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Chart: What’s the real
unemployment rate? - (www.cnbc.com) The
U.S. Labor Department said Friday that the unemployment rate fell to 6.6
percent in January—but does that rate tell the real story? A number of
economists look past the "main" unemployment rate to a different
figure the Bureau of Labor Statistics calls "U-6," which it defines
as "total unemployed, plus all marginally attached workers plus total
employed part time for economic reasons, as a percent of all civilian labor
force plus all marginally attached workers." In other words, the
unemployed, the underemployed and the discouraged — a rate that still remains
high.
Robber gangs terrorize
Colorado pot shops - (www.cnbc.com) One
thief, posing as a delivery man, pulled a can of bear mace on employees and
ransacked their marijuana shop, fleeing in a defensive cloud of
"ultra-pepper" spray. Another opened the wall of a dispensary with an
ax and attacked the store's safe with a circular saw. Still another stuck to
the basics. He kicked in the front door and pointed his gun at the counterman.
An accomplice kicked in the back door and filled a duffel bag with more than
$10,000 worth of high-quality cannabis. For weeks now, the Mile High state has
allowed the sale of recreational pot to adults, and so far the Rockies still
stand. But crimes like the ones above, all of which occurred in Colorado in the
last six months, have produced an acid-drip of anxiety in the industry,
highlighting the dangers faced by those hoping to drag America's most popular
illegal drug into the light. Because marijuana remains banned by Congress,
banks and security firms deny services to most dispensaries. That leaves them
cash-based and vulnerable, a magnet for criminals who like the idea of
unguarded counting rooms and shelves lined with lucrative horticulture. "Everyone
in the industry is having nightmares," says Michael Elliot, executive
director of the Marijuana Industry Group, a powerful young lobby in Colorado.
"You hit a 7-Eleven, you'll get 20 bucks. You hit a dispensary, you'll get
$300,000 on a good day," adds Mitch Morrissey, District Attorney for
Denver. "It's only a matter of time before someone gets shot."
"F**k
The EU" - US State Department Leaked Recording on EU Unrest Fuels
Accusations of Meddling - (www.zerohedge.com) A leaked recording of a telephone conversation allegedly between US
assistant secretary of state Victoria Nuland and the US envoy to the Ukraine,
Geoffrey Pyatt discussing who should be in Ukraine's next government has, according to The FT, threatened to fuel
east-west tensions over the troubled nation's future. In apparent frustration
with the EU – which has failed to join the US in threatening sanctions
against Ukraine’s leaders if they violently crush the protests – the voice
resembling Ms Nuland at one point exclaims "Fuck the EU". As the
two US diplomats decide whether "Klitsch" or "Yats" should
be 'in' or 'out', listeners will be reminded (uncomfortably) that the governments
of Ukraine and Russia previously alleged that the protests are being funded and
orchestrated by the US. The authenticity of the recording has not been
confirmed (though comparisons to Nuland's recent media appearances provide some
confidence) - the FT reported that the US embassy in Kiev declined to comment,
which is a tacit admission: if the clip was a fake, the US would immediately
make it clear.
Writeoffs
for Mortgage Debtors, Then the Tax Bill - (www.cnbc.com) Come
tax time, JPMorgan Chase will be able to write off the $1.5
billion in debt relief it must give homeowners to satisfy the terms of a recent
settlement. But the homeowners who receive the help will have to treat it as
taxable income, resulting in whopping tax bills for many families who have just
lost their homes or only narrowly managed to keep them. They are not alone. A
tax exemption for mortgage debt forgiveness, put in place when the economy
began to falter in 2007, was allowed to expire on Dec. 31, leaving hundreds of
thousands of struggling homeowners in financial limbo even as the Obama
administration has tried to encourage such debt write-downs. Congress routinely
allows tax breaks to expire and then reinstates them, usually retroactively, as
it did last year. But the stakes are high for families dealing with large
declines in their home values, and reinstatement of the tax breaks is more
uncertain because of a movement in Congress to broadly overhaul the tax code,
which, despite its long-shot prospects in an election year, could end up eclipsing
smaller tax issues.
The
housing recovery is a bank-promoted pump-and-dump scheme
- (
www.ochousingnews.com)
Lenders
engage in a pump-and-dump scheme to recover more on their bad loans and REO.
Future buyers must pay bubble-era peak prices and endure a much higher cost of
ownership, and they risk submerging beneath their mortgages if prices turn
south again. Lenders manipulate market supply to create market excitement and
momentum so they can resolve bad loans and sell REO at higher prices in a
massive pump-and-dump scheme.
Pump-and-dump schemes usually involve thinly traded penny stocks, but the same
principal applies to any asset class where the holder of an asset manipulates
the market to later sell at a higher price. When its done with penny stocks,
the Securities and Exchange Commission cracks down on scammers, but when its
done by the too-big-to-fail banks with housing, lenders are aided by government
officials and the federal reserve, the SEC looks the other way, existing
homeowners don’t complain, and new buyers get screwed with higher prices and
the risk of another downturn.
Gangster
Bankers: Too Big to Jail - Matt Taibbi - (www.rollingstones.com) - That
nobody from the bank went to jail or paid a dollar in individual fines is nothing
new in this era of financial crisis. What is different about this settlement is
that the Justice Department, for the first time, admitted why it decided to go
soft on this particular kind of criminal. It was worried that anything more
than a wrist slap for HSBC might undermine the world economy. "Had the
U.S. authorities decided to press criminal charges," said Assistant
Attorney General Lanny Breuer at a press conference to announce the settlement,
"HSBC would almost certainly have lost its banking license in the U.S.,
the future of the institution would have been under threat and the entire
banking system would have been destabilized.
Six
reasons the White House's Obamacare defense stinks - (www.washingtonpost.com) Obamacare
was sold as a means of promoting job mobility, delinking insurance from work.
Now the White House says it is delinking workers from work... All this leads me
to believe that the White House, as it has done with each rotten bit of news
and instance of Obamacare's unworkability, is saying whatever it needs just to
get through a few news cycles. Because it will not admit any design flaws in
the fundamental structure of the bill, it must resort to silly and
self-contradictory talking points -- or simply misrepresent facts, as the
president did when he first claimed you could keep your insurance plan and
later denied he said you could keep your insurance plan.
Emerging
markets risk repeating eurozone blunder of synchronised tightening - (www.telegraph.co.uk) Where have seen this screenplay before? A string
of countries tighten policy at the same time – some drastically – in order to
prevent capital flight and show investors how tough they can be. Turkey, South
Africa, and India all raised rates last week. Brazil and Indonesia did so
before. Chile, Peru, Hungary, and others need to loosen but dare not do so.
Russia is spending $2bn a week in FX reserves propping up the rouble,
automatically tightening its internal credit conditions in the process. The
tougher they are, the more praise they win from emerging market analysts. This
from Bartosz Pawlowski from BNP Paribas: Much of the media (and not only on the
financial pages) seems to be vying to produce the most bearish story on
emerging markets. Arguments against owning anything in emerging markets are
being thrown around carelessly and hardly anyone is reporting the other side of
the story." We think that policy responses in countries such as Turkey,
South Africa, India and even Brazil should be sufficient to show that central
banks ‘mean business’ and that if there is a need to do more, they will
deliver.
Puerto
Rico eyes new vehicle to help sell bonds -sources - (www.reuters.com) Puerto
Rico is teeing up sizeable debt deals that may include securities from an
untested borrowing agency, financial industry sources said, a move that could
take on new urgency after Standard & Poor's cut the island's credit rating
to junk. The deals, which may total as much as an estimated $2 billion, are
seen by analysts and many investors as vital to ensuring the big borrower has
adequate financial liquidity to pay its bills and debts. Government officials,
courting potential investors wary of possible financial engineering, aim to
position the newly created Municipal Financing Corp as a distinct entity among
the commonwealth's stable of municipal bond issuers, even though it will tap
sales-tax revenues as does the island's mainstay, COFINA.
GPIF’s
$709 Billion Bonds a Lost Opportunity, Utsumi Says - (www.bloomberg.com) Japan’s government pension fund is in “extreme
danger” from investing mostly in local bonds with yields depressed by
central-bank buying, said Makoto Utsumi, who helped shape the world’s largest
retirement savings pool. Yields are abnormally low due to the Bank of Japan’s
asset purchase program, said Utsumi, a member of an advisory panel on the 2006
establishment of the Government Pension Investment Fund who is now president of
debt-rating firm Japan Credit Rating Agency Ltd. GPIF, which held 58 percent of
its 124 trillion yen ($1.2 trillion) portfolio in domestic bonds as of Sept.
30, will lose out on the chance for better returns by keeping them until
redemption, he said.
Contagion
Rejected as Biggest Bond Buyers Double Down on Junk - (www.bloomberg.com) Michael
Buchanan knew
exactly what to do as markets were rocked in recent weeks on concern turmoil in
developing nations from Argentina to China andTurkey would cause the global economic recovery
to derail: buy junk bonds. “A real dramatic freefall is unlikely in our
opinion,” Buchanan, who oversees $127 billion of credit investments at Western
Asset Management Co. in Pasadena,California, said in a telephone interview yesterday. “We
were buyers on days of weakness over the past couple weeks.” Money managers
from Western Asset to AllianceBernstein Holding LP say they are uncowed by the
selloff in emerging
markets and
stocks, betting that the global economy is strong enough to withstand such
shocks as central banks keep filling the world with cheap cash. Their
bullishness contrasts with individual investors who during the past two weeks
pulled almost $2 billion from exchange-traded funds that focus on speculative-grade
bonds, including the biggest one-day withdrawal ever for BlackRock Inc.’s junk
fund.
Marc Faber: I want stocks to
fall 40% - (www.cnbc.com) With
Audio… Marc Faber predicts that stocks will drop by 20 percent to 30 percent in
the near future. But he personally hopes that they will fall even further. "I
think the market is way overdue for a 20 to 30 percent correction," said
Faber, the editor and publisher of the Gloom, Boom & Doom Report. But that
is "nothing that worries me," he said. "In fact, I'm hoping for
the market to drop 40 percent so stocks will again become—from a value point of
view—attractive." Faber added with a chuckle: "But that is not the
view of someone who is fully invested—obviously not."
Europe
exposed: Over $3 trillion in emerging market loans - (www.ft.com) The Fragile Five, BRICS and MINT are acronyms
for countries like Turkey, Mexico, Indonesia, and China that are at the focus
of the emerging crisis. But Europe may be the most vulnerable, as banks have
more than $3.4 trillion in loans in shaky markets. European companies have a
bigger exposure to emerging markets than US or Japanese firms, according to
research by Morgan Stanley Capital International. Europe’s most vulnerable
banks- the ones with the most risk in emerging markets - are BBVA, Erste Bank,
HSBC, Santander, Standard Chartered, and UniCredit, according to analysts,
Reuters reported. Deutsche Bank analysts estimate the six most exposed European
banks have more than $1.7 trillion tied up in developing markets. Spain’s
Santander is deeply intertwined in Latin America with bank earnings sourced
from Brazil (23 percent) and 132 billion euro in loans across the region at the
end of 2013.
Young
Bankers Seek ‘Good Yield’ With Their Own Nonprofits - (www.bloomberg.com) Without
deserting careers, a new wave of young bankers is starting nonprofits to help
orphans, immigrants, veterans and students. They say they’re moved to mend the
world using capitalism’s wisdom, not because of its shortcomings, preaching the
power of dividends, due diligence, leverage and efficient allocation of
resources. Some see themselves setting a new mold for post-crisis Wall Street
philanthropy by not waiting to give away their money or leaving for full-time
charity work. “Among this generation -- our generation -- is a deep passion and
interest in learning, earning and returning simultaneously,” said Andrew Klaber, 32, an analyst at hedge fund Paulson &
Co. whose nonprofit Even Ground provides
education and care to African children affected by AIDS. “You just see an unmet
need in your research, and research is what we do on Wall Street.”
Market's
19th Breakdown Sees Bulls Unmoved as Trillions Lost - (www.bloomberg.com) Eighteen
times Michael Shaoul has watched the U.S. stock market lose 5 percent or more
since 2009. Eighteen times he’s been rewarded for holding on. The bulls are being
tested anew by a retreat that started in emerging
markets and
has since spread to developed countries, erasing $3 trillion from global equity
values. Again, Shaoul’s Marketfield Asset Management LLC isn’t selling. “This
is a real bull market,” Shaoul, whose assets under management have risen to $21
billion from $400 million in 2008, said in a phone interview. “What happens in
real bull markets is they do fine, and then they are occasionally interrupted
by an exogenous shock.”
EU
bank reforms reveal hypocrisy, even from left-wing European govts - (www.rt.com) Bankers
have never been less popular and it’s difficult to justify rating them above
‘junk’ status. There are many merits to finance and financial markets - indeed
new products such as Social Impact Bonds can hugely help cash-strapped
governments provide better social services but bankers per se have failed to
demonstrate a useful niche in society. The political classes are keen to
deprecate bankers, although their resolve for reparation has been found wanting
given how few bankers have actually been prosecuted for their outrageous
behavior during the last boom. Most shockingly, many bankers remain in situ,
comfortably enjoying greater bonuses in the C-suite despite their egregious
incompetence during the crisis. Taxpayers are understandably frustrated at the
outrageous partnership between governments (regardless of political tinge) and
the bankers. A huge swathe of the finance industry - the banking segment -
appears somewhat rotten to its core. This remains a most dispiriting sign given
that society cannot prosper without a strong investment and lending sector.
Recently bankers have proven incapable of achieving such simple mercantile
aims.
TOP STORIES:
A
Rash of Deaths and a Missing Reporter – With Ties to Wall Street Investigations
- (www.wallstreetonparade.com) In a span of four days last week, two current
executives and one recently retired top ranking executive of major financial
firms were found dead. Both media and police have been quick to label the
deaths as likely suicides. Missing from the reports is the salient fact that
all three of the financial firms the executives worked for are under
investigation for potentially serious financial fraud. The deaths began on
Sunday, January 26. London police reported that William Broeksmit, a top
executive at Deutsche Bank who had retired in 2013, had been found hanged in
his home in the South Kensington section of London. The day after Broeksmit was
pronounced dead, Eric Ben-Artzi, a former risk analyst turned whistleblower at
Deutsche Bank, was scheduled to speak at Auburn University in Alabama on his
allegations that Deutsche had hid $12 billion in losses during the financial
crisis with the knowledge of senior executives. Two other whistleblowers have
brought similar charges against Deutsche Bank.
Detroit turns bankruptcy into
Wall St. vs. Main St. NYT - (www.cnbc.com)
Detroit's bankruptcy is
rapidly shaping up as a battle of Wall Street vs.
Main Street, at least as far as the city's creditors are concerned. Amy Laskey,
a managing director at Fitch Ratings, said in a recent report that
she sensed an "us versus them" orientation toward debt repayment. And
in the view of bondholders, bond insurers and other financial institutions, it
only grew worse last week after the city circulated its plan to emerge from
bankruptcy and filed a lawsuit on Friday. The suit, brought by the city's emergency
manager, Kevyn D. Orr, seeks to invalidate complex transactions that helped
finance Detroit's pension system in 2005. In a not-so-veiled criticism, the
city said the deal was done "at the prompting of investment banks that
would profit handsomely from the transaction." The banks that led the deal
were Bank of America and UBS.
They helped Detroit borrow $1.4 billion for its shaky pension system and also
signed long-term financial contracts with the city, known as interest-rate swaps,
to hedge the debt.
Venezuela
Siphoning U.S. Oil Exports to China Sinks Bonds - (www.bloomberg.com) Venezuela’s plummeting oil sales to the
U.S., its biggest export market, are exacerbating a collapse in the nation’s
debt securities. Bonds issued by Venezuela sank 3 percent on Jan. 31, a day
after data released by the U.S. Energy Information Administration showed that
2013 energy sales to the country are headed for a 28-year low. The selloff
pushed losses this year to 12.4 percent, more than three times the average 3.93
percent drop among notes from the least-creditworthy developing nations,
according to data by Bloomberg. The tumble in oil exports, Venezuela’s biggest
source of dollars, comes as President Nicolas
Maduro faces a shortage of U.S. currency that’s caused consumer
prices to soar 56 percent and foreign reserves to plunge to a decade-low of $21
billion.
As
Citigroup Spun Toward Insolvency in ’07- ’08, Its Regulator Was Dining and
Schmoozing With Citi Execs - (www.wallstreetonparade.com)
Before Timothy Geithner
became the 75th Secretary of the U.S. Treasury in 2009, he served as the
President of the Federal Reserve Bank of New York for five years. The New York
Fed is one of Wall Street’s primary regulators. But after leaving his post at
the New York Fed, Geithner testified before the U.S. House of Representatives’
Committee on Financial Services on March 26, 2009 that he was notregulating
Wall Street as he earned his $400,000 a year with car, driver and private
dining room. At the 2009 hearing, in response to a question from Congressman
Ron Paul, Geithner said: “That was a very thoughtful set of questions. I just
want to correct one thing. I have never been a regulator, for better or worse.
And I think you are right to say that we have to be very skeptical that
regulation can solve all these problems. We have parts of the system which are
overwhelmed by regulation…It wasn’t the absence of regulation that was a
problem. It was, despite the presence of regulation, you got huge risks built
up.”
Govt nearly triples job hours
lost to Obamacare - (www.cnbc.com) President Barack
Obama's signature health-care law will contribute to this phenomenon,
the CBO said, citing new estimates that the Affordable
Care Act will cause a larger-than-expected reduction in working
hours—eliminating the equivalent of about 2.3 million workers in 2021. In 2011,
the CBO estimated the law would cause a reduction of about 800,000 full-time
equivalent workers. "CBO estimates that the ACA will reduce the total
number of hours worked, on net, by about 1.5 to 2 percent during the period
from 2017 to 2024, almost entirely because workers will choose to supply less
labor—given the new taxes and other incentives they will face and the financial
benefits some will receive," said the report. "The reduction in CBO's
projections of hours worked represents a decline in the number of
full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5
million in 2024," it added.
The 10 worst states for taxes in 2014 - (www.cnbc.com) California
blows away Illinois, NY, NJ, and all other ones listed. California: Top State
Income Tax Rate: 13.3 percent. Sales tax: 7.5 percent. Property tax per capita:
$1,450. California has one of the highest income taxes in the country and
imposes an alternative minimum tax on both individuals and corporations. The
Golden State relies heavily on the income tax revenue generated by its richest
residents. This year such revenues are expected to comprise two thirds of California’s general-fund reserves. Its 7.5 percent sales tax rate includes a
mandatory statewide local tax of 1 percent.
US severely exposed if rates rise: Erskine
Bowles - (www.cnbc.com) The
United States spends about $230 billion a year in finance payments to
creditors—a level that could more than double if interest rates returned to
more normal levels, anti-debt crusader Erskine Bowles warned on Monday. To put
$230 billion a year in perspective, Bowles said on CNBC's "Squawk Box," it's more than the U.S. spends at the
departments of Commerce, Education, Energy, Homeland Security, Interior,
Justice, State and the court system combined. "If interest rates were to
return to a median level they were in the 1990s, we'd be spending not $230
billion a year but $650 billion a year," the former co-chair of the
president's debt commission said. "When you think about it, that's $650
billion that will be spent, principally in those countries we're borrowing
money from, to educate their kids, to improve their infrastructure, to do the
high value-added research on their college campuses, so the next new thing is
created over there," Bowles said. "That's crazy."
An Economic 'Perfect Storm' Is Brewing - (www.businessinsider.com) Last
week at the World Economic Forum in Davos, economist Nouriel Roubini told BI's
Joe Weisenthal that it seemed markets had sailed into a "mini-perfect storm," resulting in lots of volatility. "...Between
Chinese PMI of 50, Argentina letting its currency go, noises coming politically
from Ukraine, Turkey, and Thailand … [the] contagion is not just within
emerging markets but also affects advanced economies' equity markets." On
Sunday, the economists at Société Générale issued a similar warning using the
same vivid imagery. In a note to clients titled "Perfect Storm
Brewing As Policy Turns," they write: Following a week of extreme
volatility in emerging markets, many wonder if we are now heading for a perfect
storm, with China increasingly sucked in and Europe's already low inflation
falling further towards deflation. The current developments also mark a shift
in markets' focus on where the need for policy change is the greatest - away
from Europe where bond spreads remain resilient. We remain unconvinced,
however, that the reforms to date in Europe are enough to raise growth
sufficiently and put public debt trajectories on a sustainable path.
Currency crisis at Chinese banks 'could trigger
global meltdown’ - (www.telegraph.co.uk) The growing problems in the Chinese banking
system could spill over into a wider financial crisis, one of the most
respected analysts of China’s lenders has warned. Charlene Chu, a former senior
analyst at Fitch in Beijing and now the head of Asian research at Autonomous
Research, said the rapid expansion of foreign-currency borrowing meant a crisis
in China’s financial system was becoming a bigger risk for international banks.
“One of the reasons why the situation in China has been so stable up to this
point is that, unlike many emerging markets, there is very, very little
reliance on foreign funding. As that changes, it obviously increases their
vulnerability to swings in foreign investor appetite,” said Ms Chu in an
interview with The Telegraph. Ms Chu has been warning since 2009 about the
growth of a shadow banking system in China that has helped fuel the credit
expansion seen in the country in the wake of the Western financial crisis.
Fed draws criticism from abroad as emerging
markets still reeling - (www.reuters.com) The Federal Reserve's decision to keep trimming
its economic stimulus drew fire on Friday as India's central bank chief said
Americans should be more attuned to the global impact of their policies, and
the IMF called for vigilance given strains in financial markets.
The push-back came on Fed Chairman Ben Bernanke's last day on the job and two
days after the U.S. central bank reduced the pace of its huge asset purchase
program. The Fed made the move on Wednesday despite a bruising selloff in
emerging markets that
was prompted in part by the prospect of less U.S. monetary support. With the
turmoil in currencies and stocks spreading
into more emerging markets on Friday, Fed officials, addressing the rout for
the first time, offered no hint the sell-off would influence their policy
stance unless the U.S. economy were
threatened. But in Mumbai, Reserve Bank of India Governor Raghuram Rajan said the United
States "should worry about the effects of its policies on the rest of the
world."
