t over and the euro is on a tear, reaching almost $1.33 (U.S.) on Friday. A high euro will make European exports more expensive, damaging the touted economic recovery. Euro zone unemployment is at a record high and climbing. Youth unemployment ranges from 30 per cent to more than 50 per cent on the euro zone’s Mediterranean frontier. Budget deficits will remain intact as a strong recovery proves elusive; a triple dip recession is not out of the question. All of this means that austerity will not go away, in spite of the lower sovereign borrowing costs. Remember that the ECB’s bond-buying guarantee is conditional on austerity. The problem is that the spending cutbacks and tax hikes are making already weak economies even weaker."

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Tuesday, January 29, 2013

Mary Jo White and the revolving door

The Revolving Door in Washington--now at the SEC:

Cop or suspect? - The Economist on Mary Jo White as head of the SEC
" . . . The appointment is not without controversy. Ms White has benefited from the revolving door between public service and private practice. In the aftermath of the crisis, financial firms sought the assistance of former regulators with strong ties to the government. In a scathing article on Bloomberg's website, Jonathan Weil notes that Ms White participated in the defence of many people and institutions at the heart of the financial collapse. In October 2008 she was cited in a critical report by the SEC’s inspector general for receiving “relevant information” that was not publicly available. Some will ask whether she is truly a poacher turned gamekeeper or simply setting herself up for another lucrative turn through the revolving door. Mr Obama, for one, is convinced he is getting the "tough-as-nails prosecutor". By putting Ms White at the SEC, he has suggested that the agency’s priority is enforcement. But a bigger challenge may come from the sprawling Dodd-Frank legislation, and its many gaps and contradictions. Much of the next chairman’s time should be devoted to rethinking how America’s capital markets are structured, and deciding how that vision will be translated into the numerous rules the SEC is required to write under Dodd-Frank’s sloppy mandates. . . ." 

Bottom Line--if you've got "connections," you've got nothing to worry about. The revolving door keeps revolving.

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Saturday, January 26, 2013

Kyle Bass: Japan Debt Time Bomb Ticking

Japan’s Debt Time Bomb Is Ticking: Kyle Bass: "He predicts the bomb will detonate within two years. "All of the components of the equation are in place for this to all of a sudden go off," he said. "When it turns, it will turn at once. The yen will be its strongest right before it breaks, their interest rates will be the lowest right before they break." Bass advised anyone with yen to buy Western assets to protect themselves. He pointed to the $20 billion Softbank acquisition of Sprint and advertising agency Dentsu's purchase of Aegis in the UK as examples of Japanese companies buying Western assets."

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Thursday, January 24, 2013

Why Euro Zone Crisis May Get Worse

Why Euro Zone Crisis May Get Worse This Year: "Jean-Dominique Giuliani, who heads the Robert Schuman Foundation, a pro-European think tank in Paris, says difficult reforms must continue because the crisis shows no sign of going away. "Changes will now be constant and will demand a great deal of populations, overturn societies, surprise political leaders and unsettle experts," he said in a commentary on his group's web site. Charles Robertson, chief economist at Renaissance Capital in London, is among those wondering how much more voters are prepared to sacrifice. He expects Greece to quit the euro this year and says Spain might follow by the end of 2014. Spain has already endured one year of unemployment above 25 percent but will probably have to manage three more in order to meet the financial targets set by its international creditors. "No economy (as far as we are aware) has ever sustained this unemployment rate and maintained a peg to a fixed exchange rate,"Robertson said in a report. Most damaging of all, he said, was the absence of hope: "For households, wages are still likely to fall to boost competitiveness.Households are deleveraging and defaulting, not borrowing more to fuel consumption.""

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Tuesday, January 22, 2013

US has been let down by its leadership

US has been let down by its leadership - FT.com: " . . . Neither Democrats nor Republicans recognise that maintaining a basic welfare state, which is right and necessary in our age of globalisation, rapid technological change and demographic pressure, implies higher taxes for the middle class as well as for the rich. A deal that extends unsustainable tax cuts for 98 per cent of Americans is therefore a pyrrhic victory for Mr Obama. For now, he is being helped by the quiescent financial markets. It will probably take years for the US to confront the reality of its fiscal position and raise revenues to a level sufficient to fund a reformed – but not gutted – welfare state. Large fiscal deficits will remain the norm for the next few years, at least so long as the bond market remains quiet, as I believe it will. Bond market “vigilantes” have no appetite for destruction. Why should they? Growth is low and inflation lower; the US still has the global reserve currency; US Treasuries remain haven assets; interest rates are at zero; the US Federal Reserve is committed to QE; and China and other emerging economies will keep accruing US dollars to resist appreciations in their own currencies. All this guarantees the cheap financing of the US deficit for years to come. But eventually, the vigilantes will wake up. In short, the “mini deal” on the fiscal cliff dodged all the important questions. By not including spending cuts in the deal, the Democrats have emboldened Republicans who are determined to slash taxes but lack a plan to pay for it. It is again up to Washington’s policy makers to fix the problem before the market does it for them. . .  ."

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Saturday, January 19, 2013

Car sales crater in austerity-battered euro zone

Car sales crater in austerity-battered euro zone - The Globe and Mail
Auto makers are facing a sustained slump in the European car market as the euro zone debt crisisand government austerity measures sap consumer demand .

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Thursday, January 17, 2013

Economy is not the real beneficiary of fiscal cliff deal

Economy isn't the real beneficiary of fiscal cliff deal - The Term Sheet: Fortune's deals blogTerm Sheet: "For many years now, the rich have done very well in America while the middle class has stagnated and a growing number of poor Americans have fallen through the country's stretched safety nets. Even in the aftermath of a global financial crisis triggered by irresponsible risk taking and excessive concessions to powerful lobbies, the bulk of state support has gone to the better off segments of society. The fiscal cliff compromise is the first meaningful attempt to redress this multi-year phenomenon. By increasing tax rates on better off segments and by maintaining redistribution mechanisms, an effort is being made to stop years of steady deterioration in income and wealth inequalities. Yet the benefits will only prove durable and meaningful if the nation's overall economic context is addressed in a more comprehensive manner that improves economic growth and creates jobs. For that, we need a much more visionary, responsible and functional Congress. --Mohamed El-Erian is the CEO and co-chief investment officer of PIMCO. President Obama recently appointed El-Erian to head the U.S. global development council."

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Wednesday, January 16, 2013

Fiscal Cliff, Debt Limit, Fiscal Crisis, Debt Crisis . . .

Retirees face their own 'fiscal cliff' | Zanesville Times Recorder | zanesvilletimesrecorder.com: "Three out of four Americans near 65 have less than $30,000 in retirement savings. Inadequate savings is just part of a troublesome litany. Teresa Ghilarducci, an economist at the New School for Social Research, calculates that half of retirees are destined to live near poverty and will have to live on a food budget of about $5 per day. The values of houses — often the big asset that anchors a retirement strategy — dropped, on average, by 17 percent from 2007 to 2010. Wages have stagnated, too. Only about half of American adults have any retirement savings at all."

White House delays 2014 budget after "fiscal cliff" standoff
WASHINGTON (Reuters) - The White House will delay submission of its budget proposal to Congress for fiscal year 2014 because of the protracted fight over the "fiscal cliff," according to an official in President Barack Obama's budget office. Jeffrey ...

SF Fed chief says 'fiscal cliff' still at top of list of concerns
San Jose Mercury News
HALF MOON BAY -- Worries about whether and how U.S. lawmakers will take the hard steps needed to put the nation on a sustainable fiscal path are top of mind as U.S. central bankers weigh monetary policy, a top Federal Reserve official said on Monday.

Bernanke: 'Not Out of the Woods' Despite Cliff Deal
Although the "fiscal cliff" deal made "some progress" in resolving the nation's debt problem, "we're not out of the woods yet," Federal Reserve Chairman Ben Bernanke said Monday. "We are approaching a number of other fiscal critical watersheds ...


Fiscal Cliff Deal Extends Wasteful Farm Subsidies
Congress recently passed the so-called American Taxpayer Relief Act to avert the fiscal cliff.[1] In classic Washington style, lawmakers managed to squeeze in several unrelated provisions, including a nine-month, partial extension of the 2008 farm bill.

Sequester of US defense next fiscal crisis to avert
Daytona Beach News-Journal
Sequester of U.S. defense next fiscal crisis to avert. OUR VIEW. Published: Monday, January 14, 2013 at 5:30 a.m.. Last Modified: Friday, January 11, 2013 at 6:30 p.m.. The fiscal-cliff mess that Congress and the White House faced on New Year's Day was ...

Common Ground: Fiscal crisis deals stifle reform efforts on entitlements, debt
Baxter Bulletin
Common Ground: Fiscal crisis deals stifle reform efforts on entitlements, debt. Cal Thomas is a conservative columnist. Bob Beckel is a liberal Democratic strategist.- 10:19 pm. Charles Krauthammer: Meaning of Chuck Hagel. 'This is my last election ...

Obama: No haggling on debt ceiling, can use executive action to tighten gun laws
Fox News
President Obama on Monday warned congressional Republicans again that he will not negotiate over the debt ceiling, saying Washington must increase the limit to pay its bills and that such brinksmanship would be “absurd” and “irresponsible.” “The issue ...

Bernanke urges Congress to raise the debt limit
Los Angeles Times
WASHINGTON -- Federal Reserve Chairman Ben S. Bernanke on Monday warned Congress that it needed to raise the debt limit so the U.S. could pay its bills and not face default, which he said would be “very, very costly to our economy.” Speaking just a few ...

Obama: No negotiations with GOP over debt ceiling
Washington Post
President Obama vowed Monday that he would not negotiate with Republicans over the federal debt ceiling, warning that Social Security checks would be delayed and the nation could enter a new recession if Republicans do not agree to raise the limit on ...

Washington Post

Geithner Says Debt Limit Steps May Run Out by Mid-February
U.S. Treasury Secretary Timothy F. Geithner said so-called extraordinary measures he's taking to avoid breaching the debt ceiling would work only until mid- February to early March and warned that failure by Congress to raise the limit could “impose ...

Dems hold a trump card in debt limit showdown
Washington Post (blog)
Some Republicans seem to believe they have a clever endgame in the debt ceilingfight: The House GOP passes a bill that includes a debt limit hike and deep cuts to entitlements, and then goes home, challenging Senate Dems and the White House not to ...

Obama Warns Republicans on Debt Limit
Wall Street Journal
WASHINGTON—The next phase in the bitter, two-year-long battle between the White House and congressional Republicans began in earnest Monday, with President Barack Obama and GOP leaders digging in over spending and the debt limit. Mr. Obama ...

Wall Street Journal

History lesson: Why did Congress create a national debt limit?
Washington Post (blog)
(Jay Mallin/Bloomberg). Now that the Treasury Department has nixed the odd idea of issuing a platinum coin to get around the federal debt limit, Congress once again will be forced to decide whether to raise the debt limit. When this issue last loomed ...

Obama Warns Of Dangerous Consequences If Debt Limit Isn't Raised
Obama Warns Of Dangerous Consequences If Debt Limit Isn't Raised. by Ari Shapiro. January 14, 2013 3:00 PM. Audio for this story from All Things Considered will be available at approximately 7:00 p.m. ET. January 14, 2013. President Obama gave the last ...

Secondary Sources: Debt Ceiling Game Theory, China and Inflation, 2013 ...
Wall Street Journal (blog)
–Debt Ceiling Game Theory: Mike Konczal examines the game theory behind the post-platinum coin debt ceiling issue. “The administration decided against negotiating with the GOP over potential terms for raising the debt ceiling, even though they could ...

Obama: US debt crisis looms
Bangkok Post
WASHINGTON - President Barack Obama warned of a new economiccrisis Monday and said global stock markets would go "haywire" unless Republicans in Congress agree to raise the US sovereign debt ceiling. "To even entertain the idea of this happening ...

Bangkok Post

MassMutual takes on student loan debt crisis
SPRINGFIELD, MA: MassMutual Insurance has launched a Facebook campaign to help Millennials manage student loan debt. The “Down with Debt” initiative, which will run through February 14, is encouraging college graduates and young professionals to ...

Who'll get paid during a debt crisis?
Wilkes Barre Times-Leader
WASHINGTON — In the summer of 2011, when a debt crisis like the current one loomed, President Barack Obama warned Republicans that older Americans might not get their Social Security checks unless there was a deal to raise the nation's borrowing...

Many ideas but little agreement on solving debt crisis
WASHINGTON — Republican Sen. Marco Rubio wants the federal government to save money by freezing discretionary spending and reforming entitlement programs such as Social Security. Democratic Sen. Bill Nelson proposes ending subsidies to oil ...

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