Monday, December 31, 2012

EES: While The World Watches Fiscal Cliff, Shinzo Abe Creates Fiscal Disaster In Japan

The Yen is down 12% against the U.S. Dollar since September. While most are watching the fiscal cliff situation win Washington, Shinzo Abe is creating a fiscal canyon in Japan. Shinzo Abe has been elected with an effective platform of devaluing the Yen.

Sunday, December 30, 2012

Shinzo Abe fuels fire of Currency War in Japan

What has been a building theme for some time, central bank intervention in the markets, is going to go into overdrive in 2013, with the brewing currency war among the major central banks as each tries to devalue its way to prosperity. But don’t blame central bankers (at least not completely). Political leaders deserve a big dollop of the blame as well.

The unappreciated spark to this currency-war trend is something noted today by Opinion page columnist Dan Henniger: “A reality has become too obvious for the world’s dazed inhabitants not to notice: The greatest threat to the upward arc of human progress is the collapse of public policy making. That is the biggest cliff of all.”

In Japan, they’ve elected the seventh prime minister in six years. In Europe, they’ve raised kicking the can to an art form. In the U.S., the fiscal cliff debate shows how deadlocked, and ineffective, the government has become. In the wake of this, central bankers are stepping into the breach.

Now, this isn’t necessarily a bad thing — for equities. Indeed, stocks have had quite a nice run since Fed Chairman Ben Bernanke launched his big quantitative easing program in March 2009. So long as the whole intricate Rube Goldberg machine doesn’t collapse, all this central bank pumping should be good for stocks. Indeed Wells Capital’s Jim Paulsen, one of the biggest bulls out there, sees the S&P 500 hitting a lofty, and record, 1700 in 2013.

In Japan, the new prime minister, Shinzo Abe, was put into office on a platform that was primarily based upon forcing the Bank of Japan to ramp up its stimulus efforts, indeed to run what amounts to unlimited easing until inflation hits a certain point (2%, in this case).

Not only is Abe pressing his thumb down on the BofJ, he’s also appointed a finance minister, former prime minister Taro Aso, who will be ready to spend all those freshly printed yen, as Dennis Gartman noted this morning:

With Mr. Abe pushing for aggressive fiscal spending and an aggressive Bank of Japan and with Mr. Aso at the helm of the Ministry of Finance…to which the Bank of Japan must report…it is certain the the bank will be forced to create yen that shall be spent aggressively and perhaps even shockingly over the course of the next several months.
It isn’t very different in Europe, where the Byzantine eurocrats seem able only to keep the euro crisis from spiraling out of control. In a long newspaper interview, Germany’s Jens Weidmann, president of the Deutsche Bundesbank, said “I find it strange that politicians, who should be leading the way and making the decisions, wish to file in behind us and be guided by us.”

Henninger gave a quick “no comment” to the fiscal cliff drama, but that is the best illustration of the failure of public policy: the United States, the world’s largest economy, is being brought to the brink because its political class can’t do two basic things: pass a budget and set tax tables. In the wake of that, the central bank is acting despite the misgivings of its leadership.

Bernanke has been cajoling, imploring, and warning D.C. about the dangers of inaction all year. He has been adamant about the fact that Fed policy can’t make up for political failures. But with D.C. unable to get past itself, the Fed is filling the vacuum as best it can.

As the world’s most important central bank, the Fed is leading the way on this one, and with Bernanke adopting an essentially unlimited stimulus program, other banks are following. Until the political class, however, gets its act together, it’s hard to see how or why the emphasis on monetary policy will wane.

Writing “come together” on the side of coffee cups is a nice gesture, but it’s going to take a lot more from voters to prod the squabbling politicians across the continents, and until then, central banks are going to be very active.

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French court rejects 75 percent millionaires' tax

France's Constitutional Council on Saturday rejected a 75 percent upper income tax rate to be introduced in 2013 in a setback to Socialist President Francois Hollande's push to make the rich contribute more to cutting the public deficit.
The Council ruled that the planned 75 percent tax on annual income above 1 million euros ($1.32 million) - a flagship measure of Hollande's election campaign - was unfair in the way it would be applied to different households.

Friday, December 28, 2012

Will 'Fiscal Cliff' Accelerate Millionaire Deaths?

Because the "fiscal cliff" will not stop for death, it looks as if death's carriage may make a "kindly" stop to pick up some American millionaires this year, to paraphrase Emily Dickinson.
In 2010, after a year in which the estate tax was zeroed out altogether, Congress passed a law that set the estate tax at 35 percent and exempted all estates under $5 million, adjusted for inflation. That law expires in January 2013 when the exemption will fall to $1 million and the tax will rise to 55 percent.
Many families are faced with a stark proposition. If the life of an elderly wealthy family member extends into 2013, the tax bills will be substantially higher. An estate that could bequest $3 million this year will leave just $1.9 million after taxes next year. Shifting a death from January to December could produce $1.1 million in tax savings.
It may seem incredible to contemplate pulling the plug on grandma to save tax dollars. While we know that investors will sell stocks to avoid rising capital gains taxes, accelerating the death of a loved one seems at least a bit morbid—perhaps even evil. Will people really make life and death decisions based on taxes? Do we don our green eye shades when it comes to something this serious?

Marijuana Industry Support Grows - 2 Stocks To Own If It Hits

The news regarding the legalization of marijuana in several states hit usjust before the 2012 holiday season. While it is true that the focus of Washington, and much of the markets has been on the fiscal cliff, the legalization movement has been growing steadily.

Wednesday, December 26, 2012

EES: Euro Overvalued at current levels

Europe's demand for steel fell 8% in the last year, according to the world's largest steelmaker by volume.
Steelmaker ArcelorMittal (MTon Friday took a $4.3 billion write-down on the value of its flailing European division and said it sees little prospect for an improvement in the region's sluggish economy any time soon.
Luxembourg-based ArcelorMittal, the world's biggest steelmaker by volume, said the goodwill-impairment charge will be included in its fourth-quarter earnings. The news resulted in a downgrade by Fitch Ratings, the third by a ratings firm since August.
The significance of this information is that it shows that real demand for steel in the 'real' economy (manufacturing, shipping, etc.) is down, whereas in the U.S. it's up. For Europe, this is a bad economic sign. Similar to the Baltic Dry Index, a decline in steel indicates a decline in the real economy.

Monday, December 24, 2012

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Sunday, December 23, 2012

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Thursday, December 20, 2012

Fiscal Cliff's Dirty Secret: It's Not About Taxes At All, But Too Much Spending

There's a lot of talk right now about an impending fiscal cliff. But we already went over a cliff economically in this country a long time ago.
The current debate over tax hikes is an empty one built upon a false premise. The debate is whether raising tax rates will address our current crisis. The premise is that it is a lack of taxation that has led to the crisis. Both are hopelessly wrong.
President Obama's proposed tax increases on the top 2% of earners would fund the federal government for about eight days. Even if we taxed Americans earning over $1 million on 100% of their income, we would raise only about $600 billion in revenue.
Taxing citizens at this level is a tyranny even Europe hasn't reached, and still it would only address about one-third of our deficit.
If one actually does the math, "taxing the rich" turns out to be no real solution at all, only fantasyland rhetoric.
Every dollar the government takes is another dollar used unproductively. Every dollar removed from the private sector and wasted in the hands of bureaucrats is a dollar that will not be used to purchase goods, to pay for services or to meet a payroll.
Every dollar the government ever takes — today, tomorrow and forever — is an attack on jobs and the economy.
Instead of sitting around trying to think of new ways to vote away someone else's money, Washington leaders should finally begin to address the real crisis that has threatened us long before the current handwringing: spending.
With a $16 trillion national debt and well over $1 trillion annually in deficits, we barreled over the edge of fiscal insolvency long before this month.

Breaking: NYSE sold to ICE for 8.2 Billion

NYSE-Euronext is a 220 year old icon of global finance, but its 12 year-old Atlanta-based rival, IntercontinentalExchange (ICE) will buy it for $8.2 billion, according to a deal that has just been announced.
This revelation surprised a lot of people on the Street who thought all the exchange horse trading of 2010-2011 was over. In 2011, for example, the Justice Department blocked ICE and Nasdaq's attempt to buy the NYSE. NYSE was also stopped from merging with Germany's Deutsche Borse.

Read more:

Monday, December 17, 2012

EES: Marijuana May Be The Next Big Growth Sector

We've all seen in the news US states such as Colorado legalizing and making marijuana smoking legal.
Public support for further legalization is building. There is also talk thatmore states could soon legalize. Since this is a new growth industry, we can only speculate in what direction it will grow. But what's clear, plans to keep Marijuana illegal have gone up in smoke.

Friday, December 14, 2012

Fed Targets Foreign Banks With Stricter Capital Rules

More than two dozen foreign banks with at least $50 billion of global assets would face stricter U.S. capital rules under a Federal Reserve plan that’s aimed at lowering risks to the financial system.
The Fed staff proposed that most of the banks also be forced to comply with more stringent liquidity rules and pass stress tests analyzing how they would fare in a severe economic downturn, the central bank said today in an outline of the proposal. The board will vote today on whether to seek public comment on the plan, which would take effect in July 2015.
Deutsche Bank AG (DBK), based in Frankfurt, and London-based Barclays Plc (BARC) would be among the institutions that would have to keep more easy-to-sell assets in the U.S. and face restrictions on distributing capital to parent companies. The Fed provided $538 billion of emergency loans to the U.S. units of European banks during the financial crisis, almost as much as it did to domestic firms. That increased political pressure on lawmakers and regulators to tighten rules for all lenders.

Monday, December 10, 2012

New FX Trade Repository Launch on Track

Testing is well under way for a long-awaited repository service that will store trade data for the $4-trillion-a-day global foreign exchange market, says the Depository Trust & Clearing Corporation, which expects to go live with the new system on schedule in December.
DTCC has been working with the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, to build the trade repository as part of a looming regulatory overhaul of global financial markets.
In the wake of the global financial crisis, the Group of 20 leading economies pledged three years ago to bring trading of over-the-counter derivatives onto exchanges or approved electronic platforms before the end of 2012. They also agreed to improve overall market transparency by reporting trade data to a global trade repository.
In an interview with Dow Jones Newswires, David Thomas, who is managing the project for DTCC, said it remains on course to meet this deadline.
"We've had around 22 firms in doing some form of testing and the majority of submissions are now successful," he said.

Europe clings to scorched-earth ideology as depression deepens

The strategy of triple-barrelled contraction across a string of inter-linked countries has been the greatest policy debacle since the early 1930s. The outcome over the last three years has been worse than forecast at every stage, and in every key respect.
The eurozone has crashed back into double-dip recession. It will contract a further 0.3pc next year, according to a chastened European Central Bank. The ECB omitted mention of its own role in this fiasco by allowing all key measures of the money supply to stall in mid-2012, with the time-honoured consequences six months to a year later.
The North has been engulfed at last by the contractionary holocaust it imposed on the South. French car sales crashed 19pc last month, even before its fiscal shock therapy -- 2pc of GDP next year. The Bundesbank admitted on Friday tore up its forecast on Friday. Germany itself is in recession.
The youth jobless rate has reached 58pc in Greece, 55.8pc in Spain, 39.1pc in Portugal, 36.5pc in Italy, 30.1pc in Slovakia, and 25.5pc in France, with all the known damage this does to the life-trajectory of the victims and the productive dynamism of these economies.
EU policy elites blame "labour rigidities". The United Nation’s economic arm UNCTAD counters that the EU demand for "wage compression" is itself perpetuating the crisis.

Sunday, December 9, 2012

Financial education evades even school officials

More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.
In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school.
Charles Ramsey, president of the school board, says he needed that $2.5 million upfront, but the district didn't have it.
Why would you leave $25 million on the table? You would never leave $25 million on the table.
"We'd be foolish not to take advantage of getting $25 million" when the district had to spend just $2.5 million to get it, Ramsey says. "The only way we could do it was with a [capital appreciation bond]."
Those bonds, known as CABs, are unlike typical bonds, where a school district is required to make immediate and regular payments. Instead, CABs allow districts to defer payments well into the future — by which time lots of interest has accrued. 

Friday, December 7, 2012

US Congress bans word 'lunatic' in federal legislation

Who says Washington can’t get anything done?
Our duly elected representatives have a reputation for being forever locked in disagreement, but apparently they can reach a conclusion when facing issues of linguistic politics. On Wednesday, the House of Representatives voted 398-1 in support of a bill banning the use of the word “lunatic” in all federal legislation, the BBC reported.
The House vote comes after the Senate approved the motion in May. The bill, which will now be passed on to President Obama for his signature, is intended to erase outdated or derogatory terms from the U.S. legal code.

Read more:

Thursday, December 6, 2012

Islamic finance faces growth challenges

A steady flow of women wearing hijabs, or Muslim head veils, enter HSBC's Amanah branch in the Malaysian capital of Kuala Lumpur during lunch hour.
It's brisk business for the UK lender, which was one of the first global banks to offer Islamic finance - a field that is slowly starting to rival conventional banking in predominantly Muslim countries such as this one.
Islamic finance is based on gaining profits in a socially responsible manner. 

Wednesday, December 5, 2012

EU talks on banking supervision end without agreement

EU finance ministers have failed to reach agreement on setting up a single supervisor for eurozone banks after a meeting in Brussels.
Establishing a single supervisor under the European Central Bank (ECB) is seen as the first step in setting up a Europe-wide banking union.
But German and French ministers in particular clashed over the plans.
German Finance Minister Wolfgang Schauble raised concerns about the scope of ECB powers.
He warned that giving the ECB final say on the supervision of eurozone banks could compromise its independence.
Mr Schauble also reiterated his view that it was not reasonable to expect one institution to supervise all 6,000 European banks.
"It would be very difficult to get an approval from German parliament if [the deal] would leave the supervision for all the German banks to European banking supervision," Mr Schauble said.
"Nobody believes that any European institution would be capable of supervising 6,000 banks in Europe."
He also said there had to be a "Chinese wall" between supervision and monetary policy at the ECB.
His French counterpart Pierre Moscovici said the position of France was "steadfast" in support of the proposals.
Cypriot finance minister Vassos Shiarly, who chaired the meeting, called for another gathering to be held on December 12 in the hope of striking a deal.
EU officials are anxious that an agreement is reached before the end of the year.
The plans are seen as central to Europe's response to the eurozone debt crisis and global financial crisis.
"It is of primordial importance that an agreement be reached by the end of the year," said EU economic affairs commissioner Olli Rehn. "It is a test that Europe cannot afford to fail."

Tuesday, December 4, 2012

Global Banking Under Siege as Nations Tighten Local Rules

Global banking, a model promoted for more than 30 years by financial conglomerates cobbled together through cross-border mergers, is colliding with the post-crisis reality of stricter national regulation.
Daniel K. Tarullo, the Federal Reserve governor responsible for bank supervision, announced plans last week to impose the same capital and liquidity requirements on the U.S. operations of foreign lenders as on domestic companies. The U.K. and Switzerland also have proposed banking and capital rules designed to protect their national interests.
Regulators want to curtail risks exposed after global banks such as New York-based Citigroup Inc. (C), Edinburgh-based Royal Bank of Scotland Group Plc and Zurich-based UBS AG (UBSN) took bailouts in the biggest financial crisis since the Great Depression. Forcing lenders to dedicate capital and liquidity to multiple local subsidiaries, rather than a single parent, may undermine the business logic of a multinational structure.

GFT leaves retail US Forex

Important Announcement GFT has made the difficult business decision to cease supporting U.S. retail forex trading; rather, we are focusing on our institutional relationships which exist in the U.S and globally. As part of this decision, all U.S. retail forex customers have been placed on a position closing only basis as of 7 PM EST, Sunday December 2, 2012. We understand that this is an inconvenience for you, so we are working to make arrangements with one of our high quality institutional partners to accept the GFT U.S. retail forex accounts. We expect that your forex account will return to its normal status soon so that you can continue trading forex markets normally. Please note that your forex trading experience will remain the same after this transition. Account holders will receive additional communications from GFT in the future to continue to provide more information to you about this transition. Please contact GFT Customer Service at: 800 465-4373 or 616 956-9273 with any questions. Again, we apologize for the inconvenience this may have caused you this evening, but we believe this is the best course of action for both you, our customer, and GFT.