NEWS,04.01.2013

US jobs ease on fiscal cliff angst

The pace of hiring by US employers eased slightly in December, pointing to a lackluster pace of economic growth that was unable to make further inroads in the country's still high unemployment rate.Payrolls outside the farming sector grew 155 000 last month, the labour department said on Friday. That was in line with analysts' expectations and slightly below the level for November.Gains in employment were distributed broadly throughout the economy, from manufacturing and construction to health care.That should reinforce expectations that the economy will grow about 2% this year, unlikely to quickly bring down the unemployment rate or make the US Federal Reserve rethink its easy-money policies, which have been propping up the recovery."It's not a booming economy, but it is growing," Jim O'Sullivan, an economist at High Frequency Economics in Valhalla, New York, said before the data was released.The jobless rate held steady at 7.8% in December, down nearly a percentage point from a year earlier but still well above the average rate over the last 60 years of about 6%. The labour department raised its estimate for the unemployment rate in November by a tenth of a point to 7.8%, citing a slight change in the labour market's seasonal swings.Most economists expect the US economy will be held back by tax hikes this year as well as by weak spending by households and businesses, which are still trying to reduce their debt burdens.Friday's data nonetheless gave signals of growing momentum in the labour market's recovery from the 2007/9 recession. Many economists had expected December's payroll gains to be padded by one-time factors like the recovery from a mammoth storm that hit the East Coast in late October.The government had said last month the storm had no substantial impact on the November data, and many economists expected the government to recant by revising downward in Friday's report its estimate for payroll gains in November. Instead, the government revised its estimate for November payrolls upward by 15 000. "There is some evidence that underlying jobs growth has improved," Paul Dales, an economist at Capital Economics in London, said before the report was released. Austerity's biteDespite the signs of some momentum in hiring, a wave of government spending cuts due to begin around March loom over the economy. Many economic forecasts assume the cuts which would hit the military, education and other areas will ultimately be pushed into next year as part of a deal sought by lawmakers to reduce gradually the government's debt burden.Initially, the cuts were planned to have begun this month as part of a $600bn austerity package that also included tax hikes. Hiring in December may have been slowed by uncertainty over the timing of the austerity, economists say. Congress this week passed legislation to avoid most of the tax hikes and postpone the spending cuts.Even with the last-minute deal to avoid much of the fiscal cliff, most workers will see their take-home pay reduced this month as a two-year cut in payroll taxes expires. That leaves the Fed's efforts to lower borrowing costs as the main program for stimulating the economy.The Fed has kept interest rates near zero since 2008, and in September promised open-ended bond purchases to support lending further. On Thursday, however, minutes from the Fed's December policy review pointed to rising concerns over how the asset purchases will affect financial markets.Analysts ahead of the report expected some of the strength in job creation in December would be due to the Fed's policies."Despite the end-of-year angst over the fiscal cliff, financial conditions remained supportive of job growth in December," economists at Nomura said in a note to clients earlier in the week.

Aid for Sandy victims falls short

US lawmakers finally approved emergency disaster aid for victims of Hurricane Sandy on Friday, but only after a delay that sparked East Coast Republican outrage against their own party leadership Lawmakers voted 354-67 to provide the Federal Emergency Management Agency with $9.7bn to pay the flood insurance claims of thousands of victims of the killer October storm that devastated coastal communities.The bill now goes to the US Senate, where it could pass as early as Friday before the two chambers go into recess, but the sum falls short of what was originally promised and bitter debate is likely top continue.The Senate had approved a comprehensive $60.4bn Sandy aid package last week, but House Speaker John Boehner, stung by fractious negotiations over the deal to avert the fiscal cliff crisis, refused to bring it to the floor."It's been 70 days and many have been living in misery and heartache," Republican congressman Rodney Frelinghuysen of New Jersey told the House, describing the vote as "the first step of what we need to do to rebuild lives."Democrats again attacked the Republican leadership for what congressman Rob Andrews of New Jersey called the "inexcusable and unjust" delay in getting a bill to the House floor.And, while Boehner has pledged to bring the remaining $51bn in aid to a vote on January 15 as a two-part package, Andrews said it would be "meaningless" unless the Senate turned around and quickly approved the aid.Boehner had scrambled to tamp down fury over the delay on aid to victims of the storm, which killed 120 people and destroyed tens of thousands of homes and businesses in New York, New Jersey and neighbouring northeastern states.President Barack Obama, instrumental in cobbling together the $60bn package, joined New Jersey's outspoken Republican Governor Chris Christie in leading the charge against Boehner's delay.Christie offered a blistering critique of his own party's congressional leadership, calling Boehner's delay "absolutely disgraceful."Fuming Republican congressman Peter King of New York also tore into his own leadership, saying the delay was "a knife in the back of New Yorkers and New Jerseyans."The outrage quickly gained the national spotlight, and Boehner wasted little time announcing the two-part vote."This is not a handout, this is not something we're looking for as a favor," King told the House. "What we're asking for is to be treated the same as victims (from) other natural disaster victims have been treated."Some Republicans including Senator Marco Rubio from Florida, a hurricane-prone state which has received billions in federal disaster aid, voted against the Sandy bill in the Senate, claiming it was stuffed with "pork" funding for projects or elements unrelated to Sandy relief.Darrell Issa, the powerful Republican chairman of the House Oversight Committee, continued in that vein Friday, saying "we need to get the pork out" and pointing to funding in the Senate bill that went to programs in Alaska, more than 3 000 miles (4 800 kilometers) from the Sandy disaster zone.He said he was hopeful the re-written legislation due for a vote January 15 would be a "clean bill" focused exclusively on Sandy relief."I believe today we are buying a little bit of time, but for the people on the Eastern Seaboard who are suffering, time is running out," he said.FEMA has announced it will soon run out of flood insurance funding without the $9.7bn increase.

Signs of hope for eurozone

Tentative signs the eurozone may have passed the worst of its downturn emerged in December but business surveys also suggested Britain's economy tipped back into contraction in the final months of 2012.Friday's purchasing managers indexes, which measure the activity of thousands of companies worldwide, brought mixed news from Europe.Activity in Britain's dominant services sector fell for the first time in two years and at a faster pace than predicted by any analyst polled by Reuters, while the speed of decline among French, Italian and Spanish firms slowed.Data from the United States due later on Friday are expected to show continued but modest jobs growth and a steady expansion of its services sector.With Chinese growth showing evidence of revival, that leaves Europe as the world's economic slowcoach going into 2013.In particular, economists were surprised by news the UK services PMI slipped to 48.9 in December from 50.2 last month, sagging below the 50 mark that divides from contraction for the first time in two years."The PMIs point to an economy that is contracting modestly," said Rob Wood, chief UK economist at Berenberg Bank. "The broader picture is that for some time the economy has been bouncing around the bottom ... and I think this is likely to stay with us for the next couple of quarters."Survey compiler Markit said the figures suggest Britain's economy shrank 0.2% in the final quarter of 2012, a slightly bigger drop than most other private-sector forecasts.The eurozone composite PMI hit its highest levels since last March, rising to 47.2 in December from 46.5 in November, although it remained rooted below the 50 mark for an 11th month."I think (the eurozone PMIs) are showing a decisive bottoming-out of activity," said James Nixon, chief European economist at Societe Generale."Now, the actual levels of the surveys are still consistent with GDP declining, but at least things aren't getting worse any faster."  Worst over?The decline eased among the services firms that make up the bulk of the eurozone's economy, ranging from banks to restaurants, but manufacturers endured an awful end to 2012.Survey compiler Markit warned that Friday's figures would probably fail to prevent the eurozone's recession deepening in the fourth quarter of last year, thanks to dismal figures in October and November."The surveys at least bring some substance to the belief that the worst is over and that a return to growth is in sight for the region in 2013," said Chris Williamson, chief economist at Markit.As with last year, the eurozone economy's fate hinges on the resolution of the sovereign debt crisis, which still smoulders despite the creation of financial firewalls by the European Central Bank and European Union.German Finance Minister Wolfgang Schaeuble said last week he thought the worst had passed for the debt crisis, although similar sentiments have been expressed by various European policymakers and politicians since mid-2010.Friday's European data followed news that China's services sector saw its slowest rate of expansion in nearly a year and a half in December, although the HSBC services PMI still pointed to a modest revival in economic growth.And economists expect the US ISM non-manufacturing survey, another PMI, to fall slightly to 54.2 in December from November's 54.7. While showing slowing growth, that would still signal a far brighter economic outlook for the US compared with its European peers.Analysts also predict the US economy added around 150 000 non-farm jobs in December, compared with 146 000 the previous month.

NEWS,21.09.2012

What Business Is Wall Street In? 

 

Wall Street doesn't know what business it is in. Regulators don't know what the business of Wall Street is. Investor/shareholders don't know what business Wall Street is in.The only people who know what business Wall Street is in are the high frequency and automated traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It's a platform to be exploited by every technological and intellectual means possible.The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, high frequency traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade or the rebate they are getting from the exchange because they provide liquidity to the market.I recognize that one is illegal, the other is not. That isn't the important issue.The important issue is recognizing that Wall Street is no longer serving the purpose that it was designed to. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days?I started actively trading stocks in 1992. I traded a lot. Over the years I've written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.Over just the past five years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game that I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.So back to the original question. What business is Wall Street in?Its primary business is no longer creating capital for business. Creating capital for business has to be less than one percent of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn't shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which I think are always a mistake), than flows into companies in the form of equity.My two cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it's through a use of taxes on trades (hit every trade on a stock held less than one hour with a 10 cent tax and all these problems go away), or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for one year or more, and no tax on dividends paid to shareholders who have held stock in the company for more than five years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won't come from traders trying to hack the financial system for a few pennies per trade.And solutions won't come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks theymake will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the U.S. and world economy nearly enough for the risk of collapse they introduce into the system.Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The government needs to create simple and obvious incentives for this business and extract compensation from the traders/hackers for the systemic failure risk they introduce.There will be another flash crash, and probably a crash far worse than the May 2010 flash crash simply because there are too many players looking for the trillion dollar score. They can't all win, yet how many do you think wouldn't risk everything, even what is not theirs, for that remote chance to score big? Put another way, there is zero moral hazard attached to any trade. So why wouldn't traders take the biggest risk possible? There is value to trading automation. It is here to stay. There is absolutely NO VALUE to high frequency trading. None. We need to bring our markets back to their original goals of creating capital for business. It's impossible to guess how many small to medium size companies have been held back from growing and creating jobs and wealth because of lack of access to capital from the stock market. It's not impossible to know that our economy has suffered because Wall Street equity markets are no longer a source of equity for helping companies grow, it is not a platform for hackers and that needs to change. Quickly.

Iran parades military, warns Israel

Iran warned Israel and the United States against any aggression, as it proudly paraded its troops and military hardware on Friday under the gaze of President Mahmoud Ahmadinejad and top brass.The Tehran parade, involving thousands of military personnel, dozens of tanks and missiles borne on trucks, marked the anniversary of the start of the 1980-1988 Iran-Iraq war.Ahmadinejad, in a speech broadcast on state television, said that Iran was using "the same spirit and belief in itself" shown in that war to "stand and defend its rights" today against pressure from world powers.Top Iranian generals said the show of military might should be digested by Israel, which in recent weeks has ramped up threats that it could hit Iranian nuclear facilities."We do not feel threatened by the nonsense uttered by that regime's leaders," the chief of Iran's armed forces, General Hassan Firouzabadi, told the Fars news agency, adding that Iran's response to any attack would be "immediate and unstoppable".General Ataollah Selehi, the commander of Iran's army, told the ISNA news agency that "us holding a military parade is for deterrence and not a threat".US Navy war games He and other military leaders renewed their pledge that Israel would be annihilated if attacked.The head of the Revolutionary Guards' aerospace division in charge of missile defence, Brigadier General Amir Ali Hahjizadeh, repeated Iran's promise to close the strategic Strait of Hormuz if the Islamic republic were attacked or Western sanctions halted its crude exports."If one day the Strait of Hormuz has no benefit for us, then we will deprive others from benefiting from it," he said.However he added that "under current conditions, there is no problem".Hahjizadeh also dismissed navy war games currently being held by the United States and 30 other nations in the Gulf as "no threat to us".Iran is locked in a showdown with the UN Security Council over its controversial nuclear programme.Ahmadinejad on anti-Islam filmThe West, led by the United States, has tightened the vice on Iran by implementing crippling economic sanctions, while Israel - the Middle East's sole if undeclared nuclear weapons state - has underlined its threats of possible air strikes on Iranian atomic facilities, with or without US help.In his speech, Ahmadinejad also touched on an anti-Islam film made in America by an extremist Christian group that has fuelled violent protests in parts of the Muslim world.He said US government claims it could do nothing to censor the film was a "deception" exploiting the pretext of freedom of expression.He called the film an Israeli-hatched plot "to divide [Muslims] and spark sectarian conflict".Ahmadinejad implicitly referred to his often expressed opinion that the Holocaust never happened to lambast the West for perceived selective censorship."They stand against a question about a historical incident... they threaten and put pressure on nations for posing the question while at the same time in regards to the obscenest insults to the human sanctities and prophets... they shout adherence to freedom [of expression]," he said.Ahmadinejad's stance challenging the facts surrounding the killing of six million Jews by the Nazi regime during World War II is shared by Iran's supreme leader, Ayatollah Ali Khamenei, who is the country's commander-in-chief.Early this week, Khamenei told naval cadets: "In some Western countries, no one dares to question the unknown incident of the Holocaust or for that matter some of the morally obscene policies like homosexuality... but insulting Islam and its sanctities under the pretext of freedom of expression is allowed."

 

 

 

NEWS,25.03.2012.

US puts forward World Bank nominee

Jim Yong Kim, the US nominee to lead the World Bank, will win broad international support despite an unprecedented challenge by candidates from emerging economies, US Treasury Secretary Timothy Geithner said in an interview.Washington's hold on the World Bank presidency is being contested for the first time by candidates from emerging economies.Two respected economists and diplomats, Nigerian Finance Minister Ngozi Okonjo-Iweala and former Colombian finance minister Jose Antonio Ocampo, have been nominated.Kim, a Korean-American health expert, is well known among development experts for his work in fighting HIV/AIDS and bringing healthcare to the poor.President Barack Obama nominated him for World Bank president over the weekend.."The president was looking for a candidate who could command broad support across the world," said Geithner."That's very important, because we don't make this decision alone.""Dr. Kim's mix of skills will be particularly compelling to the bank at this time and I think the world will be very impressed with him," he said.Emerging economies such as China, India, South Africa, Brazil and Russia have sought to use their growing economic clout to pry open the selection process for the heads of the World Bank and its sister organization, the International Monetary Fund.The World Bank has always been headed by an American and the IMF by a European since their inception after World War Two.Geithner said it was not a surprise that candidates from other countries had been nominated after a 2009 agreement by leaders of the Group of 20 nations for an open and transparent process to select leaders of the two institutions."We expected that to happen and think it is healthy for the institution as a whole," Geithner said. "But I can tell you from my conversations with developing and developed countries, I am confident he (Kim) will win broad support."US officials have acknowledged that giving up the World Bank presidency would make it difficult for the White House to obtain funding from Congress for the global lender, especially with lawmakers worried about mounting budget deficits.The United States has also argued that it does not head any other global organization.After a broad search that looked at US bankers, economists and politicians, Obama settled on Kim because the Dartmouth College president has a deep commitment to development issues, Geithner said.In particular, he cited Kim's experience in programs to fight HIV/AIDS and tuberculosis in impoverished nations, which he said demonstrated that the nominee could get things done in tough environments.In coming weeks, Kim will visit nations in Africa, Asia and Latin America to try to convince them he is the best candidate to lead the poverty-fighting institution, US officials said.Kim was recommended to Obama by US Secretary of State Hillary Clinton and her husband, former President Bill Clinton, officials said. Kim and his long-time collaborator Paul Farmer worked with former President Clinton on reconstruction efforts in Haiti following a devastating earthquake in 2010.The White House has acknowledged it considered candidates tied more closely to Washington political circles, including US Senator John Kerry, US Ambassador to the United Nations Susan Rice and former White House economic adviser Lawrence Summers."The president wanted somebody who had defined their life through a commitment to the cause of development but had also demonstrated an ability to solve complex problems in a creative way," said Geithner, a Dartmouth alumnus who played a lead role in the search for a successor for outgoing World Bank President Robert Zoellick.Kim's development successes involving HIV/AIDS, tuberculosis and the provision of inexpensive medicine to the poor have received wide praise. However, some development experts say he lacks the economic credentials and diplomatic skills of rival nominees Okonjo-Iweala and Ocampo.While the World Bank's mission remains focused on eradicating poverty, the rise of some once poorer clients such as China and India have forced it to also focus on impediments to development in emerging economies, including power supply and governance issues.Okonjo-Iweala and Ocampo would bring more expertise in these areas, some development economists say.A senior Obama administration official said the bank has ample expertise and what is needed at the top is someone who can get things done.The World Bank is involved in the design of health systems in developing countries, but its funding and influence in the area has been eclipsed by groups such as the Geneva-based Global Fund and the Bill and Melinda Gates Foundation.Geithner said Kim has "an incredible feel for what matters most in development and recognizes that for economies to grow they have to invest in expanding opportunities for their people, in healthcare and in education.""Those are lessons that the most successful emerging and developing countries have learned and been forced to learn, and in that sense he has the ideal feel," Geithner added. "His experience comes from what he has done in the field, not just from his academic research."People who had worked with Kim were impressed by his ability to handle complicated situations in tough environments such as Haiti, Geithner said. In Haiti, Kim was credited with persuading the government to take steps to avoid an outbreak of tuberculosis.