by ilene - July 29th, 2015 11:15 pm
Every election needs an organizing catchphrase and that goes doubly for the Republican presidential race, with 16 candidates having entered the fray and more on the way. I think I have the perfect one for the moment: “You’ve been Trumped!” After all, one striking thing about the Republicans, now that they’ve morphed into the party of war, is that any new candidate is obligated to out-militarize his opponents, no matter what they've claimed they’d do. This has given the old World War I trench-warfare phrase going “over the top” (that is, over the parapet to attack) new meaning.
Take for example Donald Trump. On entering the race, he promptly Trumped his competitors by claiming that he was nothing short of a military genius and swearing that, for our present war in the Middle East, he would instantly find a “General Patton” or a “General MacArthur,” that is, a leader capable of finally putting our military in the win column. But for him generals were a secondary concern because Commander-in-Chief Trump has his own unstoppable plan for destroying the Islamic State. Here’s how he put it: “Take back the oil. Once you go over and take back that oil, they have nothing. You bomb the hell out of them, and then you encircle it, and then you go in. And you let Mobil go in, and you let our great oil companies go in. Once you take that oil, they have nothing left." Encircle it, yes!
And the ante’s only going up. By now, saying that, on your first day in the Oval Office, you’ll tear up the Iran nuclear accord (should it pass Congressional scrutiny in the first place) is chump (or possibly Trump) change — and so is the idea that American ground troops must be sent into Iraq War 3.0. Candidate Rick Santorum made headlines by calling for 10,000 of them to be dispatched to Iraq and was promptly Trumped by Senator Lindsey Graham, who saw his 10,000 in Iraq and raised him 10,000 more in Syria, and they both were Trumped by Senator Marco Rubio who threatened to deploy “devastating” American air power while riffing…
by ilene - July 29th, 2015 9:33 pm
I hope you’ll enjoy this interview with Mark Ames: Naked Capitalism: “We are in the business of making trouble.”
It’s unlocked only for the next 48 hours, so please check it out soon!
Also, there’s one small correction that didn’t get into the version that Mark put up. Hopefully it will be revised soon, but in case you see the article before Mark makes the update, I make a statement about “negative interest rates” that should read “negative real interest rates”.
This year’s political drama in Greece stands out as perhaps the least-understood, worst-reported major story of 2015.
Greece is mired in debt, and locked into the Euro monetary system, which means Greece’s political destiny is in the hands of the European Central Bank, the IMF and the powerful nations that dominate the Eurozone, Germany and France —and not in the hands of Greece’s “demos,” its voting public.
The implications of Greece’s political-financial struggles are huge—we could be seeing the beginning of the end of not only the Euro monetary union, but also the half-baked EU political union as well. We could also see a more globalized unraveling, but thanks to the financial world’s intentionally shady machinations, we won’t know until we know. Greece is also a major ideological battleground between a re-emerging and more radicalized western Left—Syriza—and entrenched neoliberalism, which has dominated the political ecosystem for the past few decades. The outcome could affect the fate of a lot of fledgling neo-leftist politics across the globe, and in the West in particular.
Finance stories are always complicated and by design murky—add in the layers of EU politics, and you have a story that can only be told by someone with deep finance knowledge, a grasp of the larger political and cultural inputs, and the rare ability to translate it all into vivid, sharp-tongued, and aggressively readable prose.
Which is why you should be following Yves Smith great
by ilene - July 29th, 2015 7:56 pm
Courtesy of Mish.
Impact of the "Selfie"
Are you into Facebook, Instagrams, and "Selfies" (taking lots of pictures of yourself and sharing them instantly)?
I'm not but, but in my travels I see lots of it. The popularity of sending "selfies" has even influenced retail sales and women's fashion. After all, one cannot be seen in the same outfit too often!
Here's an amusing video that discusses the impact of the "selfie".
In the above video, FT’s Andrea Felsted visits online fashion retailer Asos to see how it is adapting its business model in the era of the selfie.
Link if video does not play: How the Selfie Is Shaking Up Retail.
Cheap Dresses and Rentabag
Allegedly it's a faux pas to be seen too often with the same bag. So enter the "rentabag". I had to look this up. There's a huge selection of choices.
- Bagborroworsteal: Rent Luxury Bags Online – Huge Selection of Designer Bags – Get A New Bag Every Month
- Supursestyle: Rent designer handbags at affordable prices
- Bagdujour: Handbags for rent – Wear a Beautiful Designer Bag Today Authentic, Affordable & Convenient
- Renttherunaway: Fashion accessories, jewelry, handbags, and wraps for women
- Armgen: The Netflix of handbags. We rent trendy designer handbags at a fraction of the cost!
- Rentmeahandbag: Rene Caovilla Shoes Sandals
- Lovemeandleaveme: Buy designer bags outright, hire bags or use payment plan options
- Bagtropolis: Buy, layaway and rent borrow luxury pre-owned authentic designer handbags, bags, purses, pocketbooks at affordable prices, including Balenciaga, Celine
- Luxurylana: Rent from your favorite designer handbag online
- Monluxe: MonLuxe the european bag and jewelry rental company. Delivery in 24 hours in France, Benelux, Germany Italy, Spain, Portugal
There's even a site promoting Make Extra Money Renting Handbags and Purses.
Really Expensive Bags
$100,000 for a bag? That is the full price though, not a rental. Phew!
For comparison purposes, who wouldn't want this "beautiful" Valentino Leopard Calf Hair Rockstud Trapeze Bag, bargain-basement priced at $3,995?
by ilene - July 29th, 2015 3:30 pm
Courtesy of Charles Hugh-Smith of Of Two Minds
When stagnation grabs exporting nations by the throat, the universal solution offered is devalue your currency to boost exports. As a currency loses purchasing power relative to the currencies of trading partners, exported goods and services become cheaper to those buying the products with competing currencies.
For example, a few years ago, before Japanese authorities moved to devalue the yen, the U.S. dollar bought 78 yen. Now it buys 123 yen--an astonishing 57% increase.
Devaluation is a bonanza for exporters' bottom lines. Back in late 2012, when a Japanese corporation sold a product in the U.S. for $1, the company received 78 yen when the sale was reported in yen.
Now the same sale of $1 reaps 123 yen. Same product, same price in dollars, but a 57% increase in revenues when stated in yen.
No wonder depreciation is widely viewed as the magic panacea for stagnant revenues and profits. There's just one tiny little problem with devaluation, which we'll cover in a moment.
One exporter's depreciation becomes an immediate problem for other exporters: when Japan devalued its currency, the yen, its products became cheaper to those buying Japanese goods with U.S. dollars, Chinese yuan, euros, etc.
That negatively impacts other exporters selling into the same markets--for example, South Korea.
To remain competitive, South Korea would have to devalue its currency, the won. This is known as competitive devaluation, a.k.a. currency war. As a result of currency wars, the advantages of devaluation are often temporary.
But as correspondent Mark G. recently observed, devaluation has a negative consequence few mention: the cost of imports skyrockets. When imports are essential, such as energy and food, the benefits of devaluation (boosting exports) may well be considerably less than the pain caused by rising import costs.
Japan is a case in point. The massive devaluation of the yen was designed to boost Japan's exports and rocket-launch corporate profits, which was then supposed to drive a virtuous cycle of higher wages and increased employment.
by ilene - July 29th, 2015 2:47 pm
Courtesy of Mish.
Fed Says Little, Sheds No Light
If the Fed had a clue as to what it will do in September, it likely would have said so. Instead, it reiterated the same hash we have been hearing for years.
Here is the complete text of today's FOMC Press Release.
Information received since the Federal Open Market Committee met in June indicates that economic activity has been expanding moderately in recent months. Growth in household spending has been moderate and the housing sector has shown additional improvement; however, business fixed investment and net exports stayed soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey?based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation
by ilene - July 29th, 2015 2:01 pm
By Jacob Wolinsky at ValueWalk.
6 Great Investors Explain What Makes Stocks Rise via Barron's
Michael Mauboussin, Managing director, Global Financial Strategies, Credit Suisse Group AG (ADR) (NYSE:CS): Capital allocation is especially relevant today, said Mauboussin, because “return on invested capital is high, growth is modest, and corporate balance sheets in the U.S. have substantial cash.” Yet, very few CEOs are trained in what is senior management’s most fundamental responsibility.
The proclivity to return cash to shareholders hasn’t changed over the decades, Mauboussin said, although the means have shifted to favor buybacks over dividends. But price and value ought to be the determinants of any capital-allocation decision. A dividend treats all shareholders alike, he observed, whereas management that buys back overvalued stock benefits only the sellers.
Bruce Greenwald, Professor at Columbia Business School and academic director of Columbia’s Robert Heilbrunn Center for Graham & Dodd Investing: Greenwald noted that human-resources management too often is given short shrift by companies, and ought to be included in the capital-allocation mix. In particular, he singled out succession planning as “something done badly,” even by good managers. “Without good succession planning, the only place your [price/earnings] multiple has to go is down,” he said.
Meryl Witmer, General partner, Eagle Capital Partners: Witmer, also a Roundtable member, called out those who are “pro-buyback at any price” on the logic that reduced share count boosts earnings per share. “I view that as returning
by ilene - July 29th, 2015 10:55 am
Courtesy of Pam Martens.
Photo of the Trading Floor at the New York Fed (Obtained by Wall Street On Parade from an Educational Video Despite Stonewalling by the New York Fed)
Your humble editor and publisher of Wall Street On Parade might have had a little something to do with a growing mutiny in Congress. Back on November 4, 2012 and again on July 25, 2013, we blew the whistle on an obscene, secret entitlement program between the Fed and the too-big-to-fail banks: a century old program where every year, boom or bust, despite the overall level of interest rates in the markets, the Fed pays out a risk-free, guaranteed 6 percent dividend to its member banks. (All Fed member banks get the dividend but the lion’s share goes to the biggest Wall Street banks because their capital dwarfs all other banks.)
Now, after more than a hundred years, there’s a plan in Congress to shrink that payout to 1.5 percent and fix our crumbling roads with the savings. Only banks with $1 billion or more in assets would be affected.
The Federal Reserve mandates that its member banks subscribe to “stock” in an amount equal to 6 percent of their capital and surplus. The banks have to post half that amount with the Fed upon becoming a member; the other half is subject to being called upon. The deposited capital translates into a corresponding share of “stock” in one of the 12 regional Fed banks. (The biggest Wall Street banks, of course, prefer holding their shares in their crony New York Fed.) The “stock” then pays out the 6 percent dividend to shareholders, meaning the banks.
If the bank had a hand in crashing the economy twice in the past century, say in 1929 and again in 2008 – like JPMorgan and Citigroup – it gets an extra bonus: its 6 percent dividend is tax-exempt. That’s because the statutes say that if the bank’s shares in the Fed were acquired prior to March 28, 1942 the bank doesn’t have to pay corporate taxes on it. JPMorgan’s roots reach into the eighteenth century while Citibank, part of Citigroup, traces its founding to the City Bank of New York in 1812. CEOs of…
by ilene - July 28th, 2015 11:04 pm
Courtesy of Mish.
Economists were shocked by the plunge in the Conference Board Consumer Confidence Index this morning, well below the any economist’s guess in Bloomberg’s Econoday Forecast.
The consensus estimate was 99.6. The consensus range was 97.0 to 102.0. And the actual result … 90.9.
Consumer confidence has weakened substantially this month, to 90.9 which is more than 6 points below Econoday’s low estimate. Weakness is centered in the expectations component which is down nearly 13 points to 79.9 and reflects sudden pessimism in the jobs outlook where an unusually large percentage, at 20 percent even, see fewer jobs opening up six months from now.
A striking negative in the report is a drop in buying plans for autos which confirms weakness elsewhere in the report. Inflation expectations are steady at 5.1 percent which is soft for this reading.
How many people does the conference board survey each month? The answer is 3,000. Supposedly that’s all it takes to determine car sales, job prospects, economic slowing, home purchases, etc.
Bloomberg reports “While the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month.”
I will return to that idea in a bit. But first let’s take a look at what others say.
Risk for the Economy
Please consider Plunge in Consumer Confidence Exposes Risk for U.S. Economy.
“A less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the situation in Greece and China, appears to have shaken consumers’ confidence,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.
Really? US consumers care about the Chinese stock market and Greece? Since when?…
by ilene - July 28th, 2015 7:22 pm
Gordon T. Long (at Macro Analytics) talks with John Rubino (Dollar Collapse) about the current developments in Greece and the seemingly impossible choices facing the Greek people and their government.
THE ACCOUNTING CHARADE
To better understand how Greece and the EU found itself in this perplexing problem, John Rubino traces the history of Greece prior to joining the EU. John doesn't hold back in describing the manipulation of economic numbers carried out by Greece, abetted by Goldman Sachs to gain entry into the EU. Greece never met the Maastricht Treaty bar but nevertheless was granted entry. Goldman Sachs and the International Bankers were the big winners. In the short term so were the Greek people.
John further goes on to detail how cheap money suddenly became available to Greece and the other poor peripheral countries. The exploding growth in debt to them was perceived and treated to be debt backed by the EU. John describes it as:
"It was like giving a teenager an unlimited credit card with no supervision. You should have expected nothing less!"
The situtation in the EU with its peripherals was actually not to dis-similar to the bankers' "game plan" regarding US Agency debt (Fannie Mae and Freddie Mac) which were also perceived to be backed by the US government.
When these agencies got into serious financial trouble during the Financial Crisis the US government accepted the liabilities for these agencies and placed them in "conservatorship" thereby burdening US tax payers with the negligent lending practices they had calously incurred. EU tax payers are likewise being handed the bill for what can only be described as a wonderful party of staggering pension benefits and limited taxation for the Greek people and a lending bonanza for the bankers.
PARTY IS OVER AND THE HANGOVER BEGINS
The financing of the debt incurred cannot possibly be financed by Greece's economy nor absorbed by the EU, for fear that the other delinquent debtor nations will demand the same easy way out.