When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Monday, June 30, 2014

Roger Bootle: The Euro Is a Complete Disaster (video)

The Euro Has Been a Complete Disaster: Bootle: Video - Bloomberg: "
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Capital Economics Managing Director Roger Bootle discusses his book “The Trouble With Europe” and what he thinks IS the trouble with Europe with Anna Edwards and Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg June 10)

Sunday, June 29, 2014

Fixing Social Security is Easy! The Politics is Hard!

screenshot of the social security game

I fixed Social Security in less than five minutes using the dashboard here. The politics is the hard part--and I'm no politician --

Embrace Your Mistakes - Bloomberg View: "Anyone looking to make sure the retirement fund can meet its obligations should consider the following options: Raise the payroll-tax rate, raise the ceiling on taxable income, increase the retirement age, means test benefits, tax benefits, lower the cost-of-living adjustment, reduce benefits, or any combination of the above. The American Academy of Actuaries has even set up a dashboard where you can tweak these approaches. It turns out to be surprisingly easy to numerically make Social Security very solvent. It’s the politics that are so challenging."

Play the Social Security Game

Published on AmericanAcademyOfActuaries (http://www.actuary.org)

Saturday, June 28, 2014

Level 3 - TW Telecom $5.7B Deal (video)

Level 3 to Buy TW Telecom in Deal Valued at $5.7B: Video - Bloomberg:
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Level 3 Communications and TW telecom are in a definitive pact to qualify as tax-free reorganization. Scarlet Fu reports on Bloomberg Television’s “Bloomberg Surveillance.” (Source: Bloomberg June 16)

Friday, June 27, 2014

Why Medtronic Wants to Reincorporate in Ireland (video)

Why Medtronic Wants to Reincorporate in Ireland: Video - Bloomberg:
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Medtronic agreed to buy Covidien Plc for $42.9 billion in cash and stock as it transforms into a broader-based company bolstered by new tax advantages. Bloomberg's Zach Mider and David Welch on Bloomberg Television's "Taking Stock." (Source: Bloomberg June 16)

Thursday, June 26, 2014

How Bill and Hillary Clinton Avoid Estate Tax (video)

How the Clintons Reduce Estate Tax Pinch... Legally: Video - Bloomberg:
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Bill and Hillary Clinton have long supported an estate tax to prevent the U.S. from being dominated by inherited wealth. That doesn’t mean they want to pay it. Bloomberg’s Richard Rubin and Al Hunt speak on Bloomberg Television's “Market Makers.” (Source: Bloomberg June 17)

Wednesday, June 25, 2014

Wealthy Bill and Hillary Clinton Use Trust to Avoid Tax They "Support" (video)

Wealthy Clintons Use Trust to Duck Tax They Support: Video - Bloomberg:
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Bill and Hillary Clinton have long supported an estate tax to prevent the U.S. from being dominated by inherited wealth. That doesn’t mean they want to pay it. Betty Liu reports on “Movers & Shakers,” on Bloomberg Television’s “In The Loop.” (Source: Bloomberg June 17)

Tuesday, June 24, 2014

GDP, Asian Ascendance, Europe, US Decline (video)

GDP Power: Asian Ascendance as Europe, U.S. Decline: Video - Bloomberg:
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Bloomberg's Scarlet Fu displays the gain in percentage of global GDP in Asia as the rest of the world shows decline on Bloomberg Television's "Bloomberg Surveillance." (June 12)

Monday, June 23, 2014

High Taxes, Moving, Decline in Dynamism

"Illinois is a high tax state, property tax is extreme and I know many people that pay over a $1000.00 per month just to live in their home. Illinois income tax was recently raised, and they tax everything they can. The winters are cold, the government is all Democrats, and Chicago is a dangerous place. I won't save a lot of money on income tax by moving to North Carolina, but I will have a much nicer home on the water for less property tax, a nicer lifestyle, better weather, less traffic, and not near as much crime. My sons college cost at NC State, about half of what it cost in Illinois. The state of Illinois is in big financial trouble, and I know more tax is the only solution for this state's politicians, and I just don't see the benefit of paying the high taxes for the not so great benefits of living in Illinois...." (source infra)

Why Have Americans Stopped Moving? - Bloomberg View: One troubling possibility is that it may be a decline in dynamism in the U.S. economy. A more auspicious explanation is that workers are increasingly able to find an ideal employer early in their careers, so that they have less need to seek a job elsewhere later on.


Sunday, June 22, 2014

No Apology Obama, Bowe Bergdahl Swap (video)

Obama on Bowe Bergdahl Swap: 'I Make No Apologies': Video - Bloomberg:
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President Barack Obama said he makes “no apologies” for the Taliban prisoner exchange that freed Army Sergeant Bowe Bergdahl in Afghanistan. Responding to questions at a news conference in Brussels, Obama dismissed the uproar in the U.S. over his decision to trade five Taliban prisoners without notifying Congress in advance.


Saturday, June 21, 2014

New Normal: Awash in Cash, Fed Record Balance Sheet

Fed Prepares to Maintain Record Balance Sheet for Years - Bloomberg: "... Maintaining a large balance sheet in a tightening period would mark a strategic shift for the Fed and reverse much of central banking doctrine from the 1990s and early 2000s, which favored minimal interference in the economy. Under then-Chairman Alan Greenspan, the Fed targeted the fed funds rate, the cost of overnight loans among banks, and left most other interest rates to markets. Officials avoided subsidizing credit to specific industries, such as housing, to avoid opening a Pandora’s Box of requests to aid other sectors. That changed after the collapse of Lehman Brothers Holdings Inc. in 2008, when the central bank cut the fed funds rate almost to zero. Seeking more ways to stimulate growth, the Fed then began an effort to influence longer-term rates on home loans and other debt with purchases of longer-term Treasuries, mortgage-backed securities and housing-agency debt...."

Easy money: Even without the Fed, we are awash in cash.: "....Yes, the U.S. Federal Reserve has been an active supplier of easy money, with its various forms of quantitative easing since 2009 amounting to more than $4 trillion. But it is hardly the only source of liquidity. The Japanese government of Shinzo Abe has been actively pumping money into Japan’s economy in attempt to jump-start what has been a rather moribund system. Now Europe and China are adding to the mix. The mandate of Narendra Modi to reform the Indian economy could well mean that India will soon add to the global liquidity cornucopia. And then there are pools of money sitting in cash or less than fully invested, from the $5 trillion on U.S. corporate balance sheets alone (nearly $2 trillion of which is held by nonfinancial companies, i.e., not banks), to the more than $6 trillion controlled by sovereign wealth funds such as those of Norway, Saudi Arabia, Singapore, and Abu Dhabi. On top of that are the vast cash reserves of global savers, who have been wary of financial markets and prefer instead to keep cash savings in banks and money market funds ($2.6 trillion in the U.S. alone)...."


Thursday, June 19, 2014

US vs Citigroup, Why Talks Broke Down (video)

Why the Citigroup Talks Broke Down: Video - Bloomberg:
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The U.S. Justice Department has asked Citigroup for more than $10 billion to settle a probe into the lender’s sale of mortgage-backed bonds before the 2008 financial crisis, a person familiar with the negotiations said. Keri Geiger has more on Bloomberg Television's "Taking Stock." (Source: Bloomberg, June 13)


Tuesday, June 17, 2014

Cantor Loss, A Postscript

".... Good riddance to Cantor. He won't be missed. Boehner should step down as well. Let's get some Republicans in Congress who truly believe in free markets, smaller government, and fiscal sanity. The current leadership has been pathetic. Let's also elect a president willing to do more than pay lip service to free markets. My choice: Rand Paul. -- Mike "Mish" Shedlock @ http://globaleconomicanalysis.blogspot.com"


Monday, June 16, 2014

Cantor's Loss, Voters' Gain, Big Money the Big Loser (video)

VA Primary Winner Brat: Dollars Don’t Vote, You Do: Video - Bloomberg:
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Bloomberg Television’s “Money Clip” Host Adam Johnson breaks down House Majority Leader Eric Cantor’s shocking primary loss. (Source: Bloomberg June 11)

Sunday, June 15, 2014

David Brat, Elizabeth Warren, 2 sides of the same coin

Most of the media have got the Brats upset of Cantor all wrong -- which is probably a good thing, the longer Wall Street and the Inside Beltway crowd stay fat, dumb and ignorant, and think it was just some "tea party" thing, the greater chance we have of turning upside down the crony capitalism crowd ruling from DC and Wall Street:

David Brat, the Elizabeth Warren of the Right : The New Yorker: " . . . [Brat] comes across, instead, like a ninety-nine-per-cent conservative who sees the real villain as corporate America and its addiction to government largesse. One of his biggest applause lines is about how bankers should have gone to jail after the 2008 financial crisis. Brat is the Elizabeth Warren of the right.... I’m an economist. I’m pro-business. I’m pro-big business making profits. But what I’m absolutely against is big business in bed with big government. And that’s the problem. Put aside for a second whether it’s actually true that a C.E.O.’s plea for an end to fiscal brinksmanship is actually a mask for extracting corporate subsidies. The more interesting phenomenon is that, for Tea Party conservatives, the Wall Street Journal’s editorial page had morphed into the voice of the enemy. In his campaign against Cantor, Brat turned every issue into a morality tale about big business cheating ordinary Americans. He attacked Cantor for supporting the farm bill (“Do those billions of dollars go to the small American farmer? No, they go to huge agribusiness, right? Big business again.”), the flood-insurance bill (“Who does that go to? A lot of the money goes to gazillionaires on both coasts who have homes in nice real-estate locations.”), and the STOCK Act, an effort to stop insider trading by congressmen, which Cantor gutted by including an exception for spouses. In his Stephenson-inspired stump speech, Brat was more worked up about the STOCK Act than anything else. He promised, “If you tell your friends or neighbors about this issue, I will be your next congressman!”..."


Saturday, June 14, 2014

Bowe Bergdahl Handover Video Shot by Taliban (video)

Bowe Bergdahl Freed: Handover Video Shot by Taliban: Video - Bloomberg:
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Video released by the Taliban shows the handover of Army Sergeant Bowe Bergdahl from their custody to U.S. Special Forces. Bergdahl was handed over to U.S. forces in eastern Afghanistan on May 31. This is an excerpt of a 17-minute video from "Voice of Jihad."


Friday, June 13, 2014

Bowe Bergdahl Swap Will Encourage Taliban Kidnapping of Americans

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Behind the Scenes of Bowe Bergdahl’s Release | TIME: "....There was some disgruntlement among Taliban ranks over the terms, admits the Kandahar commander. Some members wanted a ransom payment for Bergdahl, in addition to the release of the Guantanamo detainees. But the leadership prevailed. “We told them that these five men are more important than millions of dollars to us,” he says. He was more tolerant of complaints from Taliban foot soldiers that pointed out that for all the celebrations surrounding the officials’ release, there was no reward or recognition for the Taliban fighters who captured Bergdahl in 2009. But that’s not likely to get in the way of future attempts to kidnap American soldiers, across all ranks. Asked whether the Taliban would be inspired by the exchange to kidnap others, he laughed. “Definitely,” he says. “It’s better to kidnap one person like Bergdahl than kidnapping hundreds of useless people. It has encouraged our people. Now everybody will work hard to capture such an important bird.”"


Wednesday, June 11, 2014

Federal Reserve Policy, Money Has No Value

Former Bundesbank Vice-President Recommends Gold, Says Current Economic System is "Pure Fiction" --

Mish's Global Economic Trend Analysis: Former Bundesbank Vice-President Recommends Gold, Says Current Economic System is "Pure Fiction": "Stark noted that central banks, including the ECB, "have completely lost all ability to control and perspective on the economic situation." The monetary system was saved in 2011 through concerted action by major central banks worldwide. But, according to Stark, the whole system is "pure fiction". The monetary authorities have been groping since 2008 to avoid a second Lehman Brothers, but if happen, "the system will not survive," he warned.... (read more at link above)


Tuesday, June 10, 2014

Obama Has Retired, Plays Golf, Late Night Dinners, To Live in NYC

Obama, the already retired President --

"Obama has been hosting star-studded dinners that sometimes go on well past midnight and inviting a few newcomers such as former NBA star Alonzo Mourning into his social sphere. He's playing golf more than any other year, replacing basketball as his go-to sport, partly because of concerns about getting injured. ... Obama is giving more thought to his post-presidency than his aides like to suggest. He has spoken privately of his intention to establish a foundation with the reach and influence of the Clinton Global Initiative, the international fundraising juggernaut started by former President Bill Clinton. And despite his deep connections to Chicago, he has told friends he would like to live in New York City...."
(source: Politico Playbook )

I guess when you are an ineffective leader, but stuck in the job for 2 1/2 more years, you just coast along enjoying the amenities of the office, while your mind wanders off to more idyllic thoughts of some illusory future.


Monday, June 9, 2014

The No Exit Business Model

A No Exit Strategy definitely makes sense in today's environment:

Growth for Growth's Sake Leads to Nowhere » blog.easydns.org: ".... No Exit Investing / No Exit Businesses ... exits make no sense to me. Especially in this climate. I've received numerous overtures to sell easyDNS over the years, including a few standing offers but I don't see the point in taking any deal that's come along so far. Never mind that "growth is hard". Eating a super-sized thick crust pizza in a few bites (called Series A, Series B and Series C) would be. What is harder is to build a successful company. By this I mean a company that is self-sustaining, maybe a few off years here and there but for the most part healthy and profitable. It's also hard to build a brand. So at the prospect of selling off a successful company and a brand for a pile of money, the big question I can never answer is Then What? With interest rates at Zero for the foreseeable future, thanks to worldwide government interventionism and central bank incompetence, all asset classes are malignantly distorted beyond recognition. What the hell is one supposed to do with the proverbial briefcase full-o-cash? You'll hand 25% to 40% of it over to the government, and what's left then carries a near negative yield because that same government has a "targeted inflation" policy." (read more at link above)


Sunday, June 8, 2014

Chinese Army Hacking into US Companies, Charlie Rose video

Charlie Rose | charlierose.com: "David Sanger of the New York Times & Richard McGregor of the Financial Times on the accusation of Chinese army officers hacking into American companies."


Saturday, June 7, 2014

Richard Branson: A Better World In 10 Years (video)

Richard Branson: World Better in 10 Years Than Now: Video - Bloomberg:
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Sir Richard Branson, Virgin Group Founder and Chairman, discusses Virgin Galactic, Virgin America, Virgin Atlantic, and the space, music, and airline industries with Bloomberg's Cory Johnson. (Bloomberg, May 12, 2014)


Friday, June 6, 2014

Fed Policy, Awash In Liquidity, Consequences

Definitely a "must read" at the link below (excerpt follows):

Awash In Liquidity, Part 2: The Long-Term Consequences Of Falling Interest Rates | The Economy | Minyanville's Wall Street: ".... There are going to be unintended effects that we can't yet discern, but there are some issues that we already know about. ... over the last five years, the Fed has destroyed the tools it has used for the last 100 years to carry out monetary policy. Reserves in the banking system are now 34 times the level that is "required." So, raising reserve requirements doesn't appear to be viable. Selling assets from its balance sheet (open market operations) to reduce reserves would require an undoing of about $2.6 trillion before bank reserves would become an effective tool to control bank lending or the growth of the money supply. And, the Fed as the "lender of last resort" simply doesn't make sense in a world awash in liquidity.... So, how does the Fed unwind all of this? How does it actually raise interest rates when the appropriate time comes? Today, it doesn't appear that the Fed actually knows exactly what it is going to do, nor can it model, with any precision, what the impacts will be of some new tools with which it is currently experimenting.... a zero rate policy benefits the wealthy, and hurts the middle class.The reality is that there are no real plans to reverse the bloated balance sheet. According to NY Fed chief Dudley (in a May 20 speech), the discussion inside the Fed now excludes any concept of selling assets from its portfolio. Such an admission means that the Fed has realized that it has destroyed its traditional tools, and only has those experimental ones. Prepare for volatility and unintended consequences."

see also:  first installment of this two-part series Awash in Liquidity, Part I: Why Interest Rates Are Falling


Wednesday, June 4, 2014

US Companies, China Spying Impact (video)

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Will Alleged China Spying Impact U.S. Companies?: Video - Bloomberg: "GGV Capital Managing Partner Jeff Richards and Sanford Bernstein Senior Analyst Mark Moerdler discuss the impact of alleged Chinese spying on U.S. companies and relations on Bloomberg Television’s “Market Makers.” (Source: Bloomberg May 28)


Tuesday, June 3, 2014

Hedge Fund Highflier, More Scared, More Cash

A Hedge Fund Highflier Comes Back to Earth - NYTimes.com: "....Now he is preparing for the market’s next phase.

“What killed most people in ’08 was that they couldn’t believe that a Lehman could go, or a Bear Stearns could go, or that anything could change, nor in today’s world can they ever believe that China can be anything other than totemic and strong,” he said. As he sees it, China’s reliance on an export-driven business model and large current account surpluses to underwrite development can’t continue much longer.“What happened in 2008 was they got to a size, when the world stopped growing, they stopped growing, so their export markets basically seized up, and they should have seized up on the infrastructure,” he said. “But in fact, what they did was redoubled, and redoubled again, the infrastructure spending.”He is now only 20 percent net long, reflecting his cautious position. “Despite the fact the world is recovering, you should be a little bit more scared than you’ve been and keep a little bit more cash,” he said...." (read more at link above)


Monday, June 2, 2014

Government Policy, Tech Bubble, Housing Bubble, the Difference

FiveThirtyEight explains it at link below (excerpt follows):

Why the Housing Bubble Tanked the Economy And the Tech Bubble Didn’t | FiveThirtyEight: "... Despite seeing similar nominal dollar losses, the housing crash led to the Great Recession, while the dot-com crash led to a mild recession. Part of this difference can be seen in consumer spending. The housing crash killed retail spending, which collapsed 8 percent from 2007 to 2009, one of the largest two-year drops in recorded American history. The bursting of the tech bubble, on the other hand, had almost no effect at all; retail spending from 2000 to 2002 actually increased by 5 percent. What explains these different outcomes? In our forthcoming book, “House of Debt,” we argue that it was the distribution of losses that made the housing crash so much more severe than the dot-com crash. The sharp decline in home prices starting in 2007 concentrated losses on people with the least capacity to bear them, disproportionately affecting poor homeowners who then stopped spending. What about the tech crash? In 2001, stocks were held almost exclusively by the rich. The tech crash concentrated losses on the rich, but the rich had almost no debt and didn’t need to cut back their spending...." (read more at link above)

The unintended consequences of government policies encouraging consumers to borrow money at cheap interest rates to buy houses, flip houses, take out equity loans on houses, etc., led to the housing bubble that led to the crash. The problem is that unlike rich people, most people do not have the reserves to withstand such losses, hence, the Great Recession.

The government, directly and indirectly through housing policies, tax policies, Fannie Mae, the Federal Reserve, etc., had everything to do with the Housing Bubble and subsequent crash, but had very little to do with the Tech Bubble. Whenever government gets involved with the economy, it always ends badly.


Sunday, June 1, 2014

Mathias Döpfner has it wrong, Google Is Not Dangerous, But Governments Are

You can read Mathias Döpfner’s open letter to Eric Schmidt at the link below (excerpt follows):

Mathias Döpfner’s open letter to Eric Schmidt: "....This also includes the fiction of the culture of free services. On the Internet, in the beautiful colorful Google world, so much seems to be free of charge: from search services up to journalistic offerings. In truth we are paying with our behavior –  with the predictability and commercial exploitation of our behavior. Anyone who has a car accident today, and mentions it in an e-mail, can receive an offer for a new car from a manufacturer on his mobile phone tomorrow. Terribly convenient. Today, someone surfing high-blood-pressure web sites, who automatically betrays his notorious sedentary lifestyle through his Jawbone fitness wristband, can expect a higher health insurance premium the day after tomorrow. Not at all convenient. Simply terrible. It is possible that it will not take much longer before more and more people realize that the currency of his or her own behavior exacts a high price: the freedom of self-determination. And that is why it is better and cheaper to pay with something very old fashioned – namely  money. Google is the world’s most powerful bank – but dealing only in behavioral currency. Nobody capitalizes on their knowledge about us as effectively as Google. This is impressive and dangerous...."

No Google isn't dangerous, but governments are -- here's the difference: Yes, Google wants to know all about you (likes, dislikes, habits, preferences) in order to provide better, more responsive services to your needs--i.e., search, maps, email, etc, and to serve you relevant ads, BUT Google does NOT care who you are--your preference data is known but your personal identity is irrelevant to Google because they only want a commercial relationship with you, not a personal relationship. Governments, on the other hand, not only want to know ALL about you, AND also WHO you are--so that if need or want arises, they can physically locate you to arrest you, invade your home, confiscate your property, and do other stuff, including kill you. I don't know about you, but I would rather Google serve me better with services and show me relevant ads. For me there is no fear in that. But governments are different, and should be feared.


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects