$DAX -19% for the month of August. How often do you see something like that.
Wednesday, August 31, 2011
($MACRO) Moving On From Greece?- WSJ
Will what happens in Greece, finally stay in Greece?
A host of doubts still surround the second bailout for the country. The economy is in tatters, there is doubt over the bond swap at the heart of the deal, and a spat over collateral for Finnish loans is continuing. But while Greek bond yields have surged to fresh highs, with the yield to maturity on two-year notes at 46%, the rest of the euro-zone government-bond market hasn't taken fright. That marks a step forward in the crisis.
A host of doubts still surround the second bailout for the country. The economy is in tatters, there is doubt over the bond swap at the heart of the deal, and a spat over collateral for Finnish loans is continuing. But while Greek bond yields have surged to fresh highs, with the yield to maturity on two-year notes at 46%, the rest of the euro-zone government-bond market hasn't taken fright. That marks a step forward in the crisis.
The Finnish collateral spat is another example of the euro zone's challenge in sorting out the detail for its crisis response and bringing all 17 member states together. It may yet become another deeply divisive problem, even though officials are working on a solution and Finland has said it can be flexible on the form of collateral.
Meanwhile, the news from Greece itself has been bad. The Finance Ministry now projects the economy will shrink 4.5%-5.3% in 2011, versus a prior forecast of 3.9%. The deficit may fall only to 8%-8.5% of GDP versus a target of 7.6%. And it isn't clear that the latest bailout will stave off an ultimate default, given that it doesn't reduce debt materially.
Previously, this might have sent the market into a tailspin, with fears about Greece extrapolated to other sovereigns. But Portuguese 10-year yields are 2.5 percentage points below their recent peak, while Irish 10-year yields are more than five points lower and are below 9% for the first time since April. Ireland, in particular, has benefited from the reduction in interest rates on its bailout loans and has boosted competitiveness.
The European Central Bank's resumption of bond purchases, albeit reluctant, has disrupted the contagion route to Spain and Italy, where 10-year yields are now locked around 5%. That support is crucial.
Governments elsewhere also haven't been idle: Spain, Italy and France are moving to introduce binding rules on deficits like Germany's debt brake, as well as fresh fiscal measures to hit debt targets. Euro-area economic governance is being tightened up. And banks have started reflecting Greek bond write-downs in their results. Some pain is finally being taken.
The crisis hasn't gone away. With euro-zone growth slowing to a crawl, markets could yet become concerned about debt sustainability in other sovereign countries. Politics remains a threat. The Finnish spat is a reminder of the clear tensions between national and euro-zone interests. An unexpected ratings downgrade could spark new market turmoil.
But for now, at least, Greece may have lost its capacity to shock. That can only be a good thing for the euro zone.
Meanwhile, the news from Greece itself has been bad. The Finance Ministry now projects the economy will shrink 4.5%-5.3% in 2011, versus a prior forecast of 3.9%. The deficit may fall only to 8%-8.5% of GDP versus a target of 7.6%. And it isn't clear that the latest bailout will stave off an ultimate default, given that it doesn't reduce debt materially.
Previously, this might have sent the market into a tailspin, with fears about Greece extrapolated to other sovereigns. But Portuguese 10-year yields are 2.5 percentage points below their recent peak, while Irish 10-year yields are more than five points lower and are below 9% for the first time since April. Ireland, in particular, has benefited from the reduction in interest rates on its bailout loans and has boosted competitiveness.
The European Central Bank's resumption of bond purchases, albeit reluctant, has disrupted the contagion route to Spain and Italy, where 10-year yields are now locked around 5%. That support is crucial.
Governments elsewhere also haven't been idle: Spain, Italy and France are moving to introduce binding rules on deficits like Germany's debt brake, as well as fresh fiscal measures to hit debt targets. Euro-area economic governance is being tightened up. And banks have started reflecting Greek bond write-downs in their results. Some pain is finally being taken.
The crisis hasn't gone away. With euro-zone growth slowing to a crawl, markets could yet become concerned about debt sustainability in other sovereign countries. Politics remains a threat. The Finnish spat is a reminder of the clear tensions between national and euro-zone interests. An unexpected ratings downgrade could spark new market turmoil.
But for now, at least, Greece may have lost its capacity to shock. That can only be a good thing for the euro zone.
($CLX) Again spurning the activist investor, Clorox said Tuesday that Carl Icahn’s latest acquisition offer “substantially undervalues the company and is not credible.” The board’s rejection comes on the heels of Icahn announcing that he would seek to replace the Oakland, Calif.-based company’s directors and buy Clorox for $78 a share if a higher takeover bid didn’t emerge. Icahn had offered to pay $80 a share for Clorox in July.
Even a joint bond might not save the euro - By Wolfgang Münchau
The universal experience of financial crisis management is that the longer one waits to resolve it, the more expensive the ultimate bill will be. In the eurozone that moment has been reached. Two months ago, it was said the worst things that could happen were that the crisis would extend to Italy and Spain; and the economic recovery would stall. Now the crisis has extended to Italy and Spain, and growth in the eurozone economy has slowed. The next plot point of the tragedy would be a return to recession. This is not a far-fetched scenario. Christine Lagarde, the International Monetary Fund’s managing director, warned with refreshing candour at the weekend that the risk of a recession was significant, and called for urgent policy action. The crisis now has such force that it renders the existing resolution mechanisms defunct. The European financial stability facility was set up to handle small countries, such as Greece, Portugal and Ireland; it is useless as a mechanism to protect Italy or Spain. If you raised its lending ceiling to, say €2,000bn, France would stand to lose its triple A rating. That in turn would affect the EFSF’s own lending capacity, which equals the share of the triple A rated countries.If you really wanted to provide a backstop for Italy or Spain, the only long-term solution is what is known in legal jargon as joint and several liability – in other words, a eurobond. There is no way Germany could guarantee Italy or France could guarantee Spain. The problem has become so big that the only credible guarantees are joint. Unfortunately, the eurozone bond is not something you can introduce in an emergency meeting at midnight tomorrow. It requires new institutions. It would have to be a multistep process, just like the introduction of the euro itself during the 1990s. Eurobonds would require a change in European treaties. It would also require changes in various national constitutions. In non-crisis mode, the European Council would set up a committee that would spend a year or two drawing up a master plan. This would be followed by an intergovernmental conference and a dramatic summit. And then it would take years to implement. A crisis might short-circuit some of these procedures but that would require political leadership, which is sadly absent. Just witness the pathetic row among eurozone members over Finland’s bilateral agreement with Greece to secure collateral for the Finnish portion of the next Greek package. Even now, the eurozone still squabbles over the small print of a package that is essentially irrelevant to its future. Imagine Germany, the Netherlands or Finland being asked to sign off on a eurobond tomorrow. Last week, Angela Merkel, German chancellor, ruled it out every day. Mark Rutte, Dutch prime minister, said it would require a fiscal union. Jyrki Katainen, Finnish premier, is also opposed but expects the issue to come in autumn. Wolfgang Schäuble, German finance minister, said a fully-fledged political union would be a prerequisite for a eurobond – another way of saying no.Are they all bluffing? Only up to a point. I know that observers have become cynical, in particular about Ms Merkel’s public expression of resistance. She has opposed every crisis measure, from the first Greek loan to the extension of the EFSF’s mandate, only to yield ground later. Is the eurobond not merely the next stage in this game of early denial and ultimate surrender? Will she not soften her tone once the Bundestag agrees the changes to the EFSF?I know there are people close to Ms Merkel and Mr Schäuble who agree that a eurobond will be the only solution to this crisis. I would not be surprised if they had even drawn up an emergency plan. But the politics is holding them back. Ms Merkel has a tough battle on her hands to secure a parliamentary majority for the extension of the EFSF. She will probably win it, but she might not win a fight over a eurobond. Her coalition would probably break up. So, while I cannot see how Greece or Italy can remain in the eurozone indefinitely without a eurobond, I find it equally hard to see Germany, Finland and the Netherlands agreeing to it. So something will have to give. A small eurobond, covering only a small percentage of sovereign debt, looks a tempting fudge. But it would not solve the crisis. Perhaps a Social Democrat-led German government would accept eurobonds after elections scheduled for 2013. But that would be too late. Perhaps the next stage of the crisis will be so severe that everybody grows scared enough to accept it as a lesser evil. That might work, but it is not a scenario you would wish for.The only small consolation in the short term is the European Central Bank’s extended bond-purchasing programme, which now runs to well over €100bn. I understand several members of the ECB’s council have voted against. This means the consensus is fragile, and may not be sustained for ever. The dual uncertainty over the eurobonds and the ECB’s bond-purchasing programme suggests that investors are perfectly rational in betting against the eurozone. This means the crisis will go on, and that it will get worse and more expensive. And unless there is a dramatic reversal in the political response very soon, even a eurozone bond might not work.
Greece only discusses giving cash collateral to Finland in return for its participation in the country's second bailout, Finance Minister Evangelos Venizelos said on Wednesday. "We are only talking about cash guarantees which do not create any problem to Greece's stabilisation plan," Venizelos Real FM Radio in an interview. Finland has proposed that Greek state assets be transferred to a Luxembourg-based holding company and held there as security for new loans to Athens, according to an internal document seen by Reuters.
($BAC) Bank of America Corp is looking to sell its correspondent mortgage business and the unit's employees could be notified as soon as Wednesday, the Wall Street Journal said, citing people familiar with the matter.
The bank had decided to exit the correspondent channel, which employs more than 1,000 people, because it no longer fits with the long-term strategy for its mortgage unit, the Journal said.
The bank had decided to exit the correspondent channel, which employs more than 1,000 people, because it no longer fits with the long-term strategy for its mortgage unit, the Journal said.
($MACRO) Goldman Sachs on FOMC Minutes: Officials Discussed Easing Options
BOTTOM LINE: Latest FOMC minutes suggest that further action at September 20-21 meeting a live possibility.
MAIN POINTS:1. Minutes from the August 9 FOMC meeting were consistent with our view that QE3 is coming. However, they were more dovish than expected, and indicate that the September meeting is an even closer call than we thought previously (for a summary of our latest views, see Jan Hatzius, “Q&A on Monetary Policy after Jackson Hole.” US Daily, August 29, 2011). 2. The committee discussed a range of easing options, as signaled in the post-meeting statement. In addition, the minutes noted that “a few members felt that recent economic developments justified a more substantial move” at the meeting. Chicago Fed President Evans revealed in a CNBC interview this morning that he had argued for more aggressive action, but ultimately voted with the majority. The minutes show that other Fed officials felt the same. 3. The discussion of easing options at the meeting was mostly consistent with previous public comments. The tools mentioned were: 1) asset purchases, 2) increasing the average maturity of the Fed’s portfolio, 3) cutting the interest rate on excess reserves, and 4) further reinforcing the committee’s forward guidance (which could include tying rate guidance to specific levels for economic indicators, like the unemployment rate and inflation). The minutes added a bit more detail around the idea of changing the composition of the Fed’s portfolio, saying that this would involve “selling securities with relatively short remaining maturities and purchasing securities with relatively long remaining maturities”. To our knowledge this is the first official comment on the mechanics of this approach. The different approaches each had some support among the committee. The minutes noted that “some participants judged that none of the tools available to the Committee would likely do much to promote a faster economic recovery”, but this was a minority view. 4. With regard to the easing decision, the minutes said that all committee members thought that monetary policy could not completely resolve the economy’s problems, but “most members thought the committee could contribute importantly to better outcomes”. Interestingly, the minutes showed that those favoring further easing saw a change in the forward guidance as “a measured response”—as opposed to an aggressive step (the minutes noted that the 2013 funds rate guidance was consistent with “prescriptions for monetary policy based on historical and model-based analysis”, which suggests a Taylor Rule similar to our own). 5. Finally, the minutes showed that Presidents Plosser and Fisher dissented largely because they viewed problems in the economy as nonmonetary in nature. President Kocherlakota dissented because he regarded the stance of monetary policy as already appropriate.
($MACRO) Merkel’s Cabinet Backs Measures Agreed July 21 to Expand EFSF
Aug. 31 (Bloomberg) -- German Chancellor Angela Merkel’s
Cabinet approved proposed changes to the European Financial
Stability Facility, the chancellery office said.
The changes, which include expanding the EFSF to allow
sovereign bond-buying powers, were agreed on by European leaders
at a July summit and backed by ministers meeting in Berlin
today. The draft will now go be introduced to the German
parliament on Sept. 5, with lawmakers due to vote on the
measures Sept. 29.
Cabinet approved proposed changes to the European Financial
Stability Facility, the chancellery office said.
The changes, which include expanding the EFSF to allow
sovereign bond-buying powers, were agreed on by European leaders
at a July summit and backed by ministers meeting in Berlin
today. The draft will now go be introduced to the German
parliament on Sept. 5, with lawmakers due to vote on the
measures Sept. 29.
Carrefour down 4.7% after reports first-half loss. Paris supermarket chain, swung to a first-half net loss on 2.3% higher sales. The group loss was 249 million euros ($359.2 million) compared with net income of 97 million euros in the year-earlier period. Excluding exceptional items, group net income fell 49% to 153 million euros from 302 million. Sales reached 39.61 billion euros from 38.71 billion. Carrefour attributed the results to an "[unsatisfactory] performance in France:" and a "tough environment in Europe," while the group's effort in emerging markets reflected "solid growth." For 2011, current operating profit, excluding the divested DIA, should decline 15% from 2010, Carrefour said in a Wednesday statement. First-half current operating profit fell 22% to 772 million euros.
($MACRO) Japan's industrial production rose a seasonally adjusted 0.6% in July, the Ministry of Economy, Trade and Industry said Wednesday. The result was well below an average forecast for a 1.5% rise from a Nikkei and Dow Jones Newswires survey. The ministry's regular survey of manufacturing also showed firms expect industrial output to rise 2.8% in August, up from a previous forecast of 2.0% last month, but to fall 2.4% in September. However, the ministry said "industrial production is on a recovery trend after the Great East Japan Earthquake" of March, citing rises for shipments and inventory ratios, along with a fall in inventories.-MarketWatch
($MACRO) China’s consumer inflation may have tapered off, with consumer-price-index growth slowing in the remaining months of this year from a three-year high of 6.5% in July, said analysts. Mizuho Securities’ Greater China chief economist Shen Jianguang and Qiao Yongyuan at consultancy CEBM, expected CPI to grow 6.2% in August.
($RIMM) The launch of a string of well-received BlackBerry smartphones helped Research In Motion stock gain 6 percent on Tuesday and almost 50 percent since hitting a five-year low on August 8.
The smartphone maker has also been aided by Google's $12.5 billion move to buy Motorola Mobility, which analysts say could sow dissent within Android ranks and push wireless companies to more eagerly embrace alternatives to the Google software, which is used widely."It's all on the heels of Google/Motorola and what that means for the changing landscape, and there's also a little bit of what I consider excess patent fever going on," said Colin Gillis, a tech analyst at BGC Partners in New York.
Waterloo, Ontario-based RIM also holds a solid share of mobile patents, particularly in data compression, encryption and synchronization.
"It's a value name right now, it's a deep value name," Gillis said.
RIM's stock had been skidding since February, hurt by a drumbeat of negative news. The company's earnings have missed expectations and it sharply cut forecasts, while its PlayBook rival to Apple's iPad launched to dismal reviews.
RIM has launched new versions of its BlackBerry Bold, Torch and Curve smartphones this month, which have fared better than the PlayBook did with reviewers, while investors are also picking up RIM stock because of its low cost."One of the biggest factors is a general sentiment for beaten down stocks," said Elvis Picardo, strategist and vice-president of research at Global Securities in Vancouver.
"Investors are in the mood for bargain-hunting."- REUTERS
Hewlett Packard Co ($HPQ) plans to crank out "one last run" of TouchPads, days after declaring it will kill off a line of tablets that failed to challenge Apple Inc's command of the booming market.
A day after the chief of HP's personal devices division told Reuters the TouchPad might get a second lease on life, HP announced a temporary about-face on the gadget after being "pleasantly surprised" by the outsized demand generated by a weekend fire-sale.HP slashed the price of its tablet to $99 from $399 and $499 the weekend after announcing the TouchPad's demise on August 18, part of a raft of decisions intended to move HP away from the consumer and focus on enterprise clientele.
That ignited an online frenzy and long lines at retailers as bargain-hunters chased down a gadget that had been on store shelves just six weeks.
"The speed at which it disappeared from inventory has been stunning," the company said. "We have decided to produce one last run of TouchPads to meet unfulfilled demand."
HP may lose money on every TouchPad in its final production run. According to IHS iSuppli's preliminary estimates, the 32GB version carries a bill of materials of $318.
"We don't know exactly when these units will be available or how many we'll get, and we can't promise we'll have enough for everyone. We do know that it will be at least a few weeks before you can purchase," HP said in a blogpost.
Critics have blasted HP for wavering on pivotal decisions, such as its original stated intention to integrate its webOS software into every device it makes, followed by a decision to stop making webOS gadgets, including the TouchPad.
The storied Silicon Valley giant is struggling to shore up margins as smartphones and tablets eat away at its core PC business, the world's largest. On August 18, HP said it was also considering spinning off the PC division.
CEO Leo Apotheker is under immense pressure from investors unhappy with HP's back-and-forth on strategy. The former SAP chief has also been forced to slash HP's sales estimates three times since he took over last November.
In a resounding rejection of his grand vision, shareholders sent HP shares down almost 20 percent the day it announced its sweeping moves, which included a pricey acquisition of software player Autonomy. That wiped out $16 billion of value from HP in the stock's worst single-day fall since the Black Monday stock market crash of October 1987.
HP declined to comment beyond the blogpost. Shares in the company were down marginally in after-hours trade on Tuesday.
Tuesday, August 30, 2011
($MACRO) FED KOCHERLAKOTA: Inflation, unemployment signal no need to expand policy further, while there's 'no reason' to revisit the recent decision.Too-easy policy risks above-target inflation, case for additional easing should be made on merits.Undoing pledge would harm future commitments by the Fed. Conditional commitments have been a useful tool.Will abide by the Fed's pledge to retain the zero interest rate policy til mid-2013.
The European Central Bank was seen buying Italian bonds again on Tuesday afternoon after an auction of 10-year BTPs met relatively weak demand earlier in the day.
The ECB had already stepped in shortly after the auction and bought what traders described as significant amounts of 10-year paper.
"Central banks are continuing to buy (on behalf of the ECB), especially on the 10-year maturity but also on the 5-year one," one trader said.
The ECB had already stepped in shortly after the auction and bought what traders described as significant amounts of 10-year paper.
"Central banks are continuing to buy (on behalf of the ECB), especially on the 10-year maturity but also on the 5-year one," one trader said.
($IEF, $TLT) PIMCO's investment outlook
We are into the "bumpy journey" phase of our New Normal where fear, lack of policy options and loss of control can dominate relationships.
Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook.
In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds.
We prefer investing in the "cleaner" dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.
Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook.
In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds.
We prefer investing in the "cleaner" dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.
Aug. 30 (Bloomberg) -- EFG Eurobank Ergasias SA and PiraeusBank SA have used the Bank of Greece’s Emergency LiquidityAssistance program, the Financial Times reported, citing unidentified people familiar with the matter. Eurobank borrowed 3 billion euros ($4.3 billion), one dayafter Piraeus Bank secured 2 billion euros in emergency funds,the newspaper said today.
BNP Paribas SA said Tuesday that provisions it made against losses on its Greek sovereign debt holdings were agreed with auditors and authorities.
The comments came in response to a press report that the International Accounting Standards Board was unhappy with the level of write-downs made by the bank French bank and some other players.
The Paris-based bank set aside EUR534 million against its Greek bond holdings. It has EUR2.3 billion in Greek government bonds that mature before Dec. 31, 2020. Under a Greek rescue plan agreed in July, banks that participate in the bailout will lose 21% of the value of such bonds.
"BNP Paribas has made provisions for its exposure to Greece in full agreement with its auditors and competent authorities, conforming with the plan agreed on July 21," BNP Paribas said.
($AMZN) Amazon.com Inc may sell as many as 5 million tablet computers in the fourth quarter, making the largest Internet retailer the top competitor to Apple Inc in this fast-growing niche of the consumer PC market, Forrester Research said on Monday.
Amazon.com has to price its tablet "significantly" below competing products and have enough supply to meet demand, but if the company can pull this off it can "easily" sell 3 million to 5 million units in the final three months of 2011, Forrester's Sarah Rotman Epps predicted.Apple has sold almost 30 million iPads since launching its tablet in April 2010. Rival products from companies including Samsung Electronics Co, Research in Motion and Motorola Mobility have failed to mount a serious challenge to that early lead. This month, Hewlett-Packard scrapped its TouchPad after sales languished.
"Thus far, Apple has faced many would-be competitors, but none have gained significant market share," Epps wrote. "Not only does Amazon have the potential to gain share quickly but its willingness to sell hardware at a loss, as it did with the Kindle, makes Amazon a nasty competitor."
One problem with iPad rivals has been that developers have so far waited before creating a lot of applications, or apps, for the devices, Forrester noted.
Apple claims about 100,000 custom-built iPad apps, while Google's Honeycomb platform, which is the tablet version of the Android operating system, has attracted fewer than 300 apps, according to Forrester."If Amazon's Android-based tablet sells in the millions, Android will suddenly appear much more attractive to developers who have taken a wait-and-see approach," Epps said.
Amazon's Kindle e-reader is lighter and smaller than the iPad, but Apple's tablet has a browser and other services for enhanced reading and researching, Fred Wilson, a venture capital investor and principal at Union Square Ventures, said in a recent blog.
"What we all want is a hybrid of the two -- a Kindle that is a full-blown tablet computer with a browser, apps, and an OS," Wilson added. "It looks like Amazon is going to bring that to market this fall ... It looks like a killer product."
Swiss food group Nestle SA was downgraded to market-perform from outperform on Tuesday by Sanford C. Bernstein, the first time it has changed that rating since it began covering the stock in February 2002. Analyst Andrew Wood said the shares are fully valued and cash generation was disappointing. "Nestle's stock has 'benefitted' from the perfect storm of weak markets and a strong Swiss franc," said Wood. But he said the downside of the strong franc is that it "significantly dilutes Nestle's earnings per share," and the investment firm expects EPS growth in 2011 and 2012 of 9% and 10% respectively on constant currencies, but negative 7% and growth of 3% on current foreign exchange. The 12-month price target on Nestle was dropped to CHF52 from CHF64.
($SPX, $SPY) Stocks higher, massive short squeeze
A much overlooked but important factor driving stocks higher is short interest is as high as March 2009 lows and near the highs of June 2010. This can alone stimulate HFT algos to launch short squeeze trades much in evidence Monday. Volume was much lighter occasioned by Irene which made HFT trading easier. Breadth was quite positive and we might even be short-term overbought now.The VIX while declining is still elevated, NYSI is negative with a slight turn and the NYMO is definitely now overbought short-term.
$SPX, $SPY, $NDX, $QQQ, $DJI
While I am still net long, any further strength will be accompanied by more selling, as I move back toward a market-neutral posture.-D. Kass
Marc to Market: U.S. Spending Eases Q3 Worries
Marc to Market: U.S. Spending Eases Q3 Worries: News that US personal consumption expenditures rose 0.8% in July should go a long way toward easing anxiety that the world;s largest economy...
($MACRO) European Central Bank President Jean-Claude Trichet signaled the ECB may reconsider its longstanding warnings about inflation, potentially setting the stage for a lengthy pause in its rate-increase cycle.
In testimony to the European Parliament, Mr. Trichet also played down the risks of a renewed recession in the euro bloc, saying he expects growth in the common-currency area to continue at a "modest pace." While euro-zone inflation is likely to remain above the bank's 2% target in the months ahead, "risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released in early September," Mr. Trichet said.
($MACRO, $EWZ) Brazil Puts Aside Cash in Bid to Curb Prices
SÃO PAULO, Brazil—The federal government vowed to continue curbing spending for the remainder of 2011, hoping a halt in the huge rises in expenditures of recent years will ease inflation in Latin America's biggest economy and give its central bank more leeway to lower the towering interest rates.
Finance Minister Guido Mantega on Monday said the government would put aside $6.3 billion of tax revenue in an effort to curtail government spending through December.
While not a budget cut per se—most of Brazil's annual outlays are locked in through legislation—the move keeps the government from taking advantage of growing tax revenue to boost spending even further.
The measure, the government said, would strengthen government coffers and give the country more tools to respond if a renewed global downturn further undermines Brazil's economy.
Citing Brazil's success in avoiding the worst of the global crisis after its onset in 2008, Mr. Mantega said Brazil "wants to be even more prepared now."
By seeking to stem greater government outlays, and thereby ease one of the biggest factors behind Brazil's longstanding battle with inflation, the government hopes to "open space for a reduction in interest rates," he added.
Brazil's high rates contribute to economic problems, including heavy inflows of foreign capital that have driven up the value of the country's currency, crippling local industry and exporters.
The measure comes just two days before a meeting at which Brazil's central bank is expected to maintain the country's benchmark interest rate, the highest of any major economy, at 12.5%. It also comes amid renewed debate over conflicting economic policies that in essence give Brazil's government carte blanche to spend heavily while forcing the central bank to keep rates high as a buffer against price increases.
The debate gained steam in recent weeks along with the possibility of a second global downturn.
Brazil's first response to the crisis of recent years was to open the taps on public spending. That spurred economic activity and helped Brazil, after a lull in 2009, bounce back and post growth of 7.5% in 2010. With the growth, however, came massive price increases and the threat of overheating, which forced central bankers to raise rates five times so far this year.
Meanwhile, economic projections for 2011 have steadily fallen. Many economists now forecast growth of about 3%—half what the government had predicted early in the year.
If the economy were to require stimulus again, then, economists are urging the government to take the opposite course—to slash spending and give rates room to fall. That would stimulate the private sector, they argue, and give Brazil a long-sought chance to bring interest rates in line with those of other major economies.
Though investors welcomed the announcement on Monday, most economists said rates were unlikely to come down permanently until the government pursues major fiscal reforms that would slash government spending in the long term. "We do not see the announcement as the necessary condition that would allow for a new leg of sustained real interest-rate contraction in Brazil," wrote Marcelo Salomon, an economist at Barclay's Global Research, in a report. "If this tighter fiscal stance is only based on short-run adjustments... the period of lower interest rates could be short-lived."-WSJ
Finance Minister Guido Mantega on Monday said the government would put aside $6.3 billion of tax revenue in an effort to curtail government spending through December.
While not a budget cut per se—most of Brazil's annual outlays are locked in through legislation—the move keeps the government from taking advantage of growing tax revenue to boost spending even further.
The measure, the government said, would strengthen government coffers and give the country more tools to respond if a renewed global downturn further undermines Brazil's economy.
Citing Brazil's success in avoiding the worst of the global crisis after its onset in 2008, Mr. Mantega said Brazil "wants to be even more prepared now."
By seeking to stem greater government outlays, and thereby ease one of the biggest factors behind Brazil's longstanding battle with inflation, the government hopes to "open space for a reduction in interest rates," he added.
Brazil's high rates contribute to economic problems, including heavy inflows of foreign capital that have driven up the value of the country's currency, crippling local industry and exporters.
The measure comes just two days before a meeting at which Brazil's central bank is expected to maintain the country's benchmark interest rate, the highest of any major economy, at 12.5%. It also comes amid renewed debate over conflicting economic policies that in essence give Brazil's government carte blanche to spend heavily while forcing the central bank to keep rates high as a buffer against price increases.
The debate gained steam in recent weeks along with the possibility of a second global downturn.
Brazil's first response to the crisis of recent years was to open the taps on public spending. That spurred economic activity and helped Brazil, after a lull in 2009, bounce back and post growth of 7.5% in 2010. With the growth, however, came massive price increases and the threat of overheating, which forced central bankers to raise rates five times so far this year.
Meanwhile, economic projections for 2011 have steadily fallen. Many economists now forecast growth of about 3%—half what the government had predicted early in the year.
If the economy were to require stimulus again, then, economists are urging the government to take the opposite course—to slash spending and give rates room to fall. That would stimulate the private sector, they argue, and give Brazil a long-sought chance to bring interest rates in line with those of other major economies.
Though investors welcomed the announcement on Monday, most economists said rates were unlikely to come down permanently until the government pursues major fiscal reforms that would slash government spending in the long term. "We do not see the announcement as the necessary condition that would allow for a new leg of sustained real interest-rate contraction in Brazil," wrote Marcelo Salomon, an economist at Barclay's Global Research, in a report. "If this tighter fiscal stance is only based on short-run adjustments... the period of lower interest rates could be short-lived."-WSJ
Monday, August 29, 2011
EU'S REHN: SHORT-TERM EURO ZONE INDICATORS POINT TO FURTHER MODERATION OF ECON GROWTH AFTER Q2
FINANCIAL MARKETS, REAL ECONOMY NOW MOVING IN SYNC, SERIOUSLY CONCERNED CONTINUED FINANCIAL TURBULENCE MIGHT HARM RECOVERY
SHORT-TERM GROWTH PROSPECTS HAVE WORSENED COMPARED TO EU COMMISSION'S SPRING FORECAST
EXPECTS BANK FUNDING CONDITIONS TO IMPROVE AS BANK RECAPITALISATION PROCEEDS
EURO BONDS, IN WHATEVER FORM, WOULD REQUIRE MORE FISCAL SURVEILLANCE AND POLICY COORDINATION TO AVOID MORAL HAZARD
ECB'S TRICHET SAYS UNCERTAINTY REMAINS PARTICULARLY HIGH
ECB'S TRICHET SAYS THE US FACES HEAD WINDS
ECB'S TRICHET SAYS LIQUIDITY LIKELY TO BE HELD FOR PRECAUTIONARY MEASURES RATHER THAN SPENDING
SAYS RENEWED TENSION IN FINANCIAL MARKETS LED TO VERY HIGH INTEREST RATES AND VERY LOW TRADING VOLUMES IN SOME GOVT BOND MARKETS
TRICHET-CONTINUED MODERATE GROWTH EXPECTED IN EURO ZONE IN PERIOD AHEAD
INFLATION RATES ARE LIKELY TO STAY CLEARLY ABOVE 2 PCT OVER COMING MONTHS
INFLATION RISKS ARE UNDER STUDY
UNDERLYING PACE OF MONETARY EXPANSION REMAINS MODERATE
LIQUIDITY REMAINS AMPLE, COULD FACILITATE PRICE PRESSURES
TOTAL VALUE OF ECB ELIGIBLE COLLATERAL IS 13 AND 14 TRLN EUROS, CLEARLY NO SHORTAGE
BOND PURCHASES DO NOT INTERFERE WITH MONETARY POLICY
OUR ACTIONS ARE IN FULL COMPLIANCE WITH OUR INDEPENDENCE
FULL AND TIMELY IMPLEMENTATION OF JULY 21 IS OF THE ESSENCE
The personal incomes of Americans rose 0.3% in July, but spending climbed an even faster at 0.8% as auto purchases surged, reducing the U.S. savings rate last month, the government reported Monday. The increase in spending was the largest in two years, the Commerce Department said. The savings rate fell to 5.0% in July from 5.5% in the prior month. Also, disposal income adjusted for inflation fell 0.1%, marking the first decline in 11 months. Inflation, meanwhile, rose 0.4% based on the latest reading from the personal consumption expenditure price index. The core PCE, which excludes volatile food and energy costs, rose a lesser 0.2%. Economists surveyed by MarketWatch had forecast a 0.4% increase in personal income and a 0.6% rise in consumer spending. The core PCE index was expected to rise 0.2%.
(MarketWatch) -- President Barack Obama plans to nominate Alan Krueger, a Princeton University labor economist, to be chairman of the White House Council of Economic Advisers, The Wall Street Journal reported, citing an unnamed White House official. Krueger previously was an assistant Treasury secretary during the Obama admnistration and chief economist for the Labor Department during the Clinton administration. Krueger would fill the position Austan Goolsbee vacated when he returned to his teaching post at the University of Chicago.
Germany expects domestic "bad banks" holding billions of euros in Greek debt to participate in a bond swap designed to ease Athens' debt burden. "It is a decision for the two bad banks to take," a spokeswoman for the German finance ministry said, when questioned about whether bad banks set up to house the toxic assets of Hypo Real Estate and WestLB would participate. "We expect them to make a contribution." The bad banks are overseen by Germany's finance ministry. The Financial Times reported earlier on Monday that the two bad banks had yet to decide whether to join the bond swap and suggested this could threaten the goal to secure the participation of 90 percent of private investors. A spokeswoman for EAA, the bad bank spun off from troubled lender WestLB, said: "In principle we are prepared to participate, but before we can make a final decision, we need to review how something like this impacts our public sector mandate." A spokesman for FMS, the bad bank spun-off from bailed out Hypo Real Estate, said no decision about a participation had yet been taken.
FINLAND PROPOSES CREATION OF LUXEMBOURG-BASED COMPANY TO HOLD GREEK ASSETS AS SECURITY FOR NEW LOANS TO GREECE
FINNISH PROPOSAL WOULD REQUIRE GREECE TO TRANSFER ASSETS TO HOLDING COMPANY OPERATING UNDER LUXEMBOURG LAW
GREEK PRIVATISATION AGENCY WOULD OWN ALL SHARES IN THE LUXEMBOURG ASSET HOLDING COMPANY
IN CASE OF GREEK DEFAULT ON EFSF LOANS, OWNERSHIP OF HOLDING COMPANY SHARES WOULD TRANSFER TO MEMBER STATES
Monsanto ($MON)Corn Plant Losing Bug Resistance.
Corn genetically modified to thwart a voracious beetle are falling prey to that very bug in Iowa, the first time a major Midwest pest has developed resistance to a genetically-modified crop and raising concerns that some farming methods may spawn superbugs.
Wells Fargo & Co($WFC), JPMorgan Chase & Co($JPM) and Lone Star Funds were the winners of the $9.5 billion pool of U.S. commercial real estate loan sold by failed lender Anglo Irish Bank Corp, two sources familiar with the deal said.
The sale marks one of the biggest since the downturn in U.S. commercial real estate four years ago.It attracted more than two dozen buyers, said a source who was not authorized to speak on the record. The total price paid for all the loans was between $7 billion and $8 billion, the source said.
To attract a large pool of potential buyers, the portfolio was broken into eight separate pools according to the performance of the loans and the length to maturity.
The first three pools contained performing loans. JPMorgan was the winner of the first tranche comprising loans with a balance of about $1 billion to $1.5 billion, the source said.
Wells Fargo won the second and third tranches valued at about $3 billion to $3.5 billion, the source said. Wells Fargo recently bought a $1.4 billion performing loan portfolio from the failed Bank of Ireland for about par, another source said.
Global distressed debt and equity investor Lone Star won the remaining five pools of sub-performing and non-performing loans. The five pools have a face value of about $5 billion.The heads of the U.S. Federal Reserve, IMF and OECD stepped up pressure on political leaders on both sides of the Atlantic to shake off their inertia and tackle urgent economic problems.
If politicians ignore their pleas -- including a blunt call from International Monetary Fund chief Christine Lagarde to "act now" -- the slowdown in world growth and debt turmoil in Europe could morph into a deeper crisis, top monetary officials and economists warned at an annual retreat here.
"I hope they listen," said Bank of Israel Governor Stanley Fischer.
Alarm over political deadlock was as obvious a backdrop to the annual meeting of policymakers in the wilds of Wyoming as the thunderstorms that rolled over the nearby Grand Teton peaks and dumped rain on the Jackson Lake Lodge.
"The governance right now is not going through a very brilliant moment, I have to say, neither in Europe nor in the United States," Angel Gurria, who heads the multi-nation Organization for Economic Co-operation and Development, told Reuters.
"The signals that are coming out of the short-term discussions is, 'We can't even agree on about the time of the day, even if there's a big clock telling us what the time of the day is.'"
In the United States, the political impasse has thwarted moves to tame massive budget deficits which brought the nation to the edge of a debt default and cost the United States its coveted AAA credit rating from Standard & Poor's.
Lagarde, whose appearance on Saturday was a late addition and reflected her sense of urgency, delivered a hard-hitting pitch against braking spending too fast as nations struggle to rein in long-term budget deficits.
She was far from alone.
The Fed has slashed U.S. interest rates to near zero and bought $2.3 trillion in long-term securities in an effort to kick-start the recovery. With monetary policy stretched to its limits, fiscal policy is now key, Fed Chairman Ben Bernanke suggested.
"Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not as a consequence disregard the fragility of the current economic recovery," he said on Friday.
"Fortunately the two goals of achieving fiscal sustainability -- which is the result of responsible policies set in place for the longer term -- and avoiding the creation of fiscal headwinds for the current recovery are not incompatible."
Bernanke said battling long-term joblessness in the United States must be a top priority, and he called on the U.S. government to put a floor under the sagging housing market, remarks that Lagarde echoed forcefully on Saturday.
Bernanke's speech was "the shot across the bow of the government saying, 'don't keep layering expectations on the Federal Reserve, guys, you have a job to do,'" Columbia Business School Dean Glenn Hubbard said in an interview with Reuters Insider.
"The Fed is simply saying, 'We are monitoring the situation very carefully but would encourage the government, both parties, to get their act together and pass a long-term fiscal strengthening package and then perhaps short-term stimulus.
The calls from the world's economic policy elite may give some political cover to President Barack Obama, who faces a tough re-election fight next year with the U.S. unemployment rate stuck above 9 percent.
Obama is preparing for a speech after the September 5 Labor Day holiday in which he is expected to lay out proposals to boost hiring. He is reaching out to other world leaders too.
On Saturday, Obama spoke with German Chancellor Angela Merkel, and the White House said the two leaders vowed to act to shore up a global recovery that now looks at risk.
A day earlier Obama had called Lagarde to talk about fiscal policy. They agreed that the world economy needs further steps to boost growth.
Obama's potential presidential challengers, including leading Republican candidate Mitt Romney, have repeatedly blamed Obama's policies for impeding growth.
The U.S. economy grew less than 1 percent in the first half of the year and has yet to return to its pre-recession size.
EUROPE'S BANKS FACE SCRUTINY
In Europe, the biggest threat is a spreading sovereign debt crisis, and richer euro zone nations, chief among them Germany, have shown a hesitancy in picking up the tab for nations on the debt-strapped periphery.
Stress tests last month exposed the degree to which European banks are exposed to Greek and other shaky government debt, and lenders are balking at extending credit.
Lagarde and European Central Bank President Jean-Claude Trichet both said strengthening bank balance sheets is crucial.
"Although there is clarity on required policies, the uncertainty created by the political stances in both Europe and the United States poses some serious risks," Cornell University Professor Eswar Prasad said.
If politicians ignore their pleas -- including a blunt call from International Monetary Fund chief Christine Lagarde to "act now" -- the slowdown in world growth and debt turmoil in Europe could morph into a deeper crisis, top monetary officials and economists warned at an annual retreat here.
"I hope they listen," said Bank of Israel Governor Stanley Fischer.
Alarm over political deadlock was as obvious a backdrop to the annual meeting of policymakers in the wilds of Wyoming as the thunderstorms that rolled over the nearby Grand Teton peaks and dumped rain on the Jackson Lake Lodge.
"The governance right now is not going through a very brilliant moment, I have to say, neither in Europe nor in the United States," Angel Gurria, who heads the multi-nation Organization for Economic Co-operation and Development, told Reuters.
"The signals that are coming out of the short-term discussions is, 'We can't even agree on about the time of the day, even if there's a big clock telling us what the time of the day is.'"
In the United States, the political impasse has thwarted moves to tame massive budget deficits which brought the nation to the edge of a debt default and cost the United States its coveted AAA credit rating from Standard & Poor's.
In Europe, leaders are fighting over who should pay for the sovereign debt crisis in the euro zone, which has a unified regime for monetary policy but whose member nations run their own budget policies.
PHONE CALLS, SPEECHESLagarde, whose appearance on Saturday was a late addition and reflected her sense of urgency, delivered a hard-hitting pitch against braking spending too fast as nations struggle to rein in long-term budget deficits.
She was far from alone.
The Fed has slashed U.S. interest rates to near zero and bought $2.3 trillion in long-term securities in an effort to kick-start the recovery. With monetary policy stretched to its limits, fiscal policy is now key, Fed Chairman Ben Bernanke suggested.
"Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not as a consequence disregard the fragility of the current economic recovery," he said on Friday.
"Fortunately the two goals of achieving fiscal sustainability -- which is the result of responsible policies set in place for the longer term -- and avoiding the creation of fiscal headwinds for the current recovery are not incompatible."
Bernanke said battling long-term joblessness in the United States must be a top priority, and he called on the U.S. government to put a floor under the sagging housing market, remarks that Lagarde echoed forcefully on Saturday.
Bernanke's speech was "the shot across the bow of the government saying, 'don't keep layering expectations on the Federal Reserve, guys, you have a job to do,'" Columbia Business School Dean Glenn Hubbard said in an interview with Reuters Insider.
"The Fed is simply saying, 'We are monitoring the situation very carefully but would encourage the government, both parties, to get their act together and pass a long-term fiscal strengthening package and then perhaps short-term stimulus.
The calls from the world's economic policy elite may give some political cover to President Barack Obama, who faces a tough re-election fight next year with the U.S. unemployment rate stuck above 9 percent.
Obama is preparing for a speech after the September 5 Labor Day holiday in which he is expected to lay out proposals to boost hiring. He is reaching out to other world leaders too.
On Saturday, Obama spoke with German Chancellor Angela Merkel, and the White House said the two leaders vowed to act to shore up a global recovery that now looks at risk.
A day earlier Obama had called Lagarde to talk about fiscal policy. They agreed that the world economy needs further steps to boost growth.
Obama's potential presidential challengers, including leading Republican candidate Mitt Romney, have repeatedly blamed Obama's policies for impeding growth.
The U.S. economy grew less than 1 percent in the first half of the year and has yet to return to its pre-recession size.
EUROPE'S BANKS FACE SCRUTINY
In Europe, the biggest threat is a spreading sovereign debt crisis, and richer euro zone nations, chief among them Germany, have shown a hesitancy in picking up the tab for nations on the debt-strapped periphery.
Stress tests last month exposed the degree to which European banks are exposed to Greek and other shaky government debt, and lenders are balking at extending credit.
Lagarde and European Central Bank President Jean-Claude Trichet both said strengthening bank balance sheets is crucial.
"Although there is clarity on required policies, the uncertainty created by the political stances in both Europe and the United States poses some serious risks," Cornell University Professor Eswar Prasad said.
"Getting the policy balance right is tricky in itself; this adds a layer of uncertainty that will make it that much harder," Prasad said.-Reuters
Saturday, August 27, 2011
($MACRO) - The struggling U.S. economy expanded even more slowly than previously thought in the second quarter of 2011, but a breakdown of the growth suggested a new recession could be avoided.
Gross domestic product rose at an annual rate of 1 percent, the Commerce Department said on Friday, as restocking by businesses and growth in exports proved less strong than initially estimated."While confidence indicators have plummeted of late, the most timely hard numbers certainly do not suggest that the economy has fallen back into a recession," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.-Reuters
Jim Rogers about the USA
First they need to get a little education about the rest of the world and about their own economic situation and then we have to change our tax code dramatically. We have to cut spending with a chainsaw; not with an axe, with a chainsaw.
We got troops stationed in over 120 countries around the world. I mean the politicians have sent them there you know, and those military establishments are making things worse for America, not better. We got to change our total way of thinking just as the British did when the British started facing reality. - in BBC News
We got troops stationed in over 120 countries around the world. I mean the politicians have sent them there you know, and those military establishments are making things worse for America, not better. We got to change our total way of thinking just as the British did when the British started facing reality. - in BBC News
Marc to Market: Why I am Going to Worry about Italy on my Summer V...
Marc to Market: Why I am Going to Worry about Italy on my Summer V...: I am about to take a two week vacation (though will update the blog). I had some time off earlier in the summer, but it was dominated by t...
Marc to Market: Nothing New from Bernanke
Marc to Market: Nothing New from Bernanke: The much anticipated Bernanke speech in Jackson Hole is under-whelming. He did not break any new ground. While much of the recent history i...
Marc to Market: Nothing New from Bernanke
Marc to Market: Nothing New from Bernanke: The much anticipated Bernanke speech in Jackson Hole is under-whelming. He did not break any new ground. While much of the recent history i...
Friday, August 26, 2011
($MACRO)DIFFICULT DISCUSSIONS EXPECTED DURING EU/IMF INSPECTION VISIT TO GREECE NEXT WEEK
GREECE RISKS MISSING 2011 FISCAL TARGETS- SOURCE CLOSE TO EU/IMF
Greece faces tough EU/IMF talks, fiscal slip -source
ATHENS, Aug 26 (Reuters) - Greece risks missing its 2011 fiscal targets and can expect tough discussions with senior EU, IMF and ECB inspectors next week on its bailout programme, a source close to the inspectors said on Friday. EU and IMF mission chiefs for Greece will be in Athens on Monday for an inspection visit that will determine whether the debt-choked country will receive a sixth aid tranche from its international lenders to avoid bankruptcy. "There is a risk concerning the targets, which the Greeks say is due to the recession. We have some doubts whether it's entirely due to the recession," the official told Reuters. "Not meeting the targets will trigger very difficult negotiations," the official said. "It will not be easy next week." Greece must cut its budget deficit to 7.6 percent of GDP this year from 10.5 in 2010, under the terms of the EU/IMF bailout. Finance Minister Evangelos Venizelos told lawmakers earlier on Friday the government will come "very close" to meeting the targets if it fully applies the austerity measures already agreed. [ID:nATH006336] Venizelos has also said Greece's economy may contract by up to 5.3 percent this year instead of an earlier 3.9 percent projection, union officials said this week. [ID:nATH006328] But the official close to the inspectors said that, although it was likely that the economy had contracted more than forecast, it was very hard to make updated projections. "We will have difficulties making a projection for the economy because the statistics office has not published seasonally adjusted data. We don't really know where the economy stands in the short term," the official said. "It's more or less a shot in the dark." Greece's statistics office ELSTAT published no quarter-on-quarter data for April-June and said the economy had contracted by an annual 6.9 percent during these three months, on a non-seasonally adjusted basis. Unadjusted data tend to put a rosier tint on output by overstating activity from sectors such as tourism and construction which pick up during the summer.
FED TALK
FED'S BERNANKE - RECOVERY FROM CRISIS MUCH LESS ROBUST THAN HOPED
DATA SUGGEST MORE PERSISTENT DRAGS, NOT JUST TEMPORARY FACTORS, RESTRAINING GROWTH
FED TO MEET FOR TWO DAYS INSTEAD OF ONE IN SEPTEMBER TO CONSIDER TOOLS TO PROVIDE ADDITIONAL MONETARY STIMULUS, OTHER ISSUES
BERNANKE FED PREPARED TO EMPLOY TOOLS AS NEEDED TO PROMOTE STRONGER RECOVERY
BERNANKE REPEATS FED HAS RANGE OF TOOLS TO PROVIDE MORE ECONOMIC STIMULUS, DISCUSSED THOSE TOOLS AT AUGUST MEETING
FED HAS MARKED DOWN ITS OUTLOOK FOR GROWTH OVER COMING QUARTERS
EXPECT INFLATION TO SETTLE AT LEVELS AT OR BELOW 2 PCT, OVER COMING QUARTERS
FINANCIAL STRESS CONTINUES TO BE SIGNIFICANT DRAG ON ECONOMY AT HOME AND ABROAD
ECONOMIC HEALING WILL TAKE A WHILE, WILL NEED TO REMAIN ALERT TO RISKS TO RECOVERY, INCLUDING FINANCIAL RISKS
GIVEN HIGH LONG-TERM UNEMPLOYMENT, POLICIES PROMOTING STRONGER RECOVERY IN NEAR TERM WILL AID LONGER-TERM ECONOMIC PERFORMANCE
HEALING PROCESS FROM DOWNTURN SHOULD NOT LEAVE MAJOR SCARS IN U.S. ECONOMY
DATA SUGGEST MORE PERSISTENT DRAGS, NOT JUST TEMPORARY FACTORS, RESTRAINING GROWTH
FED TO MEET FOR TWO DAYS INSTEAD OF ONE IN SEPTEMBER TO CONSIDER TOOLS TO PROVIDE ADDITIONAL MONETARY STIMULUS, OTHER ISSUES
BERNANKE FED PREPARED TO EMPLOY TOOLS AS NEEDED TO PROMOTE STRONGER RECOVERY
BERNANKE REPEATS FED HAS RANGE OF TOOLS TO PROVIDE MORE ECONOMIC STIMULUS, DISCUSSED THOSE TOOLS AT AUGUST MEETING
FED HAS MARKED DOWN ITS OUTLOOK FOR GROWTH OVER COMING QUARTERS
EXPECT INFLATION TO SETTLE AT LEVELS AT OR BELOW 2 PCT, OVER COMING QUARTERS
FINANCIAL STRESS CONTINUES TO BE SIGNIFICANT DRAG ON ECONOMY AT HOME AND ABROAD
ECONOMIC HEALING WILL TAKE A WHILE, WILL NEED TO REMAIN ALERT TO RISKS TO RECOVERY, INCLUDING FINANCIAL RISKS
GIVEN HIGH LONG-TERM UNEMPLOYMENT, POLICIES PROMOTING STRONGER RECOVERY IN NEAR TERM WILL AID LONGER-TERM ECONOMIC PERFORMANCE
HEALING PROCESS FROM DOWNTURN SHOULD NOT LEAVE MAJOR SCARS IN U.S. ECONOMY
GERMANY'S ECON MINISTER SAYS FIRMLY CONVINCED THAT HIS FDP PARTY WILL SUPPORT EFSF IN PARLIAMENT
German Economy Minister Philipp Roesler said on Friday he was firmly convinced his Free Democrats, junior coalition partners in Chancellor Angela Merkel's government, would support the euro zone rescue fund in parliament.
Divisions are growing in the cabinet in the run-up to a parliamentary vote on the European Financial Stability Facility (EFSF) rescue fund to be held by the end of September.
German Economy Minister Philipp Roesler said on Friday he was firmly convinced his Free Democrats, junior coalition partners in Chancellor Angela Merkel's government, would support the euro zone rescue fund in parliament.
Divisions are growing in the cabinet in the run-up to a parliamentary vote on the European Financial Stability Facility (EFSF) rescue fund to be held by the end of September.
JPM $SPX $SPY Technical
· Short term- Today’s 1190 bearish outside day from 1189/1200 near term rally targets ends Mon’s lift from 1121.
Supports are 1156, 1147, 1137. Resists 1170/1178. Seasonals are bearish until early October.
· Long term- Damage remains. SPX is interim bearish below 1200/1227 & long term below 1250-1270, and declining 1284
200 day MA. Risks a lower-low to 1060-1080 by October. Floor at 1011. Then ‘4Q lift.
· Sentiment/Breadth/Momentum- The DSI is very oversold, but Invest Intell & AAII are not at bottom levels. Breadth/ new
52 week lows confirmed Aug 9’s new lows. Monthly momentum keeps July’s sell. The weekly sell lacks divergences seen at major troughs
Supports are 1156, 1147, 1137. Resists 1170/1178. Seasonals are bearish until early October.
· Long term- Damage remains. SPX is interim bearish below 1200/1227 & long term below 1250-1270, and declining 1284
200 day MA. Risks a lower-low to 1060-1080 by October. Floor at 1011. Then ‘4Q lift.
· Sentiment/Breadth/Momentum- The DSI is very oversold, but Invest Intell & AAII are not at bottom levels. Breadth/ new
52 week lows confirmed Aug 9’s new lows. Monthly momentum keeps July’s sell. The weekly sell lacks divergences seen at major troughs
Goldman Sachs on $BAC
Benefitting from the Buffett blessing; remain Buy rated 1
Today Bank of America announced that Berkshire Hathaway will invest in $5 billion of cumulative preferred
stock. We believe today’s investment was less about building capital and more about instilling confidence in
BAC’s stock, as the transaction provides only a minimal common capital benefit today. While this should help improve sentiment for the stock, several key overhangs still remain including the servicing settlement,
concerns over its put-back settlement and mortgage litigation risk, and macro uncertainty. While sizing these
can prove to be challenging, the market appears to be pricing in an overly adverse outcome or a massively
dilutive capital raise, neither of which we believe will happen. Even if losses related to these come out on the
high end of our expectations, we believe BAC can absorb $40 bn of losses over the next few quarters and
still have a 6% Basel III capital ratio at 4Q12.
We continue to believe BAC will take further actions to pursue non-dilutive forms of raising capital, including
selling non-core assets (similar to its international card sale) and disposing of part of its CCB stake. These
should continue to help calm market fears over the strength of its capital base.
Implications
We reiterate our Buy rating, as we continue to believe the market is overly discounting a more adverse
outcome than we foresee playing out. Additionally, we have revised our 2011 and 2012 EPS estimates from
($0.25) and $1.25, respectively, to ($0.26) and $1.20 in order to reflect Berkshire Hathaway’s $5bn
investment.
Valuation
Our 12-month price target remains $10 and is based on 8.3X our 2012 EPS estimate of $1.20.
Key risks
Key risks include housing, regulation, and further mortgage put-backs.
stock. We believe today’s investment was less about building capital and more about instilling confidence in
BAC’s stock, as the transaction provides only a minimal common capital benefit today. While this should help improve sentiment for the stock, several key overhangs still remain including the servicing settlement,
concerns over its put-back settlement and mortgage litigation risk, and macro uncertainty. While sizing these
can prove to be challenging, the market appears to be pricing in an overly adverse outcome or a massively
dilutive capital raise, neither of which we believe will happen. Even if losses related to these come out on the
high end of our expectations, we believe BAC can absorb $40 bn of losses over the next few quarters and
still have a 6% Basel III capital ratio at 4Q12.
We continue to believe BAC will take further actions to pursue non-dilutive forms of raising capital, including
selling non-core assets (similar to its international card sale) and disposing of part of its CCB stake. These
should continue to help calm market fears over the strength of its capital base.
Implications
We reiterate our Buy rating, as we continue to believe the market is overly discounting a more adverse
outcome than we foresee playing out. Additionally, we have revised our 2011 and 2012 EPS estimates from
($0.25) and $1.25, respectively, to ($0.26) and $1.20 in order to reflect Berkshire Hathaway’s $5bn
investment.
Valuation
Our 12-month price target remains $10 and is based on 8.3X our 2012 EPS estimate of $1.20.
Key risks
Key risks include housing, regulation, and further mortgage put-backs.
FED PLOSSER: FOMC statement was 'overly pessimistic,' endorses wait-and-see approach as the economic forecast hasn't 'changed very much.'
Still sees a 'very weak recovery,' argues that its a mistake to hold the benchmark rate at the record low until mid-2013.
FOMC must be aware of the risk for inflation, expects a 'long, slow slog' for the recovery.-CNBC TV
$AAPL'You've got to find what you love,' Jobs says
This is a prepared text of the Commencement address delivered by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, on June 12, 2005.
I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.
The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?
It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.
And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.
It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:
Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.
Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.
My second story is about love and loss.
I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.
I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.
I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.
During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.
I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.
My third story is about death.
When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.
This was the closest I've been to facing death, and I hope it's the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:
No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.
Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.
Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.
Stay Hungry. Stay Foolish.
Thank you all very much.
I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.
The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?
It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.
And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.
It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:
Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.
Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.
My second story is about love and loss.
I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.
I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.
I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.
During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.
I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.
My third story is about death.
When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.
This was the closest I've been to facing death, and I hope it's the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:
No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.
Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.
Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.
Stay Hungry. Stay Foolish.
Thank you all very much.
Marc to Market: Thursday in FX: Wait and See Mode
Marc to Market: Thursday in FX: Wait and See Mode: Trading in the major currencies is choppy but largely directionless. Bernanke's speech tomorrow is seen as the near-term key. The Greek si...
Greece sets 90 pct take-up rate as condition for debt swap.
Greece said on Friday it would not go ahead with a debt swap crucial to its second bailout if private sector holders of less than 90 percent of the bonds participate, failing to satisfy its international partners. The statement comes after signs that the debt swap plan is facing delays, with between 60 and 70 percent of bondholders participating so far. Greece and banking lobby group IIF, which jointly coordinate the debt swap talks, had so far presented the 90 percent participation rate as a simple target and not as a condition. The condition applies to the holders of Greek bonds maturing by 2014 or 2020, the government said in a letter sent to finance ministers around the world, according to a statement it posted on the web site of the Athens Stock Exchange. "If these thresholds (or either of them) are not met, Greece shall not proceed with any portion of the transaction described in this letter if it determines, in consultation with the official sector, that the total contribution of private sector creditors towards the financing needs of Greece and Greece's debt sustainability resulting from this transaction is insufficient to permit the official sector to support the new multi-year adjustment programme for Greece announced on July, 2011," the letter said. According to two senior Greek bankers who spoke on condition of anonymity, the letter is meant as invitation to banks to declare by Sept. 9 their non-binding interest to take part in the bond swap. "After Sept. 9, there will be a formal invitation to declare binding interest to participate, by early October," one banker said. According to a second Greek banker, the government has also slightly changed the accounting treatment of the bond value losses to be incurred by bondholders, to make them more favourable for banks. The IIF downplayed the delay with the scheme on Thursday and said it expected participation would grow as Greece made concrete proposals. Market players are watching progress on the deal closely, seeing its completion as a key condition for Greece's banking sector to start returning to normal.-REUTERS
East Coast hunkers down for Hurricane Irene
Three states declare emergencies as the storm takes aim at the Mid-Atlantic Seaboard. Hurricane scenarios run from bad to worse
With market volatility abounding, an earthquake under our belt and Hurricane Irene on the way, investors may be wondering what Steven Spielberg movie they're caught in. Could asteroids be next?
With market volatility abounding, an earthquake under our belt and Hurricane Irene on the way, investors may be wondering what Steven Spielberg movie they're caught in. Could asteroids be next?
($MACRO)Fed’s Hoenig Says Focus Should Shift to Fixing U.S.Fiscal Woes
Aug. 25 (Bloomberg) -- Federal Reserve Bank of Kansas City
President Thomas Hoenig said there’s a limit to how much more
the central bank can help the U.S. economy and that the focus
should now be on solving the country’s fiscal problems.
“We can’t do it all,” Hoenig, the central bank’s longest-
serving policy maker, said in an interview with Bloomberg
Television that airs today. “We have a problem in this country
with debt” and “if we don’t turn to the long run, we will be
dealing with overnight crises for as far as the eye can see.”
The regional bank chief, 64, joined colleagues like Dallas
Fed President Richard Fisher by saying monetary policy can’t be
expected to cure all that ails the economy, and shouldn’t be
used to target high unemployment. Hoenig, who doesn’t vote on
the Federal Open Market Committee this year, said it probably
isn’t “a surprise” to learn that he would have dissented
against the FOMC’s Aug. 9 decision to keep rates near zero
through at least mid-2013.
“Monetary policy is an important tool, it is a valuable
tool, but it is not an exclusive tool,” Hoenig said in the
interview from Jackson Hole, Wyoming, where the Kansas City Fed
is hosting the central bank’s annual symposium. Yet “it does
not solve all problems.”
Fed policy makers have tried to spur growth by holding the
target for the overnight lending rate between banks near zero
since December 2008, and by expanding the central bank’s balance
sheet to more than $2.8 trillion.
Three Dissenters
Fisher was one of three regional bank presidents to dissent
at the Fed’s most recent meeting this month, posing the most
opposition on the FOMC in almost 19 years. The Dallas Fed head
joined Charles Plosser of Philadelphia and Narayana Kocherlakota
from Minneapolis in preferring to maintain a commitment to keep
rates low for an unspecified “extended period.”
Hoenig, who has led the Kansas City Fed since 1991, said he
would probably oppose the idea of the Fed taking further action
to stimulate the economy. He said he still continues to support
the central bank’s dual mandate for achieving price stability
and full employment.
“The mandate is quite fine,” Hoenig said. “We need to
follow the mandate.”
The issue is that “we do have a lot of debt in this
country, we need to work it off, and that will take time,” he
said. “Not having a solution to fiscal policy and having an
environment where businesses are unsure of what the future will
hold has its own constraining effects on the economy.”
“One of the important issues for the U.S. economy today is
the debt load” being carried by U.S. consumers, state
governments and federal authorities, Hoenig said in a separate
interview with Bloomberg Radio.
Consumer Confidence
Claims for U.S. unemployment benefits unexpectedly rose
last week, while consumer confidence stabilized at a level near
an all-time low. Stocks fell, with the Standard & Poor’s 500
Index declining 1.2 percent to 1,163.28 at 12:31 p.m. in New
York.
The Fed can use monetary policy to “perhaps nudge the
economy in the short run,” he said. Yet “whether it has a
long-term beneficial effect is of greater debate, something that
would have to be debated. I’m not sure more short-run fixes are
necessarily good for the economy.”
Failing to lift the benchmark interest rate from near-zero
levels, and failing to have a U.S. fiscal policy that takes into
consideration long-term debt and revenue issues, puts the
economy at risk, Hoenig said. “We need to be seriously thinking
about bringing those back into line.”
‘Operation Twist’
When asked whether he would support action like that of
“Operation Twist,” the 1961 initiative by the central bank and
President John F. Kennedy’s administration to spur growth by
lowering long-term rates and keeping short-term ones unchanged,
Hoenig told Bloomberg Television, “I don’t see any reason” why
it would work.
“What’s the fundamental problem?” Hoenig said. “Is the
fundamental problem a yield curve issue? Or is the fundamental
problem that the United States and world have too much debt?”
“Would Operation Twist help solve the problem?” he said.
“If the answer is yes, go for it. If the answer is no, let’s
not.”
President Thomas Hoenig said there’s a limit to how much more
the central bank can help the U.S. economy and that the focus
should now be on solving the country’s fiscal problems.
“We can’t do it all,” Hoenig, the central bank’s longest-
serving policy maker, said in an interview with Bloomberg
Television that airs today. “We have a problem in this country
with debt” and “if we don’t turn to the long run, we will be
dealing with overnight crises for as far as the eye can see.”
The regional bank chief, 64, joined colleagues like Dallas
Fed President Richard Fisher by saying monetary policy can’t be
expected to cure all that ails the economy, and shouldn’t be
used to target high unemployment. Hoenig, who doesn’t vote on
the Federal Open Market Committee this year, said it probably
isn’t “a surprise” to learn that he would have dissented
against the FOMC’s Aug. 9 decision to keep rates near zero
through at least mid-2013.
“Monetary policy is an important tool, it is a valuable
tool, but it is not an exclusive tool,” Hoenig said in the
interview from Jackson Hole, Wyoming, where the Kansas City Fed
is hosting the central bank’s annual symposium. Yet “it does
not solve all problems.”
Fed policy makers have tried to spur growth by holding the
target for the overnight lending rate between banks near zero
since December 2008, and by expanding the central bank’s balance
sheet to more than $2.8 trillion.
Three Dissenters
Fisher was one of three regional bank presidents to dissent
at the Fed’s most recent meeting this month, posing the most
opposition on the FOMC in almost 19 years. The Dallas Fed head
joined Charles Plosser of Philadelphia and Narayana Kocherlakota
from Minneapolis in preferring to maintain a commitment to keep
rates low for an unspecified “extended period.”
Hoenig, who has led the Kansas City Fed since 1991, said he
would probably oppose the idea of the Fed taking further action
to stimulate the economy. He said he still continues to support
the central bank’s dual mandate for achieving price stability
and full employment.
“The mandate is quite fine,” Hoenig said. “We need to
follow the mandate.”
The issue is that “we do have a lot of debt in this
country, we need to work it off, and that will take time,” he
said. “Not having a solution to fiscal policy and having an
environment where businesses are unsure of what the future will
hold has its own constraining effects on the economy.”
“One of the important issues for the U.S. economy today is
the debt load” being carried by U.S. consumers, state
governments and federal authorities, Hoenig said in a separate
interview with Bloomberg Radio.
Consumer Confidence
Claims for U.S. unemployment benefits unexpectedly rose
last week, while consumer confidence stabilized at a level near
an all-time low. Stocks fell, with the Standard & Poor’s 500
Index declining 1.2 percent to 1,163.28 at 12:31 p.m. in New
York.
The Fed can use monetary policy to “perhaps nudge the
economy in the short run,” he said. Yet “whether it has a
long-term beneficial effect is of greater debate, something that
would have to be debated. I’m not sure more short-run fixes are
necessarily good for the economy.”
Failing to lift the benchmark interest rate from near-zero
levels, and failing to have a U.S. fiscal policy that takes into
consideration long-term debt and revenue issues, puts the
economy at risk, Hoenig said. “We need to be seriously thinking
about bringing those back into line.”
‘Operation Twist’
When asked whether he would support action like that of
“Operation Twist,” the 1961 initiative by the central bank and
President John F. Kennedy’s administration to spur growth by
lowering long-term rates and keeping short-term ones unchanged,
Hoenig told Bloomberg Television, “I don’t see any reason” why
it would work.
“What’s the fundamental problem?” Hoenig said. “Is the
fundamental problem a yield curve issue? Or is the fundamental
problem that the United States and world have too much debt?”
“Would Operation Twist help solve the problem?” he said.
“If the answer is yes, go for it. If the answer is no, let’s
not.”
Marc Faber on QE3 and Bernanke
I think what Bernanke will say is that they are monitoring the situation, and they will take ‘appropriate measures’ when they are required. To some extent we are in midst of QE3 already, because by announcing the Fed will keep zero interest rates until the middle of 2013, they basically encourage financial institutions to borrow short-term and to buy 10-year Treasuries.
Cramer on $BAC
Did Bank of America ($BAC) give away the store to Warren Buffett? Does it not matter? Is Doug Kass within the realm with his "Say It Ain't So, Brian"?
Here’s my take. I heard this same sort of criticism when Prince Alaweed took the historic plunge and bought a huge chunk of Citigroup ($C), the first time it imploded in 1990-1991. People thought that the store had been given away. That the dilution was ridiculous. The critics were ridiculous. He saved Citigroup.
Now Bank of America wasn’t in as bad shape as Citigroup back then. But you have to understand that the pressure on this institution’s stock was eventually going to show up on the ratings agencies’ screens. We know that they downgrade when they see stocks plummet endlessly. We saw that time and again. Even when they shouldn’t.Bank of America has a gigantic deposit base, so a run on the bank is pretty inconceivable. But notice the caveat “pretty.” We have learned that when people do not trust banks, they have a habit of needing outside help. There is no doubt in my mind that the shorts were trying to break this bank and its big shareholders, forcing the company not into a dilutive fund raise but into a handout from the government.
That would be catastrophic for bank shareholders and dreadful for the stock market.
That’s what was averted here.
So I say, three cheers for Warren. I know the market is ugly today, but you take that systemic issue off the table, and you know how much better things are now than they were. I now trust the book value. I now believe the mortgage issues will work out over time.
Does that mean I think that BAC is a double? I wish so. Can it go up 50%? I hope so -- my charitable trust owns some.
But what I care about is catastrophe here removed. We have enough over there in Europe. This is good news, and the price? Well, let's just say it’s downright cheap versus the alternative.(MarketWatch) — Japan is due to get a new leader next week, with the move potentially helping to ease the path of policy making and end the gridlock that has stymied attempts to heal the economy.
Japan’s current prime minister, Naoto Kan, confirmed Friday that he is resigning as leader of the Democratic Party of Japan, according to Japanese press reports.
“I did my best, and I did what I had to do under difficult circumstances,” Kan said, according to a translation by Dow Jones Newswires.
The widely expected move clears the way for an election for a new party leader, expected on Monday, who would then become the new prime minister.
Japan’s current prime minister, Naoto Kan, confirmed Friday that he is resigning as leader of the Democratic Party of Japan, according to Japanese press reports.
“I did my best, and I did what I had to do under difficult circumstances,” Kan said, according to a translation by Dow Jones Newswires.
The widely expected move clears the way for an election for a new party leader, expected on Monday, who would then become the new prime minister.
Jobs' new job at $AAPL could be 'chief visionary'
SAN FRANCISCO (AP) -- The end of Steve Jobs' reign as Apple Inc. CEO doesn't mean he is bowing out as the maestro of personal technology.
True to its tight-lipped style, Apple isn't spelling out how actively involved Jobs will be as the company's new chairman while he tends to his own fragile health after surviving pancreatic cancer and a liver transplant during the past seven years.
But longtime Apple watchers have no doubt that Jobs will weigh in on all key decisions and help sculpt the company's future product lineup.
"I know enough about Steve Jobs to know that as long as he has a breath in him, he will be giving direction at Apple," said Tim Bajarin, president of Creative Strategies and the dean of Apple analysts. "He is going to remain Apple's chief visionary."
In his Wednesday resignation letter as CEO, Jobs, 56, wrote that he planned to be "watching and contributing" to Apple's success as chairman, a position that had long been vacant.
In a sign of his commitment, Jobs put in a full day at Apple's Cupertino headquarters during his last full day as CEO, even though he was technically still on medical leave, said Yankee Group analyst Carl Howe.
Bajarin and other people in close contact with Apple said Jobs remained intimately involved there even as he spent 14 of the past 32 months on medical leaves of absence. During that stretch, Apple kept pumping out smash hits and became more successful than ever, with its market value swelling from $80 billion to nearly $350 billion today.
Even so, the mere specter of Apple operating without Jobs conjures unwelcome memories. After co-founding Apple in 1976 and establishing it as a technology trailblazer, Jobs was forced out in 1985. When he finally returned in 1997, the company was in danger in going bankrupt and even needed financial help from longtime nemesis Microsoft Corp. to survive.
The ongoing prosperity during Jobs' recent illnesses is a testament to the management team he assembled and schooled, and to his own ability to remain engaged and inspired even as he convalesces.
The Steve Jobs way is so deeply ingrained in Apple's DNA that analysts are convinced that new CEO Tim Cook and his key subordinates no longer need to hear from Jobs every day to know what he wants.
In a Thursday letter to Apple employees, Cook stressed he won't mess with the formula that worked so well during Jobs' 14-year tenure as CEO.
"I want you to be confident that Apple is not going to change," Cook wrote. "I cherish and celebrate Apple's unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that."
Cook also noted that he is "looking forward to Steve's ongoing guidance and inspiration."
Cook, who has run Apple during all three of Jobs' medical absences since 2004, will have ample help beyond his former boss. The other key players include marketing guru Phil Schiller, design chief Jonathan Ive, software mastermind Scott Forstall and the head of finance, Peter Oppenheimer.
"If you were trying to describe this group of people, it would be the dream team of executive management," said Howe said.
Nearly all the key Apple executives have been at the company for years, many of them joining the company around the time of Jobs' 1997 return.
The biggest area of concern is Ron Johnson, the man in charge of the Apple stores that have become the main showcase for the company's sleek devices. Johnson is leaving Apple in November to become J.C. Penney Co.'s CEO, but Howe thinks Apple won't have much problem finding another savvy merchant to replace him.
Jobs has done such a masterful job plotting Apple's progression from the iPod to the iPhone to the iPad that the next few years of new products are probably already in the pipeline. With an operating system already in place for use on a multitude of devices, it's likely that Jobs already has laid the groundwork to place Apple's technology on other gadgets with screens, including in-car navigation systems and televisions, Bajarin said.
Investors appear to be betting that Apple won't miss a beat. Apple's stock dipped $2.46, or less than 1 percent, Thursday to close at $373.72.
Things could get rocky if it becomes clear Jobs' health is getting worse. He has looked frail in his recent public appearances.
Jobs resignation letter indicated he isn't feeling well enough to be a full-time CEO. But analysts think that could just mean he has figured out he needs to focus more on his health and spend just part of his time as Apple's chief visionary.
The resignation may even turn out to be a positive for Apple because it will end the perpetual guessing game about who is going to succeed Jobs as CEO and give Cook even more of a chance to prove his management chops, said Sterne Agee analyst Shaw Wu.
Jobs' decision to step aside "is very brave," Wu said. "Some guys hold on to the last minute, but he had the foresight, the maturity level to do this. It's a huge step."
Apple's hot streak probably made the choice easier, Bajarin said. "If there ever was a time where Steve Jobs was going to make his own health his top job, this is it."
It could well be that Jobs will relish the opportunity to focus more on big-picture ideas and less on the more mundane tasks of running a company that can now be left to Cook and others, said Jay Elliot, a former Apple vice president who worked closely with Jobs in the 1980s.
"Steve is incredibly passionate about the product, his whole life is driven by the product," said Elliot, who wrote a book "The Steve Jobs Way -- iLeadership For a New Generation." "I view him as an artist making sure the final painting is a masterpiece."
True to its tight-lipped style, Apple isn't spelling out how actively involved Jobs will be as the company's new chairman while he tends to his own fragile health after surviving pancreatic cancer and a liver transplant during the past seven years.
But longtime Apple watchers have no doubt that Jobs will weigh in on all key decisions and help sculpt the company's future product lineup.
"I know enough about Steve Jobs to know that as long as he has a breath in him, he will be giving direction at Apple," said Tim Bajarin, president of Creative Strategies and the dean of Apple analysts. "He is going to remain Apple's chief visionary."
In his Wednesday resignation letter as CEO, Jobs, 56, wrote that he planned to be "watching and contributing" to Apple's success as chairman, a position that had long been vacant.
In a sign of his commitment, Jobs put in a full day at Apple's Cupertino headquarters during his last full day as CEO, even though he was technically still on medical leave, said Yankee Group analyst Carl Howe.
Bajarin and other people in close contact with Apple said Jobs remained intimately involved there even as he spent 14 of the past 32 months on medical leaves of absence. During that stretch, Apple kept pumping out smash hits and became more successful than ever, with its market value swelling from $80 billion to nearly $350 billion today.
Even so, the mere specter of Apple operating without Jobs conjures unwelcome memories. After co-founding Apple in 1976 and establishing it as a technology trailblazer, Jobs was forced out in 1985. When he finally returned in 1997, the company was in danger in going bankrupt and even needed financial help from longtime nemesis Microsoft Corp. to survive.
The ongoing prosperity during Jobs' recent illnesses is a testament to the management team he assembled and schooled, and to his own ability to remain engaged and inspired even as he convalesces.
The Steve Jobs way is so deeply ingrained in Apple's DNA that analysts are convinced that new CEO Tim Cook and his key subordinates no longer need to hear from Jobs every day to know what he wants.
In a Thursday letter to Apple employees, Cook stressed he won't mess with the formula that worked so well during Jobs' 14-year tenure as CEO.
"I want you to be confident that Apple is not going to change," Cook wrote. "I cherish and celebrate Apple's unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that."
Cook also noted that he is "looking forward to Steve's ongoing guidance and inspiration."
Cook, who has run Apple during all three of Jobs' medical absences since 2004, will have ample help beyond his former boss. The other key players include marketing guru Phil Schiller, design chief Jonathan Ive, software mastermind Scott Forstall and the head of finance, Peter Oppenheimer.
"If you were trying to describe this group of people, it would be the dream team of executive management," said Howe said.
Nearly all the key Apple executives have been at the company for years, many of them joining the company around the time of Jobs' 1997 return.
The biggest area of concern is Ron Johnson, the man in charge of the Apple stores that have become the main showcase for the company's sleek devices. Johnson is leaving Apple in November to become J.C. Penney Co.'s CEO, but Howe thinks Apple won't have much problem finding another savvy merchant to replace him.
Jobs has done such a masterful job plotting Apple's progression from the iPod to the iPhone to the iPad that the next few years of new products are probably already in the pipeline. With an operating system already in place for use on a multitude of devices, it's likely that Jobs already has laid the groundwork to place Apple's technology on other gadgets with screens, including in-car navigation systems and televisions, Bajarin said.
Investors appear to be betting that Apple won't miss a beat. Apple's stock dipped $2.46, or less than 1 percent, Thursday to close at $373.72.
Things could get rocky if it becomes clear Jobs' health is getting worse. He has looked frail in his recent public appearances.
Jobs resignation letter indicated he isn't feeling well enough to be a full-time CEO. But analysts think that could just mean he has figured out he needs to focus more on his health and spend just part of his time as Apple's chief visionary.
The resignation may even turn out to be a positive for Apple because it will end the perpetual guessing game about who is going to succeed Jobs as CEO and give Cook even more of a chance to prove his management chops, said Sterne Agee analyst Shaw Wu.
Jobs' decision to step aside "is very brave," Wu said. "Some guys hold on to the last minute, but he had the foresight, the maturity level to do this. It's a huge step."
Apple's hot streak probably made the choice easier, Bajarin said. "If there ever was a time where Steve Jobs was going to make his own health his top job, this is it."
It could well be that Jobs will relish the opportunity to focus more on big-picture ideas and less on the more mundane tasks of running a company that can now be left to Cook and others, said Jay Elliot, a former Apple vice president who worked closely with Jobs in the 1980s.
"Steve is incredibly passionate about the product, his whole life is driven by the product," said Elliot, who wrote a book "The Steve Jobs Way -- iLeadership For a New Generation." "I view him as an artist making sure the final painting is a masterpiece."
Subscribe to:
Posts (Atom)