General Mills to cut 850 jobs
by ilene - May 22nd, 2012 3:27 pm
General Mills to cut 850 jobs (via AFP)
US food giant General Mills said Tuesday it would cut 850 jobs globally in a restructuring plan aimed at cutting costs. General Mills, maker of Green Giant frozen vegetables, Cheerios breakfast cereal and Pillsbury products, also said it would write down some production equipment as part of the restructuring…
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DiggThe Other Euro Flaw
by ilene - May 22nd, 2012 2:02 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
We have not been shy to point out the potential (and now proven) flaws in the Euro experiment (here, here, and here for example) over the past year or so but UBS reminds us that while most people remain fixated on the absence of a fiscal transfer union in so large a monetary union (to offset incidents of inappropriate monetary policy) as Eurobonds and Federalism come back to the fore; it is the second flaw – the absence of an integrated banking system (backed implicitly by a credible lender of last resort) – that should be getting front-page headlines. As Niall Ferguson noted at Zeitgeist this morning, "Structural reforms will work but will not work this week" and in the meantime, TARGET2 balances grow out of control and the longer the 'problem' remains, the worse it becomes leaving an implicit infinitely supported firewall as the only interim solution. While most who foresaw the Euro as implicitly leading to federalism were right, it seems the link to a German dominance (of ECB rulings and general fiscal and monetary decisions) has been the ultimate outcome. While an integrated banking system would do nothing to change the relative competitiveness or growth issues that plague Europe, the 'essential' internal capital flows would be sustained. Is this sort of integration a realistic prospect? The politics is not especially propitious.
UBS – The other flaw with the Euro
Before the ink had dried on the Treaty of Maastricht, economists gathered to point out the two fundamental problems that existed. The first was the absence of a fiscal transfer union in so large a monetary union to offset incidents of inappropriate monetary policy. Fiscal policy transfers cannot create equality of economic performance, of course, but they can smooth the rough edges of a monetary union.
Much of the current crisis of the Euro has focused on the fiscal failings of the union. This is, perhaps, an inevitable consequence the current circumstances. A partial transfer mechanism is in place which is fuelling national resentments. Governments have focused, occasionally with a certain amount of hypocrisy, on the need for fiscal rules to be rigidly enforced on others (few governments have followed the rules to date). Fiscal transfers are a visible cost to taxpayers in parts of the union, and so…
JPM Hires Ex-SEC Chief Enforcement Officer to Help Prop Trading Loss Damage Control
by ilene - May 22nd, 2012 1:57 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
For anyone who had doubts that the JPM CIO debacle was only just starting, the just broken news by Bloomberg that the firm has hired former SEC enforcement chief William McLucas "to help respond to regulatory probes of the firm’s $2 billion trading loss" should put all doubts to rest. Because the last thing JPM needs now is to be perceived as engaging in even more regulatory capture (its current general counsel was also previously a head of enforcement at the SEC) . Yet because it is doing precisely this, means that the offsetting cost, namely the fallout that will be associated with the CIO unwind if and when completed (and we will know for sure when the Q2 earnings are released at the latest), will be fast and furious.
From Bloomberg:
The lender’s May 10 announcement of the “self-inflicted” loss spurred reviews by the SEC, Commodity Futures Trading Commission, Office of the Comptroller of the Currency and Federal Bureau of Investigation. JPMorgan has said the losses may increase. Kristin Lemkau, a company spokeswoman, didn’t have an immediate comment on the hiring. The people requested anonymity because the appointment hasn’t been made public.Investigators may focus on how JPMorgan disclosed the risk of losses, SEC Chairman Mary Schapiro said today in congressional testimony. The agency is studying the veracity of JPMorgan’s first-quarter reports, she said.
McLucas, a Washington-based partner at law firm Wilmer Cutler Pickering Hale & Dorr LLP, led the SEC’s enforcement division from 1989 to 1998. He represented board committees in the collapses of Enron Corp. and WorldCom Inc. McLucas, 61, didn’t reply to a phone call and e-mail seeking comment.
McLucas is not Dimon's first foray into reg capture:
JPMorgan’s general counsel and most senior lawyer, Stephen Cutler, also previously served as the head of enforcement at the SEC. Cutler, 50, worked with McLucas at Wilmer from 2005 to 2007, before being hired by JPMorgan.
So… Time to revisit that stress test analysis Zero Hedge broke yesterday which caps the CIO loss at about $31.5 billion?
Barron’s Interviews Ray Dalio
by ilene - May 22nd, 2012 1:16 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
While hedge fund manager Ray Dalio generally stays under the radar, it is always interesting to read the thought's of the man who runs the world's largest hedge fund shop. This weekend Barron's did an extensive interview with the man, and it is worth the full read. He does a very interesting comparison of Europe now with "America" post revolution in terms of structure. Some excerpts below:
We're in a phase now in the U.S. which is very much like the 1933-37 period, in which there is positive growth around a slow-growth trend. The Federal Reserve will do another quantitative easing if the economy turns down again, for the purpose of alleviating debt and putting money into the hands of people.
We will also need fiscal stimulation by the government, which of course, is very classic. Governments have to spend more when sales and tax revenue go down and as unemployment and other social benefits kick in and there is a redistribution of wealth. That's why there is going to be more taxation on the wealthy and more social tension. A deleveraging is not an easy time. But when you are approaching balance again, that's a good thing.
How do you expect Europe to fare?
Europe is probably the most interesting case of a deleveraging in recorded history. Normally, a country will find out what's best for itself. In other words, a central bank will make monetary decisions for the country and a treasury will set fiscal policy for the country. They might make mistakes along the way, but they can be adjusted, and eventually there is a policy for the country. There is a very big problem in Europe because there isn't a good agreement about who should bear what kind of risks, and there isn't a decision-making process to produce that kind of an agreement.
We were very close to a debt collapse in Europe, and then the European Central Bank began the LTROs [long-term refinancing operations]. The ECB said it would lend euro-zone banks as much money as they wanted at a 1% interest rate for three years. The banks then could buy government bonds with significantly higher yields, which would also produce a lot more demand for those assets and ease the pressure in countries like Spain and Italy. Essentially,…
OECD warns eurozone crisis stunting global recovery
by ilene - May 22nd, 2012 12:06 pm
OECD warns eurozone crisis stunting global recovery (via AFP)
Europe came under mounting pressure Tuesday to take action to boost growth as the OECD warned that the eurozone crisis has worsened and poses the greatest risk to a recovery for the global economy. On the eve of a European summit, the head of the International Monetary Fund added her voice to the clamour…
Facebook shares pummeled again
by ilene - May 22nd, 2012 12:03 pm
Facebook shares pummeled again (via AFP)
Facebook shares fell further Tuesday even as US markets pushed higher, with investors voting with their feet on what was just a week earlier the most-awaited IPO in years. At 1530 GMT on the second full day of trade after its much-anticipated Friday debut, the shares were at $33.28, down from Monday…
What Is Wealth?
by ilene - May 22nd, 2012 10:30 am
Courtesy of Charles Hugh Smith from Of Two Minds
We all think we know what wealth is, but sometimes the "obvious" misses the mark.
Asking "what is wealth?" seems needless because we all know what wealth is: never having to work again, endless leisure, endless consumption of the "good things of life," being waited on hand and foot, luxurious belongings, vehicles and homes, a life of travel and sport, trust funds, stacks of secure gold, and so on.
All this is "obvious," but is that certainty illusory? There are many people with $2 million in net worth, a significant number with $20 million, and more than a few with $200 million. All would be considered wealthy by the average household earning $63,000 annually with a total net worth of less than $100,000, not to mention the 61 million American wage-earners who pull down less than $20,000 a year who own negligible net worth.
Those with a mere $2 million may not reckon themselves wealthy, if their eyes are fixed on those with $20 million. But if a wealthy person suddenly discovers they are riddled with fast-growing cancer, then they quickly lose interest in financial wealth except in terms of what medical treatment it can buy.
There really isn't much more modern medicine can do for someone worth $200 million than it can for someone worth $2 million; once one's life and health are at risk, then conceptions of "wealth" are drastically reordered: health is wealth, and nothing else matters.
Once lost, health is difficult to restore, and financial wealth is no longer the key metric. The graveyards are full of extremely wealthy people who died "before their time."
A life of leisure may not be all it's cracked up to be, either. Whether it is paid or not, work is the foundation of meaning and identity. Those without work become depressed, those who retire often fade and die, and those with no goals or work ethic become dilettantes who enrich various therapists and pyschiatrists with their ailments and unhappinesses.
It's not just leisure that's wealth, it's control of one's work life.
We might also ask if wealth correlates all that closely with happiness. Judging by the hordes of wealthy people who are drugged-out, alcoholic, and in permanent therapy, we can surmise the correlation is not quite as strong as the "financial wealth is everything" PR would…
Youth joblessness near crisis peak: ILO
by ilene - May 22nd, 2012 3:07 am
Youth joblessness near crisis peak: ILO (via AFP)
Youth joblessness is almost back at its peak following the outbreak of the global economic crisis and is unlikely to ease until at least 2016, the International Labour Organization warned Tuesday. The ILO said nearly 75 million youths or 12.7 percent of people aged 15 to 24 will be out of work this…
Greek Voters Need to Look Beyond the Lies of Bloomberg, Merkel, ECB, IMF, Ekathimerini; Greece Nightmare Coming or Already at Hand?
by ilene - May 22nd, 2012 2:45 am
Courtesy of Mish
A half-baked editorial on Bloomberg, full of one-sided distortion, warns Greek Voters Need to Look Beyond Syriza’s Dangerous Lies.
Tsipras and his Syriza party are selling the Greek people a falsehood: namely, that Greece can renounce the terms of its bailout agreements with the euro-area governments and still receive their money. If voters believe him, and he attracts enough votes in elections on June 17 to follow through with his threats, then his country, Europe and the global economy will live for years with the consequences.
Tsipras hardly has a mandate — he won 16.8 percent of the vote on May 6, and may increase that to 20 percent or more in June. But polls suggest Syriza is now fighting for first place with the center-right New Democracy party. In Greece, that matters, because the top party gets an extra 50 seats in the 300-seat parliament.
Europe’s politicians, across the political spectrum, need to make clear the distinction between Syriza and other parties that disagree with Europe’s austerity strategy. They need to say, repeatedly, that they want to help Greece, but they cannot, and it cannot remain in the euro, if its leaders simply abandon the commitments the country signed.
Greeks need to know that when they vote on June 17. And they need to know that what Syriza and its young leader are telling them is a lie.
Snakeoil vs. Lies
It's certainly true that it is highly unlikely for Greece to stay in the eurozone if it defaults on debt.
I am not a fan of lies (and I have pointed out lies by Tsipras). However, I am not a fan of snakeoil, thievery, and one-sided analysis either.
Snake Oil and One-Sided Analysis
Check out the Bloomberg hypocrisy in this statement: "Other Greek politicians say they’ll seek to renegotiate the austerity package, and Europe may now listen."
Bloomberg knows full well those are blatant lies. Bloomberg could have and should have blasted the New Democrats and Pasok leaders for those lies (but chose not to).
Moreover, Bloomberg knows full well nearly all of Greece is dead set against more austerity measures. Bloomberg also knows full well if New Democracy and Pasok came flat out and said the deal will not be renegotiated they would be trounced to smithereens in the next election.
Bloomberg Hypocrisy
…
Three Critical Industries Now in Serious Capital Destruction Mode
by ilene - May 22nd, 2012 12:04 am
Courtesy of Russ Winter of Winter Watch at Wall Street Examiner
In the whodathunk department, Reuters is reporting that Chinese buyers are defaulting on deliveries of iron ore and coal shipments. As I have been reporting for months, ships have been mothballed, triggering another round of under-reported banking losses. Also reported from China is a 15% drop YoY in property sales, and more importantly it saw a 19% drop in land sales. Land sales are how China’s local governments finance themselves (see China Bubble Bursts Symposium).
This is all part of the general extreme maladjusted theme that I wrote about earlier on natural gas and more. This creates impossible conditions for producing firms in which to operate. It should now be no surprise that this climate is creating a bust in the shale gas area, which has now spread to the coal area. The problems with both shale gas and coal are high, capital-destroying production costs.
Apparently coal companies drank the “sell to China forever” Kool Aid, and ramped up production. As a result of the over-production, coal company stocks have experienced a historic sell off and panic. Like shale gas producers, many coal firms are leveraged, and are now facing insolvency. In turn this has spread to electric utilities where marginal rates have collapsed. Many utilities are also now selling the marginal power below cost of production, and are thus destroying capital.
In my glass-empty view, the idea that three key industries — natural gas, coal production and electric utilities — are operating well below the cost of production is not a bullish event, even if it temporarily results in price breaks for industrial users. And what are industrial users suppose to do? Ramp up production based upon the continuation of bargain prices as the three industries proceed to liquidate themselves? Of course not. Once again I ask: How does any industry plan to operate smartly in this unstable environment? I submit that this development is disruptive and very bearish. This is made even worse by the end-game Keynesian/Wizard of Oz economics of the day.
As investors, these short-term booms followed by severe busts are hard to navigate. As an operating theme though, one can see that once the bust gets underway, capital and lending is withdrawn, and the market begins to see who (CHK for example) was swimming without a bathing suit when…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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