Econintersect: The Obama administration has announced a five point corporate tax reform plan that would reduce the top rate from 35% to 28%, with lower top rates for certain businesses. The White House claims the proposal would move the U.S. closer to a competitive corporate tax posture compared to the rest of the world. Critics have said that closer is not good enough, but that the top rate should be dropped to 25% which is the average for countries in the OECD (Organization for Economic Co-operation and Development). Some have called for the rates to be cut far below 25%. If the U.S. does not take action the country will be the developed country with the highest corporate income tax rate in the world as Japan has dropped its top rate to 30% effective in April.
Econintersect: The CES (Securities and Exchange Commission) is expanding its examination of possible manipulation of ETFs (electronically traded funds). Last year the SEC started an investigation of leveraged ETFs that allow investors to take positions that are nominally 2x or 3x a reference index, both positively (long) and negatively (short). The question at that time was whether the frequent trading of these vehicles was contributing to excessive market volatility. At the time a number of knowledgeable investment people were of the opinion that the likelihood that there was much effect when the leveraged products accounted for only 2-3% of all the money invested in all ETFs. (See Tom Lydon review, ETF Trends.) Click on cartoon for larger image.
Econintersect: Not many people have been noticing but the Mumbai (Bombay) BSE Sensex has exploded to the upside in 2012, advancing more than 19% since the New Year began and over 21% from the market low on 20 December 2011. The advance has been led by Tata Motors (NYSE:TTM) gain of more than 60% so far in 2012 and more than 80% since late November.
Bloomberg reports that the luxury car market is what is boosting sales and profits for the company that is most famous for the tiny low cost sub sub-compact, the Nano. Jaguar and Land Rover have been racking up big gains in China, Russia and emerging markets in general.
Econintersect: Prof. William K. Black says that President Obama is doing far less than required to investigate and prosecute bank fraud. In an interview with The Real News, Black says that even with the latest announcements about new fraud investigation efforts the resources identified so far would have to be increased more than 1,000 fold (Econintersect math) to be of the same relative scale as the Savings & Loan crisis in the late 1980s to early 1990s. The math? This crisis is more than 70 times larger in inflation adjusted money terms and the number of investigators in the new task force is less than 1/20 of the number in the Savings and Loan investigation. The product, 20 x 70 (1,400) is a first order estimate of the present shortfall. The video follows the “Read more” break. (Click on cartoon for larger view.)
Econintersect: What is going on in the world of banking? From The World Bank, to a couple of central banks to other banks around the world there has been a wave of resignations in recent weeks. Also, a head of state has resigned in disgrace and even the Vatican has had to deal with priests who have been conducting illegal activities out of theVatican's official bank. We can even conclude this report with a juicy rumor about a high profile CEO. Some of the resignations do not appear to be connected with scandal or performance issues, but others have connections to political controversy and some are clearly tainted.
Econintersect: Eurozone finance ministers have reached agreement on approval of a bail-out plan for Greece. Key to reaching the final agreement was pushing haircuts on Greek bondholders even deeper than had been previously worked out. This €130 billion bailout will be the second for Greece, following €110 billion that came in May 2010. It is clear from a “strictly confidential” report obtained by Peter Spiegel of the Financial Times that the Eurozone finance ministers expect that a third bailout will be necessary down the road, even in the “most optimistic scenario.”
Econintersect: One rickshaw driver in Bangladesh, who saved for 30 years on $6 per day, founded a small hospital in the remote village of Tanhashadia. His efforts have made him a national celebrity and his clinic now treats 300 patients each day. The following video from Al Jezeera tells the story:
Econintersect: Yesterday (February 17) GEI News reported on a Wednesday (February 15) article in The New York Times about a settlement of $158.3 million paid by Citigroup resulting from mortgage fraud that victimized the FHA (Federal Housing Administration).
Bloomberg reports that $31 million will go to whistleblower Sherry Hunt, an employee of Citigroup’s quality control team who personally filed the suit (which the government later joined) that led to the settlement. Hunt will pay attorney and legal fees out of that sum.
The FHA will receive $127 million, less any outside attorney fees and expenses.
Econintersect: The news sneaked by with little notice on Wednesday (February 15). Citigroup (NYSE:C) agreed to pay $158.3 million to settle claims that its mortgage unit defrauded the government through the company’s actions over a six year period. According to The New York Times the government said that CitiMortgage had fraudulently certified 30,000 mortgages for FHA (Federal Housing Administration) insurance. Many certifications were “knowingly and recklessly false.” (Quotes were in the NYT article.) More than 1/3 of the improperly certified mortgages have gone into default so far. Almost half (47%) of the mortgages written in 2006 and 2007 have already defaulted. (Click on picture for huge enlargement of a prime quality foreclosure property.)
Econintersect: Week 6 of 2012 ending 11February 2012 shows rail traffic growing over 2011 levels according to data released by the American Association of Railroads (AAR).
The Association of American Railroads (AAR) today reported an mixed weekly rail traffic for the week ending February 11, 2012, with U.S. railroads originating 279,501 carloads, up 1.7 percent compared with the same week last year. Intermodal volume for the week totaled 227,207 trailers and containers, down 0.4 percent compared with the same week last year.
Editor's note: This is breaking news presented with interspersed editorial comment.
From the report on the Council recommendation for appointment of Mario Draghi (pictured) to be the President of the European Central Bank (rapporteur: Sharon Bowles):
4. Do you have any business or financial holdings or any other commitments which might conflict you with your prospective duties, and are there any other relevant personal or other factors that need to be taken account of by the Parliament when considering your nomination?
Econintersect: Japan Oil, Gas and Metals National Corp has started drilling for a new energy source, methane hydrate, below the seabed at 1,000 meters depth about 70-80 km off the coast of the Atsumi Peninsula (Aichi Prefecture, east of Osaka) in the Philippine Sea. The deposits under the south central part of japan are estimated to be sufficient to supply more than 10 years of Japan’s natural gas supply needs. It is expected that the initial drilling will be completed this year and that production tests will be run first quarter of 2013. This will be the first commercial attempt to harvest natural gas from methane hydrates. Click on picture for larger image with caption.
Econintersect: Looking into the minds of the members of the Federal Open Market Committee (FOMC) gives insights on how they view the economy. The January 25, 2012 meeting statement provided the actions taken, but the meeting minutes released today provides the detailed discussion.
Econintersect noted from the meeting statement:
No new programs were announced - and the FOMC voted to continue doing whatever they were doing- although the FOMC extended its outlook when the next rate increase was possible to the end of 2014 (18 month extension). Most of the difference in this January meeting statement amounts to word engineering - changing words to other words having the same meaning.
Econintersect considers any interest rate policy projections beyond a few months to be speculation and the 18 month extension of current policy could have been no change or 36 months with no change in significance.
Econintersect: CoreLogic reports that 1.4 million homes, or 3.4% of all homes with a mortgage, were in the foreclosure inventory as of December 2011. The amount of completed foreclosures fell from 1.1 million in 2010 to 830,000 in 2011. Since September 2008, there have been 3.2 million foreclosures. Other highlights from the report:
The percent of homeowners nationally who were more than 90 days late on their mortgage payment, including homes in foreclosure and REO, was 7.3 percent for December 2011 compared to 7.8 percent for December 2010, and 7.2 percent in November 2011.
Econintersect: The 2013 proposed budget from the Obama administration calls for an increase in the appropriation for the SEC (Securities and Exchange Commission) of 18.55% to $1.566 billion. One significant area of activity would increase the number of examiners who inspect investment advisors, private-equity and hedge funds. Another area of increased emphasis would involve the activities of ETFs (exchange trade funds) and of money market funds. The increase in funding is required to carry out the implementation of activities mandated under the Dodd-Frank act, according to the White House. Any increase in funding for the SEC is expected to face strong opposition from Republicans in Congress who have been critical of the lack of effectiveness of the agency.Read more »
Econintersect: FINRA (Financial Industry Regulatory Authority, an industry self-regulatory organization) has issued a 16-page compliance alert to broker-dealers under its purview. The letter outlined the 2012 watch list for business and sales practices aimed at consumers. The organization’s top concerns address the risk that investors face with some high-yield investments and the lack of liquidity that may exist with other options. FINRA also cautioned against failing to classify cash flow returns because it is “particularly important so investors know when returns are being paid from their own principal or from capital raised in subsequent offerings” rather than from interest or dividends from earnings.Read more »
Econintersect: The NFIB's monthly optimism index rose almost imperceptibly 0.1 to 93.9 - remaining at recession levels. The fun in reading the NFIB reports is the blasts directed at Washington.
“The most positive statement that can be made about January’s reading is that the Index did not go down; a change of 0.1 points is essentially no change and it is hardly indicative of a surge in economic activity,” said NFIB Chief Economist Bill Dunkelberg. “Nothing happened last month that would significantly improve the small-business outlook; Washington is at a stalemate. The Index remains below its level a year ago of 94.1 which means that no progress was made in 2011. Congress has failed to pass a budget for over 1,000 days, and without discipline on spending or any budgetary priorities, there is no path to fiscal sanity in Washington. U.S. debt is now larger than our GDP, and headed in the wrong direction. This does not make for a comforting future, a fact reflected by low consumer and small-business owner optimism.”
Econintersect: Rechargeable batteries for applications ranging from cellphones to electric cars have been considered to be a domain for lithium ion systems. The relatively high cost of the elemental raw material as naturally occurring salts has been considered one of the limitations of the technology. Now new research indicates that sodium based battery systems may become feasible to compete with lithium. If new research described in R&D Magazine comes to commercial fruition the resource limits currently existing for lithium could be mitigated. Sodium is more than 1,000 times as plentiful in the earth’s crust (Wikipedia) and more than 100,000 times more plentiful in seawater (Marine Science).Read more »
Econintersect: Japan had the third quarter of economic contraction in the past four with a GDP decline at the annual rate of 2.3% in the fourth quarter of 2011. The decline was much larger than had been expected with consensus estimates averaging -1.3%. The big drags were lost production for Japanese products in Thailand, which was ravaged by flooding, and a sharp decline in exports, particularly to China and the Eurozone. The slowdowns in those two regions added to the drag of a stronger yen which reached Y75.35 vs. the U.S. dollar in the quarter. The yen has appreciated 100% against the dollar over the past 20 years and more than 200% over the past 30 years.
Econintersect: It will be on a selected case-by-case basis, but some local government loans will be rolled over by banks when they mature over the next three years. The national government has issued these instructions as local government debt as ballooned to $1.7 trillion as a result of an infrastructure building frenzy undertaken partly as stimulus to prevent China from succumbing to the 2007-09 recession. There has been concerned expressed by some economists that the infrastructure boom in China is not sustainable. See for example Michael Pettis, GEI Analysis.
John Carney, a senior editor at CNBC.com, has been writing a series of articles about the job guarantee (JG) aspect of what is known as Modern Monetary Theory(MMT). The JG is also known as the employer of last resort (ELR), a concept often associated in modern times with economist Hyman_Minsky.
On December 29 Carney posted an article which has raised a vigorous response from many MMT protagonists. The specific three issues Carney raised were really presented as statements of fact as follows:
"....there could be some hidden debt bombs as a recent Bloomberg finding suggests that China's banks may be understating their exposure to runaway local borrowing by possibly billions of dollars that is raising fears of a government bailout."
Here are more details. It appears that, based on a Bloomberg News survey, the construction boom by many local governments as part of China's stimulus program that started in November 2008 have now become too big to complete and may require a bailout even bigger than the Euro debt crisis. Read more »
The National Association of Realtors (NAR) completely destroyed its December 2011 existing homes sales data and analysis with their January release today - and now they are saying their January 2012 data is better. At this point there is no doubt sales volumes are increasing - but the improvement originally conveyed in December makes the January "improvement" a step backwards.
Home sales prices too were screwed up in December - at the time it seemed strange prices were shown as increasing. This is what we had said in our December analysis: Read more »
The January 2012 Chicago Fed National Activity Index (CFNAI) release shows the 3 month moving average of +0.14 - indicating national economic activity was slightly above its historical trend. The index is approximately equal to the levels one year ago, and has broken out of the range channel it has languished in for the last 8 months.
The Chicago Fed National Activity Index (CFNAI) is Econintersect’s primary coincident indicator tool as it provides a summary quantitative value for all the economic data being released. The data is not spun or explained - it is what it is. However, this index may not be accurate in real time (see caveats below) - and it did miss the start of the 2007 recession. Read more »
Monetary policy is a bit like watering a garden. Its nourishment is intended to foster growth and jobs, and when in full bloom, a rising standard of living for the majority of people in society. A functioning spigot (central bank) and nozzle at the end of the hose (banking system) are needed for monetary policy to water the economic garden. If either isn’t functioning properly, too much or too little water will flow from the financial system into the economy. Just as too much water can kill a healthy plant, too much money can cause inflation, erode the purchasing power of workers, and lower their standard of living. When too little money (credit) flows, economies contract, unemployment rises, and government tax revenue falls. Read more »
The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight).
But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews, lots of victims paying for banks’ misdeeds: Read more »
Greece continues to screw up the economic landscape.
The unanswerable question remains how Greece will default. Greece (as well as its weak sisters) cannot survive without an overhaul of the basic structure of the Eurozone. No talks are underway to reform the basic Eurozone structure - only continuing efforts to slash budgets which will intensify the death spiral. It amazes me at the market continuing to react to "good" Eurozone news. There is no good news - only bad news in various degrees. Read more »
The Consumer Price Index (CPI-U) annual inflation rate fell to 2.9% in January 2012 from 3.0% in December. This was above the Econintersectexpectation of 2.5%. Core inflation (CPI less food and energy) was rose slightly to 2.3% annual inflation [note that the Federal Reserve uses 2.0% core inflation as an inflation target].
There has been some hinting at the Fed that inflationary targets may be flexible at this time with so much economic slack, and the Fed statements continue to indicate they expect inflation to recede in the coming months. Read more »
This is the second month of the "new" Leading Economic Index from The Conference Board, and after a month of review this index appears to be a significant tool useful for long-range outlook economic forecasts.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in January to 94.9 (2004 = 100), following a 0.5 percent increase in December and a 0.3 percent increase in November.
This index is designed to forecast the economy six months in advance. Additional comments from the economists at The Conference Board add context to this positive outlook. Read more »
Combined imports and export container shipment growth was literally zero year-over-year at the Ports of LA and Long Beach in January 2012. This is a flat start for the new year.
Exports (which are an indicator of competitiveness and global economic growth) slightly contracted for the second time since August 2010.
Read more »
The Philly Fed Business Outlook Survey headlines for February 2012 show the index again improved slightly - and it remains in expansion territory. Survey components new orders and unfilled orders have improved - with both now in expansion territory.
Responses from manufacturing firms polled for this month’s Business Outlook Survey suggest that regional manufacturing activity continued to expand in February. The survey’s broad indicators for general activity, new orders, and shipments all increased from their readings in January. Firms reported near-steady employment levels but an increase in average work hours. More firms reported higher input prices this month, and a sizable share of firms reported price increases for their own manufactured goods. The survey’s broad indicators of future activity fell from levels in recent months but continue to reflect optimism about future manufacturing growth.
The Producer Price Index (PPI) finished goods prices increased 4.1% year-over-year in January 2012 (less than the 4.8% in December) - and increased 0.1% month-over-month. The PPI represents inflation pressure that could move into consumer prices - and the PPI continues to moderate.
PPI finished goods also is showing moderating pressures from intermediate goods and crude goods price inflation - in fact the differential in the producer price chain has almost disappeared. The market had been expecting a 0.3% month-over-month increase in finished goods prices (compared to the 0.1% increase).
Read more »
Residential building permits and construction completions in January 2012 show the industry rebound is continuing - and it is being fueled this month by both single family and apartments (structures with 5 or more units).
US Census Headlines:
building permit up 0.7% month-over-month, up 19.0% year-over-year
construction completions down 12.0% month-over-month, up 4.1% year-over-year
the market expected 650K to 675K annualized housing permits versus the 676K reported
Econintersect Analysis:
Building permits are up 20.4% month-over-month, up 27.2% year-over-year.
construction completions are down 4.7% month-over-month, up 2.3% year-over-year.
"The latest home prices data shows that a stable market in January is leading to an up month in February. Rents and newly listed property prices all climbing weekly."
Like Giants fans around the country still celebrating a big win, the housing markets seem to want to play the role of the triumphant underdog. Rolling into February 2012, the housing market has a set of reasonably bullish signals. But is it too early to celebrate? Read more »
The headlines say Industrial Production (IP) was unchanged in January 2012 and up 3.4% year-over-year. Econintersect analysis is down 0.4% month-over-month while up 2.8% year-over-year.
The market was expecting a month-over-month increase of 0.1% to 0.6% (vs the headline 0.0%).
IP headline data has three parts - manufacturing, mining and utilities. In the January 2012 report, manufacturing was up 4.5%, mining up 5.8% and utilities were down 7.5% (all percentages year-over-year). Note that utilities are 10.9% of the industrial production index.
The year-over-year rate of growth for IP has degraded since October 2011 (second derivative)- yet the manufacturing component of IP (which tracks the economy) has a slightly positive rate of growth since May 2010. The "sick" part of IP is utilities which is causing the overall index to misrepresent the true state of the economy.
Read more »
The Empire State Manufacturing Survey (manufacturing in New York State) in February 2012 continued on its third month of climb from negative territory. Manufacturing expansion is indicated by positive numbers to this index:
The index rose six points to 19.5. This index is at the highest level since June 2010.
Expectation was for a readings between 14.0 to 15.0
This index is now improving, and well above levels associated with past recessions. As a subjective statement, this index is showing manufacturing has entered "moderate" expansion territory.
Read more »
[This post has been revised - see note at bottom]
The Bureau of Labor Statistics (BLS) currently does not break down employment numbers by size of firm - and Econintersect has been relying on the data published by ADP in their monthly employment reports. However, the BLS is now thinking of providing this breakdown.
The Current Employment Statistics (CES) program is examining the feasibility of publishing monthly CES employment, hours, and earnings estimates by firm size. Currently, BLS publishes the first preliminary CES employment estimates for a given month at selected industry detail. Subsequent estimates for that month are published in more industry detail with the following month’s first estimates. Research suggests that the available sample may make it feasible to publish monthly size-class employment estimates by major industry sector together with the first preliminary estimates. Employment change by firm size would add a valuable dimension of detail to understanding current employment trends.
Business sales continued to show moderate growth in December 2011 - but are strangely soft. Business sales combines manufacturing, wholesale and retail sales.
Business sales (inflation adjusted) now has the worst growth rate since February 2010 confirming this softness. Inventories look good with inventory-to-sales levels near historical lows for Decembers.
As inventories only rose slightly, Econintersect suspects business anticipated a weaker Christmas season - and cut back offerings accordingly. Interestingly, advance January 2012 retail sales also came in soft today. Read more »
January 2012 export prices rose 0.2% month-over-month while import prices rose 0.3%. The January rise in import prices is due to fuels / lubricants and foods, while the rise in export prices was driven by agriculture exports.
The data is continuing to indicate that the run up in prices seen since mid-2010 is over. Exports now up only 2.5% year-over-year and imports up 7.1%.
Read more »
Pundits are throwing out various reasons (including some apparent incorrect auto sales data) for reasons why January 2012 advance retail sales are improving at a weak rate. The expectations were for retail sales improvement 2 to 3 times higher than what was reported.
Econintersect analysis is that retail sales are not warning of an impending economic crash - but appear to be disappointing for those who want retail sales to lead a recovery.
No matter how the data is cut, retail sales are expanding faster than population growth - and roughly paralleling GDP. Looking at inflation adjusted data which gives a better feel of the quantity of things being purchased - shows the rate of growth has been roughly the same over the last 4 months.
Read more »
The January 2011 Ceridian-UCLA Pulse of Commerce Index™ (PCI) fell 1.7% year-over-year, and 2.2% below year-ago levels. Econintersect uses the PCI raw data to help forecast Main Street economy - and our analysis is that the index is up 2.6% month-over-month and down 0.1% year-over-year.
The data has been in a long term "less good" trend.
Read more »
Editor's note: Global Economic Intersection welcomes Mark Bern, a frequently published author at Seeking Alpha on investment analysis, tactics and strategy. Mark will post investment analysis here on a regular basis, as well as summaries of his extensive work at Seeking Alpha.
AGCO Corporation (NYSE:AGCO) stock has experienced a stellar rally since its recent low near $30 in early October 2011. With the price at $53.17 (at the close on Friday, February 17, 2012), even after giving up some of the gains, this stock is up about 70% in less than five months. I can’t help but think about how appropriate it is that a company which serves the agricultural industry is a genuine growth company. But that is past history. What really matters to investors is what does the future hold?Read more »
The stock market has gotten off to a great start this year. Coupled with better than expected economic reports a surge of optimism has investors focused on how much higher the market is likely to rise, rather than whether it will fall. Various measures of investor sentiment reflect a disproportionate level of bullishness. As noted in our February 1 Special Update, we think the market is forming at least a short term high, and vulnerable to a 4% to 7% correction. Comparing investor’s bullish outlook to the actions of corporate insiders also provides a note of caution. According to Vickers Weekly, corporate insiders have been selling 8 times the dollar amount of their purchases. In late September, they were only selling $.80 forevery $1 of purchases. This suggests they think their stock prices have gotten ahead of where they think their businesses are going. This supports our view that the economy is likely to slow in coming months.Read more »
by Martin Hutchinson, Global Investing Strategist, Money Morning
In today's market, dividend investing is the best way to achieve a decent income stream without taking on too much risk. On the other hand, this is also true: emerging markets give investors the benefit of the world's fastest economic growth.
Investors would be wise then to combine these two strategies by buying emerging markets stocks that pay steady dividends.
In practice, this is more difficult than it ought to be - but it's not impossible. In fact, as you'll learn later I have found numerous ways to profit from this best of both worlds strategy.Read more »
Since the start of the Great Recession there has been little reason for enthusiasm about the US housing market. The home construction industry and related sectors have been a continuing drag on the recovery.
In my circle of friends I know of several first-time home purchases in the last couple of years. I was reminded of this last night when visiting my niece and her husband, seeing their beautiful new urban home and enjoying a wonderful "Restaurant Week" dinner at a place new to us all. It is too easy for us stodgy old analysts to forget that successful young people want their own homes. For them, the time to buy is now.
Regular readers know that I embrace the illustrative power of the anecdote, but I live on data. Taking a look at this week's calendar, I expect more media attention to the prospects for improvement in housing.
The latest January trade data of China showed the broadest measure of China's global trade surplus fell to a several-year low to around 2.7% of GDP. Export also collapsed to anegative 0.5%year-over-year in January, down from +13.4% in December. Imports looked even more dire with a 15.3% year-over-year decline.
Below is a summary of the activity on Trefis during the past week that we thought you would find interesting. Trefis is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. It provides the unique feature of allowing the user to model future valuation based upon projected changes in components of each business. It also provides communication capabilities among members, including consensus of member analysis compared toTrefis staff analysis and blogging opportunities for members.
When a general stops leading his army mass surrender usually soon follows. Very often when an index begins to lose leadership from its general the entire complex soon finds itself in big trouble. If there was ever an index that had a singular more important hard-core heavyweight leader than the Nasdaq 100 has in AAPL, I’d like to know what index that was. AAPL now makes up a full 17% of the market capitalization of the entire $NDX. So obviously when an enormous corporation like AAPL starts to take a bit of a bruising, it behooves us to take a real close look at what’s going on. (Click on picture for larger image of apple face.)Read more »
Editor’s Note:This article is republished with permission of LEAP/E2020. See end of article for credits.
- Public announcement GEAB N°62 (17 February 2012) -
As anticipated by LEAP/E2020, the fear largely fed by the City of London and Wall Street of a Eurozone break-up over the Greek debt crisis proved unfounded. Euroland has come out of this violently conflictual episode with its "natural allies" much reinforced. According to our team, 2012 will mark the starting point for the perpetuation of a new global power, Euroland. However, this development remains conditional on the question of democratization that we analyze in this issue, through the three sequences of Euroland’s evolution 2012-2016. These five years will lead Europeans to profoundly influence a global geopolitical rebalancing whilst domestically a radical new phase of European integration is opening up in the coming months. Read more »
Striking a vital blow against accountability, Attorney General Peter Kilmartin endorsed the “50-state” settlement on foreclosure fraud yesterday, led by the Iowa Attorney General, Tom Miller. The settlement essentially allows banks to skip away from the crimes they committed in the course of foreclosing on a few million people’s houses.
To recap: this settlement has been over a year in the making, and is intended to clean things up in the real estate market, absolving banks of responsibility for their misdeeds in exchange for money that will go to principal reduction, and also doing some short sales and refinancing and payoffs to unjustly foreclosed borrowers. These are good things, but there is a problem.Read more »
Herein we retrace the events of the Goldman-Greece-Draghi controversy and relate it to the Draghi-Morgan-Stantley disclosure issue. The June 2011 ECB President nomination hearing at the Committee on Economic and Monetary Affairs of the European Parliament will serve as a point of reference.
Before the hearing
Prior to nomination hearing (June 2011), there had been a series of posts at Baseline Scenario (Simon Johnson, James Kwak), notably this one, raising the alarm about a possible connection to the falsification of Greek debt data while at Goldman Sachs. Apparently, Draghi felt compelled to clarify, in a statement released by the Central Bank of Italy (BOI).Read more »
When thinking about current economic problems in Europe, it is clear that we have had a problem with the adjustment in the euro zone. Some countries saw productivity rise faster than wages, other experienced the opposite. So, price levels are now “wrong” in the sense that current account balances are not sustainable. Germany net exports too much, the periphery still net imports too much. It seems now that the Troika is pushing ahead its agenda of abandoning all those ineffective structural rigidities. Here is the Economonitor:
The Greek minimum wage is apparently a point of contention between the Troika (ECB/EU/IMF) and the Greek government. The NY Times cites competitiveness gains as a rationale for the minimum wage cut:
The goal of any pay cuts would be to help make Greek workers, who are generally less productive than workers elsewhere in Europe, able to compete more effectively inside the euro zone, where countries share a common currency that does not allow devaluations to help even out differences in labor costs.
Huh? See below. The going line seems to be that the Greeks are lazy. They earn minimum government-negotiated wages without actually doing a whole lot because they’re uncompetitive. This is wrong; the data do not support this view.Read more »
On theheals of the Russian (and Chinese) veto of a U.N. Resolution meant to deal with the Syrian slaughter of civilians, let's not forget who the former USSR really is!
"... When we speak of the Iranian nuclear capability, it is Russia that is enabling them to build it. When we speak of Iranian missile defense it is Russia that is enabling them to build it. From an economic standpoint, Russia is in no hurry to impose sanctions on its trading partner. The same can be said for China who is dependent on Iranian oil to fuel its economic growth.
Vladimir Putin said Wednesday that sanctions imposed now would be premature. China Thursday had glowing comments about its growing economic alliance with Iran. So when, according to these two countries, would the time be right? The larger question, which is really a rhetorical one, is whether Russia and China are really our allies in this battle at all, or just self-serving players in this negotiation charade? The answer is obvious, and before the world reaches the nuclear day after tomorrow, action has to be taken..."
“Democracy, as we know it today, is akin to communism in one critical aspect: destroying capitalism! Here is the subtle difference between them: communism violently destroyed capitalism over night, while democracy has been peacefully destroying capitalism over time.”
with lower top rates for certain businesses. The White House claims the proposal would move the U.S. closer to a competitive corporate tax posture compared to the rest of the world. Critics have said that closer is not good enough, but that the top rate should be dropped to 25% which is the average for countries in the OECD (Organization for Economic Co-operation and Development). Some have called for the rates to be cut far below 25%. If the U.S. does not take action the country will be the developed country with the highest corporate income tax rate in the world as Japan has dropped its top rate to 30% effective in April
than 19% since the New Year began and over 21% from the market low on 20 December 2011. The advance has been led by Tata Motors (NYSE:TTM) gain of more than 60% so far in 2012 and more than 80% since late November.
world there has been a wave of resignations in recent weeks. Also, a head of state has resigned in disgrace and even the Vatican has had to deal with priests who have been conducting illegal activities out of theVatican's official bank. We can even conclude this report with a juicy rumor about a high profile CEO. Some of the resignations do not appear to be connected with scandal or performance issues, but others have connections to political controversy and some are clearly tainted
agreement was pushing haircuts on Greek bondholders even deeper than had been previously worked out. This €130 billion bailout will be the second for Greece, following €110 billion that came in May 2010. It is clear from a “strictly confidential” report obtained by Peter Spiegel of the Financial Times that the Eurozone finance ministers expect that a third bailout will be necessary down the road, even in the “most optimistic scenario.”
by Citigroup resulting from mortgage fraud that victimized the FHA (Federal Housing Administration). 
Econintersect
under its purview. The letter outlined the 2012 watch list for business and sales practices aimed at consumers. The organization’s top concerns address the risk that investors face with some high-yield investments and the lack of liquidity that may exist with other options. FINRA also cautioned against failing to classify cash flow returns because it is “particularly important so investors know when returns are being paid from their own principal or from capital raised in subsequent offerings” rather than from interest or dividends from earnings
ion systems. The relatively high cost of the elemental raw material as naturally occurring salts has been considered one of the limitations of the technology. Now new research indicates that sodium based battery systems may become feasible to compete with lithium. If new research described in R&D Magazine comes to commercial fruition the resource limits currently existing for lithium could be mitigated. Sodium is more than 1,000 times as plentiful in the earth’s crust (Wikipedia) and more than 100,000 times more plentiful in seawater (Marine Science)
government has issued these instructions as local government debt as ballooned to $1.7 trillion as a result of an infrastructure building frenzy undertaken partly as stimulus to prevent China from succumbing to the 2007-09 recession. There has been concerned expressed by some economists that the infrastructure boom in China is not sustainable. See for example Michael Pettis, GEI Analysis
The National Association of Realtors (NAR) completely destroyed its December 2011 existing homes sales data and analysis with their January release today - and now they are saying their January 2012 data is better. At this point there is no doubt sales volumes are increasing - but the improvement originally conveyed in December makes the January "improvement" a step backwards.
Home sales prices too were screwed up in December - at the time it seemed strange prices were shown as increasing. This is what we had said in our December analysis: 
The 
The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight).
But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, 
Greece continues to screw up the economic landscape.
The unanswerable question remains how Greece will default. Greece (
This is the second month of the "new" Leading Economic Index from The Conference Board, and after a month of review this index appears to be a significant tool useful for long-range outlook economic forecasts.
Combined imports and export container shipment growth was literally zero year-over-year at the Ports of LA and Long Beach in January 2012. This is a flat start for the new year.
Exports (which are an indicator of competitiveness and global economic growth) slightly contracted for the second time since August 2010.
The Philly Fed Business Outlook Survey headlines for February 2012 show the index again improved slightly - and it remains in expansion territory. Survey components new orders and unfilled orders have improved - with both now in expansion territory.
4.1% year-over-year in January 2012 (less than the 4.8% in December) - and increased 0.1% month-over-month. The PPI represents inflation pressure that could move into consumer prices - and the PPI continues to moderate.
PPI finished goods also is showing moderating pressures from intermediate goods and crude goods price inflation - in fact the differential in the producer price chain has almost disappeared. The market had been expecting a 0.3% month-over-month increase in finished goods prices (compared to the 0.1% increase).
Residential building permits and construction completions in January 2012 show the industry rebound is continuing - and it is being fueled this month by both single family and apartments (structures with 5 or more units).
market in January is leading to an up month in February. Rents and newly listed property prices all climbing weekly."
The headlines say Industrial Production (IP) was unchanged in January 2012 and up 3.4% year-over-year. Econintersect analysis is down 0.4% month-over-month while up 2.8% year-over-year.
The market was expecting a month-over-month increase of 0.1% to 0.6% (vs the headline 0.0%).
IP headline data has three parts - manufacturing, mining and utilities. In the January 2012 report, manufacturing was up 4.5%, mining up 5.8% and utilities were down 7.5% (all percentages year-over-year). Note that utilities are 10.9% of the industrial production index.
The year-over-year rate of growth for IP has degraded since October 2011 (second derivative)- yet the manufacturing component of IP (which tracks the economy) has a slightly positive rate of growth since May 2010. The "sick" part of IP is utilities which is causing the overall index to misrepresent the true state of the economy.
The Empire State Manufacturing Survey (manufacturing in New York State) in February 2012 continued on its third month of climb from negative territory. Manufacturing expansion is indicated by positive numbers to this index:
Business sales continued to show moderate growth in December 2011 - but are strangely soft. Business sales combines manufacturing, wholesale and retail sales.
Business sales (inflation adjusted) now has the worst growth rate since February 2010 confirming this softness. Inventories look good with inventory-to-sales levels near historical lows for Decembers.
As inventories only rose slightly, Econintersect suspects business anticipated a weaker Christmas season - and cut back offerings accordingly. Interestingly, advance January 2012 retail sales also came in soft today. 
January 2012 export prices rose 0.2% month-over-month while import prices rose 0.3%. The January rise in import prices is due to fuels / lubricants and foods, while the rise in export prices was driven by agriculture exports.
The data is continuing to indicate that the run up in prices seen since mid-2010 is over. Exports now up only 2.5% year-over-year and imports up 7.1%.
Pundits are throwing out various reasons (including some apparent incorrect auto sales data) for reasons why January 2012 advance retail sales are improving at a weak rate. The expectations were for retail sales improvement 2 to 3 times higher than what was reported.
Econintersect analysis is that retail sales are not warning of an impending economic crash - but appear to be disappointing for those who want retail sales to lead a recovery.
No matter how the data is cut, retail sales are expanding faster than population growth - and roughly paralleling GDP. Looking at inflation adjusted data which gives a better feel of the quantity of things being purchased - shows the rate of growth has been roughly the same over the last 4 months.
The January 2011 Ceridian-UCLA Pulse of Commerce Index™ (PCI) fell 1.7% year-over-year, and 2.2% below year-ago levels. Econintersect uses the PCI raw data to help forecast Main Street economy - and our analysis is that the index is up 2.6% month-over-month and down 0.1% year-over-year.
The data has been in a long term "less good" trend.
AGCO Corporation 
on how much higher the market is likely to rise, rather than whether it will fall. Various measures of investor sentiment reflect a disproportionate level of bullishness. As noted in our February 1 Special Update, we think the market is forming at least a short term high, and vulnerable to a 4% to 7% correction. Comparing investor’s bullish outlook to the actions of corporate insiders also provides a note of caution. According to Vickers Weekly, corporate insiders have been selling 8 times the dollar amount of their purchases. In late September, they were only selling $.80 forevery $1 of purchases. This suggests they think their stock prices have gotten ahead of where they think their businesses are going. This supports our view that the economy is likely to slow in coming months
hand, this is also true: 
In my circle of friends I know of several first-time home purchases in the last couple of years. I was reminded of this last night when visiting my niece and her husband, seeing their beautiful new urban home and enjoying a wonderful "Restaurant Week" dinner at a place new to us all. It is too easy for us stodgy old analysts to forget that successful young people want their own homes. For them, the time to buy is now.
by Elliott Morss
Striking a vital blow against accountability, Attorney General Peter Kilmartin endorsed the “50-state” settlement on foreclosure fraud yesterday, led by the Iowa Attorney General, Tom Miller. The settlement essentially allows banks to skip away from the crimes they committed in the course of foreclosing on a few million people’s houses.
President nomination hearing at the Committee on Economic and Monetary Affairs of the European Parliament will serve as a point of reference.
When thinking about current economic problems in Europe, it is clear that we have had a problem with the adjustment in the euro zone. Some countries saw productivity rise faster than wages, other experienced the opposite. So, price levels are now “wrong” in the sense that current account balances are not sustainable. Germany net exports too much, the periphery still net imports too much. It seems now that the Troika is pushing ahead its agenda of abandoning all those ineffective structural rigidities. Here is the 
On theheals of the Russian (and Chinese) veto of a U.N. Resolution meant to deal with the Syrian slaughter of civilians, let's not forget who the former USSR really is!
In my 1/20/2012 post (
