NEWS,20.11.2012

Seven And A Half Things To Know: Fiscal Cliff Spurs Super-Rich Panic

Thing One: Super-Rich Super Panic: Rich Americans likely have the most on the line as we near the fiscal cliff, the New York Times notes. Their tax rates would rise under the President's plan or if lawmakers don’t reach a deal. Some are taking action in advance. The Walton family, which founded Walmart, may save as much $180 million in taxes thanks to the company’s decision to push up its dividend payout to December from January so investors can count the income for this year, according to The New York Times. If Obama and Congress fail to reach a deal this year the tax rate on dividend income could more than double. But as The NYT notes in a separate article, under Obama’s plan, rich is defined rather broadly. It could mean the super-wealthy Waltons or an individual or small business owner making more than $200,000 per year.Meanwhile, corporations also stand to lose: More than $150 billion over 10 years in tax breaks, according to the Financial Times. Some business leaders say they would graciously agree to help America by giving up their corporate tax breaks so as long as they come with more complete corporate tax reform next year. Still, it’s likely what business leaders want the most is for lawmakers to reach a solution. Stock indexes rose to their best day in two months on Monday on optimism that lawmakers would agree to a deal, according to the Wall Street Journal. There’s at least one CEO out there claims he’s willing to give up tax breaks for a solution, NASDAQ head Robert Greifeld said politicians need to worry less about “winning” and admitted that “broadening the tax base” may be necessary to get the necessary deal done. Thing Two: Walmart's Thanksgiving May Be Ruined: As Walmart’s founders are looking for ways to skirt higher taxes, some of their employees are protesting the company’s decision to make them work on Thanksgiving. More than 30,000 people have already signed an online petition protesting the company’s decision to open on Thanksgiving Day. Meanwhile, the Wall Street Journal reports that labor officials are trying to decide as soon as possible whether to seek an injunction on behalf of Walmart to stop planned protests at 1,000 of its store locations on Black Friday, the biggest shopping day of the year. Walmart claims the protests are an illegal disruption of business. Thing Three: The Twinkie Is Saved: Twinkie enthusiasts calm down, you’ll still be able to relive the tasteless 1950s as often as you’d like. Hostess Brands, the makers of Twinkies, agreed to mediation, with the Bakers Union, the group the company claimed was forcing them to liquidate. But don’t stop hoarding Cup Cakes and Ding Dongs just yet, the company isn’t positive it will reach a solution, a Hostess spokesman told the Financial Times. The two sides will meet with the bankruptcy judge that ordered the mediation Tuesday in an aim to reach a new contract and save 18,500 jobs, according to the Wall Street Journal. If they can’t reach a deal, Hostess will be able to move forward with its plans to liquidate.Thing Four: Eurozone Crisis Still Not Over: The European crisis rages on and yes, leaders are still fighting about what exactly to do. European finance ministers are racing to find a fix after deciding last week to give Greece two extra years to cut its budget deficit creating a $19 billion hole in the country’s finances and angering the IMF, according to Bloomberg. Meanwhile, France, one of the region’s stronger economies isn’t faring too well. Moody’s cut the country’s credit rating and slammed President Fancois Hollande’s attempts to fix the economy, according to the Wall Street Journal.Thing Five: Ex-Trader Found Guilty Of Losing Lots Of Money: In the continuing saga of finding others to blame for banks’ risky behavior, ex-UBS trader Kweku Adoboli was convicted of one count of fraud for losing the bank $2.3 billion, according to Reuters. In defending himself Adoboli had said that his managers encouraged him to push the risk limits, adding that his huge loss came “in pursuit of the goals set by our leadership.”Thing Six: Credit Suisse 2.0: Apparently when one of your rivals cuts 10,000 jobs it makes you consider a few things. Credit Suisse is splitting off its investment bank unit outside Switzerland from its global wealth bank, Swiss investment banking and wealth management units in an aim to meet the “new regulatory reality,” according to the Financial Times. The move comes just a few weeks after rival UBS slashed 10,000 jobs in its investment banking unit. The move will likely keep the bank less vulnerable to the whims of international markets and corporate finance. The bank might also get another thing added to its plate soon. The New York Attorney General’s office is planning to file a lawsuit against Credit Suisse, alleging that the bank misled investors on the quality of its mortgage-backed securities in the lead up to the financial crisis, according to Reuters. Thing Seven: People Still Don't Like PCs: The death of the PC claims another victim. Intel CEO Paul Otellini announced yesterday that he’s stepping down from his post early after not successfully shifting the chipmaker from a PC-based business to a mobile business, according to Bloomberg. The unexpected announcement may indicate the depth of the company’s woes, Intel is typically known for careful succession planning and Otellini could have stayed on for another three years, according to the Financial Times.Thing Seven And A Half: Your Favorite Thanksgiving Moments Revealed: Just two more days for Thanksgiving and the best holiday of the year can’t come soon enough. Here are the 15 best moments of Thanksgiving (many in gif form) via Buzzfeed to get you through these last 48 hours of work.

 

China escalates subsidies spat with US

China is to ask the World Trade Organisation to rule on its latest commercial spat with the United States, the WTO said on Tuesday, hoping it will back Beijing's complaint that punitive US tariffs imposed on a raft of Chinese goods are illegal.In a move that deepened the dispute, China will ask the WTO to set up a three-person dispute panel at a meeting on Nov. 30. If China wins the case and any subsequent appeal Washington could be forced to drop the tariffs it levied on 31 Chinese products which it said were being traded unfairly.The US tariffs affected photovoltaic cells and modules used in solar power, various steel products, off-road tyres, aluminium goods as well as towers for windfarms.Such capital-intensive and cyclical commodity products have frequently been at the centre of trade disputes as national industries have asked governments to step in and stop foreign competition from destroying profits and jobs.Steel products have frequently been involved, as more recently have solar power components, with the oversupplied global solar industry struggling to maintain its profit margins.The United States has been a fierce critic of what it says are clandestine Chinese subsidy programmes, but Beijing says Washington's efforts to tackle suspected wrongdoing have gone beyond the rules.China's complaint targets Public Law 112-99, which was signed by President Barack Obama in March, as well as US steps taken against suspected export-distorting subsidies between Nov. 20 2006 and the passage of the contested law.In a WTO filing, China said the US law had broken the rules because it applied retroactively to suspected Chinese subsidies as far back as 2006.The United States was also at fault, China said, because it used "double remedies" against China between 2006 and March this year.Double remedies means targeting the same Chinese exports twice over - once for being subsidised and once for being "dumped", or sold at unfairly cheap prices.China launched the complaint in September, just hours after the United States lodged a similar complaint against China's support for car exports.Under WTO rules a country accused of breaking the rules has 60 days to try to resolve the complaint, after which the complainant can ask the WTO to set up a panel of adjudicators to judge the merits of the dispute. The WTO's ruling is likely to be made public in mid-2013.

Watchdog investigates lending practices

Britain's consumer watchdog has launched investigations into several payday lenders over aggressive debt collection and expressed its concern about general poor practice within the sector.Payday lenders offer short-term loans, which are intended to be paid back when borrowers receive their wages. Britons have increasingly turned to these loans as mainstream banks have tightened their criteria for granting short-term credit."We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them," David Fisher, the Office of Fair Trading's (OFT) director of consumer credit, said on Tuesday."It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action."The OFT identified issues around debt-collection practices, the adequacy of affordability checks made by lenders, the number of loans not repaid on time and the lack of forbearance shown by some lenders when borrowers get into financial difficulties.Wonga.com, which offers individuals short-term loans of up to 1 000 pounds, more than trebled its earnings last year. Like other payday lenders, the company has faced criticism that its annual percentage rate (APR), listed on Wonga.com as 4 214%, takes advantage of the financially vulnerable.The OFT is reviewing the whole sector and has said that some firms will face enforcement action if they do not improve their practices.Wonga said that it welcomed the OFT's review. "We provide a valued, transparent service to more than a million customers and want to see rogue practices rooted out across all financial services," it said.The OFT will publish a full report next year and state whether wider action is needed to tackle problems in the sector.

NEWS,19.10.2012

EU eyes bloc-wide bank watchdog

EU leaders on Friday agreed to bring banks under bloc-wide supervision next year, but failed to pin down an exact date dashing hopes of a quick move towards a full banking union.Although loose, the 2013 timetable settled during 11 hours of talks at a Brussels summit should eventually pave the way for ailing banks to receive cash directly from Europe's bailout funds.The decision took place in a calmer market environment Thursday, but also against a backdrop of fresh violence in Greece, the origin of the three-year crisis, where a man died during a general strike and anti-austerity protests.The 27 European Union leaders set themselves "the objective of agreeing on the legislative framework by 1 January 2013," said a statement. Work on actually setting up the body would take place "in the course of 2013", it added.German Chancellor Angela Merkel called the timetable "very ambitious," even as French President Francois Hollande pushed for quick implementation. She said the EU needed "quality before speed" and a watchdog "worthy of the name."The European Commission's Jose Manuel Barroso said European Central Bank (ECB) head Mario Draghi had told leaders a "reasonable" estimate for implementation would be "less than one year but certainly more than one or two months.""I can't give you a precise date," EU President Herman Van Rompuy conceded when pushed during an early-hours press conference. Finance ministers, next scheduled to meet on November 12, would take up the issue, he said.Expectations that the new body could begin work from the start of the new year slipped amid discord between Europe's two powerhouses, one European official saying that even in the "fastest scenario", it would be "summer 2013."A French government source said the ECB would only supervise all 6 000 eurozone banks "from the beginning of 2014."The basic idea remains that in future, struggling banks in debt-wracked countries that pose a danger to Europe's financial system could be recapitalised directly from EU bailout funds.But a Spanish governmental source said Madrid had "assumed" for the last month - since the German, Dutch and Finnish governments had rowed back on aspects of a provisional agreement dating from June - "that there wasn't going to be a direct recapitalisation."The Spanish official said the result of independent stress tests was that the recapitalisation would amount to 4.0% of Spain's gross domestic product, "which we can handle." Hollande said expectations on markets of a sovereign bailout request by Spain had not come up, although he warned that "adding austerity to austerity" by imposing harsh conditions on Madrid would be counter productive. Germany has been pushing Madrid back for weeks, and Hollande suggested that next year's German general election lay behind proposals from Berlin to beef up the power of the European Commission to supervise individual countries' budgets.Eurozone leaders also hailed "good progress" in Greece to carry out reforms aimed at getting its economy back on track, after the so-called 'troika' of international lenders said it hoped for a deal "within days" on resuming much-needed financial aid.Greece's conservative-led government is in talks with the troika on an austerity package needed to unlock a loan payment of €31.5bn, which has been pending since June.Greek riot police fired tear gas at protesters on the sidelines of a large anti-austerity rally. A 65-year-old man collapsed and died from a heart attack but it was not immediately clear if his death was linked to the sporadic bursts of tear gas.Elsewhere at the summit, EU President Herman Van Rompuy invited all 27 EU members to attend the December awarding of the Nobel Peace Prize in Oslo, adding that the hardships the bloc now faced were nothing compared to the post-war era.Leaders were to return six hours later from 08:00 GMT, to tackle relations with China and discuss hotspots Syria, Iran and Mali.

To Those Seized by Debt Fear: China Holds Just 10 Percent, Down From 2 Years Ago

America is not Greece. We are the world's 1 nation, and the U.S. dollar is the world's reserve currency. Others want to buy our Treasury notes, even at absurdly low interest rates. History will view our failure to finance the rebuilding of our roads, bridges, tunnels, water systems, electric grid all due to Republican obstructionism when others are almost handing us the money to do it as one of the epic economic follies of all time. Nothing like mindless fanaticism to spoil a good day or decade, eh?Nor, as the conventional wisdom would have you believe, have we "mortgaged ourselves to China."How many times do we hear the forces of doom primarily from the right wing that wants to end just about everything government does that can help the American people  that we cannot going on "borrowing from China"?Most Americans seem to believe that we have mortgaged our entire country to China, and that it is only a matter of time before China "forecloses." Not only would it tank the Chinese economy if it tried to "foreclose," but and here's the key point China only owns 10 percent of our debt.Ten percent. And, that is down from 12 percent just two years ago.Mitt Romney, in debate #1, said that he liked Big Bird and Jim Lehrer, but "he could not borrow money from China to pay for it."I attended a major economic forum at Stanford University earlier this year. Niall Ferguson, Harvard Professor of Economics, talked about the dangers of debt by raising the specter that we are fighting wars we are "borrowing from China" to pay for. The audience, that included some of the world's leading economists and financial managers, nodded their heads. [I raised my hand to object, but did not get called on].There may be many reasons why increasing the debt is not a good idea e.g., the interest payments required when interest rates return to more normal levels, and the need for us to have reserves to fund the retirement of the boomers, but the Bushies blew that surplus 10 years ago.But the concern that China is funding our spending is another fiction drummed up by the establishment and fed to us day after day by the lamestream (Sarah, I will always thank you for this one, you got this right!) media, too lazy to say even, "wait a minute, just how much of our debt does China hold?" to the bloviating head-nodding establishment types that appear on our news as "experts." [One might add that, even if China did hold 50 percent of our debt, calling the loans would hurt them more than us, but why bother with such complexities.Indeed, I have yet to hear anyone object to this canard. If they did, one suspects they would never be invited back on the program again, because they have violated the sacred belief system.And, would it not make them apoplectic if they had to acknowledge that, in the last two years under President Obama, the amount owed China has declined to 10 percent, from 12 percent, of our debt. Now, that would be a real stick-in-the-eye.

Gun Industry Thrives During Obama's First Term

Tennessee lawyer Brian Manookian says he never considered himself a gun enthusiast. He owns just one handgun and was raised in a gun-free home. But the firearms industry has proven so successful in recent years that he decided to give up practicing law and make guns his livelihood.It's a decision that's put Manookian on track to earn four times what he made as a corporate health care attorney, a job that earned him six figures right out of law school, he said.And he's far from alone. An analysis by The Associated Press of data tracking the health of the gun industry shows that President Barack Obama has presided over a heyday for guns.Sales are on the rise, so much that some manufacturers cannot make enough fast enough. Major gun company stock prices are up. The number of federally licensed, retail gun dealers is increasing for the first time in nearly 20 years. The U.S. gun lobby is bursting with cash and political clout. Washington has expressed little interest in passing new gun laws, despite renewed calls to do so after recent deadly shootings in Colorado and Wisconsin.Four years ago the gun lobby predicted Obama would be the "most anti-gun president in American history." Yet it is hard to find a single aspect of the gun world that isn't thriving."The driver is President Obama. He is the best thing that ever happened to the firearm industry," said Jim Barrett, an industry analyst at C.L. King & Associates Inc. in New York.Obama has made no pledges to push for new gun control legislation and does not have the support in Congress or among voters even if he did. During this week's presidential debate, he did suggest renewing a U.S. ban on assault weapons and coming up with an overall strategy to reduce violence. But both Obama and Republican presidential nominee Mitt Romney said the real need is for the government to enforce gun laws already on the books.Meanwhile, sales are brisk.Since opening a $5 million armory in Nashville last month, Manookian and his business partner have outdone their own expectations, selling inventory three to four times faster than they expected. The facility has high ceilings and granite fixtures in the bathroom and provides instructional courses and a shooting range in addition to firearms for sale."It is a very strong investment," Manookian said.Others agree.For the first time since 1993, the number of federally licensed retail gun dealers in the U.S. increased slightly in 2010 and 2011. The country added 1,167 licensed retail gun dealers, according to Bureau of Alcohol, Tobacco, Firearms and Explosives records. After the assault weapons ban of 1994 – now expired – the number of gun dealerships dropped annually until 2010. As of October 2012, there were 50,812 retail gun dealers – 3,303 more than in 2009."Business has been very good," said Frederick Prehn, who a year ago opened a small gun store above his dentistry practice in Wausau, Wis. In the past year, Prehn has relocated twice to larger spaces and gone from one employee to eight.Some gun store owners can't keep shelves stocked, said Brian Jones, owner of Bullseye Shooter's supply in Painted Post, N.Y. Jones said he opened his gun store in November 2010. In his first year, he said he sold between 600 and 700 guns. A little more than halfway through his second year, he's already sold 700.For the first time in the company's history, Sturm Ruger & Co. Inc. stopped taking orders for a couple of months this year. Ruger, one of the nation's largest gun manufacturers, has since resumed taking orders, though gun-sellers say demand is still outpacing production.Dan Wesson Arms, Inc., a small gun manufacturer that sells to a niche market, stopped taking orders this spring because the company had sold out the entire year's production, spokesman Jason Morton said. The company has stopped taking orders before, but never so early on the entire line, he said."Wouldn't you want to be in a business where customers are just begging to hand you money?" said Bill Bernstein, owner of East Side Gun Shop in Nashville.Obama is not yet through his first term, but the federal government already has conducted about as many background checks for gun owners and prospective buyers on his watch as it did during the first six years of George W. Bush's presidency. In the first 3 1/2 years of the Bush administration, the FBI conducted about 28 million background checks. During the same period of the Obama administration, the FBI conducted more than 50 million. The gun industry uses the number of background checks as a reliable indicator of demand.Ruger and Smith & Wesson represent nearly 30 percent of the U.S. gun manufacturing industry and lead the market in production of pistols and revolvers, according to government statistics. The two companies have been running production lines around the clock, hiring workers and operating at maximum capacity, said Barrett, an industry analyst who also owns Ruger stock.Ruger's sales have increased 86 percent since Obama took office, and Smith & Wesson's sales have gone up nearly 44 percent, compared with 18 percent for overall national retail sales.And the companies have big expectations for the industry's future, as they're spending more money on research and development than ever before.The NRA itself has done well, too. The lobbying organization has had more cash on hand during the Obama years than it had since 2004, finishing 2010 with more than $24 million, according to the most recent figures available."Which makes it incredibly ironic that the gun lobby is opposing Obama," said Dan Gross, president of the Brady Campaign to Prevent Gun Violence. Gross said Obama, who initially campaigned to reinstate the assault weapons ban that expired under Bush, has done what he said was "disappointingly little" on gun control.But the gun lobby says the success of the industry does not indicate that Obama is good for Second Amendment rights."This is the most dangerous election in our lifetimes," NRA chief executive officer Wayne LaPierre said in February, a point he's made regularly during the NRA's campaign to defeat Obama.The gun lobby stands by its 2008 predictions that Obama would be anti-gun. NRA spokesman Andrew Arulanandam noted Obama's appointment of two Supreme Court justices whom the NRA considers anti-gun, plus Obama's support of a United Nations arms trade treaty and the botched operation called Fast and Furious, which the NRA says was concocted as part of a plan to enforce new gun restrictions."Gun owners and hunters fear that a second Obama administration with no future political campaigns to worry about will try to destroy this great American freedom," Arulanandam said.Fears of a Democratic president taking office and issuing stricter gun control laws led to an initial spike in gun sales in 2008, giving dealers some of the highest profit margins they'd ever seen. But even after it became clear Obama was not going to make gun control a priority as president, the industry has continued to do well.Fear of crime may be driving some sales. The number of violent crimes rose by 18 percent in the U.S. in 2011, according to Justice Department figures released this week. It was the first year-to-year increase for violent crime since 1993, marking the end of a long string of declines.Firearm sales typically increase during poor economic times, said Steve Sanetti, chief executive officer and president of the National Shooting Sports Foundation, a trade association for the industry. More Americans are hunting and shooting for recreation as well, he said. Sanetti attributes that to military servicemen and women with firearms experience returning to civilian life and wanting to keep up with shooting as a pastime. He also said recreational shooting is a relatively cheap and accessible hobby, drawing in new buyers.Voters have made clear that gun control isn't a priority. A recent AP-National Constitution Center poll found that 49 percent of adults felt laws limiting gun ownership infringe on the public's right to bear arms, while 43 percent said such laws do not infringe on those rights. After the recent mass shootings in Colorado and Wisconsin, 52 members of Congress sponsored a bill to track bulk sales of ammunition, but the legislation went nowhere.The firearms industry entrepreneur Manookian said it is clear that guns are a priority for Americans. People around the country are waiting in lines at shooting ranges, he said, cash registers at gun stores are ringing with $1,000 purchases and his brand new armory in Nashville is in the black two weeks after it opened.