Dec 022017
 
 December 2, 2017  Posted by at 9:39 am Finance Tagged with: , , , , , , , , ,  9 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


James McNeill Whistler Harmony in Blue and Silver: Trouville 1865

 

Senate Approves Republicans’ Tax Overhaul (R.)
Debt, Taxes, Growth And The GOP Con Job (Stockman)
SocGen: The Good Times Are Coming To An End In 2018 (BI)
Keeping You Awake At Night (Roberts)
Stock Market Acceleration In Final Stage (Kessler)
Pensions Aren’t The Ticking Timebomb – Rents Are (G.)
Carmageddon for Tesla (WS)
AI Has Already Taken Over, It’s Called the Corporation (Lent)
The UN Is Investigating Extreme Poverty … In America (G.)
Despite Greek Shelter, Yazidis Struggle To Integrate (AFP)

 

 

Largely hastily and secretly written by lobbyists, and mostly unread by lawmakers. Doesn’t seem to be the way to do things. Have you no pride?

Senate Approves Republicans’ Tax Overhaul (R.)

The U.S. Senate approved a sweeping tax overhaul on Saturday, moving Republicans and President Donald Trump a major step closer to their goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes. In what would be the largest U.S. tax overhaul since the 1980s, Republicans want to add $1.4 trillion over 10 years to the $20 trillion national debt to finance changes that they say would further boost an already growing economy. U.S. stock markets have rallied for months in hopes Washington would provide significant tax cuts for corporations. Following the 51-49 vote, talks will begin, likely next week, between the Senate and the House of Representatives, which has already approved its own tax bill. The two chambers must craft a single bill to send to Trump to sign into law.

Trump wants that to happen before the end of the year, allowing him and his Republicans to score their first major legislative achievement of 2017, despite controlling the White House, the Senate and the House since he took office in January. Celebrating their victory, Republican leaders said the tax cuts would encourage U.S. companies to invest more and boost economic growth. “We have an opportunity now to make America more competitive, to keep jobs from being shipped offshore and to provide substantial relief to the middle class,” said Mitch McConnell, the Republican leader in the Senate. The tax overhaul is seen by Republicans as crucial to their prospects in the November 2018 mid-term election campaigns when they will have to defend their majorities in Congress.

In a legislative battle that moved so fast a final draft of the bill was unavailable to the public until just hours before the vote, Democrats slammed the measure as a give-away to businesses and the rich financed with billions in taxpayer debt.

Read more …

Stockman agrees.

Debt, Taxes, Growth And The GOP Con Job (Stockman)

During more than four decades in Washington and on Wall Street it is quite possible that we never picked up any useful skills. But along the way we did unavoidably acquire what amounts to a survival tool in those fair precincts—-namely, a nose for the con job. And what a doozy we have going now as a desperate mob of Capitol Hill Republicans attempts to enact something—anything— that can be vaguely labeled tax reform/tax cut. And for a reason that lies only slightly below the surface. In a word, they are scared to death that the political train wreck in the Oval Office will put them out of business for years to come. So they are attempting to erect a shield of legislative accomplishment that can be sold in 2018 as the work of the GOP Congress, not the unhinged tweet-storm in the White House.

To be sure, some element of political calculus always lies behind legislation. For instance, the Dems didn’t pass the Wagner Act in 1935, the Voting Rights Act of 1965 or the Affordable Care Act of 2010 as an exercise in pure civic virtue—-these measures targeted huge constituencies with tens of millions of votes at stake. Still, threadbare theories and untoward effects are just that; they can’t be redeemed by the risible claim that this legislative Rube Goldberg Contraption is being jammed through sight unseen (in ACA redux fashion) for the benefit of the rank and file Republican voters—and most especially not for the dispossessed independents and Dems of Flyover America who voted for Trump out of protest against the failing status quo. To the contrary. The GOP tax bill is of the lobbies, by the PACs and for the money. Period.

There is no higher purpose or even nugget of conservative economic principle to it. The battle cry of “pro-growth tax cuts” is just a warmed over 35 year-old mantra from the Reagan era that does not remotely reflect the actual content of the bill or disguise what it really is: Namely, a cowardly infliction of more than $2 trillion of debt on future American taxpayers in order to fund tax relief today for the GOP’s K-Street and Wall Street paymasters. On a net basis, in fact, fully 97% of the $1.412 trillion revenue loss in the Senate Committee bill over the next decade is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (and repeal of the related AMT). All the rest of the massive bill is just a monumental zero-sum pot stirring operation.

Read more …

She sings.

SocGen: The Good Times Are Coming To An End In 2018 (BI)

The party’s almost over, Societe Generale strategists say. A strong earnings recovery and a growing economy have fueled investor interest in buying risky corporate bonds this year. SocGen’s credit strategists see 2018 as a transition year for the credit market, with the low-yield environment that has driven some investors into riskier credit instruments likely to turn. “We expect 2018 to see the last of the good times, with very positive conditions early in the year,” the strategists Juan Esteban Valencia and Guy Stear said. “In our view, the ultra-low yield environment will remain in place, making credit a very attractive proposition, even at current levels. Additionally, economic growth should remain healthy and the CSPP (and QE program) should remain supportive of the asset class. However, at some point, we expect these idyllic conditions to start shifting.”

By stopping their bond-buying programs, the ECB and the Fed would leave credit, including the market for government bonds, more vulnerable to market movements, according to SocGen. Global credit already looks overvalued, the strategists said. Sustained demand for riskier corporate bonds has reduced the spread between their yields and comparable government bonds to the lowest levels in three years. A previous study they conducted showed that the level of spreads explained about half of the following year’s performance. “Low spreads are the mother of negative excess returns,” they said, adding that credit markets would start 2018 on the wrong footing with tight valuations and low breakevens. Like Societe Generale’s credit strategists, the firm’s economists see a risk that the US economy starts to slow down in 2019 or 2020 amid lower profit margins.

Read more …

More great graphs from Lance. The last breaths of the system: It now requires nearly $4.00 of debt for each $1.00 of economic growth..

Keeping You Awake At Night (Roberts)

[..] while Janet Yellen was focused on Federal Debt, the real issue is total debt as a percentage of the economy. Every piece of leverage whether it is government debt, personal debt and even leverage requires servicing which detracts “savings” from being applied to more productive uses. Yes, in the short-term debt can be used to supplant consumption required to artificially stimulate growth, but the long-term effect is entirely negative. As shown in the chart below, total system debt how exceeds 370% of GDP and is rising.

It now requires ever increasing levels of debt to create each $1 of economic growth. From 1959 to 1983, it required roughly $1.25 of debt to create $1 of economic activity. However, as I have discussed previously, the deregulation of the financial sector, combined with falling interest rates, led to a debt explosion. That debt explosion, which allowed for an excessive standard of living, has led to the long-term deterioration in economic growth rates. It now requires nearly $4.00 of debt for each $1.00 of economic growth.

Read more …

Tick. Tock.

Stock Market Acceleration In Final Stage (Kessler)

Secular stock-market bullish trends tend to accelerate as they mature. The last three big bull moves in the Dow Jones Industrial Average look very similar and suggest a near-term major correction. See below:

 

 

Read more …

What happens when you blow bubbles to hide your failures. But just make homes places to live in again, not speculative assets. It’s not that hard to understand, or do.

Pensions Aren’t The Ticking Timebomb – Rents Are (G.)

Scottish Widows is the sort of unassuming pensions company that rarely likes to publicly criticise government policy. But an analysis it published this week is a stark warning about the ticking time bomb that will explode in 10 to 20 years’ time. And it’s not pension incomes that are the worry – it’s the fact that so many of tomorrow’s pensioners who never got on to the property ladder in the 2000s and 2010s will have to find huge amounts of money to pay ever-escalating rents to private landlords. Scottish Widows skirts around the issue by suggesting that non-homeowners currently in their 50s should start saving an extra £6,000 a year now to be able to afford their rent in retirement. As if people on low incomes are going to find that sort of money. The reason they are renting is that they were never able to find the savings for a deposit on a house in the first place, or didn’t earn enough to qualify for a mortgage.

The reality is that these people are likely to retire with little more than the state pension plus a small bit of private pension. Maybe they will be picking up about £200 a week once they are 67. Given that the average rent in England and Wales is £845 a month – and in London it’s about £1,250 a month – then the whole lot will be gobbled up by the landlord. So the taxpayer will have no alternative but to step in and pay most of the rent, and we are then on the hook for payments going on for maybe 20 or 30 years. All so that the buy-to-let landlord with multiple properties can enjoy a lavish retirement themselves. This is the lunacy of promoting buy to let as a long term form of tenure for millions of people. Even in developed countries where renting is common, such as Germany, most people are living in a home they own by the time they reach retirement.

Renting all the way through retirement, funded by the taxpayer, to a landlord who has the power to evict without reason and at short notice, is the worst possible situation. And it’s one we are hurtling towards. Make no mistake about the dramatic change in the retirement landscape that is coming. Scottish Widows projects that one in eight retirees will be renting by 2032 – treble today’s figure. After that it will continue rising. It says there is a £43bn gap between the income and savings people have now and what the rent bill will be in retirement. That’s more than one-third of the entire NHS budget for a year – to be squandered on rent.

Read more …

“In February 2017, Tesla hyped these Model 3 production numbers for 2017: “Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018.” November is solidly in the fourth quarter. 5,000 vehicles per week would mean over 20,000 a month. OK, this is November and not December, so maybe 4,000 a week for a total of 16,000. We got 345.”

Carmageddon for Tesla (WS)

Today was the monthly moment of truth for automakers in the US. They reported the number of new vehicles that their dealers delivered to their customers and that the automakers delivered directly to large fleet customers. These are unit sales, not dollar sales, and they’re religiously followed by the industry. Total sales in November rose 0.9% from a year ago to 1,393,010 new vehicles, according to Autodata, which tracks these sales as they’re reported by the automakers. Sales of cars dropped 8.2%. Sales of trucks – which include SUVs, crossovers, pickups, and vans – rose 6.6%. Strong replacement demand from the hurricane-affected areas in Texas papered over weaknesses elsewhere. As always, there were winners and losers. And one of the losers was Tesla.

First things first: There is nothing wrong with a tiny automaker trying to design, make, and sell cool but expensive cars that a few thousand Americans might buy every month, and trying to do so on a battleground dominated by giants. Porsche has been doing that for years. Porsche AG is owned by Volkswagen AG, which is itself majority-owned by Porsche Automobil Holding SE. Tesla is out there by itself. And Tesla has put electric vehicles on the map. That was a huge feat. EVs have been around since the 1800s, but given the challenges that batteries posed, they simply didn’t catch on until Tesla made EVs cool. Yet Tesla has to buy the battery cells from battery makers, such as Panasonic. Tesla isn’t quite out there by itself, though. The Wall Street hype machine backs it up, dousing it with billions of dollars on a regular basis to burn through as fast as it can.

This masterful hype has created a giant market capitalization of about $52 billion, more than most automakers, including Ford ($50 billion). It’s not far behind GM ($61 billion). But Tesla – which lost $619 million in Q3 – delivered only 3,590 vehicles in November in the US, down 18% from a year ago. There are all kinds of interesting aspects about this. One: 3,590 vehicles amounts to a market share of only 0.26%, of the 1,393,010 new cars and trucks sold in the US in November. Porsche outsold Tesla by 55% (5,555 new vehicles). Two: Tesla doesn’t report monthly deliveries. It wants to play with the big boys, but it doesn’t want people to know on a monthly basis just how crummy and by comparison inconsequential its US sales numbers are. Opaque and dedicated to hype, it refuses to disclose how many vehicles it delivered that month in the US.

So the industry is estimating Tesla’s monthly US sales. Tesla discloses unit sales data in its quarterly earnings reports, long after everyone has already forgotten about the months in which they occurred. Three: So how are Model 3 sales doing? Since Tesla doesn’t disclose its monthly deliveries in the US, the industry is guessing. The assembly line still isn’t working. “Manufacturing bottlenecks,” as Tesla calls it, and “manufacturing hell,” as Elon Musk calls it, rule the day. In Q3, Tesla delivered 220 handmade Model 3’s. In October, it delivered about 145 handmade units. In November, the assembly line still wasn’t assembling cars. Inside EVs estimates that Tesla delivered a whopping 345 units in November.

Read more …

Interesting angle.

AI Has Already Taken Over, It’s Called the Corporation (Lent)

When corporations were first formed back in the seventeenth century, their inventors—just like modern software engineers—acted with what they believed were good intentions. The first corporate charters were simply designed to limit an investor’s liability to the amount of their investment, thus encouraging them to finance risky expeditions to India and Southeast Asia. However, an unintended consequence soon emerged, known as moral hazard: with the potential upside greater than the downside, reckless behavior ensued, leading to a series of spectacular frauds and a market crash that resulted in corporations being temporarily banned in England in 1720. Thomas Jefferson and other leaders of the United States, aware of the English experience, were deeply suspicious of corporations, giving them limited charters with tightly constrained powers.

However, during the turmoil of the Civil War, industrialists took advantage of the disarray, leveraging widespread political corruption to expand their influence. Shortly before his death, Abraham Lincoln lamented what he saw happening with a resounding prophecy: “Corporations have been enthroned … An era of corruption in high places will follow… until wealth is aggregated in a few hands … and the Republic is destroyed.” Corporations, just like a potential runaway AI, have no intrinsic interest in human welfare. They are legal constructions: abstract entities designed with the ultimate goal of maximizing financial returns for their investors above all else. If corporations were in fact real persons, they would be sociopaths, completely lacking the ability for empathy that is a crucial element of normal human behavior.

Unlike humans, however, corporations are theoretically immortal, cannot be put in prison, and the larger multinationals are not constrained by the laws of any individual country. With the incalculable advantage of their superhuman powers, corporations have literally taken over the world. They have grown so massive that an astonishing sixty-nine of the largest hundred economies in the world are not nation states but corporate entities.

Read more …

The UN fails to speak out on far too many issues. It has made itself a lame duck.

The UN Is Investigating Extreme Poverty … In America (G.)

The United Nations monitor on extreme poverty and human rights has embarked on a coast-to-coast tour of the US to hold the world’s richest nation – and its president – to account for the hardships endured by America’s most vulnerable citizens. The tour, which kicked off on Friday morning, will make stops in four states as well as Washington DC and the US territory of Puerto Rico. It will focus on several of the social and economic barriers that render the American dream merely a pipe dream to millions – from homelessness in California to racial discrimination in the Deep South, cumulative neglect in Puerto Rico and the decline of industrial jobs in West Virginia. With 41 million Americans officially in poverty according to the US Census Bureau (other estimates put that figure much higher), one aim of the UN mission will be to demonstrate that no country, however wealthy, is immune from human suffering induced by growing inequality.

Nor is any nation, however powerful, beyond the reach of human rights law – a message that the US government and Donald Trump might find hard to stomach given their tendency to regard internal affairs as sacrosanct. The UN special rapporteur on extreme poverty and human rights, Philip Alston, is a feisty Australian and New York University law professor who has a fearsome track record of holding power to account. He tore a strip off the Saudi Arabian regime for its treatment of women months before the kingdom legalized their right to drive, denounced the Brazilian government for attacking the poor through austerity, and even excoriated the UN itself for importing cholera to Haiti. The US is no stranger to Alston’s withering tongue, having come under heavy criticism from him for its program of drone strikes on terrorist targets abroad.

In his previous role as UN special rapporteur on extrajudicial executions, Alston blamed the Obama administration and the CIA for killing many innocent civilians in attacks he said were of dubious international legality. Now Alston has set off on his sixth, and arguably most sensitive, visit as UN monitor on extreme poverty since he took up the position in June 2014. At the heart of his fact-finding tour will be a question that is causing increasing anxiety at a troubled time: is it possible, in one of the world’s leading democracies, to enjoy fundamental human rights such as political participation or voting rights if you are unable to meet basic living standards, let alone engage, as Thomas Jefferson put it, in the pursuit of happiness?

Read more …

Untreated traumas. A largely forgotten part of the refugee crisis.

Despite Greek Shelter, Yazidis Struggle To Integrate (AFP)

Having run the gauntlet of invasion, combat, killings and enslavement by Islamic State jihadists in Iraq, the members of this religious minority have found temporary shelter in the largely agricultural region of Serres in northern Greece. The camp they have been allocated to is one of the best in the country – their prefabricated homes have air conditioning and solar panels to heat water. The grounds are clean and there is a playground for the children. Many hope to be reunited with other Yazidis stranded in Greece, but with the country struggling to manage more than 50,000 refugees and migrants stranded on its territory, that is not always an option. “Creating a camp just for Yazidis is neither possible nor viable,” said a Greek official with knowledge of refugee management efforts.

The camp can normally accommodate 700 people. At the moment there are some 350 Yazidis, most of them women and children, waiting for EU-sponsored relocation to other parts of Europe. Greece’s policy is to move eligible refugees from overcrowded island camps – where they undergo identity checks upon arrival from Turkey – to the mainland, where more comfortable accommodation is available in better camps, UN-funded flats and hotels. But the Yazidis, who have already faced an ordeal keeping their dwindling community together thus far, oppose this policy. This is partly down to fear of other communities. They had a scare earlier this year, when a Yazidi celebration in Kilkis, another part of northern Greece, descended into violence between Arabs and Kurds.

[..] In areas controlled by Islamic State, thousands of women and girls from the Yazidi minority were used as sex slaves and suffered horrific abuse, including rape, abduction, slavery and cruel, inhumane and degrading treatment. The suffering the Yazidis have endured explains why community elders in Serres have written to the migration ministry to officially request that the camp be assigned to Yazidis alone. “We ask for our community not to be disturbed and to live here in safety until we depart,” says Hajdar Hamat, a self-styled spokesman for the Yazidis at the camp. “Everybody knows about our peoples’ genocide. We did not come from Sinjar to Greece for fun. Europe must protect us,” says Hamat.

Read more …

Oct 092016
 
 October 9, 2016  Posted by at 8:54 am Finance Tagged with: , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


NPC Balloon at Shriners convention, Washington DC 1923

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)
The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)
World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)
Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)
Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)
Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)
US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)
UK MPs Demand Vote On Hard Brexit Plans (G.)
Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

 

 

Recovery in all its glory.

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)

According to a new survey, people in their 20s and 30s are having trouble “adulting,” or achieving financial independence. Conducted by Bank of America and USA Today, the report says less than half of the 22-26-year-olds surveyed pay their own rent (47%), health insurance (41%), or contribute to a retirement account (27%). One thing they learned from the survey of Millennials (born in the early 1980s to mid ‘90s) and Generation Z’ers (born in the mid-1990s to early 2000s) said Andrew Plepler, the bank’s Enterprise, Social and Governance executive, was that “adulthood” defined by people in their 20s isn’t about age or milestones such as getting married or buying a home. “Instead, the majority said that adulthood really begins when you’re financially independent – when you can find a job, pay your own bills, cover your own rent and stop relying on mom and dad for financial support,” he said.

Indeed, the respondents who did report feeling like adults said it’s because they had help preparing from their parents (60%), because they have a job (60%) or they had a role model to guide the way (49%). They’re also thinking ahead about the economy in the wake of the presidential election : • 65% say economic issues are more important to them than social issues (34%) • Most would choose a candidate that’s best for the country (79%) over one who would improve just their own financial situation (21%) • Job growth/unemployment (27%), health care costs (25%) and college affordability/student debt (24%) rose to the top as young voters’ top campaign issues in this election. • Among those with student debt, nearly 25% say it will impact the way they vote “a great deal”

Read more …

Yeah, maybe net worth vs energy use is a good way to measure reality.

The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)

As the Financial Circus continues today, pushing down the precious metals prices, millions of Americans are going to get wiped out when the collapse of U.S. net worth begins in earnest. Anyone with a tad bit of common sense realizes these financial markets today are totally disconnected from reality. With new stories of 40 million Russians to take part in “Nuclear Disaster” drill, the Philippine President telling President Obama “To Go To Hell”, he’s buying weapons from Russia, U.S. Suspends Diplomatic Relations With Russia on Syria, U.S. Ends Fiscal 2014 With $1.4 Trillion Debt Increase: Third Largest In History, Deutsche Bank Troubles Raise Fear of Global Shock, it’s completely hilarious that the gold and silver prices are selling off big time today.

With 90% of the U.S. media now in control by six large mega-corporations, Americans have no idea just how bad the U.S. financial system has become. News stories today that would have caused a stock market crash and a spike in the precious metals years ago… no longer are a realistic barometer of the market today. Instead, the broader Stock, Bond and Real Estate Markets where 99% of Americans are invested, continue to be propped up. How propped up? Well, let’s say by a staggering $31 trillion in the past six years. According to the wonderful folks at the Federal Reserve, U.S. net worth increased from $57.9 trillion Q2 2010, to a stunning $89 trillion Q2 2016:

I would imagine a lot of wealthy Americans believe they are living life “High On The Hog” today. However, that $31 trillion in additional wealth is a nothing more than a “Digital Mirage.” For wealth to grow, more energy must be burned and positive economic activity must be generated. This is the foundation of all economic principles. Unfortunately, Americans did not burn more energy to create this additional $31 trillion in U.S. net worth. Matter-a-fact, total U.S. energy consumption in 2016 will likely turn out to be less than it was in 2010. This chart is very simple to understand. The left axis shows U.S. net worth in trillions of dollars while the right axis indicates total U.S. energy consumption in quadrillion Btu’s (that’s one hell of a lot of energy). As we can see, total U.S. energy consumption has fluctuated a bit, but has been relatively flat for the past six years.

[..] How the U.S. GDP increased nearly 25% in six years while its energy consumption remained flat is one for the record books. Now, this wasn’t always the case. U.S. energy consumption nearly tripled from 34 quad Btu’s in 1950 to 98 quad Btu’s in 2000. Thus, U.S. GDP increased as total energy consumption increased.

Read more …

Obsolete.

World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)

World finance leaders pledged Saturday to use more resources to try to bolster economic gains as they confront stubbornly slow growth and a rising backlash against globalization. The policy committee for the 189-nation IMF said the world has “benefited tremendously from globalization” but that protectionism is a threat. Increasing anger over globalization dominated the annual meetings of the IMF and its sister lending agency, the World Bank. The unhappiness is evident in Britain’s vote in June to leave the EU and in the U.S. presidential campaign of Republican Donald Trump. Trump has said millions of Americans have lost jobs or seen wages stagnate because of unfair trade practices of countries such as China and Mexico. He is vowing to impose penalty tariffs if those practices are not halted.

The British vote sent shockwaves through financial markets this summer, and there were further troubles Friday when the British pound plunged by 6% against the dollar before recovering. Investors worry whether there will be more turbulence if the British exit proves to be messy and prolonged. IMF Managing Director Christine Lagarde said “growth has been too low for too long, benefiting too few,” and that’s what officials need to address. In their statement, IMF officials committed to designing and putting in place policies “to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.”

Read more …

Raising more debt to pay for legal costs….

Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)

Deutsche Bank CEO John Cryan failed to reach an agreement with the U.S. Justice Department to resolve a years-long investigation into its mortgage-bond dealings during a meeting in Washington Friday, Germany’s Bild newspaper reported. The meeting was meant to negotiate the multi-billion-dollar settlement the bank will have to pay to resolve alleged misconduct arising from its dealings in residential-mortgage backed securities that led to the 2008 financial crisis, according to a Bild am Sonntag report. The German lender is still considering seeking damages against Anshu Jain and Josef Ackermann, who are both former CEOs of the bank, the newspaper reported. Bild said the bank froze part of the millions in bonus payments to Jain and other former top managers.

Concerns about Deutsche Bank’s ability to pay the $14 billion opening settlement bid from the Justice Department sent the lender’s stock to a record low last month. The bank, which set aside €5.5 billion ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including one into a money-laundering probe tied to its Russia operations. Analysts at Barclays speculate that could cost the bank as much as €2 billion. Cryan, a Briton who speaks fluent German, has sought for the last three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health.

The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise €5 billion, people with knowledge of the matter said this week. Qatar’s royal family is also considering increasing its stake in Deutsche Bank to as much as 25%, according to people with knowledge of the matter. Cryan has said the lender may fail to be profitable this year after posting the first annual loss since 2008 last year. With plans to eliminate thousands of jobs and cut risky assets, he called 2016 a peak restructuring year.

Read more …

The state of the German economy: selling off assets.

Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)

On September 15, the Justice Department in the United States ordered the company to pay a $14 billion fine to settle accusations of fraud in Deutsche Bank’s packaging and sale of mortgage-backed securities in the free-wheeling days that led to the global financial crisis. Speculators and politicians have been in a state of near panic since the announcement, with open speculation about the possibility of a government bailout for the prestigious bank. An atmosphere of frustration and depression is currently prevailing inside the bank and Cryan is trying to combat it with messages of perseverance. For a time, Deutsche Bank’s market value plummeted below €15 billion, down from €35 billion a year ago.

Large-scale investor HBJ and his cousin – the former Emir of Qatar, Sheik Hamad bin Khalifa al-Thani, who he has since brought in as an investor as well – are believed to have lost more than a billion euros – on paper, at least. This summer, the two increased their holdings to just under 10% of the company, but Deutsche Bank’s market capital has since continued to slide. And yet, it appears that the low share price is encouraging the sheikhs to invest even more now that it wouldn’t take more than a few billion for them to gain control of Deutsche Bank. Information obtained by SPIEGEL indicates that the al-Thani cousins are considering propping up the bank with a fresh capital infusion and purchasing a blocking stake of 25% together with other investors.

To do this, they could partner with sovereign wealth funds, some of which are apparently willing to invest in the company. But the information obtained by SPIEGEL also suggests that HBJ and the former emir would only be willing to take that risk if they could have a strong say in business decisions at Deutsche Bank. They are said to be deeply frustrated over the fact that the bank has been unable to maneuver itself out of its defensive position. The Qataris are said to be increasingly unhappy with Cryan’s current management team and believe the company’s present course is dangerous. The problems can’t be fixed through cost saving measures alone, they believe, particularly with eroding revenues and profits could. This displeasure manifested itself through the appointment in July of attorney Stefan Simon to the supervisory board. He represents the Qataris’ interests inside the company.

Read more …

Might as well have said 2029. Useless and hollow.

Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)

Inflation in the euro area should return to the European Central Bank’s target by early 2019 at the latest, ECB President Mario Draghi said. “Our inflation rate will pick up during the course of 2017, and then will continue moving in 2018 toward the objective which is close but below 2%,” Draghi said on Saturday at a press conference during the annual meeting of the IMF in Washington. “This is predicated on maintaining the extraordinary support of our monetary policy.” While the ECB hasn’t met its own definition of its mandate on inflation since early 2013, an unprecedented wave of stimulus measures during Draghi’s tenure including the current asset-purchase pace of €80 billion per month has helped keep the currency bloc away from outright deflation.

Draghi’s comments imply that fresh staff forecasts due in December – which build-in the impact of current stimulus – will show a 2019 inflation rate in line with the goal. Achieving that target would mark the end of Draghi’s fight against the euro area’s stubbornly low inflation after more than six years. The ECB has deployed negative rates, asset purchases and cheap long-term loans to banks to rein in inflation. The December round of staff forecasts may serve as the basis for a decision on whether the ECB intends to continue its quantitative easing program at the current rate beyond the end date in March 2017, whether the program will be wound down gradually after that, or if it could be stopped completely.

Read more …

Update. No escape. No velocity.

US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)

The national unemployment rate rose slightly to 5% in September, the Labor Department reported Friday. But relying on that one headline number as an indicator of the economy’s direction leaves a lot of important information below the surface. Every month on “Big Jobs Friday,” the Bureau of Labor Statistics releases a boatload of data, each point of which provides its own unique perspective on a facet of the nation’s employment situation. Economists look past the official unemployment rate — that 5% figure, which is known as the “U-3” rate — to other metrics that provide their own nuanced views of the state of jobs. One of those figures is called the U-6 rate, which has a broader definition of what unemployment means. That figure remained unchanged at 9.7% in September.

The official unemployment rate is composed of “total unemployed, as a% of the civilian labor force,” but doesn’t include a number of employment situations in which workers might find themselves. The U-6 rate is defined as all unemployed, plus “persons marginally attached to the labor force, plus total employed part time for economic reasons, as a% of the labor force.” In other words: That’s the unemployed, the underemployed and the discouraged. The U-3 rate has in the past few months returned to the prerecession levels that economists consider full employment. The U-6 rate has remained above precession levels, though it has seen significant improvement in the past few years. Economists expected 176,000 jobs to be added in September, according to a late Reuters estimate. The report showed that the market added 156,000 jobs.

Read more …

I see busy lawyers in your future…

UK MPs Demand Vote On Hard Brexit Plans (G.)

Theresa May is under massive cross-party pressure to grant MPs a vote on any decision to leave or limit UK involvement in the European single market, amid growing outrage at the prospect that parliament could be bypassed over the biggest economic decision in decades. Tory MPs joined forces with former leaders of Labour and the Liberal Democrats, the SNP and Greens to insist that parliament have a say and a vote, pointing out that, while the British people had backed leaving the EU, they had not chosen to leave the biggest trading market in the western world. Former Labour leader Ed Miliband held discussions with pro-EU Tory MPs on Saturday, and was said to be considering tabling an urgent question in the Commons, demanding that May appear before parliament to explain its future role in Brexit decisions, when MPs return on Monday.

The SNP and pro-EU Tory MPs Nicky Morgan and Anna Soubry were also considering tabling questions, while former Lib Dem leader Nick Clegg, now the party’s Brexit spokesman, said it would be appalling if detailed terms of Brexit, including the UK’s future relations with the single market, were not voted on by MPs. Miliband told the Observer: “Having claimed that the referendum was about returning sovereignty to Britain, it would be a complete outrage if May were to determine the terms of Brexit without a mandate from parliament. “There is no mandate for hard Brexit, and I don’t believe there is a majority in parliament for [it] either. Given the importance of these decisions for the UK economy … it has to be a matter for MPs.”

Clegg said: “My great worry is that while there will be a vote on repealing the 1972 European Communities Act, which is about the decision to leave the EU, it will be left to the executive alone to decide the terms of Brexit. That would not be remotely acceptable.”

Read more …

It’s becoming a lovely nation.

Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

The Home Office has refused to respond to official requests from the French authorities to accept unaccompanied child refugees stranded in Calais who are eligible to come to Britain, the British Red Cross has said. With the planned demolition of Calais’s refugee camp only weeks away, the Red Cross says the Home Office is turning down “take charge” requests by the French on often pedantic grounds. Once such a request has been accepted by the UK government it is in effect responsible for a child who is seeking asylum. In some cases British officials claim to have “misplaced” requests from the French to help children, raising questions over Britain’s approach to what humanitarian experts call an urgent child protection issue.

The camp is scheduled to be demolished this month, with no provision agreed by the British and French for most of the 1,000 unaccompanied minors there, of whom at least 400 are eligible to enter the UK. A new report damningly articulates the Home Office’s intransigence, with research by the Red Cross revealing it takes up to 11 months on average to bring a child to the UK under an EU scheme to reunite families. Lawyers say there is no reason why the process should take more than several weeks. The report also identifies “problems ranging from basic administrative errors causing severe delays to a shortage of human resources on the French side”. It accuses the Home Office of unnecessarily forcing vulnerable children to stay in the camp for months after their case is rejected because of a basic administrative error or lack of documents. “Insufficient discretion or consideration is made for the child’s vulnerability and circumstances,” says the report, No Place For Children, released on Sunday.

Read more …