Financial News: March 2014

Monday, March 31, 2014

[video] Forex Trading Video: Headlines Stir ECB, Fed Rate Expectations but Not EURUSD (Forex News by DailyFX)

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Citigroup uncovered rogue trading in Mexico, fired two bond traders

Banamex suffered paper losses from unauthorized trading that ran into the millions or perhaps even tens of millions of dollars, the sources said. A spokeswoman for Citigroup confirmed the bank had fired two fixed income traders for violating its code of conduct and said in a written statement that the bank "escalated the issue to regulators and took immediate action against" the individuals. Mexico's bank and securities regulator, the National Bank and Securities Commission, is aware of the matter, which was investigated internally by the bank, a spokesman for the regulator said. The trading loss, even if realized, would be small in the scheme of Citigroup's $13.7 billion of earnings for 2013.

by via Yahoo! Finance: Top Stories

GM enters harsh spotlight as Congress hearings begin

The U.S. Congress will try to establish who is to blame for at least 13 auto-related deaths over the past decade, as public hearings are launched on Tuesday on General Motors Co's slow response to defective ignition switches in cars. Despite tougher laws being enacted in 2000 and 2010 to encourage automakers and the National Highway Traffic Safety Administration (NHTSA) to aggressively root out safety concerns, it took GM more than a decade to acknowledge publicly that it had a potentially fatal problem. Documents that GM and NHTSA turned over to the House of Representatives Energy and Commerce Committee have provided new insights into GM's practices. They include decisions to install ignition switches in Chevrolet Cobalts, Saturn Ions and other models that did not meet all of the company's own specifications.

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Australia holds rate, repeats steady rates for a period

Australia's central bank held its benchmark cash rate steady at 2.50 percent, as expected, and reiterated that "the most prudent course is likely to be a period of stability in interest rates."

The Reserve Bank of Australia (RBA), which has maintained its rate since August 2013, said continued accommodative monetary policy should support demand and help economic growth strengthen over time while inflation is expected to remain in line with the bank's 2 -3 percent target.

The RBA's guidance that rates are likely to remain unchanged for some time was the same as it gave in February and March and its statement today also largely mirrored last month's view of the prospects for Australia's economy.

The exchange rate of the Australian dollar - known as the Aussie - is still considered "high by historical standards," and the RBA voiced concern over the recent rise in the exchange rate following a drop over in the last year.

"The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months," the RBA quoted its governor, Glenn Stevens as saying.

The Aussie weakened sharply from May through August last year, falling from around 1.05 to the U.S. dollar to 0.89 by August 30. It then gained strength through October before again falling to a low of below 0.87 to the dollar in late January this year.

But in the last two months it has started appreciating again, trading at 0.92 to the dollar earlier today.

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[text] Equity market more suicidal in 2014 than 2000 or 2007 | Juggling Dynamite

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"For any of us that hoped people might have learned a little wisdom or self-preservation bias from the pain of the last two equity market implosions…we would be wrong. Emboldened by taxpayer bailouts, market participants heading into March were more highly levered than at any other time since this secular bear began in in 2000 (red line below)."

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Bailing Out Banks Put Homeowners Underwater (SchiffReport)

Precious Metals Dealers List

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Asian shares hit four-month high on China data, Yellen

Asian shares hit four-month high on Tuesday after China's official PMI survey showed manufacturing managed to continue expanding in March, and dovish comments from Federal Reserve Chair Janet Yellen. China's official Purchasing Managers' Index increased to 50.3 in March from February's 50.2, in line with economists' forecasts. While the PMI figure alone is unlikely to dispel concerns of a slowdown in China, investor sentiment has improved on China in recent weeks as they expect Beijing will adopt a stimulus plan to achieve its growth target.

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[video] Forex Strategy Video: Get Ready for Rate Speculation-based Volatility (Forex News by DailyFX)

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U.S. judge says SEC lawsuit against Bank of America should proceed

U.S. Magistrate Judge David Cayer in Charlotte, North Carolina, where the bank is based, made the recommendation four days after urging dismissal of a related Department of Justice civil lawsuit, which alleged violations of a different law. That ruling had been seen as a possible setback for government efforts to fight fraud by Wall Street in the sale of mortgage securities. "We are reviewing the magistrate judge's recommendation carefully," bank spokesman Lawrence Grayson said on Monday, with regard to the SEC civil case. Authorities accused Bank of America of misleading Wachovia Corp, now part of Wells Fargo & Co, and the Federal Home Loan Bank of San Francisco about risks in the $855 million offering, dating from early 2008 and backed by 1,191 "jumbo" adjustable rate mortgages that proved less safe than expected.

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[video] candlestick forum market direction March 31, 2014 (Stephen Bigalow)

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U.S. congressional probe heats up as GM expands recalls

WASHINGTON/DETROIT (Reuters) - A U.S. congressional probe is focusing on why General Motors Co employees repeatedly approved substandard ignition switches linked to at least 13 fatalities, as the automaker on Monday announced another major recall, this time related to power steering issues. On the eve of a high-profile hearing before a House of Representatives panel, GM said it is recalling more than 1.5 million additional vehicles globally. The Detroit-based automaker says it is taking an aggressive stance on safety issues, after coming under intense criticism for waiting more than a decade to recall millions of cars with potentially faulty ignition switches. On Monday, Democrats on the House Energy and Commerce Committee released details of some of the more than 200,000 pages of documents they have received from GM and a federal regulator.

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GM to recall 1.5 million vehicles to fix electric power steering issue

This brings to 6.26 million the number of vehicles recalled by GM since the start of this year. "Steering control can be maintained because the vehicle will revert to manual steering, but greater driver effort would be required at low vehicle speeds, which could increase the risk of a crash," GM said in a statement. Three of the six models recalled on Monday are also involved in a massive ignition switch recall of 2.6 million vehicles worldwide. This includes a previously disclosed $300 million charge for three recalls announced on March 17, and the ignition switch recall on February 25.

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JPMorgan fails to end lawsuit over London Whale losses

JPMorgan Chase & Co must face a lawsuit from shareholders accusing it of securities fraud by misleading them about its ability to manage risk, which surfaced when it lost $6.2 billion in the "London Whale" scandal. U.S. District Judge George Daniels in Manhattan said shareholders could pursue claims that JPMorgan, Chief Executive Jamie Dimon and former Chief Financial Officer Douglas Braunstein knowingly hid the increased risks that the bank's Chief Investment Office had been taking in early 2012. In separate decisions also issued on Monday, the judge also dismissed a lawsuit brought against JPMorgan directors, and a lawsuit by employees over their losses from investing in the bank's stock in their retirement accounts. The $6.2 billion loss was linked to trades by Bruno Iksil, a French national who had worked in a bank office in London.

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Senator says Caterpillar avoided billions in taxes

Sen, Carl Levin says manufacturing giant Caterpillar Inc. has used an aggressive tax strategy to shift profits overseas in order to avoid paying billions in U.S. taxes.

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Dunkin’ Donuts Sticks Marshmallow Peeps On Donuts, Calls It Breakfast

PEEPS Donut If you really need to get moving in the morning, try the new seasonal offering from Dunkin’ Donuts: flower-shaped donuts with a layer of colorful frosting, topped with a marshmallow Peep. You could also call it a sugar-coated pastry with a sugar-encrusted sugar blob on top. “As America’s donut leader, we are always seeking new and innovative donut varieties to help our guests celebrate special moments and occasions,” Dunkin’ Brands Executive Chef Stan Frankenthaler says in a press release, because of course Dunkin’ Donuts has an executive chef.

by Laura Northrup via Consumerist

[video] Forex Technical Focus: 3/31/2014 (Forex News by DailyFX)

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Gold's Touchdown Pass: Nonfarm or China's PMI? -- GOLD GAME FILM (Kitco NEWS)

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Stocks to Watch: GM, Ford, Apollo Education are stocks to watch Tuesday

Among the companies whose shares are expected to see active trade in Tuesday’s session are General Motors, Ford, and Apollo Education Group.

by via MarketWatch.com - Stocks to Watch

Comcast, Verizon March On To Worst Company Quarterfinals

Today, four of the biggest names in Consumerist news, including one former champ, fought it out in the Worst Company Sandbox of… Sand. Each member of this cruddy quartet may be deserving of the Golden Poo, but only two could move on the next round.

COMCAST VS. FACEBOOK

Both of these contenders were dominant in their Round One matches, with Comcast taking nearly 90% of the vote against Yahoo and Facebook earning three times the votes given to DirecTV. But they can’t both win, so today’s bout was to see which of those two drubbings was a true indicator of widespread hate. And while Comcast’s 69% Round Two win is nowhere near the margin of victory it enjoyed in Round One, it’s a clear sign that anyone who wants the Golden Poo will probably have to pry it from the hands of the Kabletown Krew.

But there are still some fights to be fought before we can go crowning any contender. Up next for Comcast is Verizon, which beat fellow telecom titan in the other Round Two action from today…

VERIZON VS. AT&T

We had a hunch going into today’s match between the Death Star and Big V that many voters would be deciding based on which of the company they were customers of, as opposed to AT&T and Verizon’s bigger-picture anti-consumer behavior, like forcing everyone into arbitration, or, ya know, gutting the core of net neutrality. Regardless of why they voted, it was the bigger (at least in terms of wireless customers) company coming out on top, with Verizon barely eking out a narrow victory over its longtime rival.

Given how close this battle was and how well Comcast has performed thus far, it would be a pretty big upset for Verizon to beat Comcast in the quarterfinals. We’ll find out when that voting opens later this week.

Once again, here is how the WCIA bracket stands with only two matches to go in Round Two:

by Chris Morran via Consumerist

How Much Does It Cost To Propose At Your Home Team’s Baseball Game?

It’s $209 to pop the question at the Minnesota Twins’ Target Field. (Christopher V.)

Getting your face on the kiss cam? Amateur. Proposing to your loved one via a billboard message for everyone at the game to see? That’s how the pros do it, and it can cost a pretty penny. It’s Opening Day across our baseball-loving land and while spring weather might not be in the air everywhere, love can be — but at what price?

The enterprising folks over at Swimmingly.com have put together a pretty neat infographic (though that word makes my internal organs recoil in on themselves) showing the range of prices offered at all 30 MLB teams’ stadiums — including the handful of parks that don’t allow for such romantic gestures. They’ve probably never been in love before, and for that, I’m truly sorry.

It’ll cost you anywhere from the bargain price of $39 at a Pittsburgh Pirates game all the way up to the grandaddy of marriage packages, at $2,500 for a live video of a proposal at a Los Angeles Dodgers game. Although that might seem like a hefty amount, the proceeds go to charity and many stadiums offer extra perks like a commemorative baseball marked with the date.

Some packages are quite reasonably priced — like at Miller Park, host to my hometown team, the Milwaukee Brewers — $100 for a single-line message up to 35 characters or your very own full scoreboard message for $250. Basic, gets the message across, done.

Others come with more perks the more you pay — $500 at Marlins Park will get you a message on the scoreboard, a live video, a PA announcement and a dozen red roses delivered by Billy Marlin, the team mascot.

Check out Swimmingly.com for the whole list, and if your team doesn’t offer proposals? Just make one of those big obnoxious signs and flap it incessantly until a cameraman notices you.

You can follow MBQ on Twitter but please don’t propose unless you’re Aaron Rodgers, not that you’re trying to, just saying: @marybethquirk

by Mary Beth Quirk via Consumerist

More Details Revealed On WEBLEARN Debit/Cred Card Scam

Last week, we told you how our banking sources had linked the recent rash of fraudulent debit and credit card charges from a mysterious company listed as WEBLEARN to the scammers behind a similar scheme that had dinged victims’ accounts for bogus $9.84 transactions during the holidays. Some further investigation by those better equipped to do so has turned up more on this link.

Cybersecurity journalist Brian Krebs writes today about the connections between WEBLEARN and the folks behind the so-called $9.84 scam.

Krebs confirmed what we’d heard from the bank folks — that this scam, like the earlier one, was using a third-party card-payment processor, in this case a company called BlueSnap, to push through its fraudulent transactions.

The processor in the $9.84 scam was company named Credorax, which lists offices in Malta, Israel, London, and Massachusetts. In January, it claimed to have been just an innocent dupe of the scammers. Interestingly enough, BlueSnap also has offices in Malta, Israel, London, and Massachusetts.

BlueSnap also used to go by the name of Plimus. In 2011, Krebs wrote about Plimus because it was processing payments for a scam artist who was selling computers that were pre-loaded with botnets. It was also sued for its part in allegedly creating fake online reviews and marketing campaigns for various affiliated websites.

Writes Krebs of the similarities between WEBLEARN and the $9.84 scam:

As with the $9.84 scheme, this latest round of phony charges appears tied to an affiliate marketing scheme for “online learning” (hence, the “Weblearn” notation on victims’ credit card statements). One site that’s connected to the Weblearn scheme is onlinelearningaccess.com, which actually includes commented-out code hidden in its HTML content stating that “the charge will appear on your credit card as WebLearn8884612032.”

That same site is closely tied to a network of other flimsy affiliate learning systems, including greatweblearning.com, jnselearning.com, and learnonlinemembers.com. As we can see from the checkout page at onlinelearningaccess.com, the base price of the “system” is $8.83, but different checkout totals can be achieved ($11.08 and $10.78, e.g.) simply by selecting different items to add to your shopping cart.

Regardless of who is behind the scams, or whether they are caught or stopped, these sort of nickel-and-dime schemes will continue so long as their are bad, clever jerks with access to computers.

So it’s worth reposting the following advice:

1. Be vigilant about checking your debit and credit card statements

Yes, it’s annoying and time-consuming (and depending on how little you have in your bank account and/or how much you owe to a credit card company, it might be depressing), but checking your statements a couple of times a week is the best way to catch these things before it’s too late. The longer these transactions go unnoticed, the harder it is for investigators to do their job, and the harder it is to make your case that it’s fraud.

2. Be mindful of all transactions, not just WEBLEARN

When looking at your statements, don’t just look at the company names for obvious scams. Look at the names and the dollar amounts and make sure each transaction on your card makes sense to you. The $9.84 scam used multiple names but the same amount, while the WEBLEARN scam is using different dollar amounts but the same company name. Previous scams have used company names that look a lot like businesses you might spend money at in order to fly under the radar.

3. Call your bank or credit card company immediately
Even if you get through to someone who promises to refund your money, you need to contact your bank and/or credit card issuer so they can investigate. Likewise, if you’re unsure of a transaction on one of your cards, the bank can usually provide more information that will help you determine whether or not some strange-looking purchase is legitimate or not. After all, something that looks like it’s coming from a company you’ve never heard of might be a legit purchase in the unfamiliar name of a holding company or franchisee.

by Chris Morran via Consumerist

At The Melting Pot, Kids Eat Free For $15

At Erica’s local Melting Pot, they have what sounds like a super fun event, a Little Chefs dinner where kids can cook macaroni and cheese fondue and a chocolate dessert fondue, while wearing chef hats and learning the magical ways of cheese and chocolate. That sounds fun…but Erica received an e-mail from the restaurant that made this all seem very confusing.

“Check out this email from the Melting Pot I just received! Kids eat Free!” she wrote. “For this promotion, ‘free’ is defined as $15.”

That’s one way to look at it. It could also be that kids eat for free, but it costs them $15 or $25 to cook. Actually, it looks like the people who put together this e-mail scrambled the text for the Little Chefs event and the graphics for a separate event where kids do eat for free, with the purchase of an adult entrée.

Melting Pot is a franchised restaurant, but we checked in with their national media relations team to make sure we’ve got the confusion sorted. If they get back to us, or if Erica lets us know that they’ve issued a correction e-mail, we’ll update this post.

by Laura Northrup via Consumerist

NHTSA: New Vehicles Must Have Rearview Technology Starting May 2018

(STL Okie)

In four years, when you buy a new car or truck it’ll have a rearview camera as a standard feature. That’s because it’ll have to under a new rule just issued by the U.S. Department of Transportation’s National Highway Traffic Safety Administration.

The NHTSA just issued its final rule after delaying it the first time around — the requirement was supposed to go into effect by 2014 but was pushed back in 2012. The agency says it took its time to make sure the rule was flexible enough, pointing out that many automakers have already started installing systems on their own.

The rule applies for all vehicles under 10,000 pounds, including buses and trucks, that are made on or after May 1, 2018. All those vehicles will have to include technology that expands the field of view to allow drivers to see behind the vehicle in a 10-foot by 20-foot swath.

At the heart of the rule is the fact that many drivers end up backing over things they shouldn’t, putting themselves and anyone standing behind a car in potential danger. The NHTSA says there are an average of 210 fatalities and 15,000 injuries per year due to backover crashes.

“Safety is our highest priority, and we are committed to protecting the most vulnerable victims of backover accidents — our children and seniors,” said U.S. Transportation Secretary Anthony Foxx. “As a father, I can only imagine how heart wrenching these types of accidents can be for families, but we hope that today’s rule will serve as a significant step toward reducing these tragic accidents.”

by Mary Beth Quirk via Consumerist

Why Google is splitting its stock

The main reason is not because the stock price is so high.

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Sad About Losing SiriusXM ’40s On 4? Try Asking For A Refund

40sjoel When we posted on Friday about SiriusXM temporarily bumping their station ’40s on 4 to make room for a station that’s 24/7 Billy Joel, we didn’t realize how many people enjoy rocking out Greatest Generation-style in their cars. One fan was able to get a small concession from SiriusXM, and this might work for others, too.

Sirius, of course, counters that they are offering a solution: they’re making the ’40s on 4 content available online through Interweb-connected devices. No, Landon wasn’t able to get the station restored to his radio. “I was able to call Executive Customer Service at 212-584-5100 and get 3 months’ credit to cover the time that the 40’s on 4 was going to be off the air,” he wrote to us. “It was quick and painless.”

212-584-5100 isn’t the standard customer service number: it’s the corporate switchboard for SiriusXM. When someone answers, ask for a customer service representative located in North America, or for executive customer service. GetHuman also has some toll-free numbers that customers report are equally effective.

Follow the standard rules of executive customer service: be professional and polite to the operator and to the representative. Make reasonable demands: we think that a three-month credit for the run of the Billy Joel station is a fair compromise, and calling will also let the people in charge at SiriusXM know that their customers are unhappy.

We can’t confirm whether this will work for everyone, since SiriusXM still hasn’t answered our original request for a statement about the programming change.

by Laura Northrup via Consumerist

You Don’t Have To Go Home, But You Can’t Stay At Walmart Drinking Beer For 2 Days

Tempting, we know. (plasmadis)

Back in the wilder days of my college youth, we knew the fun was over when the bar powers that be came on over the loudspeaker, saying “You don’t have to go home, but you can’t stay here.” Perhaps a New York Walmart could’ve used such a reminder for a woman accused of trespassing at the store for two days, just chilling out and drinking some beer.

Police say the woman was first spotted in the store Thursday night taking cans of beer from the store and drinking them where she stood, reports the Albany Times-Union.

Workers told her to hit the road, but then found her five hours later asleep in a shipping container in the “employees only” receiving dock area, according to the State Police, with beer cans scattered on the floor nearby.

She was booted once again but was discovered the next day at the store, allegedly with a 24 oz. beer shoved in her pocket. While employees waited for the police to arrive, she reportedly went into the bathroom and chugged the evidence.

The attraction of just settling down with a beverage where you buy it might be nice, but more appropriate behavior for say, a bar, or the privacy of your own home. Besides, the last time I slept in a shipping container I swore would be my last. Couches are infinitely more comfortable.

Woman drinks beer, trespasses at Walmart [Albany Times-Union]

by Mary Beth Quirk via Consumerist

Markets Pop Higher On Yellen: Trade These Levels For Easy Profits (InTheMoneyStocks)

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[video] Forex Forecast: Traders on Alert with Risk Trends, ECB, NFPs on Tap (Forex News by DailyFX)

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5 ways GM CEO Mary Barra can quiet the critics

When she testifies before Congress on Tuesday, Barra needs to provide forceful evidence GM has become a more responsible automaker.

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Lessons From the McDonald's-Taco Bell Breakfast War

Here's what you can learn from the companies' clever attempts to one-up each other's advertisements.

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Organization Promising Fraud Protection Scams $20 Million From Senior Citizens

(bclinesmith)

Scamming people is wrong. Scamming senior citizens is immoral, disrespectful, and a number of other adjectives. Still, there are companies in the world that prey on the elderly. The Federal Trade Commission has put a stop to one such organizations that bilked more than $20 million from seniors.

The FTC announced Monday that a U.S. District Court issued a temporary order to halt a scam that claimed to protect consumers from fraud but in reality defrauded millions of dollars from senior citizens.

In shuttering the scam, allegedly perpetrated by Ari Tietolman and his companies, First Consumers, LLC, Standard American Marketing, Inc., and PowerPlay Industries LLC, the court found that the FTC was likely to prevail at trial and that funds should be preserved so they could potentially be returned to the victims.

According to the FTC complaint, from May 2011 to December 2013 Tietolman and associates used a telemarketing boiler room in Canada to cold-call seniors claiming to sell fraud protection, legal protection, and pharmaceutical benefit services. The cost for the defendants’ alleged services ranged from $187 and $397.

In some instances, the telemarketers who carried out the scam allegedly impersonated government and bank officials, and enticed consumers to disclose their confidential bank account information.

The account information was used to create checks drawn on the consumers’ bank accounts and deposited into corporate accounts the scammers established in the United States.

“The defendants’ conduct in this case was simply outrageous. They targeted and called senior citizens and lied to them to get their bank account information. Then they used this information to withdraw money from their bank accounts,” Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection, said in a news release. “Consumers can count on the FTC to be aggressive in the fight against this type of fraud”

FTC Stops Mass Telemarketing Scam That Defrauded U.S. Seniors and Others Out of Millions of Dollars [Federal Trade Commission]

by Ashlee Kieler via Consumerist

Russell 2000 overall implied volatility at 19; 26-week average is 17

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iShares Silver Trust overall implied volatility at 26; 26-week average is 30

SPDR Gold Trust overall implied volatility at 16; 26-week average is 19

The Matterhorn Interview 2014 Special: Jim Rickards (GoldSwitzerland)

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Builders FirstSource upgraded to Buy from Hold at Deutsche Bank

Ericsson named network supplier, managed service provider for Telenor in Myanmar

Materials sector upgraded to Market Weight at Wells Fargo

Top Image Systems, Konica Minolta Business Solutions Spain deploy joint project

Cameco ends toll-conversion agreement with Springfields Fuels

Affiliated Managers upgraded to Buy from Neutral at Citigroup

Forest Labs announce positive Phase IIb topline results for cariprazine

Echo Global upgraded to Outperform from Market Perform at FBR Capital

C.H. Robinson upgraded to Market Perform from Underperform at FBR Capital

Xoom partners with HDFC Bank in India

Anacor announces first patient enrolled in Phase 3 Trial of AN2728

Sanofi appoints Dr. Anne Beal as Chief Patient Officer

Novartis PARADIGM-HF trial of LCZ696 met efficacy, primary endpoints

PGT, Inc. downgraded to Hold from Buy at Deutsche Bank

Century Casinos reports Q4 EPS (1c), consensus 5c

RANsquawk - Week Ahead - 31st March 2014

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Fiji holds rate on comfortable inflation, reserve outlook

Fiji's central bank maintained its Overnight Policy Rate at 0.5 percent, steady since November 2011, saying the current policy stance "was appropriate as the outlook for foreign reserves and inflation is comfortable."

Barry Whiteside, governor of the Reserve Bank of Fiji, added in a statement issued today after a monthly board on meeting on March 28 that the accommodative policy stance would be re-aligned if there are challenges to the bank's twin core objectives of foreign reserves and inflation.

Inflation in Fiji fell to 0.2 percent in February, the lowest since April 2009, from 2.3 percent in January. The central bank attributed to drop in inflation to free primary and secondary education that was announced in the 2014 national budget.

Fiji's foreign reserves were estimated at US$1.705 billion as of March 28, enough for 4.5 months of goods, and down from $1.763 billion as of Jan. 30.

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[video] Forex, Commodities and Equities Outlook - 03.31.2014 (Forex News by DailyFX)

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Sunday, March 30, 2014

Professor William Black-Epic Epidemic of Fraud (Greg Hunter)

Become an IT Patron

from Greg Hunter

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U.S. top court considers patent protections for software

The U.S. Supreme Court will on Monday delve into the hotly contested question of when software is eligible for patent protection. The nine justices will hear a one-hour oral argument in a case of interest not just to software companies but also to a wide range of businesses that sell products containing computer-implemented features. Google Inc, Dell Inc, Verizon Communications Inc, Microsoft Corp, Hewlett-Packard Co and engine manufacturer Cummins Inc, are among the companies that have filed legal papers weighing in on the issue. Those that often get sued for patent infringement, such as Google, favor a tighter definition.

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China's Huawei books quickest profit growth in four years on smartphone demand

SHENZHEN/BEIJING (Reuters) - China's Huawei Technologies Ltd, the world's No.2 telecommunications equipment maker, reported its fastest profit growth in four years as expansion in enterprise and consumer revenue far exceeded growth in its network building division. Shenzhen-based Huawei is now looking for revenue from Chinese mobile phone operators switching to fourth-generation networks to cushion the impact of a slowdown in network spending abroad.

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Qualcomm to benefit amid China Mobile push into faster phones, Bloomberg says

Asian stocks edge higher on growing hopes of China stimulus

Asian stocks were up slightly in a cautious start to the week on Monday, with investors holding out hopes that China would take steps to stimulate the economy. China's Premier Li Keqiang on Friday sought to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment. The euro lingered near a one-month low it hit against the dollar on Friday after an unexpected drop in Spanish and German inflation bolstered expectations the European Central Bank could further ease monetary policy as early as Thursday. "It all depends on whether the ECB views the recent slowdown as a temporary pullback or a deeper problem.

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Biofuel Energy surges after Greenlight discloses proposal

video course on fundamental and technical analysis

Hi, I am looking to get a dvd course on how to do fundamental and technical analysis for a beginner? any recommendations?

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Delphi told panel GM approved ignition switches below specifications

WASHINGTON/DETROIT (Reuters) - General Motors Co approved ignition switches for cars that have been linked to 13 deaths, even though the parts did not appear to meet the company's specifications, officials of Delphi Automotive told U.S. congressional investigators. In a memo released on Sunday by the House of Representatives Energy and Commerce Committee, documents provided by GM and a federal regulator provided "unsettling" information, according to Republican Representative Tim Murphy, who leads a subcommittee of the panel. The memo was released ahead of Tuesday's testimony from GM Chief Executive Mary Barra, who will appear at the committee's first public hearing on the recalls. She is likely to be asked why it took GM so long to identify and address the ignition switch problem.

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Trustwave disputes plaintiffs' allegations related to Target data breach

Delphi says GM approved ignition switches below specifications, Reuters says

Edwards' Sapien XT outperforms Medtronic’s CoreValve, Bloomberg reports

ECB wrestles with 'danger zone' inflation

The European Central Bank's dilemma over barely rising prices seems likely to dominate a week starting with a euro zone inflation estimate and ending with U.S. jobs figures, the monetary policy driver on the other side of the Atlantic. After more than a month of East-West tensions centered on Russia's annexation of Crimea, U.S. President Barack Obama and Russia's Vladimir Putin finally spoke to each other on Friday, suggesting a possible diplomatic path out of crisis. With geopolitical issues calmer, even if not resolved, the financial markets are more likely to be guided more by global economic data and central bank deliberations. The ECB's Governing Council meets on Thursday and, although the vast majority of economists expect it to hold interest rates (ECB/INT), it is wrestling with a response to inflation persistently below its target of below but close to 2 percent.

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RBS close to appointing Credit Suisse banker next CFO, WSJ says

Monetary Policy Week in Review – Mar 24-28, 2014: Zambia raises as global trend shifts toward tightening

Seventeen central banks took policy decisions last week, with Hungary wrapping up its easing cycle, Zambia raising its rate, and the Philippines and Nigeria raising reserve requirements, underlining the shift toward tightening in global monetary policy.

The transition from five years of ultra-easy global monetary policy is spearheaded by the U.S. Federal Reserve which began unwinding its asset purchases in January. This has helped trigger 11 rate rises so far this year, including those by central banks in Turkey, South Africa, India, Ghana and Zambia in an effort to protect their currencies and retain foreign investment

While there is still a lingering debate over what Fed Chair Janet Yellen really meant to signal on March 19, other central banks and financial markets have taken her words - and those of other members of the Federal Open Market Committee - to heart and expect the Fed to raise rates earlier than expected.

In their statements last week the Bank of Israel noted that “the interest rate path expected by FOMC members increased compared with the previous meeting,” the South African Reserve Bank (SARB) said “financial markets now believe that the first interest rate increases may occur earlier in 2015 than previously expected,” and the Central Bank of Trinidad and Tobago said the Fed gave guidance that “policy interest rates could increase even faster than initially anticipated.”

The shift in the direction of global capital away from emerging and frontier markets to advanced economies has gone through several bouts of volatility since May last year and central banks are eager to avoid fanning the flames and cause any sudden shift in risk sentiment.

But as William Dudley, president of the New York Fed, said last week, emerging markets are much better positioned than in the past “to weather those times in the cycle when the external environment turns from welcoming to wary” due to a raft of reforms and changes, including more coherent monetary policy frameworks, the absence of fixed exchange rates, larger foreign exchange reserves, moderate debt and stronger banking systems.

South Africa, Nigeria and the Philippines’ central banks illustrate Dudley’s point. Most emerging market central banks are keenly aware of the challenges they are facing from the well-publicized shift in Fed policy and are responding in a disciplined and predictable manner.

Last week SARB said it remains in a tightening cycle but added that this doesn’t mean rates have to be changed at every meeting. SARB maintained its rate after raising it by 50 basis points in January in response to capital outflows and a plunge in the rand.

The recent improvement in global sentiment towards emerging markets had boosted the rand and thus improved the inflationary outlook, giving the central bank breathing space as it seeks to solve the dilemma of sluggish growth and inflationary pressures.

Like SARB, the Central Bank of Nigeria (CBN) also maintained its policy rate, but tightened policy by raising the cash reserve requirement on private sector deposits – in January it had raised the CRR on public sector deposits – saying the need to safeguard stability “required firm and bold measures.”

"Thus, prudent monetary stance would also facilitate better reserve and exchange rate management in an environment where Fed tapering increases pressure on emerging economies’ financial markets," CBN said, showing a steady hand amid a challenging international and domestic environment.

Bangko Sentral ng Pilipinas (BSP) also kept its policy rate steady but raised the reserve requirement to curb liquidity in a move that was signaled by the central bank’s governor last week after he said an early and gradual adjustment of monetary policy rather than discreet movements would be less disruptive to businesses.

The Philippine central bank added that it would “consider further adjustments in its policy tools to safeguard price and financial stability" and "buoyant domestic growth prospects allow some scope for a measured adjustment in the BSP's policy instruments amid the ongoing normalization of monetary policy overseas."

The annexation of Crimea by Russia from Ukraine added a new dimension to the global risk spectrum, but the National Bank of Georgia responded in a calm and measured manner.

The central bank of Georgia – on the eastern border of the Black Sea in the Caucasus region – said it still believed that monetary stimulus should be withdrawn but put off any rate rise, citing the potential threat from geopolitical factors and uncertainty that could undermine investors’ mood, demand for its exports and remittances from workers abroad.

Through the first 13 weeks of this year, rates have been raised 11 times, or 9 percent of this year’s 125 policy decisions by the 90 central banks followed by Central Bank News, down from 10 percent at the end of February.

But the Global Monetary Policy Rate (GMPR) – the average policy rate – rose to 5.56 percent this week from 5.53 percent at the end of January, helped by Zambia’s 175 basis-point rate rise.

Rates have been cut 15 times so far this year, or 12 percent of this year’s policy decisions, down from 14 percent at the end of February, as central banks still seek to shore up growth while inflationary pressures worldwide are kept at bay from sluggish global demand.

LIST OF LAST WEEK’S CENTRAL BANK DECISIONS:

Israel holds rate, changes depend on CPI, growth, shekel

Hungary cuts rate for 20th time but signals pause

Armenia holds rate, inflation seen falling further

Nigeria holds rate, raises CRR to 15%, bold moves needed

Morocco maintains rate, cuts reserve ratio by 200 bps

Georgia holds rate on geopolitical risk, but sees tightening

Rwanda holds rate to sustain credit to private sector

Philippines holds rate, raises RR, to mull further tightening

Norway holds rate, repeats on hold until summer 2015

Taiwan holds rate on moderate growth, mild CPI outlook

South Africa holds rate, but remains in tightening cycle

Czech holds rate, confirms will intervene to cap FX rate

Romania maintains rate after 6 cuts on subdued inflation

Zambia raises rate 175 bps to 12% in 2nd hike in row

Trinidad holds rate, sees rising inflationary pressure

TABLE WITH LAST WEEK’S MONETARY POLICY DECISIONS

COUNTRY MSCI NEW RATE OLD RATE 1 YEAR AGO ISRAEL DM 0.75% 0.75% 1.75% ARMENIA 7.50% 7.50% 8.00% MOROCCO EM 3.00% 3.00% 3.00% NIGERIA FM 12.00% 12.00% 12.00% HUNGARY EM 2.60% 2.70% 5.00% RWANDA 7.00% 7.00% 7.50% GEORGIA 4.00% 4.00% 4.50% NORWAY DM 1.50% 1.50% 1.50% PHILIPPINES EM 3.50% 3.50% 3.50% TAIWAN EM 1.88% 1.88% 1.88% MOLDOVA 3.50% 3.50% 4.50% ALBANIA 2.75% 2.75% 3.75% SOUTH AFRICA EM 5.50% 5.50% 5.00% CZECH REPUBLIC EM 0.05% 0.05% 0.05% ROMANIA FM 3.50% 3.50% 5.25% ZAMBIA 12.00% 10.25% 9.25%

This week (Week 14) six central banks will be deciding on monetary policy, including Australia, India, Brazil, Uganda, Ghana and the European Central Bank.

COUNTRY MSCI DATE CURRENT RATE 1 YEAR AGO AUSTRALIA DM 1-Apr 2.50% 3.00% INDIA EM 1-Apr 8.00% 7.50% BRAZIL EM 2-Apr 10.75% 7.50% UGANDA 2-Apr 11.50% 12.00% GHANA 2-Apr 18.00% 15.00% EURO AREA DM 3-Apr 0.25% 0.75%

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by InformedTrades via InformedTrades

Vipshop upgraded to Buy from Neutral at Goldman

Regulators twice declined to initiate formal GM investigation, WSJ says

Wall St. Week Ahead-U.S. jobs and Russia to rule stocks

U.S. stock investors will take their cues this week from March jobs data and diplomacy to defuse East-West tensions over Russia's annexation of Ukraine's Crimea region. Friday's monthly jobs report, the most widely watched U.S. economic indicator, is expected to show that employers added 200,000 jobs in March to nonfarm payrolls, according to a Reuters poll of economists. Employers added 175,000 jobs to nonfarm payrolls in February after creating 129,000 new positions in January. When trading begins on Monday, investors will keep an eye on developments involving Russia and Ukraine.

by via Yahoo! Finance: Top Stories

Amgen's AMG 145 reduced LDL cholesterol in statin intolerant patients

The Medicines Co. presents analysis of Angiomax trials at ACC

Elbit Systems awarded $163M contract

Boston Scientific presents follow-up of CRT for mild heart failure patients

Key GM crisis questions: Who approved switch revision and why recall took so long

WASHINGTON/DETROIT (Reuters) - Among the most critical unanswered questions in General Motors' mounting crisis over a defective ignition switch that led to crashes and at least 13 deaths is who, eight years ago, approved a change in the part for new vehicles and why that didn't lead to a recall of older cars to fix the problem. Among the evidence that investigators inside and outside of the company will need to reconcile is the company's timeline of the switch's engineering, which describes an unnamed GM engineer approving the design change, and the deposition of a senior switch engineer, Ray DeGiorgio, who said he was not aware of it. GM declined to discuss the matter beyond its timeline or to make DeGiorgio available for an interview. DeGiorgio referred Reuters to GM, which has presented no evidence to suggest that he was the executive approving the design change.

by via Yahoo! Finance: Top Stories

[video] Forex Peace Army|Sive Morten Gold Daily 03.31.14 (ForexPeaceArmyCOM)

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Coca-Cola's management underperforms, Barron's says

Ann Inc. could rise 15%, Barron's says

Citigroup could reach close to $60 by FY15, Barron's says

VeriFone could rally another 15%, Barron's says

Finisar, Ciena, others should see increasing value in products, Barron's says

Kate Spade shares look overpriced, Barron's says

Exact Sciences could rise 50%, Barron's says

DDR Corp. looks like a bargain, Barron's says

After years of probes, SEC fraud trial over Texas tycoons to start

The U.S. Securities and Exchange Commission faces off against wealthy Texas investor Samuel Wyly and the estate of his late brother, Charles, this week in a trial over long-standing accusations that they engaged in a $550 million fraud. Jury selection is set to begin Monday in a federal court in New York in what is expected to biggest test this year of the SEC's ability to hold individuals accountable at trial, following a recent series of disappointing verdicts in fraud and insider trading cases. The trial is the culmination of years of litigation and investigations by the SEC of the Wylys. The case has continued even after Charles Wyly died in a car crash in August 2011, with his estate substituted for him.

by via Yahoo! Finance: Top Stories

Tesla's Gigafactory looks too ambitions, Barron's says

[video] Forex Peace Army|Sive Morten AUD Daily 03.31.14 (ForexPeaceArmyCOM)

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[text] US Federal Reserve Interest Rates Projected to Be at 2% in 2017

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"Look again, however, and the path forward appears similar across the rich world: low interest rates stretch off into the visible distance. The outlook is clearest in Europe, where the ECB may toy with negative rates as a means to fend off deflation. But even in America and Britain “normal” rates are a distant prospect. In February Mark Carney, the Bank of England’s governor, promised that eventual rate rises would happen gradually, and would level off below the pre-crisis norm. On March 19th Ms Yellen offered similar guidance. Markets project that short-term rates in both economies will still be just 2% in early 2017 (see chart 1), a level the euro zone will not hit until 2020."

by InformedTrades via InformedTrades

[text] Real Price of Gold since 1791–2013 — Visualizing Economics

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by InformedTrades via InformedTrades

Delta-Virgin takes up battle for New York-London fliers

Delta Air Lines (DAL) has been making inroads in the dogfight over the lucrative market for business travel between New York and London, but the newly merged American Airlines Group (AAL.O) is fighting back. Delta is hoping to attract customers through its new partnership with Virgin Atlantic, known for its high-tech and non-traditional approach to flying, and its own boosted profile in New York, where it expanded flights and renovated terminals. That convenience can win over corporate accounts, locking in lucrative business travelers. American and joint venture partner British Airways (IAG.L) have an estimated 59 percent share of seats flown between the United States and London's Heathrow airport, compared with about 24 percent for Delta and Virgin, and United Continental Holdings Inc's (UAL) 14 percent share, according to a U.S. government filing by Delta and Virgin.

by via Yahoo! Finance: Top Stories

Kraft challenged by "healthier" macaroni and cheese brands

Kraft Macaroni & Cheese has been a favorite meal for generations of American children, but smaller brands made with more natural ingredients are starting to nibble at its market share, part of a trend that is biting into growth at large U.S. food companies. Zenobia Godschalk, an Atlanta mother of two young boys, stopped buying Kraft's "mac and cheese" after reading its complicated ingredient list. Now she buys Annie's organic version in bulk at Costco Wholesale Corp (COST). "I'm fully aware that it is not a health food," said Godschalk, of Annie's macaroni and cheese product.

by via Yahoo! Finance: Top Stories

Stocks to Watch: Facebook, Biogen, Cal-Maine are stocks to watch

Biotech stocks and Internet names like Facebook Inc. could see active trade in Monday’s session after last week’s drubbing. Cal-Maine Foods Inc. and UTi Worldwide Inc. also will get attention as they report quarterly earnings.

by via MarketWatch.com - Stocks to Watch

Saturday, March 29, 2014

Analysis: Russia sell-off spurs hunt for bargains

Rising tension between Russia and the West has rattled the country's stock and bond markets, but some big money managers see the turbulence as an opportunity. Russia's equity market has plummeted 18 percent so far this year. Foreigners dumped the country's stocks, bonds and the ruble following the early March invasion of Crimea, a territory of Ukraine. "Russia's stock market right now is one of the cheapest in the world, and probably one of the most hated," said investor and commodities guru Jim Rogers, chairman of Rogers Holdings, in Singapore.

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Two Short Straddle Examples (Basic Options 21)

Two Short Straddle Examples- Basic Options 21.

In this video, we continue with the Short Straddle by looking at an example using Dow chemical and an example using JP Morgan

.

Vid Text:

Hello and Welcome. In this video we will continue looking at the Short Straddle trade by looking at 2 examples of Short Straddle trades.

You may remember from my video on the Short Straddle that for a Short Straddle trade, a trader sells two Options on the same stock, a Call and a Put, both with the same Strike Price and expiration.

Selling both a Call Option and a Put Option creates a range around the current price. If the price of the stock remains within that range, the trade is profitable. In other words, the trade is profitable if the price of the stock does not go above a certain price or below a certain price.

The profit or loss from this trade becomes the difference between the up-front premium the trader is paid for selling the Options, and the amount that the underlying stock price increases above or falls below the Strike Price.

Let's look at an example using Dow Chemical. At the time of making this video, Dow is currently $50.64 per share. A trader could place a Short Straddle on Dow by selling the $50 Call Option and selling the $50 Put Option that both expire in about 7 weeks.

The Call Option costs $2.01 and the Put Option costs $1.54. Selling both means that the trader collects a total of $3.55 per share up front for selling the Options. This means that, for the trade to be profitable, the price of Dow must remain within $3.55 of the $50 Strike Price. In other words, for the trade to be profitable, the price of Dow has to remain above $46.55 and below $53.55 up until the time that the options expire.

The $3.55 premium the trader was paid up front for the Options is the trader's maximum potential profit. The Strike Price for both Options is $50. If the price of Dow is exactly at $50 when the options expire, neither Option has any intrinsic value. This means that both Options expire worthless, and the trader keeps the $3.55 that he was paid up front.

As the price of the stock moves away from the $50 Strike Price, one Option still has no intrinsic value. However, the other Option does have intrinsic value. This means that the profit the trader made selling the Options declines by that value.

If the price of Dow is between the $50 Strike Price and the break-even points, the trader's profit will be between 0 and $3.55. If the price of Dow rises above $53.55, or drops below $46.45, the trade loses money.

If the price of Dow is above the $50 Strike Price, the trader's profit or loss is the $3.55 Premium that he collected up front selling the options, minus the difference between the current price of Dow and the $50 Strike Price.

If the price of Dow is below the $50 Strike Price, the trader's profit or loss is the $3.55 Premium that he collected up front selling the options, minus the difference between the $50 Strike Price and the current price of Dow

Let's look at another example using JP Morgan. At the time of making this video, JPM is currently $59.90 per share. A trader could place a Short Straddle on JPM by selling the $60 Call Option and selling the $60 Put Option that both expire in about 7 weeks.

The Call Option costs $1.55 and the Put Option costs $1.93. Selling both means that the trader collects a total of $3.48 per share up front for selling the Options. This means that, for the trade to be profitable, the price of JPM must remain within $3.48 of the $60 Strike Price. In other words, for the trade to be profitable, the price of JPM has to remain above $56.52 and below $63.48 up until the time that the options expire in about 7 weeks.

The $3.48 premium the trader was paid up front for the Options is the trader's maximum potential profit. The Strike Price for both Options is $60. If the price of JPM is exactly at $60 when the options expire, neither Option has any intrinsic value. This means that both Options expire worthless, and the trader keeps the $3.48 that he was paid up front.

If the price of JPM is between the $60 Strike Price and the break-even points, the trader's profit will be between 0 and $3.48.

If the price of JPM rises above $63.48, or drops below $56.52, the trade loses money.

If the price of JPM is above the $60 Strike Price, the trader's profit or loss is the $3.48 Premium that he collected up front selling the options, minus the difference between the current price of JPM and the $60 Strike Price.

If the price of JPM is below the $60 Strike Price, the trader's profit or loss is the $3.48 Premium that he collected up front selling the options, minus the difference between the $60 Strike Price and the current price of JPM.

So that is 2 examples of Short Straddle trades. I hope that you enjoyed this video. Thanks for watching.

by Tekmnd via InformedTrades

Exclusive: Mt. Gox faced questions on handling client cash long before crisis

Two years before Mt. Gox filed for bankruptcy, a half dozen employees at the Tokyo-based bitcoin exchange challenged CEO Mark Karpeles over whether client money was being used to cover costs, according to three people who participated in the discussion. The question of how Mt. Gox handled other people's money - the issue raised by staff in the showdown with Karpeles in early 2012 - remains crucial to unraveling a multi-million dollar mystery under examination by authorities in Japan. The still-unresolved issue has thrown a spotlight on how Mt. Gox functioned as a hybrid between an online brokerage and an exchange. Essentially, the more than 1 million traders who used Mt. Gox at its peak had entrusted a 3-year-old firm to hold their money safely until they decided to cash out.

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Thoughts from the Frontline: When Inequality Isn’t (John Mauldin)

Originally Published by Mauldin Economics

“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”

–Plutarch, Greek historian, first century AD

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen . The other effects emerge only subsequently; they are not seen ; we are fortunate if we foresee them.

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

“Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”

–Frédéric Bastiat, “That Which Is Seen and That Which Is Unseen,” 1850

“Still one thing more, fellow-citizens – a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.”

–President Thomas Jefferson, first inaugural address

Plutarch argued over 1900 years ago that it was income inequality that lay at the heart of the failure of the Greek republics. Other writings of that period demonstrate that the leaders were worried about the distribution of wealth in society. The causes of unequal distribution have certainly changed over time, but it seems to be built into our DNA to obsess over what we have relative to what others have.

That we are living in the most splendid golden age in the history of humanity – if by golden age we mean that for the world at large there is less hunger, longer lives, less poverty, better healthcare, better and more universal education, and a host of other factors that are manifestly superior as compared to 2000, 1000, 200, 100, 50, and even 20 years ago – is patently evident. We are far from the world Thomas Hobbes described in 1651 in Leviathan when he said “[T]he life of man [is] solitary, poor, nasty, brutish, and short.” He would be amazed at the relative abundance achieved by mankind in the last 263 years.

And still, authority after authority the world over, in rich country and poor, from the President of the United States to the leaders of some of the most impoverished nations, describes income inequality as a fundamental injustice and the source of many problems .

We have spent three letters (so far) dealing with the topic of income inequality. The topic is everywhere in our daily conversation and in economic research. I’ve dealt with many of the facts of income inequality in these three issues and will try to conclude the topic this week. We’ve discovered so far that income inequality is a fact; however, income mobility has remained roughly the same over the last 40 years. That is, a person’s chances of rising from a lower stratum of wealth distribution to a higher stratum is approximately the same as it was in 1975.

We have liberals and progressives who use data to demonstrate the correlation between income inequality and recessions or slow growth and then erroneously equate correlation with causation. I think we have sufficiently shown the absurdity of their conclusions. This week we will look at some of the actual causes of income inequality, and in an argumentum ad absurdum I will offer “solutions” that I guarantee can absolutely reduce income inequality just as easily as taking money from the rich and giving it to the poor. In fact my solutions are far more direct, as they affect the causes rather than the effects of income inequality. I must warn you, however, that if you harbor a religious passion for pursuing higher taxes rates on the rich and rely on income inequality as your excuse, you may not be happy with my suggestions or with the rather inconvenient facts I present.

I would like to begin this week’s letter with a quote that might at first appear to have nothing to do with income inequality, but it strikes me that it is at the heart of the argument advanced by those who favor more progressive taxation. Charles Gave argues that there is a correlation (and he sees causation) between the financial repression perpetrated by central banks and the reduction of growth in the developed-world economies. And he links the low-interest-rate policies of central banks to an increased Gini coefficient and income inequality. Those of us who are of a more classical economic persuasion will find this correlation more attractive than we do the supposed one between income inequality and recessions. And we will see that the logic behind Charles’s argument is more compelling.

The simple fact is that there are many correlations to be found in the economic world, and politicians find economists useful in supplying justifications to support almost any policy. The fact that economists might not agree on the data that is used in this way is immaterial to politicians who are simply looking for an excuse to do what they want to do anyway. In this regard, economists perform the same function as shamans and witch doctors in tribal societies, who regard the entrails of sheep or some other unfortunate animal and predict the future, which generally corresponds to what the chief wants to hear. Economists are far more advanced than that, of course. We painstakingly gather data and develop complex computer models to show what our politicians want to hear.

I realize that I argue at the extreme and that most economists are actually well-intentioned and trying hard to figure out how the world works. But they cleave to economic theories in much the same way that people hold religious beliefs to try to explain how the world functions. These theories often predetermine the conclusions economists come to when they analyze data. Maybe someday we will have more precise models and better theories, but until then it is probably best to be somewhat humble in setting forth our conclusions.

Now, let’s devote a few moments of our attention to six paragraphs from Charles Gave’s latest note (gavekal.com – subscribers only) (emphasis mine):

I read everywhere that the US budget deficit is contracting because government consumption is falling as a percentage of GDP, now that the worst of the crisis has passed. This would be very good news indeed; however, I am not so sure that this decline is for real. In fact, I believe it is an accounting illusion.

Over a period of time long [interest] rates, if left to their own devices, always converge to the nominal GDP growth rate (this was called the “golden rule” by Economics Nobel laureate Maurice Allais, and [this] is the core belief in Knut Wicksell’s theory). However, a central bank can fight against this natural tendency by maintaining short rates at abnormally low levels, as the Federal Reserve did from the early 1970s until 1980 and again since 2002. During these two periods long rates were conspicuously lower than growth rates, violating the golden rule.

If negative, the difference between long bond rates and the economic growth rate is effectively a subsidy paid by the saver to the government. In short, this difference measures the amount of financial repression taking place in an economy. The fact that it is not paid to the Treasury does not mean it doesn’t exist. It is a tax paid by a nation’s savers – e.g., pensioners in Peoria….

This shows us that US savers have been paying a virtual tax equivalent to between 1% and 2% of GDP almost every year since 2002 – a sign of the “euthanasia of the rentier” central to every Keynesian analysis. The problem is that subsidizing government spending ultimately leads to lower productivity, slower structural growth and higher financial-crisis risk. We saw a similar euthanasia from 1966 to 1980, when the real structural growth rate of the economy was also in collapse…. The re-imposition of that dreadful tax by Alan Greenspan in 2002, only to be further aggravated by his successor Ben Bernanke, is a key factor behind the falling structural growth rate, the financial crisis and the subsequent slow recovery.

Unnaturally low funding costs undermine the structural growth rate of the US economy, because of capital misallocation. The losers in this deal are usually ordinary folk. Pensioners get no interest on their savings, while rich investors use cheap capital to chase up the cost of property, oil, etc. The Gini coefficient rises, as the poor are seldom asset-rich, and real disposable incomes take a hit as prices rise. Sometimes banks are pressured to make up the shortfall with consumer loans to the struggling classes – adding to the bonfire when the inevitable financial crisis comes.

At the end of the day, it is simple. Savings equal investments, so any tax on savings leads to lower economic growth over time. We may be seeing declining ratios in government spending as a percentage of GDP, but this is really an accounting decline. Financial repression means the government is still taxing the savers, leaving less aside for meaningful investment in the future.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here .

© 2013 Mauldin Economics. All Rights Reserved.

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The article Thoughts from the Frontline: When Inequality Isn’t was originally published at mauldineconomics.com.

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