TOP STORIES:
Puerto Rico moves closer to
default - (www.cnbc.com) Creditors to Puerto Rico are meeting in New
York on Thursday with lawyers and debt restructuring specialists as the
territory appears increasingly likely to default on its $70 billion in public
sector debt and an additional $40 billion of unfunded pension liabilities,
these specialists say. A possible suspension on payment of the debt comes
despite the progress Puerto Rico's Gov. Alejandro Garcia Padilla has made in
raising taxes and reducing the territory's deficit. Any such decision partly
reflects legal complications arising under Puerto Rico's ambivalent status,
which today makes a Chapter 9 filing for bankruptcy protection for local
governments, such as the Detroit municipal filing last July, impossible. It
also reflects the maths of a debt service burden that requires paying between
$3.4 billion and $3.8 billion each year for the next four years. As doubts grow
about the ability of the commonwealth to service that debt, the cost of doing
so will inevitably rise.
Intel
shelves cutting-edge Arizona chip factory - (www.reuters.com) Intel Corp (INTC.O), hit by slumping personal computer
sales, has put off opening a major chip factory that President Barack Obama once held up as an
example of U.S. manufacturing potential. The "Fab 42" facility built
in Chandler, Arizona, originally slated as a $5 billion project that in late
2013 would start producing Intel's most advanced chips, will remain closed for
the foreseeable future while other factories at the same site are upgraded,
said Intel spokesman Chuck Mulloy. Intel's decision not to open the chip plant
was first reported by the Arizona Republic on Tuesday. "The new construction is going to be left
vacant for now and it will be targeted at future technologies," Mulloy
told Reuters.
A
serious emerging-markets selloff is underway - (www.marketwatch.com) Much has been said about the weak January start
of U.S. equities, but this pales in comparison with what is going on in
emerging markets, which have fallen off a cliff. When I wrote this slightly more strategic piece on the
situation in emerging markets two days before the infamous mini “taper,” I did
not mean that the Earth would open immediately, and the whole asset class would
fall into the crack. Yet, this is precisely what has happened in the three
weeks since. On both a relative and absolute basis against
the S&P 500, emerging markets have started a new leg lower that appears to
be accelerating. The surprisingly weak U.S. December payrolls number has helped
some in the sense that it suggests less tapering and a weaker dollar for the
time being, which is supportive of dollar-indebted emerging markets. But if the
December employment report was just weather-related, the same
stronger-dollar/weak-commodity markets pathology would play out, pulling
emerging markets lower.
Christie
Bridge Jam Inquiry to Probe Billion-Dollar Projects - (www.bloomberg.com) As two New Jersey legislative committees begin
probes today of who ordered lanes closed at the George Washington Bridge and
why, they’ll examine whether the resulting traffic jams had anything to do with
a pair of high-rise developments just blocks away in Fort Lee. The closures
ordered by allies of Governor Chris
Christie from Sept. 9 to 12 brought traffic to a standstill in
Fort Lee, at the New Jersey end of the bridge to New York. Last week, Christie,
a 51-year-old Republican, fired a top aide and jettisoned his campaign manager.
Fort Lee Mayor Mark Sokolich, a Democrat, questioned whether the tie-ups were
payback for his failure to support Christie’s re-election.
Detroit's Gonna
Drive a Corvette Over a Cliff - (www.bloomberg.com)
This departure from
fundamentals is troubling, considering that the good times won’t last forever.
After all, the major breakthrough underlying the luxury car gold rush isn’t
some new seat warming technology or the all-electric Tesla Model S, but
financial innovation. Auto loans have surpassed credit cards as the
second-largest consumer debt category, and with the mortgage market remaining
weak, banks and investors are flocking to auto-loan-backed securities. As a
result, auto-loan terms are getting longer, lending standards are declining and
the subprime market is burgeoning. At least half of all recorded sales of
popular luxury models such as the BMW 3 Series are in fact leases. With wages and employment
stagnating even as easy credit fuels luxury car sales, it’s clear that the
profits fueling the auto industry’s high times are built on a tenuous
foundation. The car business has long been highly cyclical, to use the
economist’s euphemism for downright bipolar, either generating huge profits or
epic losses.
[Fed
Bank of Philadelphia, Plosser] Perspectives on the Economy and Monetary Policy
- (www.phil.frb.org)
[Fed Bank of Dallas, Fisher] Beer Goggles, Monetary Camels, the Eye of the Needle and the First Law of Holes - (www.dallasfed.org)
[Fed Bank of Dallas, Fisher] Beer Goggles, Monetary Camels, the Eye of the Needle and the First Law of Holes - (www.dallasfed.org)
Cisco
Annual Security Report Documents Unprecedented Growth of Advanced Attacks and
Malicious Traffic - (www.online.wsj.com)
Severe Smog in North China Prompts Warnings to Stay Inside - (www.bloomberg.com)
Severe Smog in North China Prompts Warnings to Stay Inside - (www.bloomberg.com)
Europe
Car Sales Surge Most in Four Years on Lower Prices - (www.bloomberg.com)
U.K. Home-Price Index Near 2002 High as Carney Sees Strength - (www.bloomberg.com)
U.K. Home-Price Index Near 2002 High as Carney Sees Strength - (www.bloomberg.com)
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