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News in Charts: From Behind the Maginot Line
This research note is provided by Fathom Consulting. All of the charts below and many many more, covering a range of topics and countries on both the macroeconomy and financial markets are available in the Chartbook to Datastream users at www.datastream.com. Alternatively you can access Fathom's Chartbook at www.fathom-consulting.com/TR. "What you need to understand … is that the crisis in Europe is over," François Hollande, President of France, 8th of June 2013 Introduction Markets appear to agree with M. Hollande – the crisis is over, the euro zone economy is out of recession, and equity prices are on the rise. French and Euro Area officialdom has, since the recession, been focused on protecting the Core countries from the bad debts accumulated by the Peripheral economies. And they feel their efforts have been triumphantly successful – so much so that Mr Barroso last week described their joint efforts as "fantastic". A pity then that the French government seems to disagree. It lowered its growth forecast for 2014 to 0.9% from 1.2%. At the same time its estimate for that year's budget deficit has been increased to 3.6% vs. an initial estimate of 2.9%. For 2013 the budget deficit is now expected at 4.1% from 3.7% reported previously. The changes in our view reflect a lacklustre recovery and a realignment of over-optimistic government projections with those of the IMF/OECD. The threat from rising yields and a flight to safety in global capital markets that result from Fed tapering is not a problem for Germany – which needs tighter monetary conditions, and is regarded as safe – and the Peripheral economies will be protected by the ECB if necessary. But while all their attention was focused on defence against the risk from the Periphery, the banking crisis may have already reached the banlieues of Paris. We identify a key risk that is not currently priced into the market, in the French corporate and banking sectors. French NFCs are experiencing low and falling profitability, reflected in stock market earnings. Moreover, French banks are highly exposed to French NFCs, and are also relatively vulnerable to a potential flight to safety in international capital markets. There is a pronounced risk that Fed tapering could trigger a major non-performing loan (NPL) problem in the French banking sector. But higher yields will erode the already weak profits of the corporate sector. And the prospect of capital flight is a threat to French banks. The central importance of French banks in the Euro Area means that a problem for them could quickly become a problem for the entire Euro Area banking system. France is vulnerable… The balance of opinions of Primary Dealers in the New York Fed's survey is convinced that tapering will begin in September. We agree with that assessment and look to a modest reduction in the Fed's rate of asset purchases to begin then, even after Friday's mediocre non-farm payrolls data. This tapering will add to pressure on the most fiscally challenged European economies as their sovereign yields could follow US yields higher. But France is not among them – at least, not yet. Our Sovereign Fragility Index still has France in Aaa territory, but only barely. Further evidence lies in the fact that the rating agencies have been more cautious and have all stripped France of her AAA rating. Refresh Chart Edit Chart …and needs looser policy rates which are not on the horizon Given the economic conditions prevailing in the country today the last thing France wants is tighter monetary conditions, such as might result from Fed tapering. France and Germany are both core Euro Area economies, but their needs are very different. Our Taylor rule analysis suggests that the German economy would not just survive but might actually benefit from tighter money – perhaps much tighter. But the French economy needs a monetary loosening. Higher interest rates in these circumstances could be profoundly damaging for the French corporate sector which in turn could lead to a substantial rise in NPLs there. Refresh Chart Edit Chart Fed tapering means NPLs could become a problem for its banks… The French Non-Financial Corporate sector is already suffering from low profitability. Non-performing loans to the French NFC sector currently stand at only 4% as of Q1 2013, according to Bank of France data – low by historical standards. However, a scenario of continued falls in profitability, rising costs of external finance and weak growth in aggregate demand, triggered by the impact of Fed tapering, could see that ratio rise sharply. In such a scenario, the NPL ratio breaches 10% by 2018, as shown in the chart below. A description of the model is available in the Appendix. If this outcome materializes, the French banking sector would, in turn, be at risk with potentially explosive outcomes for the rest of the Euro Area banking system. …and a problem for French banks is a problem for everyone in the Euro Area. It is impossible to be sure about the channel through which any future shocks might be propagated through the Euro Area banking system. However, past correlations throw some light on this question – and underline the central importance of France. Using a correlation model, we can illustrate France's central position in the Euro Area equity markets. The chart below maps the most efficient way of connecting all the markets represented in the 'constellation', in the sense that there is no other map that would deliver a higher overall degree of interconnectedness. The constellations map the likeliest path that shocks to the system might take: the path of least resistance (or highest historical correlation). Interestingly, the Peripherals tend to cluster together in both the stock market and bond market analyses, including some markets (like those of Slovenia, Slovakia and Malta) not usually considered along with the Periphery (Greece, Portugal, Ireland, etc.). France stands out as the central Euro Area equity market, while Germany is directly connected only to France. A shock to the French equity market would be more significant for the rest of the Euro Area than would be a shock to any other country's equity market, including that of Germany. Conclusion The nexus between over-extended French banks and unprofitable French NFCs represents the soft, vulnerable underbelly of the Euro Area as a whole. The impact of Fed tapering could expose that vulnerability – which, to date, has not been widely reported. Should that risk materialise, we envisage direct and significant implications for French assets. Fed tapering could feed through to lower asset prices in France – according to our analysis, there is a risk that the CAC 40 index will shed its 2013 gains by 2015, repeating the experience of 2011. Refresh Chart Edit Chart Our central view on French equities remains hold. But the risk of a downside is growing, and we will be watching developments in France very closely in coming weeks with that in mind, specifically in relation to the performance of the banks and trends in interest rates. Any indication that NPLs might be on the rise would cause us to change our recommendation to sell. Investors need to be ready to move quickly and be cautious about increasing their positions in French and possibly Euro Area equities in general. The focus of Euro Area policy since the recession has been protecting the Core countries from the Periphery. But, while attention is directed at the Periphery, the banking crisis has already, quietly, seeped deep into the Core. France is the centre of the Euro Area: geographically, politically, and in terms of the interconnectedness of its economy and banking sector. A problem for France is a problem for the whole Euro Area. Fed tapering could bring an issue that has been below the radar for some time – weak and falling profitability in the French corporate sector – right into the foreground. The impact on asset markets and the real economy, not just in France but right across the Euro Area, could be profound. Receive stories like this to your inbox as they are published. Subscribe here and follow us @Alpha_Now on Twitter. If you are looking to access Thomson Reuters data or analytics, register for a free trial.
US Income Gap Soars To Widest Since "Roaring 20s"
The last time the top 10% of the US income distribution had such a large proportion of the entire nation's income was the 1920s - a period that culminated in the Great Depression and a collapse in that exuberance. As AP reports, the very wealthiest Americans earned more than 19% of the country's household income last year — their biggest share since 1928, the year before the stock market crash. And the top 10% captured a record 48.2% of total earnings last year. Analysis by Emanuael Saez shows that, based on IRS data, in 2012, the incomes of the top 1% rose nearly 20% compared with a 1% increase for the remaining 99%. Economists point to several reasons for widening income inequality including globalization and technology. However, as John Taylor explains in his recent WSJ Op-Ed, using this as a lever for Obama's "middle-out" policies - higher tax rates, more intrusive regulations, more targeted fiscal policies - will not revive the economy. More likely they will perpetuate the weak economy we have and cause real incomes—including for those in the middle—to continue to stagnate. Via AP, Berkeley's Emmanuel Saez, said the incomes of the richest Americans surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January. In 2012, the incomes of the top 1 percent rose nearly 20 percent compared with a 1 percent increase for the remaining 99 percent. ... Since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent. That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession. The top 1 percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000. The income figures include wages, pension payments, dividends and capital gains from the sale of stocks and other assets. They do not include so-called transfer payments from government programs such as unemployment benefits and Social Security. ... America's top earners tend to be highly paid executives or entrepreneurs — the "working rich" — instead of elites who enjoy lives of leisure on inherited wealth, Saez wrote in a report that accompanied the new analysis. Still, he added: "We need to decide as a society whether this increase in income inequality is efficient and acceptable." and John Taylor's response to the Obama "Middle-Out" strategy based on this inequality (via WSJ), The Weak Recovery Explains Rising Inequality, Not Vice Versa Last year at this time a debate raged about whether economic growth and job creation has been abnormally slow compared with previous recoveries from recessions in the United States. Now that the growth rate has declined to 1.6% over the past year from 2.8%, the debate is no longer about whether. It's about why. ... The administration and its supporters are not about to blame the slow recovery on its own policies, or those of the Fed. Instead, President Obama and his supporters have been talking about "an economy that grows from the middle out," as he put it in Galesburg, Ill., in July. The fashionable middle-out view blames today's troubles on policies that took root in Ronald Reagan's administration. ... The reason? "Washington," as Mr. Obama asserted in Galesburg, "doled out bigger tax cuts to the very wealthy and smaller minimum wage increases for the working poor." ... Weak economic growth today, according to the middle-out view, is the consequence of a wider distribution, or dispersion, of income (more at the upper end). ... The data for the recovery since mid-2009 do not support this view. The 5.4% overall savings rate during this recovery is not high compared with the 8.4% average since 1960. It is relatively low compared to past recoveries, such as the 9.3% savings rate during a comparable period during the recovery in the early 1980s. ... The middle-out view fails to explain the weak economy and high unemployment today. It also fails to explain the strong economy and low unemployment in the 1980s and '90s. ... Widening income distribution can be a concern, however, especially if it signals reduced income mobility and a growing inequality of opportunity. ... What caused the differential income growth in the 1980s and 1990s? Research shows that the returns to education started increasing in the 1980s. For example, the wage premium for going to college compared to high school increased. But the supply of educated students did not respond to the increase in returns. High-school graduation rates were declining in the 1980s and '90s and have moved very little since then. Test scores of American students fell in international rankings. With little supply response, the returns to those with the education rose more quickly, causing the income distribution to widen. ... The policies favored by those with a middle-out view—higher tax rates, more intrusive regulations, more targeted fiscal policies—will not revive the economy. More likely they will perpetuate the weak economy we have and cause real incomes—including for those in the middle—to continue to stagnate. and the full report is below: Saez UStopincomes 2012
Is The Perfect Always And Everywhere The Enemy Of The Good?
Against a backdrop which offers an eerie parallel with events which took place somewhat to the North more than 30 years ago, Catalonia is now threatening to separate from Spain. In so doing the region seems to be putting at risk both the future of the host country and beyond that the outlook for the Euro currency and the process of European unification. The parallel is of course with the drive for Baltic independence and its impact on Mikhail Gorbachev's ill-fated attempt to peacefully reform the disintegrating Soviet Union. In the words of Aleksandr Yakovlev, one of his closest associates at the time, the ideas of those seeking independence were "out of touch with reality" and any expectation that the Baltic republics could regain the independent status they had before Soviet annexation in 1940 was "simply unrealistic." As late as February 1991 Gorbachov himself was still describing the Lithuanian vote – described by the countries leaders as simply a non-binding opinion poll – as illegal, and this a matter of days before it was actually held. Sound familiar? It should do, since these very same arguments are now being played out in another pole of Europe. Not only is the Spanish administration taking precisely the view that any vote in Catalonia on whether or not to separate from Spain would be illegal, the attitudes of those outside the country are largely being conditioned, not by the merits or otherwise of the Catalan case, but by the fear of what might happen to Spain if Catalonia left. While Catalans busy themselves assuring each other that any new state would be economically viable, few on the outside doubt that this would be the case. To give but one example, former chief economist at the IMF Kenneth Rogoff recently commented that Catalonia taken on its own constitutes one of the richest regions in Europe. This is simply stating the obvious. What has external observers really worried is the subsequent viability of Spain, and with it the future of the Euro. If Spain is too big to be allowed to fail, then Catalonia is too small to have inalienable rights the argument seems to run. It is for this reason, I feel, that the Catalan cause is attracting little sympathy beyond the confines of what is often called "The Principate". Many feel that Catalonia is being selfish – just as they felt in their day that the citizens of the Baltics were – in putting their own particularist interests (a better fiscal distribution, the right to a national football team) before those of the collective (economic recovery, closer political union in Europe, etc.). But this way of looking at things is essentially flawed, just as it was in Estonia, Latvia and Lithuania. The movement for Catalan independence is primarily, and at its core, a democratic one. So what should matter to the outside world is not whether the vote will be considered legal by the central government in Madrid, or whether the Catalans have a good case. If the Catalans vote peacefully and democratically, and by a significant majority, that they want to form a separate state, then it is clear that the region's days inside the frontiers of the Kingdom of Spain are numbered. Unless that is the Catalans be retained within those frontiers by the use of force, in which case some of the fundamental principles of the Treaty of Europe will be put in question. Hence the fundamental dilemma which the Catalan independence drive presents to the whole European Union. Under these circumstances what outside observers should focus on is what the result of the vote, when it does finally take place, will be. After all what the Catalans are demanding at the moment is "the right to decide", and at the end of the day it is they who will decide. My country, as the saying goes, right or wrong. Nothing here is either unavoidable or inevitable. As in the case of Greek Euro exit, beyond the expedient there are no ex ante juridical limits to the bounds of the possible. What is important for everyone is that the eventual solution be an orderly one. In this context messages that the new country, should one be created, would need to apply for membership of the European Union constitute nothing more than mere hot air, just as the suggestions from the Spanish administration that any such application would be met with a veto on their part is no more than an empty threat. Such talk is not in the realm of the real, or the realistic. It is simply an attempt to alter the outcome of the vote, and a bad and ineffective one at that. Not for nothing does Catalonia's President Mas describe the speechwriters of the Partido Popular as running a production line for manufacturing separatists. If Spain's sovereign debt is already on an unsustainable path, then how much less sustainable would it become if the country suddenly had its GDP reduced by 20%? Common sense dictates that negotiations would be held, negotiations in which Catalonia would be asked to accept a proportion of the legacy debt, just as common sense suggests that Catalonia's financial system, which has assets of around 500 billion Euros (i.e. it is much larger than the Greek equivalent) would be allowed to remain in the Eurosystem. The alternatives – and their consequences well beyond the frontiers of Europe – are simply unthinkable. Naturally sometimes the unthinkable happens, especially when a majority of the key players assume it won't. Catalonia has now decided to hold some sort of "consultation" or "opinion poll" during 2014. As in the Lithuanian case the outcome may not be binding, but few should draw comfort from that single fact and assume that the result will not be significant and even decisive for the short term future of Europe. As I say, nothing here is inevitable, or foretold in advance. But avoiding predestination involves facing up to the facts, and not, as the IMF director general Christine Lagarde recently put it in the Greek context, engaging in wishful thinking. And the facts in this case are that dialogue between Catalonia and the rest of Spain has now broken down. Catalans feel themselves to be tired of not being listened to, while the rest of Spain feels itself tired of the Catalans and their constant demands for more autonomy. At one pole there is "Spain weariness" and at the other "Catalonia exhaustion". Matters have now past the point where orderly solutions will be sought out and found internally. Most external observers expected some sort of offer to be made by the central government after the last Catalan elections, but reading the result as a setback and defeat for President Mas the only "offer" which has been sent in the direction of Barcelona is one which involves "Hispanicising" children via the reform of the Catalan education system, a move which has effectively united the Catalans behind their new government. That is why a decisive intervention on the part of Europe's political leaders is now crucial. Whether they like it or not they have no alternative but to become intermediaries in the search for viable solutions, if not neglect will only produce the result everyone seeks to avoid. It is no accident that the Baltics saw their chance just in the moment of maximum Russian weakness, and that Catalans see their only realistic possibility of achieving their objective of having their own state just when Spain is effectively on the ropes, and possibly in terminal decline. Some, comforted perhaps by the writings of Francis Fukuyama, feel that what is happening to Spain is simply an unfortunate setback on the bumpy road to becoming a mature democracy, but darker readings are possible. The current economic crisis is not simply cyclical or conjunctural and there is a real possibility that the country's problems are so complex that it will become impossible for Spain's leaders to fix them without recourse to an Argentina style default. It is precisely the loss of confidence in the capacity of the Spanish political class to resolve the country's dire economic situation, and the mounting frustration with their perpetual insistence that all will be well starting tomorrow that has the Catalans running for the exit door. If the building is about to burn down they don't want to be trapped inside when it happens. As Janice Joplin once put it freedom is sometimes "just another word for having nothing left to lose". In the critical weeks and months that are to come, I think it important that all participants bear in mind that once the Baltic vote was taken, and once the demise of Gorbatchev became inevitable, attitudes towards the new countries rapidly changed. All three are now consolidated members of the European Union, and the past is simply that, what is over. Many Catalans tell me they are doing what they are doing, not for themselves but for their children and their grandchildren. Measured on such a timescale a few years of economic turbulence seem as nothing. In the interest of the common good solutions need to be found – solutions which are able to both satisfy the aspirations of the Catalans and guarantee stability in Europe. If this search is not initiated soon, then time will ineluctably run out and the likely will steadily become the inevitable, simple application of the rules of game theory tell us that. There isn't a day to lose. You know it makes sense. The above is a short chapter I wrote for the book "What's Up With Catalonia" published earlier this year by the Catalan Press.
Small Business Is Going Nowhere
Submitted by Lance Roberts of Street Talk Live blog, Each month I continue to update our analysis of the small business survey when it is published by the National Federation of Independent Business (NFIB). While this survey doesn't get a tremendous amount of press, as a small business owner myself, I find its results more aligned with what I am seeing in the "Main Street" economy versus what the government reported data suggests. For example, last month's report entitled "Making Lemonade" showed relatively little improvement in the economic outlook by small businesses. Since that time the Institute of Supply Management's and Federal Reserve's surveys have showed sharp upticks while, at the same time, the Bureau of Economic Analysis revised GDP up from 1.7% to 2.5%. Therefore, it should be expected that such improvement in the government related reporting should translate into a much more robust report from small businesses. However, that was not the case as the NFIB reported: "Small business optimism remained flat in August, dropping 0.1 points from July for a final reading of 94.0" "While the total reading showed essentially no change over the month prior, a look at the individual indicators reveals incongruent details." One of those incongruences in particular was in job creation plans the jumped to a level not seen since before the last recession. However, that increase is not supported by the dramatic deterioration in real sales. The chart below shows the very abnormal divergence between actual sales versus sales expectations. The problem is that real sales tends to lead expectations which would mean that we may have seen the peak of expectations currently. The favorable employment plans also contrasted sharply with the increasingly negative expectations of future business conditions. While there had been some recent improvement in recent months from historically low levels at the end of 2012 - outlooks remain at very recessionary levels. The statement from the NFIB summed this up well stating: "Overall, the Index of Optimism says the small business sector is going nowhere and that's what it feels like. Consumer sentiment is falling so there is no wind in the sails of the consumption barge. It floats, but no speed...Owners reported lousy performance in the past few months with employment cuts, falling sales and profits, no ability to raise prices, and weak sales the top business problem for 1 in 5 employers. In particular, spending on services (70 percent of consumption) is very sluggish, up 0.5% year over year and declining at a 1.5% annual rate in July. This is where jobs are generated. Disposable income is up only 0.8% year over year, so no support for spending there. The savings rate is very low again therefore not much room to support more spending with less saving. Durable goods spending has posted strong growth, but this are doesn't produce many new jobs." Bright Spots However, despite that there were some bright spots in the report. First of all, as shown in the chart below, there was a massive jump in job creation plans for the next few months. The spike is somewhat anomalus but not entirely unlike what was seen in 2003. The issue, however, is that this may be more representative of two things: 1) labor hoarding has most likely run its course as employers have run out the ability to increase worker productivity much further leading to a need for hiring, and; 2) this may likely represent the peak of employment for the current cycle as it did in 2003. It will be interesting to see if actual employment actually follows the current spike in intentions. Capital expenditure plans also increased on the back of rising employment plans and the need to expand inventory holdings. The sluggish demand from the beginning of the year has led to short term pent up demand and low levels of inventory which now need to be restocked. The issue will be sustainability going forward if actual demand, in terms of sales which has been very poor, does not markedly improve. "While more owners expect the economy to sink further over the next six months than improve, there was a surge in expectations for gains in real sales volumes at their own companies. This is paradoxical at the macro level, although with differing regional economies, possible." While the world is currently glued to the events surrounding Syria; the reality is that such an event has very little to do with the real economy. The surges in expectations by business is very interesting given the actual demand that drives the real economy. Real employment remains weak and corporate earnings are struggling given the diminishing returns of cost cutting. The recent increases in interest rates also have a very important "tightening" effect on the "Main Street" economy which will also likely suppress consumption in coming months somewhat. Also not likely factored in to current survey's is the upcoming debt ceiling debate and the onset of the Affordable Care Act (ACA). The ACA is a de facto increase in taxes and there is a potential for further tax hikes coming from the budget debate. One of the more interesting points from the NFIB was their view on the upcoming Federal Reserve "taper." "Federal Reserve 'tapering' [will not have] a noticeable impact on the real side. Financial markets (where trading, not investing, dominates) will see more volatility. If tapering occurs, it will fall on Treasury purchases, not MBS. The market is a bit short of Treasuries for doing business anyway, so any reduction in the $85 billion in purchases will fall on Treasury bonds. The reality has been, and which is now being realized by the Federal Reserve, is that these ongoing interventions have done little to help the real economy but rather just inflated asset prices. Therefore, the "taper" has more of an effect on Wall Street rather than Main Street. The current survey suggests that the economy is still stuck in "struggle mode" and an acceleration above 2% real economic growth is currently unlikely. The divergence between expectations and real demand will likely converge in the next couple of months so we will see businesses follow through with their optimisitic outlooks. NFIB chief economist Bill Dunkelberg makes an excellent conclusion: "But we saw some interesting things happening with the Index this month. The August reading provided us with a rather perplexing set of statistics; internally consistent on some dimensions, such as lower sales bringing lower profits, but contradictory in other ways, such as lower job openings but huge gains in hiring plans. We know that the upcoming implementation deadlines for the healthcare law are weighing on the minds of employers, and the current dim prospects for real tax reform must be, as well. The September survey will hopefully straighten things but with Syria on the horizon, the budget situation still up in the air, and Obamacare being rolled out, clarity over our economic direction is not likely to be the outcome."
Guest Post: America's Energy Boom And The Rising U.S. Dollar
Submitted by Charles Hugh-Smith of OfTwoMinds blog, The energy boom directly reduces the number of U.S. dollars being supplied to the global economy, and that pushes the value of the dollar higher. The petrodollar regime--that oil is bought and sold globally in U.S. dollars--is easy to understand. It boils down to these two principles: 1. Petroleum is the lifeblood of the global economy. 2. Any nation that can print its own currency and trade the conjured money for oil has an extraordinary advantage over nations that cannot trade freshly created money for oil. This is why many analysts trace much of America's foreign policy back to defending the petrodollar regime. In the normal course of things, anyone printing money in quantity would soon find the conjured currency bought fewer and fewer barrels of oil as the surplus of conjured currency floating around the world greatly exceeded the supply of oil. Currency can be conjured out of thin air, but oil is increasingly costly to find, extract and process. America's energy boom is creating consequences for the value of the dollar. As I have explained here a number of times, this goes back to Triffin's Paradox, which states that when one nation's fiat currency is used as the world's reserve currency, the needs of the global trading community are different from the needs of domestic policy makers. What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012) Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012) Prior to 1971, the dollar was backed by gold, which acted as a supra-national anchor to the dollar's reserve status. The gold standard inhibited both massive trade deficits and money creation, so it was jettisoned. The Triffin paradox is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit. (emphasis added) The use of a national currency (i.e. the U.S. dollar) as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States. Net currency inflows and outflows cannot both happen at once. In other words, the U.S. must "export" U.S. dollars by running a trade deficit to supply the world with dollars to hold as reserves and to use to pay debt denominated in dollars. If the trade deficit shrinks, fewer dollars are available for reserves and to service debt denominated in dollars. Basic supply and demand will push the dollar higher relative to other currencies and eventually, other assets. One reason why the trade deficit is shrinking is the U.S. is supplying more of its own energy. Every unit of petroleum extracted in the U.S. means a unit does not have to be imported from oil exporting nations. The energy boom directly reduces the number of dollars being supplied to the global economy. This creates a relative scarcity of dollars, which pushes the value of the dollar higher: Is it coincidence that the dollar's uptrend aligns with the rise of U.S. energy production? It's not coincidence, it's causation. Oil prices have broken out of a technical wedge: As global oil prices push higher, more previously marginal petroleum reserves in the U.S. and Canada become profitable, further boosting production. The more energy produced in the U.S., the smaller the trade deficit and the fewer dollars provided to the global economy. As the dollar strengthens, the U.S. will pay less for imported energy and earn more for exported energy. This decline in energy costs will ripple through the real economy, offsetting any decline in exports. A strengthening dollar lowers the cost basis of all goods and services originating in the U.S. A strengthening dollar also benefits trading nations, as the increasing value of their dollar reserves enlarges the base for their own credit. This is the irony of China's dumping of its dollar reserves: China only amassed such massive dollar reserves because it was running equally massive trade surpluses with the U.S. As the trade surplus shrinks, so too must China's dollar reserves contract. Many observers confuse the dollars created by the Federal Reserve with the dollars available to trading nations for reserves and dollar-denominated debt. If the Fed creates $1 trillion which then lays fallow in the U.S. financial system, those dollars are not exported into the global economy via trade deficits. Add all this up and it's clear America's energy boom will push the dollar higher as the trade deficit shrinks and those needing dollars on the global market will have to pay more for to get the dollars they need for reserves and payment of dollar-denominated debts.
Statement by the President on Syria
1:52 P.M. EDT THE PRESIDENT: Good afternoon, everybody. Ten days ago, the world watched in horror as men, women and children were massacred in Syria in the worst chemical weapons attack of the 21st century. Yesterday the United States presented a powerful case that the Syrian government was responsible for this attack on its own people. Our intelligence shows the Assad regime and its forces preparing to use chemical weapons, launching rockets in the highly populated suburbs of Damascus, and acknowledging that a chemical weapons attack took place. And all of this corroborates what the world can plainly see -- hospitals overflowing with victims; terrible images of the dead. All told, well over 1,000 people were murdered. Several hundred of them were children -- young girls and boys gassed to death by their own government. This attack is an assault on human dignity. It also presents a serious danger to our national security. It risks making a mockery of the global prohibition on the use of chemical weapons. It endangers our friends and our partners along Syria's borders, including Israel, Jordan, Turkey, Lebanon and Iraq. It could lead to escalating use of chemical weapons, or their proliferation to terrorist groups who would do our people harm. In a world with many dangers, this menace must be confronted. Now, after careful deliberation, I have decided that the United States should take military action against Syrian regime targets. This would not be an open-ended intervention. We would not put boots on the ground. Instead, our action would be designed to be limited in duration and scope. But I'm confident we can hold the Assad regime accountable for their use of chemical weapons, deter this kind of behavior, and degrade their capacity to carry it out. Our military has positioned assets in the region. The Chairman of the Joint Chiefs has informed me that we are prepared to strike whenever we choose. Moreover, the Chairman has indicated to me that our capacity to execute this mission is not time-sensitive; it will be effective tomorrow, or next week, or one month from now. And I'm prepared to give that order. But having made my decision as Commander-in-Chief based on what I am convinced is our national security interests, I'm also mindful that I'm the President of the world's oldest constitutional democracy. I've long believed that our power is rooted not just in our military might, but in our example as a government of the people, by the people, and for the people. And that's why I've made a second decision: I will seek authorization for the use of force from the American people's representatives in Congress. Over the last several days, we've heard from members of Congress who want their voices to be heard. I absolutely agree. So this morning, I spoke with all four congressional leaders, and they've agreed to schedule a debate and then a vote as soon as Congress comes back into session. In the coming days, my administration stands ready to provide every member with the information they need to understand what happened in Syria and why it has such profound implications for America's national security. And all of us should be accountable as we move forward, and that can only be accomplished with a vote. I'm confident in the case our government has made without waiting for U.N. inspectors. I'm comfortable going forward without the approval of a United Nations Security Council that, so far, has been completely paralyzed and unwilling to hold Assad accountable. As a consequence, many people have advised against taking this decision to Congress, and undoubtedly, they were impacted by what we saw happen in the United Kingdom this week when the Parliament of our closest ally failed to pass a resolution with a similar goal, even as the Prime Minister supported taking action. Yet, while I believe I have the authority to carry out this military action without specific congressional authorization, I know that the country will be stronger if we take this course, and our actions will be even more effective. We should have this debate, because the issues are too big for business as usual. And this morning, John Boehner, Harry Reid, Nancy Pelosi and Mitch McConnell agreed that this is the right thing to do for our democracy. A country faces few decisions as grave as using military force, even when that force is limited. I respect the views of those who call for caution, particularly as our country emerges from a time of war that I was elected in part to end. But if we really do want to turn away from taking appropriate action in the face of such an unspeakable outrage, then we must acknowledge the costs of doing nothing. Here's my question for every member of Congress and every member of the global community: What message will we send if a dictator can gas hundreds of children to death in plain sight and pay no price? What's the purpose of the international system that we've built if a prohibition on the use of chemical weapons that has been agreed to by the governments of 98 percent of the world's people and approved overwhelmingly by the Congress of the United States is not enforced? Make no mistake -- this has implications beyond chemical warfare. If we won't enforce accountability in the face of this heinous act, what does it say about our resolve to stand up to others who flout fundamental international rules? To governments who would choose to build nuclear arms? To terrorist who would spread biological weapons? To armies who carry out genocide? We cannot raise our children in a world where we will not follow through on the things we say, the accords we sign, the values that define us. So just as I will take this case to Congress, I will also deliver this message to the world. While the U.N. investigation has some time to report on its findings, we will insist that an atrocity committed with chemical weapons is not simply investigated, it must be confronted. I don't expect every nation to agree with the decision we have made. Privately we've heard many expressions of support from our friends. But I will ask those who care about the writ of the international community to stand publicly behind our action. And finally, let me say this to the American people: I know well that we are weary of war. We've ended one war in Iraq. We're ending another in Afghanistan. And the American people have the good sense to know we cannot resolve the underlying conflict in Syria with our military. In that part of the world, there are ancient sectarian differences, and the hopes of the Arab Spring have unleashed forces of change that are going to take many years to resolve. And that's why we're not contemplating putting our troops in the middle of someone else's war. Instead, we'll continue to support the Syrian people through our pressure on the Assad regime, our commitment to the opposition, our care for the displaced, and our pursuit of a political resolution that achieves a government that respects the dignity of its people. But we are the United States of America, and we cannot and must not turn a blind eye to what happened in Damascus. Out of the ashes of world war, we built an international order and enforced the rules that gave it meaning. And we did so because we believe that the rights of individuals to live in peace and dignity depends on the responsibilities of nations. We aren't perfect, but this nation more than any other has been willing to meet those responsibilities. So to all members of Congress of both parties, I ask you to take this vote for our national security. I am looking forward to the debate. And in doing so, I ask you, members of Congress, to consider that some things are more important than partisan differences or the politics of the moment. Ultimately, this is not about who occupies this office at any given time; it's about who we are as a country. I believe that the people's representatives must be invested in what America does abroad, and now is the time to show the world that America keeps our commitments. We do what we say. And we lead with the belief that right makes might -- not the other way around. We all know there are no easy options. But I wasn't elected to avoid hard decisions. And neither were the members of the House and the Senate. I've told you what I believe, that our security and our values demand that we cannot turn away from the massacre of countless civilians with chemical weapons. And our democracy is stronger when the President and the people's representatives stand together. I'm ready to act in the face of this outrage. Today I'm asking Congress to send a message to the world that we are ready to move forward together as one nation. Thanks very much. END 2:02 P.M. EDT
Rich Cyprus Savers To Lose Up To 60 PERCENT Of Their Accounts
NICOSIA, Cyprus -- Big depositors at Cyprus' largest bank may be forced to accept losses of up to 60 percent, far more than initially estimated under the European rescue package to save the country from bankruptcy, officials said Saturday. Deposits of more than 100,000 euros ($128,000) at the Bank of Cyprus will lose 37.5 percent in money that will be converted into bank shares, according to a central bank statement. In a second raid on these accounts, depositors also could lose up to 22.5 percent more, depending on what experts determine is needed to prop up the bank's reserves. The experts will have 90 days to figure that out. The remaining 40 percent of big deposits at the Bank of Cyprus will be "temporarily frozen for liquidity reasons," but continue to accrue existing levels of interest plus another 10 percent, the central bank said. The savings converted to bank shares would theoretically allow depositors to eventually recover their losses. But the shares now hold little value and it's uncertain when – if ever – the shares will regain a value equal to the depositors' losses. Emergency laws passed last week empower Cypriot authorities to take these actions. Cyprus' Finance Minister Michalis Sarris said the measures were taken to put the Bank of Cyprus on a solid footing. "We suffered a serious blow without doubt ... but we now have a bank which is reformed and ready to assume its role in the Cypriot economy," the state-run Cyprus News Agency quoting him as saying. Analysts said Saturday that imposing bigger losses on Bank of Cyprus customers could further squeeze already crippled businesses as Cyprus tries to rebuild its banking sector in exchange for the international rescue package. Sofronis Clerides, an economics professor at the University of Cyprus, said: "Most of the damage will be done to businesses which had their money in the bank" to pay suppliers and employees. "There's quite a difference between a 30 percent loss and a 60 percent loss." With businesses shrinking, Cyprus could be dragged down into an even deeper recession, he said. Clerides accused some of the 17 European countries that use the euro of wanting to see the end of Cyprus as an international financial services center and to send the message that European taxpayers will no longer shoulder the burden of bailing out problem banks. But German Finance Minister Wolfgang Schaeuble challenged that notion, insisting in an interview with the Bild daily published Saturday that "Cyprus is and remains a special, isolated case" and doesn't point the way for future European rescue programs. Europe has demanded that big depositors in Cyprus' two largest banks – Bank of Cyprus and Laiki Bank – accept across-the-board losses in order to pay for the nation's 16 billion euro ($20.5 billion) bailout. All deposits of up to 100,000 are safe, meaning that a saver with 500,000 euros in the bank will only suffer losses on the remaining 400,000 euros. Cypriot officials had previously said that large savers at Laiki – which will be absorbed in to the Bank of Cyprus – could lose as much as 80 percent. But they had said large accounts at the Bank of Cyprus would lose only 30 to 40 percent. Asked about Saturday's announcement, University of Cyprus political scientist Antonis Ellinas predicted that unemployment, currently at 15 percent, will "probably go through the roof" over the next few years. "It means that (people) ... have to accept a major haircut to their way of life and their standard of living. The social impact is yet to be realized, but they will be enormous in terms of social unrest and radical social phenomenon," Ellinas said. There's also concern that large depositors – including many wealthy Russians – will take their money and run once capital restrictions that Cypriot authorities have imposed on bank transactions to prevent such a possibility are lifted in about a month. Sarris, the finance minister, said that foreign branches of the Bank of Cyprus and Laiki Bank in countries such as Britain, Russia, Ukraine and Romania will eventually be sold. He also said that Cypriots would seek out new markets like China and the Arab countries while maintaining good business relations with Russians, "despite their bitterness." Cyprus agreed on Monday to make bank depositors with accounts over 100,000 euros contribute to the financial rescue in order to secure 10 billion euros ($12.9 billion) in loans from the eurozone and the International Monetary Fund. Cyprus needed to scrounge up 5.8 billion euros ($7.4 billion) on its own in order to clinch the larger package, and banks had remained shut for nearly two weeks until politicians hammered out a deal, opening again on Thursday. But fearing that savers would rush to pull their money out in mass once banks reopened, Cypriot authorities imposed a raft of restrictions, including daily withdrawal limits of 300 euros ($384) for individuals and 5,000 euros for businesses – the first so-called capital controls that any country has applied in the eurozone's 14-year history. The rush didn't materialize as Cypriots appeared to take the measures in stride, lining up patiently to do their business and defying dire predictions of scenes of pandemonium. Under the terms of the bailout deal, the country' second largest bank, Laiki – which sustained the most damaged from bad Greek debt and loans – is to be split up, with its nonperforming loans and toxic assets going into a "bad bank." The healthy side will be absorbed into the Bank of Cyprus. On Saturday, economist Stelios Platis called the rescue plan "completely mistaken" and criticized Cyprus' euro partners for insisting on foisting Laiki's troubles on the Bank of Cyprus. ____ AP business correspondent Geir Moulson in Berlin and APTN reporter Adam Pemble in Nicosia contributed.
Unofficial Problem Bank list declines to 791 Institutions
Here is the unofficial problem bank list for Mar 29, 2013. Changes and comments from surferdude808: As anticipated, the FDIC released its enforcement action activity through February 2013 this week, which led to several changes to the Unofficial Problem Bank List. For the week, there were eight removals and two additions leaving the list at 791 institutions with assets of $290.0 billion. A year ago, the list held 948 institutions with assets of $377.6 billion. For the month of March 2013, the list shrank by a net 18 institutions and assets fell by $12.8 billion. It is the third time over the past year the list has experienced a monthly net decline of 18 institutions. Enforcement actions were terminated against Intervest National Bank, New York, NY ($1.7 billion Ticker: IBCA); Citizens Bank and Trust Company, Chillicothe, MO ($824 million); First American International Bank, Brooklyn, NY ($527 million); American Gateway Bank, Baton Rouge, LA ($404 million); Greer State Bank, Greer, SC ($360 million Ticker: GRBS); The State Bank, Fenton, MI ($308 million Ticker: FETM); The Harbor Bank of Maryland, Baltimore, MD ($249 million Ticker: HRBK); and East Dubuque Savings Bank, Dubuque, IA ($158 million). Added this week were Marathon Savings Bank, Wausau, WI ($180 million) and Trust Company Bank, Mason, TN ($34 million). Trust Company Bank entered the list in an unusual manner through a Prompt Corrective Action order. Normally, an institution will first receive an enforcement action such as a Consent Order or Written Agreement that seeks corrective action for many operational areas. In contrast, a Prompt Corrective Action order solely addresses capital inadequacy. This is only the eleventh institution out of more than 1,600 to enter the list in this unusual manner. The other change to the list this week is the FDIC issuing a Prompt Corrective Action order against Bank of Wausau, Wausau, WI ($53 million). The Treasury recently released its monthly update to Congress on the Troubled Asset Relief Program (TARP) for February 2013. Treasury reported that 113 banking companies failed to make their required TARP dividend payment on February 15th. There are 85 institutions or their parent holding companies on the Unofficial Problem Bank List that failed to make the February 15th dividend payment (see spreadsheet). Within this group, 54 institutions have missed 10 or more quarterly dividend payments. There are 13 banks that did not make the February 15th dividend payment, but have been released from a formal enforcement action. Interestingly, the enforcement action terminations this week against Intervest National Bank, New York, NY ($4.6 million in non-current dividends); Greer State Bank, Greer, SC ($1.2 million in non-current dividends); and The Harbor Bank of Maryland, Baltimore, MD ($935 thousand in non-current dividends) occurred although the companies were unable to make the February 15th required dividend payment. While TARP was supposed to only flow to healthy banks, there are two banks that missed the latest payment that were under an enforcement action before receipt of TARP. Metropolitan National Bank, Little Rock, AR, which has missed 14 payments in a cumulative amount of $4.8 million, was under a Formal Agreement on May 28, 2008 but did not receive TARP until January 30, 2009. OneUnited Bank, Boston, MA, which has missed 16 payments in an amount of $2.4 million, has been operating under a Cease & Desist order since October 27, 2008 but received TARP on December 19, 2008. Many readers may recall OneUnited Bank because of the House Ethics Committee investigation of Representative Maxine Water's ties to the bank (see, Ethics panel set to clear Rep. Maxine Waters). Earlier: • Summary for Week Ending March 29th • Schedule for Week of March 31st
The Chess Game of Capital Controls
.– Boris Spassky, World Chess Champion, 1969-1972Jeff ClarkCasey Research You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany. Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits? You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?Pawn to A3 On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isn't likely to be invading Germany anytime soon – one of the original reasons Germany had for storing its gold outside the country – the move is only natural and no big deal. But Germany's gold stash represents roughly 10% of the world's gold reserves, and the cost of moving it is not trivial, so we see greater import in the move. The Bundesbank said the purpose of the move was to "build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time." It's just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that it's nothing more than this, Bundesbank points out that half of Germany's gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%). google_ad_client = "pub-1897954795849722"; /* 468x60, created 6/30/10 */ google_ad_slot = "8230781418"; google_ad_width = 468; google_ad_height = 60; Sounds reasonable. But these economists remind me of the analysts who every year claim the price of gold will fall – they can't see the bigger implications and frequently miss the forest for the trees.Check What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If Germany were to actually need its gold, regardless of the reason, any request for transfer or sale would be… difficult. There would be, at the very least, delays. At worst such requests could be denied, depending on the circumstances at the time. That's not just bad – it defeats the purpose of owning gold.But this still doesn't capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isn't just a commodity, a day-trading vehicle, or even an investment. It's a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, it's something you can use to pay for goods or services when all other means fail. It is precisely those who don't recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.) Second, here's the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a "pre-emptive" measure "in case of a currency crisis." Germany's central bank thinks a currency crisis is really possible. That's a very sobering fact. We agree, of course: history is very clear on this. No fiat currency has lasted forever. Eventually they all fail. Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency. Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, it's clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average person's standard of living will be greatly reduced. And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a "gold run" in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite.CheckmateIf other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing?Remember, India keeps tinkering with ideas like this already.What this means for you and me is that moving gold outside your country – especially if you're a US citizen – could be banned. Fuel would be added to the fire by blaming gold for the dollar's ongoing weakness. Don't think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. You'd have easier access to foreign-held bullion, depending on the country and the specific events. None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction. The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements. Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harm's way. The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller. Don't just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you won't be any worse off for having some precious metals stored elsewhere. If you're moved to take action, know that you're not alone. It's critical that you take these first steps now, while you still can. google_ad_client = "ca-pub-1897954795849722"; /* 468x60, created 7/28/12 */ google_ad_slot = "9833874419"; google_ad_width = 468; google_ad_height = 60; The best chess players in the world aren't that way because they can see the next move. They're champions because they can see the next 14 moves. You only have to see the next two moves to "win" this game. I suggest making those moves now before your government declares checkmate. There's another "great game" when it comes to the precious metals market: the junior mining sector. The truth is, these stocks aren't for every investor – junior miners are more volatile than any other stock on Earth. However, for those who can stomach sudden price swings and are willing to bet against the crowd, right now junior explorers are offering the profit opportunity of a lifetime.If you've ever wanted a realistic shot at making a fortune, you owe it to yourself to sign up for the upcoming Downturn Millionaires free online video event. It will feature famous speculators, including Doug Casey, Rick Rule, and Bill Bonner, who will detail how everyday investors can leverage junior miners to fantastic profits… just as they have done time and again over the years. Get the details and sign up now. var linkwithin_site_id = 557381; linkwithin_text='Related Articles:' var fnames = new Array();var ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';fnames[1]='FNAME';ftypes[1]='text';fnames[2]='LNAME';ftypes[2]='text';var err_style = ''; try{ err_style = mc_custom_error_style; } catch(e){ err_style = 'margin: 1em 0 0 0; padding: 1em 0.5em 0.5em 0.5em; background: FFEEEE none repeat scroll 0% 0%; font- weight: bold; float: left; z-index: 1; width: 80%; -moz-background-clip: -moz-initial; -moz-background-origin: -moz- initial; -moz-background-inline-policy: -moz-initial; color: FF0000;'; } var mce_jQuery = jQuery.noConflict(); mce_jQuery(document).ready( function($) { var options = { errorClass: 'mce_inline_error', errorElement: 'div', errorStyle: err_style, onkeyup: function(){}, onfocusout:function(){}, onblur:function(){} }; var mce_validator = mce_jQuery("#mc-embedded-subscribe-form").validate(options); options = { url: 'http://activistpost.us1.list-manage.com/subscribe/post-json? u=3ac8bebe085f73ea3503bbda3&id=b0c7fb76bd&c=?', type: 'GET', dataType: 'json', contentType: "application/json; charset=utf-8", beforeSubmit: function(){ mce_jQuery('#mce_tmp_error_msg').remove(); mce_jQuery('.datefield','#mc_embed_signup').each( function(){ var txt = 'filled'; var fields = new Array(); var i = 0; mce_jQuery(':text', this).each( function(){ fields[i] = this; i++; }); mce_jQuery(':hidden', this).each( function(){ if ( fields[0].value=='MM' && fields[1].value=='DD' && fields[2].value=='YYYY' ){ this.value = ''; } else if ( fields[0].value=='' && fields [1].value=='' && fields[2].value=='' ){ this.value = ''; } else { this.value = fields[0].value+'/'+fields[1].value+'/'+fields[2].value; } }); }); return mce_validator.form(); }, success: mce_success_cb }; mce_jQuery('#mc-embedded-subscribe-form').ajaxForm(options); }); function mce_success_cb(resp){ mce_jQuery('#mce-success-response').hide(); mce_jQuery('#mce-error-response').hide(); if (resp.result=="success"){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(resp.msg); mce_jQuery('#mc-embedded-subscribe-form').each(function(){ this.reset(); }); } else { var index = -1; var msg; try { var parts = resp.msg.split(' - ',2); if (parts[1]==undefined){ msg = resp.msg; } else { i = parseInt(parts[0]); if (i.toString() == parts[0]){ index = parts[0]; msg = parts[1]; } else { index = -1; msg = resp.msg; } } } catch(e){ index = -1; msg = resp.msg; } try{ if (index== -1){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } else { err_; html = ' '+msg+''; var input_; var f = mce_jQuery(input_id); if (ftypes[index]=='address'){ input_; f = mce_jQuery(input_id).parent().parent().get(0); } else if (ftypes[index]=='date'){ input_; f = mce_jQuery(input_id).parent().parent().get(0); } else { input_+fnames[index]; f = mce_jQuery().parent(input_id).get(0); } if (f){ mce_jQuery(f).append(html); mce_jQuery(input_id).focus(); } else { mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } } } catch(e){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } } } BE THE CHANGE! 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Dell's Public Problem
SAN FRANCISCO (AP) — Dell's financial advisers tried to persuade 71 potential bidders to make an offer for the troubled personal computer maker before two of them emerged to challenge a proposed $24.4 billion deal with the company's founder, according to documents filed Friday. The wide-ranging efforts to ignite a bidding contest for Dell Inc. are among the morsels of new information contained in a voluminous recitation of the events that have thrust the world's third largest PC maker on to the auction block. The bidding has boiled down to a group led by company CEO Michael Dell and Silver Lake Partners vying against separate alternative proposals submitted during the past week by buyout specialist Blackstone Group LP and billionaire investor Carl Icahn. The other potential suitors contacted by Dell's financial advisers weren't identified in Friday's disclosures. For now Dell's board is standing behind its nearly two-month old agreement to sell the Round Rock, Texas, company to Michael Dell and Silver Lake for $24.4 billion, or $13.65 per share. But the board is still holding out the possibility that it might side with one of the offers from Blackstone or Icahn once they finalize their bids in the next few weeks. Blackstone has pledged to offer more than $14.65 per share for most of Dell Inc.'s outstanding stock while Icahn says he plans to pay $15 per share for up to 58 percent of the company's outstanding stock. Dell hopes to complete a sale by Aug. 2, although it still hasn't even set a date for a shareholder meeting to approve whichever deal gets the board's final blessing. Friday's regulatory filing provided Dell's board with its best chance yet to convince shareholders that it has gone to great lengths to ensure the company is sold for the highest possible price, given the challenges facing PC makers at a time sales of desktop and laptop machines have been declining as more people embrace smartphones and tablets. Dell's disclosures underscored the bleak outlook in Friday's filing by including snapshots of internal financial projections that were lowered during the past eight months as the company's management and board came to grips with the depths of the PC downturn. In July Dell's management presented a forecast calling for an operating profit of $5.6 billion on revenue of $66 billion in the current fiscal year ending in January 2014. After mulling a variety of information, Dell's board concluded the company is more likely to post an operating profit of $3 billion, a 46 percent decrease from the July prediction. The board is now planning for revenue of $56.5 billion for the current fiscal year, a 14 percent drop from the earlier forecast. Michael Dell, the company's CEO and founder, believes he will be in a better position to engineer a turnaround if he doesn't have to cater to Wall Street's fixation on whether revenue and earnings are growing from one quarter to the next. That's why Dell would end its 25-year history as a publicly held company if its CEO's debt-laden proposal wins out. The deal would saddle Dell Inc. with more than $15 billion in debt, including a $2 billion loan from Microsoft Corp. Blackstone and Michael Dell also have left open the possibility of working together, if Blackstone should end up in control of the company. Icahn hasn't indicated whether he would want to retain Michael Dell if his bid succeeds. Michael Dell's deal is facing resistance from major shareholders who believe the sales price isn't high enough. Southeastern Asset Management, the company's second biggest shareholder after Michael Dell, contends Dell Inc. is worth nearly $24 per share. The Memphis, Tennessee, firm had suggested that it work with Michael Dell on a buyout last June, according to Friday's filing. A month after Southeastern floated the buyout idea, Michael Dell met with a Silver Lake representative at an industry conference and set up an August meeting to discuss how they might work together. Silver Lake initially was competing against another unidentified buyout firm that dropped up of the bidding in early December. Silver Lake at first proposed paying $11.22 to $12.16 per share before finally settling on $13.65 per share after being prodded by Dell's board to raise its offer on several occasions, according to the company's filing. After the deal with Michael Dell and Silver Lake was announced in early February, company adviser Evercore Partners contacted 67 different potential suitors and fielded unsolicited inquiries from four other parties, according to the filing. Only 11 of the potential bidders that spoke with Evercore were interested in exploring a deal. The documents didn't identify any of the other suitors besides Blackstone and Icahn. To keep Blackstone at the negotiating table, Dell agreed to pay up to $25 million of the firm's expenses.
Guest Post: The Chess Game Of Capital Controls
Submitted by Jeff Clark of Casey Research, The best indicator of a chess player's form is his ability to sense the climax of the game. –Boris Spassky, World Chess Champion, 1969-1972 You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany. Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits? You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on? Pawn to A3 On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isn't likely to be invading Germany anytime soon – one of the original reasons Germany had for storing its gold outside the country – the move is only natural and no big deal. But Germany's gold stash represents roughly 10% of the world's gold reserves, and the cost of moving it is not trivial, so we see greater import in the move. The Bundesbank said the purpose of the move was to "build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time." It's just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that it's nothing more than this, Bundesbank points out that half of Germany's gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%). Sounds reasonable. But these economists remind me of the analysts who every year claim the price of gold will fall – they can't see the bigger implications and frequently miss the forest for the trees. Check What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If Germany were to actually need its gold, regardless of the reason, any request for transfer or sale would be… difficult. There would be, at the very least, delays. At worst such requests could be denied, depending on the circumstances at the time. That's not just bad – it defeats the purpose of owning gold. But this still doesn't capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isn't just a commodity, a day-trading vehicle, or even an investment. It's a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, it's something you can use to pay for goods or services when all other means fail. It is precisely those who don't recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.) Second, here's the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a "pre-emptive" measure "in case of a currency crisis." Germany's central bank thinks a currency crisis is really possible. That's a very sobering fact. We agree, of course: history is very clear on this. No fiat currency has lasted forever. Eventually they all fail. Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency. Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, it's clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average person's standard of living will be greatly reduced. And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a "gold run" in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite. Checkmate If other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing? Remember, India keeps tinkering with ideas like this already. What this means for you and me is that moving gold outside your country – especially if you're a US citizen – could be banned. Fuel would be added to the fire by blaming gold for the dollar's ongoing weakness. Don't think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. You'd have easier access to foreign-held bullion, depending on the country and the specific events. None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction. The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements. Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harm's way. The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller. Don't just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you won't be any worse off for having some precious metals stored elsewhere. If you're moved to take action, know that you're not alone. It's critical that you take these first steps now, while you still can. The best chess players in the world aren't that way because they can see the next move. They're champions because they can see the next 14 moves. You only have to see the next two moves to "win" this game. I suggest making those moves now before your government declares checkmate.
Cyprus Postmortems: Part II
image sourceStephen LendmanActivist Post On March 28, Cyprus Mail said banks opened for the first time in almost two weeks. They did so at midday local time. Cypriots face draconian restrictions. How they'll react remains to be seen. Capital controls limit withdrawals, restrict non-cash transactions, freeze check cashing, and convert checking accounts into fixed-term deposits. Finance Minister Michalis Sarris "signed into law a temporary decree." It caps cash withdrawals "per person per bank at 300 euros." It "effectively ban(s) cheques and control(s) cash outflows from the country." It permits only 1,000 euros per person to travel abroad per trip. Higher amounts require special approval.Business payments are capped at 5,000 euros per day. Others up to 200,000 euros require approval of a "special four-member committee." Amounts above 200,000 require similar approval. Distributing company payrolls require supporting documents. They're needed for student tuition and living expenses. They're required to send funds to first degree relatives studying abroad. google_ad_client = "pub-1897954795849722"; /* 468x60, created 6/30/10 */ google_ad_slot = "8230781418"; google_ad_width = 468; google_ad_height = 60; Overseas payments or transfers by debit, credit or prepaid cards are allowed up to 5,000 euros per month per person per bank. The same goes for comparable amounts overseas by debit, credit or prepaid cards. "Other payments or transfer of funds require the prior approval of the committee, taking into account the liquidity buffer situation of each credit institution in question." It won't "be possible to prematurely break fixed-term deposits unless the funds are used to repay a loan within the same bank." As long as capital controls remain, when fixed deposits mature, depositors "will only have access to either 5,000 euros or 10 per cent of the total, depending which is higher." They're required to "put that amount either in a current account or a new fixed-term deposit in the same bank, depending on his (or her) choice." Residual amounts will be kept in the original deposit an extra month. Financial transactions, payments or transfers not finalized before controls were instituted are subject to the same restrictions. Banks are warned not to "execute cashless transfers that facilitate the circumvention of the restrictive measures." They apply to all accounts, payments and transfers regardless of currency.Exemptions include:new funds transferred from abroad; cash withdrawals or checks cashed from foreign institutions abroad; committee-authorized payments; and cash withdrawals from accounts banks held with Cyprus' Central Bank, the Cyprus Republic, and Central Bank operations. Central Bank internal audit head, Yiangos Demetriou, said measures in place will be reviewed after four days. Expect no loosening any time soon. Whether clever lawyers and accountants find innovative exits remains to be seen. Ahead of reopening, "truck loads of euro notes arrived at the Central Bank in Nicosia." They came "under heavy police escort." Helicopters hovered overhead. Cash will be distributed among Cypriot commercial banks and cooperatives. Depositors be warned. Eurozone banking is irrevocably broken. Bank-held deposits no longer are safe. Eurocrat diktats can be imposed anywhere. Economics Nobel Prize recipient Christopher Pissarides said "Cyprus finds not all nations are equal." He came home end of January. He helped President Nicos Anastasiades' campaign. He didn't expect what happened. The way Eurocrats treated Cyprus "shows that far from the currency bloc acting as a partnership of equals, it is a disjointed group of countries where the national interests of the big nations stand higher than the interests of the whole." "Meanwhile, the haphazard decision-making in the eurogroup continues." It reached "a new low." It "casts serious doubts on the ability of this group to make the decisions to push Europe forward to financial stability and economic growth." Nicosia looks "eerie." Streets are deserted. People are glued to television for late news. "There is total desperation. The smiles have gone. Nothing like this ever happened before." Stories circulate about wealthy Russians and others getting overseas calls to move assets and businesses there. "The future is indeed bleak. It is not clear what is coming next and from where." The Daily Telegraph's international business editor, Ambrose Evans-Pritchard, headlined "Cyprus has finally killed myth that EMU (EU Economic and Monetary Union) is benign."The punishment regime imposed on Cyprus is a trick against everybody involved in this squalid saga, against the Cypriot people and the German people, against savers and creditors. All are being deceived.It's not a bailout. Cyprus gets no debt relief. A potential "economic death spiral" looms. Capital controls "shattered" EMU monetary unity. "A Cypriot euro is no longer a core euro. We wait to hear the first stories of shops across Europe refusing to accept euro notes issued by Cyprus, with a G in the serial number." Violating insured bank deposit security means anyone's money can be stolen. It'll happen if creditor state leaders think doing so's in their best interests. "Monetary union has become a danger to property." Eurogroup chief Jeroen Dijsselbloem calls it a template for future EMU rescues. "(U)ninsured deposit holders" can expect eventual haircuts. The "Dijssel Bomb" confirms creditor powers. They'll impose them "if push ever comes to shove." At the same time, "the German bloc (lies) about the real cost of holding the euro together. The accord pretends to shield" EMU creditor states' taxpayers from future losses. The cost of Cyprus' new credit line shifts to the ECB. It "will have to offset the slow-motion (Cypriot) bank run with its Emergency Liquidity Assistance (ELA)." It's likely to be a large amount. Much will show up on the Bundesbank's balance sheet and its peers. It'll do so "through the ECB's Target2 payment nexus." Money "will leak out of Cyprus unless (Eurocrats) encircle the island with razor wire." According to Jeffries' Marchel Alexandrovich:In saving 5.8 billion euros, "the other euro area countries will likely be on the hook for four to five times more in contingent liabilities." But, of course, the former represents real money that gives politicians a headache; the latter is monopoly central bank money.Ahead of Germany's September elections, Angela Merkel "will do anything (to) disguise the true cost of the EMU project." Paul Krugman says "Cyprus should leave the euro. Staying in means an incredibly severe depression." Normura's Dimitris Drakopoulos believes no one knows what's coming. "The economy could go into a free fall." Cyprus lost its core industry. Its assets equal eight times GDP. Nothing's there to replace it. Tourism won't work. EMU membership made it "shockingly expensive." Prospective tourists won't know what to expect on arrival. Seizing money irresponsibly "was an act of state madness." What happened shows EMU went "off the rails." Stability's endangered. It "should be dismantled before it destroys Europe's post-war order." Southern European countries have their own crises. Their "denouement will arrive when (they) conclude that recovery is a false promise (and) break free of EMU's contradictory regime." Economist Yanis Varoufakis addressed "The Good, the Bad and the Extremely Ugly (Aspects of the Cyprus Deal)." The latter two way outweigh the former. "The Memorandum of Understanding" hasn't been presented. The "deal is utterly incomplete." It's unknown "what degree and type of austerity will be imposed upon a collapsing social economy." It's almost certain to be "an austerian package bound to crush weaker Cypriots…." Wiping out foreign depositors will devastate Cypriot banking and tourism. Transferring 9 billion of ELA money from Laiki Bank to the Bank of Cyprus "flies in the face of basic banking resolution principles." Doing so reflects Eurocrat tyranny. It's unclear how capital controls will be implemented. It's uncertain they'll work. Cypriot euros are no longer exportable. Restricting them to Cyprus flies in the face of monetary union. Eurocrat demands are "exceptionally ugly." They jeopardized sacrosanct deposit insurance guarantees. They compromised Eurozone integrity. They "sacrifice(d) the (EU's) single market principle according to which capital controls are" verboten. The ugliest part of the deal exposes the illusion of "genuine Eurozone-wide banking union." Dijsselbloem said so in no uncertain terms.The combination of (a) the denial of the need to effect public debt consolidation, (b) the derailing of a meaningful banking union and (c) the heavy-handedness with which Cyprus was treated over the past week, spell a new, uglier, state of affairs in Europe.Eurocrats spurned unifying moves. They chose authoritarian/divisive ones instead. Doing so pushes Eurozone countries "in precisely the opposite direction to that dictated by political and economic sustainability." "I would not be surprised" if what happened doesn't reflect "a major turning point." It may become "the moment in history when Europe moved beyond the pale." It might have been worse. Cyprus state broadcaster CyBC said German Finance Minister Wolfgang Schaeuble proposed a 40% haircut on all deposits. google_ad_client = "ca-pub-1897954795849722"; /* 468x60, created 7/28/12 */ google_ad_slot = "9833874419"; google_ad_width = 468; google_ad_height = 60; IMF managing director Christine Lagarde concurred. On March 26, Cypriot Finance Minister Michalis Sarris said large uninsured Laiki Bank depositors could lose up to 80% of their money. "Realistically," he added, "very little will be returned." Euro expert Bernard Connolly looks prescient. Before its introduction, he predicted the euro's failure. He called it a harebrained idea doomed to fail. He said one or more of Europe's weakest countries would face rising deficits, troubled economies, and a "downward spiral from which there is no escape unaided. When that happens, the country concerned will be faced with a risk of sovereign default." It only remains for it to happen. Expect perhaps eventual EMU collapse.Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.com. His new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. 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"You have to Destroy the Maastricht Treaty to Save It"
There are plenty of news headlines rattling Europe today. Let's take a look at some of them.Severe Capital Controls in Cyprus In spite of the fact the Maastricht Treaty under which the eurozone was formed mandates a free flow of capital, Cyprus unveils severe capital controls. "Cyprus is the first eurozone country ever to apply capital controls, with limits on credit card transactions, money transfers abroad and the cashing of cheques. Depositors will be limited to credit card transactions of up to €5,000 per month and will be able take a maximum of €3,000 of bank notes out of the country per trip." Capital controls are said to expire in seven days. So, don't worry, its only temporary. Hopefully everyone understands the implied theory: "You have to Destroy the Maastricht Treaty to Save It." Top Orwellian Comments Of All TimesAn American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it." Vice President Joe Biden: "We Have to Go Spend Money to Keep From Going Bankrupt." President George W. Bush: "I've abandoned free-market principles to save the free-market system."(For a discussion please see The Most Redeeming Feature of Capitalism is Failure) Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video) Larry Summers says "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." (Reuters) But What about those advertised losses of 30% on large Cyprus depositors? Glad you asked. "Laiki depositors holding more than €100,000 may lose up to 80 per cent of their funds, and only get the remaining 20 per cent back over a period of years, Cyprus's finance minister said on Tuesday."Italy Industrial Orders SinkDow Jones reports Italy Industrial Orders Fall in Jan on Declining Internal Demand "Italian industrial orders dropped for the third consecutive month in January and were down compared with the same period a year ago, hit by declining internal demand, the national statistics institute reported Wednesday. Orders fell 1.4% in January from December in seasonally-adjusted terms and were down 3.3% from January 2012 in unadjusted terms, Istat reported."Merkel Ally Backs Double-Digit Hike in Top Tax Rate If you thought Merkel and her CDU party were true conservatives, it's time for you to think again.Reuters reports Merkel CDU Ally Backs Double-Digit Hike in Top Tax Rate. "A senior conservative ally of Chancellor Angela Merkel, Annegret Kramp-Karrenbauer, premier of the western state of Saarland and a senior figure in the Christian Democratic Union (CDU), said in a weekend radio interview that Merkel's predecessor Gerhard Schroeder had gone too far by reducing the top rate to 42 percent from 53 percent in the 1990s."Is Poland Having Second Thoughts? The Financial Times reports Poland opens way to euro referendum. "Donald Tusk, Poland's prime minister, took a big political gamble on Tuesday when he opened the door to a referendum on joining the euro, in the face of strong public opposition to the common currency. The latest opinion survey shows 62 per cent of Poles are opposed to joining, with scepticism increasing markedly since the financial and debt crises hit Europe five years ago. But now Mr Tusk has publicly raised the possibility of allowing a referendum – demanded by rightwing opposition parties opposed to euro membership – in return for an agreement with the opposition to push through the necessary constitutional changes." Tusk is setting a trap. Tusk wants the constitutional changes now, but will only hold a vote when favorable. Should the vote fail, rest assured there will be another and another and another. Unless of course the eurozone splinters to high heavens in the meantime which of course is a likely possibility. The correct move is for the opposition to demand a referendum immediately, and if and only if it passes (it won't), should the constitutional changes be taken up.French Unemployment Hits 16-Year High President Francois Hollande's socialist policies are firing on all four cylinders now, except in reverse as French Unemployment Hits 16-Year High. The Financial Times reports "French unemployment nudged a record level in February as the jobless total rose for the 22nd month in succession to a 16-year high, adding to the acute political pressure on President François Hollande as he battles a stalled economy. The OECD predicts unemployment will reach 11.25 per cent, surpassing the record level of 10.8 per cent previously hit in 1994 and 1997." Except for Spain, Germany, Greece, Cyprus, Portugal, Italy, Ireland, Slovenia, Luxembourg, France, and various other eurozone countries, everything in the eurozone is quite lovely. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Press Briefing by Principal Deputy Press Secretary Josh Earnest, 03/27/2013
James S. Brady Press Briefing Room 12:39 P.M. EDT MR. EARNEST: Two quick announcements at the top before we go to your questions. They're both scheduling announcements, actually. The first is, at 3:00 p.m. today the President will host a swearing-in ceremony for the new director of the United States Secret Service, Julia Pierson. That will be in the Oval Office, and we've arranged for a pool to be there to witness it. So that should be pretty good. The second thing is about tomorrow. Tomorrow, the President will hold an event here at the White House where he will stand with mothers who want Congress to take action on common-sense measures to protect children from gun violence. The event will take place in the East Room. And in addition to the mothers on stage with the President, there will be law enforcement officials, victims of gun violence, and other stakeholders. So that will be tomorrow. I don't know the exact time, but we'll have more on that on the guidance tonight. So, yes, here in the East Room in the White House. With that, Julie, I'll let you get us started. Q Thank you. Just a couple things on DOMA. Did the President get any update from the Solicitor General following the oral arguments today? And was there anyone from the White House who was there to witness the arguments, like yesterday? MR. EARNEST: It is my understanding that the President has been kept apprised of the arguments made at the Supreme Court on these issues, both through reading the coverage of you and your colleagues but also based on briefings that he's gotten from his legal staff here at the White House. It's also my understanding that the White House officials who attended yesterday are the White House officials also attended today. So that was Valerie Jarrett, Kathy Ruemmler, the Counsel of the White House, and Kathleen Hartnett, who's an associate counsel here at the White House. Q There seemed to be, in sort of the initial reading of the justices' questions, a sense that they were also questioning the constitutionality of DOMA. Did the President, in the short period of time that's passed since it was wrapped up, have any reaction to the proceedings today? MR. EARNEST: I haven't heard from him about his reaction to the proceedings today. I know that going into the proceedings that he had full confidence in his team at the Justice Department and others who were responsible for preparing the arguments, and had total confidence in the people who were prepared to walk in there and deliver them. But in terms of his reaction for how it played out, I didn't get one. Q We're seeing a little bit more from the President, at least publicly this week, on immigration reform -- the interviews today, the event on Monday. Is there a reason why he feels like he needs to be kind of more forthright publicly this week as Congress works its way towards a possible deal? MR. EARNEST: The reason that the President felt like it was important for him to be very public this week, as he has been in previous weeks about immigration reform, is that it remains a top priority of his. This is something that he talked about quite extensively during the campaign; and something since the beginning of this year, when he laid out his principles in a speech in Las Vegas in January, has made clear that this is an important priority, both in terms of the impact that -- reforming in a comprehensive way our broken immigration system because of the impact that it would have on our economy, but also because it's the President's view that we need to make sure that everybody is playing by the same set of rules. And by reforming our broken immigration system in a comprehensive way, we can accomplish those two goals. So the President is looking forward to the opportunity that he'll have to speak with Univision and Telemundo correspondents this afternoon to talk about why that's such a priority for him. And I think what he'll also note, though, to be fair, is the progress that's being made by the bipartisan group of eight senators who are working on this in the United States Senate. Q One of the sticking points right now is this wages for guest workers. Obviously, business and labor are split on this. Has the President done any outreach to labor, to Trumka at AFL-CIO on this? MR. EARNEST: I don't have any specific calls to read out to you. As you know, the White House staff, throughout this process of negotiations -- bipartisan negotiations have been ongoing -- has been engaged. And they have been engaged both to offer some technical assistance, but also to ensure, or at least to represent the administration point of view, to try to steer the proposal in the direction of the principles that the President had laid out. So we're pleased with the progress that the groups are making in terms of trying to hammer out an agreement here. And we are also heartened by the fact that Senator Schumer at least has said that he expects that a bill will be filed shortly after the Easter vacation. And if that's the case, we're certainly pleased with the progress and looking forward to taking a look at what they have agreed upon. Hey, Steve. Q Josh, what's the next step in trying to reach a grand bargain with Republicans over the deficit? MR. EARNEST: Well, as you know, Steve, for some time now, the chief impediment to reaching a grand bargain has been the refusal of Republicans to ask the wealthiest and well-connected to pay even a dime more to help us deal with our deficit challenges. I'm sad to report that even months later that that continues to be the case, that we are seeing a group of Republicans in the Congress who are refusing to compromise on this. In fact, you even see some of them that are actually running around the country bragging about their intransigence on this. That's not in the best interest of the country. It's not in the best interest of our economy. The President has put forward his own plan, a genuine compromise that reflects the balanced approach that the President supports. It would reduce our deficits based on the agreements that we've reached over the last 18 months or so. It would reduce our deficits by about $4 trillion, $4.5 trillion over 10 years, and it would reach that deficit reduction by making smart cuts in government spending, by eliciting some savings from reforms to our entitlement programs, and by asking the wealthy and well-connected to pay a little bit more. Q So what happens now then? MR. EARNEST: Well, we are in a place now where it's difficult for us to reach an agreement when you have a firm block of Republican senators who are refusing to compromise. It's even more disappointing where -- it's even more disappointing that the natural compromise that should exist in terms of additional cuts in government spending, some reforms to entitlement programs, both of those -- those are two items that Republicans have long said that they have sought, and asking the wealthiest and well-connected to pay a little bit more. By pursuing that balanced approach, we can reach some significant deficit reduction in a way that's good for the economy. But as long as Republicans are saying we're not going to ask the wealthiest and well-connected to pay a single dime to reduce our deficit, then it is hard to imagine that we're going to reach a compromise. Q So basically the process has stalemated then? MR. EARNEST: Well, the process is currently being blocked by Republicans who refuse to consider -- even consider asking the wealthiest and well-connected to pay more. Q So any more meetings planned or any talks about this? MR. EARNEST: Nothing that I have to read out to you right now. The President has -- since December -- has had on the table an updated compromise plan, one that he originally presented to Speaker Boehner in mid-December. The details of that offer are posted on the White House website. They remain on the table. So if there happens to be a critical mass of Republicans in Congress who take a look at that proposal and say, you know what, we actually would like to reach an agreement that would do something significant about our deficit; that would make some strategic cuts to government programs where we can; that would reform entitlements in a way that would protect those programs for the future, but also enjoy some savings that we could pay toward reducing the deficit; and ask the wealthy and well-connected to pay a little bit more, then that would be the outline of compromise. What we need to see is we need to see Republicans who are willing to demonstrate some political courage to do that. Q And quickly on another subject. North Dakota is signing a law banning most abortions. Is this something you're taking a look at on whether it is constitutional? MR. EARNEST: Well, this is -- it's a state matter, and so I don't have a specific comment on it. I know that the expectation is -- just from reading the reports, I know the expectation is that there are a number of legal challenges that are likely to be pursued. And I know that many people who know a whole lot more about the law than I do are skeptical that these types of laws will stand up to legal scrutiny like that, but that's not a decision for us to make. The President's view on this is pretty clear. He certainly is opposed to measures like that. He believes in protecting a woman's right to choose. But in terms of if there is a legal process forthcoming, that's something that will be -- that will wind its way through the process and not something that we'll -- at least initially -- be involved in. Jim. Q Back on immigration, if we could. Senator McCain in his home state said yesterday that he -- he told some of his constituents that, "I don't know if we can achieve agreement or not. We've been working hard…but I can't guarantee anything." Is the White House concerned? And is in fact this push that happened on Monday and then, again, the interviews today, are those linked in any way in a concern that this is stalled at this point? MR. EARNEST: No, in fact, we're actually encouraged by the progress that's being made by the bipartisan group of senators who have been working on this for a number of months now. Senator Schumer said just on Sunday that he was optimistic that they'd be able to file a piece of legislation when they got back from the Easter recess. I know that Senator McCain and his Arizona colleague, Senator Flake, are hosting a couple of their Democratic colleagues -- Senator Bennet and Senator Schumer -- in Arizona today, again, to take a look at the border, to take a look at the important investments and commitments that have been made by this administration to securing the border. And we are hopeful that, as they work their way through this process, that we'll have a bipartisan agreement that reflects many of the principles that the President himself has laid out. We'll reserve judgment on the product of those discussions until it's produced, but at this time we are -- we remain encouraged by the progress that they're making. Q So Sunday's statement by Senator Schumer would trump yesterday's statement by Senator McCain that he, in fact, can't guarantee they will have a bill and that he is, in fact -- couldn't guarantee anything and he is discouraged? MR. EARNEST: I haven't seen the exact comments from Senator McCain. I would -- if he's suggesting that he's not going to make any guarantees about what happens in Congress two weeks from now, I would actually suggest that he's quite -- he's being pretty judicious, because I think it is difficult to predict what exactly happens in Congress. But I think that the vast majority of indications are that this bipartisan group has made a lot of progress. That's progress that the White House has been involved in, as I mentioned earlier. The White House has offered some technical assistance to them as they've been working through drafts of legislation and I know that there are others who are involved in those talks who are interested in ensuring or at least trying to steer that group in the direction of the principles that the President has laid out. And by all indications, they've made some important progress. I'm not up here offering any guarantees either. But what I am encouraged by and what the White House is encouraged by are the indications that they're making some progress and will be prepared in a couple of weeks to file a piece of legislation or around the deadline that they set for themselves a few months ago. Q So, finally, just to be clear here, so the President hasn't changed his mind about stepping back, letting Congress work this out, and not inserting himself as he did on Monday and as he is a little bit today with the Spanish-language media? That's not reasserting himself into the process at this point? MR. EARNEST: Well, I'll let you guys sort of evaluate whether or not the President is asserting himself or inserting himself into the process. The President has beliefs. The President campaigned on and won reelection on a platform of pursuing comprehensive immigration reform early in his second term. That is a promise that the President has followed through on. The reason -- one of the important reasons that immigration reform is such a legislative priority for both sides is because of the public support that the President has marshaled on this issue. So it is natural that the President would be involved in the process of putting together a policy that would finally fix our broken immigration system. But in this case, we have allowed a bipartisan group of senators, at their request, to take the lead in the conversations about a bipartisan compromise in the United States Senate. Those are conversations that we've been involved with from the beginning, but we're pleased that we see this group of eight senators -- Democrats and Republicans -- working together to try to put in place a policy that could pass through the Senate with bipartisan support, could pass through the House with bipartisan support, and would be the kind of legislation that the President could sign. That's the way that the system is supposed to work. Major. Q I just want to talk to you about North Korea for a minute. And I took seriously what Jay said about the statement. But what I'm trying to get at is if there is any conversation that's reached the President, or if he's aligned or put together working groups that view what's happened in North Korea in the last three or four weeks as materially different the kind of rhetoric and provocations and actions that this government has seen before. Because there are a number of people who are familiar with this issue who do feel increasingly that there is a material difference and that the risks are greater, and that there is something afoot here that is different and possibly more threatening to South Korea and U.S. interests throughout the region than we have seen before. I wanted to ask you if you can tell us anything about whether the administration believes that's true, if it feels it is materially different, and is doing anything in response to that conclusion. MR. EARNEST: Well, the thing that we have -- it's difficult to offer you a specific assessment from here. But I can tell you that the White House and this administration, and certainly through the Department of Defense and other agencies and leaders in this government who are responsible for the safety and security of not just the United States of America but also our allies, have been engaged with our international partners to try to deal with this challenge. I mean, what we've seen from North Koreans is more bellicose rhetoric and threats that only follow a pattern designed to raise tensions and intimidate others. The North Koreans are not going to achieve anything through these threats and provocations, and they're only going to further isolate the North Koreans and undermine international efforts to bring peace and stability to Northeast Asia. We remain committed to ensuring that the security of the South Koreans, our allies, are protected, and we have the capability that we need to ensure that the United States and our assets are protected. Q The Treasury Secretary was over in China, had -- was the first civilian leader to see the new Chinese President. Obviously, he has a very good relationship with the President. I'm wondering if there were any conversations or any reports back to the President from the Treasury Secretary, because I have to believe in these conversations North Korea did come up as a general topic. MR. EARNEST: I'm not familiar with the details of the discussions between Secretary Lew and President Xi, so I'd refer you to the Treasury Department for that. Q Right. And can you tell us if there is any different posturing here in the building, on a daily basis or even a weekly basis, about North Korea? MR. EARNEST: What do you mean by posturing? Q Meetings, briefings to the President? MR. EARNEST: No, I'd say no. Q Is anything being lifted up to a higher level of scrutiny, analysis and presentation of that analysis to the President? MR. EARNEST: Well, I can tell you that this is something that is being -- Q Is there a higher level of urgency or curiosity or interest now than there was, say, two months ago? MR. EARNEST: Well, I think that there's always been a pretty vigilant posture when it comes to North Korea, in terms of monitoring their statements, in terms of monitoring their capabilities, and making sure that we have the resources that we need to protect our interests and our allies. We remain engaged with our international partners in the region who also have a stake in resolving this peacefully. It's hard for me to compare that to previous instances like this, but I can tell you that this is something that we have been vigilant about for quite some time now. Q But not more so now than throughout the entire administration? MR. EARNEST: Well, I would say at least as vigilant as we have been previously. Ed. Q Josh, I want to ask all of Jim's questions over again -- (laughter) -- but just to insert gun control instead of immigration reform. Will you guarantee that there's going to be a big gun control bill that will pass through both chambers? MR. EARNEST: I don't want to try to stand here and predict the future about what's going to happen in the Congress, but I can tell you that, in the same way that we're encouraged by the progress that's been made in bipartisan fashion on immigration reform, we're encouraged by the bipartisan progress that's been made in the Senate. There are a number of measures that passed through the Senate Judiciary Committee, last week I believe it was, and we're going to continue to work with the Senate and with members in both parties, frankly, who are interested in working with the President to put in place measures that would reduce gun violence. As the President himself has said pretty articulately that this is a complex problem, but we shouldn't let the complicated nature of it prevent us from taking action. And there are some meaningful, common-sense things that we can do to reduce gun violence in our communities at the same time respecting the rights provided by the Second Amendment of the Constitution. Q Today I believe is 100 days since the tragedy at Sandy Hook, and obviously the President -- that may be one reason why he's having this event here at the White House tomorrow, obviously to mark that. There's a national day of action tomorrow, as well on this. But a lot of time -- 100 days has passed since the tragedy. The nation's attention was focused. Obviously, the fiscal cliff and other things have come up. Is he getting more active now, worried that perhaps he's lost some momentum on this important issue? MR. EARNEST: Well, I think I would slightly disagree with the premise of your question because I think that the President has been engaged on this pretty quickly. And I think -- Q But how many events has he had here at the White House on this in this room, pushing with moms or -- MR. EARNEST: Sure. There have been more than 20 events actually, more than 20 events and interviews and public appearances, between the President and the Vice President's activities, spread out over 100 days. That's more than one a week. So this is something that the President has been engaged on from the beginning. Putting somebody like the Vice President in charge of this is significant. This is somebody that has a long history with these issues from being the Chairman of the Judiciary Committee and intimately involved in the passage of the first crime bill that included an assault weapons ban. But two days after the tragedy in Newtown, the President spoke pretty eloquently about steps that Congress should take. Three days later, he stood at this podium in this room where he appointed -- or he asked the Vice President to take the lead here, at least initially, in coming up with some ideas. But even in those remarks, he talked about and challenged Congress to pass legislation on banning military-style assault weapons, banning high-capacity magazines, and closing loopholes in the background checks. And that's something that the President said and called on Congress to act on, on December 19th. And since that time, the President has spoken repeatedly about this from weekly addresses. The President had a very eloquent challenge in the State of the Union, where he asked Congress to vote on specific measures that would actually have a tangible impact on reducing gun violence. Q He's done all that, and yet his own Senate Majority Leader, fellow Democrat Harry Reid, would not include the assault weapons ban in the package of reforms that's coming up. There's talk about a separate vote on it as an amendment. But despite all of that talk, all of the speeches, all of the meetings, even the Senate Majority Leader is not guaranteeing that they're going to get an assault -- MR. EARNEST: I think because of all the talk of the President and because of his aggressive advocacy of this issue, there will be a vote in the United States Senate on whether or not military-style assault weapons will be banned from the streets of this country. I think there is -- that represents progress. Now, does it mean -- I can't stand here and guarantee that it's going to pass, but it is a question that 100 senators are going to ask themselves when they wake up in the morning and look themselves in the mirror about whether or not they are going to -- about which side they're going to be on when it comes to voting on a ban on military-style assault weapons. And the President will certainly continue to advocate for senators to support that ban. Peter. Q If I can, I want to ask you a question about what's happening at 3:00 p.m. today. The President is going to be there with Julia Pierson for the U.S. Secret Service Director. First of all, was she the President's first choice to be Secret Service Director? MR. EARNEST: The President believes that she's the right person for the job, absolutely. Q Does that mean she was the first choice? MR. EARNEST: Well, I'm not going to get into that -- to the process here. I don't know that there is even more than one candidate. I mean, Ms. Pierson, as you know, is a 30-year veteran of the United States Secret Service. She's somebody who has held a variety of leadership roles at the Secret Service from some protective activities to cybercrime, and most recently as the chief of staff of the organization. So this is somebody that has a strong record of leadership at the organization. And she embodies the kind of character and leadership that the President would like to see at the top of that organization. Q Obviously, that organization faces unique challenges right now. The Washington Post reported some information that I just want to get your thoughts on. They spoke to a series of agents that were interviewed in the last couple of weeks that said that Pierson was a "weak candidate about rank-and-file agents because she has spent relatively little time supervising or working high-priority protective details, spending most of her career in administrative jobs." Is that a concern for the President to have somebody who has more time in the field than behind the desk? MR. EARNEST: No, I think the President believes that Julia Pierson has exactly the kind of experience that we want the person who's going to lead that agency to have. I guess the other thing I would point you to is that I know that the outgoing director, Mark Sullivan, who I know has a lot of respect across the agency, is somebody who has strongly supported her for candidacy and said that she was exactly the right person for the job. So it's not just the President who believes that she's the right person for the job, it's the outgoing Director of the Secret Service who believes that she has exactly the experience and skills necessary to lead that agency. Q This one -- given the fact that the White House came under a lot of scrutiny in recent weeks or months about what the Cabinet looked like and what some of the top leaders of this top administration looked like and that there weren't enough women at the time, now we can say that the head of the DEA, the head of the U.S. Marshals Office and now the head of the Secret Service will all be women. Does this represent something significant that America should be taking note of -- that the administration would want to declare with yet another female head? MR. EARNEST: Well, I guess what I would say is that Ms. Pierson got the job because of her 30 years of experience and because the leadership skills that she's shown throughout her career at the United States Secret Service. The fact that she's the first woman to lead this agency is notable and I think it's important, but it's not the reason she was chosen for the job. She's chosen for the job because she is the right person at the right time to lead this agency that has a critical law enforcement function -- not just in terms of protecting the President and his family, but also in terms of safeguarding the financial system and other large public events that come under the jurisdiction of the Secret Service. So she's got a big job but she's the right person to get it done right. Q And then digressing on one other topic and I'll tee it up for the next person if they like, but why if the spending cuts are locked into place with the CR, why didn't the President just veto the CR? Why wasn't this something worth fighting for to continue his effort? MR. EARNEST: Well, the President does believe that eliminating the sequester is something that's worth fighting for. The President said that this was bad policy from the beginning. Republicans said it was bad policy from the beginning, at least many of them did. After it passed, though, we unfortunately saw a lot of tea party Republicans say that this was a political victory. I know another one of them called it a homerun. So that's unfortunate. What the President also believes, though, is we can't have a situation where Washington careens from one fiscal crisis to another. That is -- that has a terrible impact on our economy. And the truth is what we've seen is that we've actually seen that our economy is starting to actually get some traction in the recovery from the worst recession since the Great Depression. So we're starting to make some progress -- whether you look at jobs numbers or consumer confidence, even housing data recently came out to indicate that home values are -- have increased as much as they have in any time in the last eight years. So there's a lot of progress that's being made in terms of our economic recovery, and we can't careen from one fiscal crisis to another because that's only going to block that progress. What we actually need is we need comprehensive compromise, economic policymaking in this town that actually supports that recovery instead of inhibit it. Brianna. Q A report by the Society of Actuaries says that insurers will have to pay on average 32 percent more for claims on insurance policies, individual insurance policies that they purchase because of Obamacare, and that that's likely to be passed on to consumers. It says that there will be a dip some places, but some states are going to see really big increases, like 62 percent in California, 80 percent in Ohio and Wisconsin. What do you think about those numbers? MR. EARNEST: Well, I think that you are citing a study that I believe was conducted by a health insurance company that's critical of the Affordable Care Act. So that part I'm not particularly surprised about. The reason that the Affordable Care Act was put in place was to ensure that we were expanding access to health care for every American, but also because we wanted to actually protect consumers who are repeatedly victimized by insurance companies. So it's not particularly surprising to me that an insurance company would conduct a study that was critical of a piece of legislation that was promising to hold them accountable for their actions. Q But can you talk about some of the numbers -- I know that there is some contention with the way that they -- sort of what they've factored in and what they haven't factored in. What do you think about that? MR. EARNEST: Well, I know that -- you should check with the Department of Health and Human Services who may have some more detailed information on this. I know that there are some assumptions on there that are spurious at best. But there are a number of things about the Affordable Care Act that at this point are inarguable at this point, if you will. The Affordable Care Act has already saved consumers an estimated $2.1 billion on their health insurance premiums that probably otherwise were it not for the Affordable Care Act would be an additional $2 billion that were paid into the pockets of insurance companies, like that one that funded this study. Once the law takes full effect, it will have the benefit of increasing competition, driving down cost, and result in average premiums that are lower today -- I'm sorry, that will be lower in the future than they are today for the same benefits that are being provided. And that's an analysis that's conducted by the nonpartisan Congressional Budget Office. Q Can I ask you about some comments yesterday, made reportedly by your Health and Human Services Secretary, saying that that there will be an increase in premium cost for some Americans as a result of Obamacare? Do you agree with that? MR. EARNEST: I didn't see those comments. I mean, what I did see yesterday was actually a blog post from the Chairman of the President's Council of Economic Advisors, who said that each year, from 2009 to 2011, the national health expenditure data shows the real rate of annual growth in overall health spending was between 3 and 3.1 percent, which is actually the lowest rate of growth since reporting began in 1960. Q Will there be increases for some people who are purchasing insurance? Do you concede that? Kathleen Sebelius reportedly has. MR. EARNEST: Well, what I would actually point you to is I would actually point to the results that we're already seeing from the Affordable Care Act, which is a savings of $2.1 billion, and the analysis from the CBO that actually says in the future we're going to see rates that are lower for higher benefits. Q Is she wrong? Because she's talking about people paying more for higher benefits. MR. EARNEST: Again, I didn't see her comment. I didn't see her comments. Q On the guest worker program, does the President think it's necessary for it to be in there to have a viable, comprehensive immigration reform bill that can get bipartisan support? MR. EARNEST: Well, this is something that a variety of parties who have interests in this are working on. And if it's included in line with the other principles that the President has rolled out -- laid out in terms of what should be included in comprehensive immigration reform, that's certainly something that we could support. But we're going to reserve judgment on what that looks like until it's actually produced. Q What's more important? Coming to an agreement, or bringing labor along and making sure that they're included? MR. EARNEST: What the President wants to see is he wants to see a bipartisan agreement in line with the principles that the President has laid out. There is an opportunity for us to fix our broken immigration system in a way that will strengthen our economy and ensure that everybody is playing by the same set of rules. That is the priority, and that's what the President is looking for. Q How important is the labor sign-on? MR. EARNEST: Well, I mean, we're in a place right now where we want a piece -- see a piece of legislation that's in the best interests of the economy and that reflects our nation's heritage, as a nation of immigrants but also a nation of laws. And we certainly want to build as much support for that as we possibly can, both from Democrats and Republicans as well as from outside organizations that traditionally support Democrats and outside organizations that traditionally support Republicans. Ari. Q During the arguments over DOMA, the justices seemed to have a lot of questions about why the President has decided to continue enforcing a law that he thinks is unconstitutional. The Chief Justice said, "I don't see why he doesn't have the courage of his convictions and not enforce the law if he thinks it is unconstitutional." Can you explain that? MR. EARNEST: Well, there is a responsibility that the administration has to enforce the laws that are on the books, and we'll do that even for laws that we disagree with, including the Defense of Marriage Act. The argument that we have made before the Supreme Court and the argument that we have made publicly, including in a letter that the Attorney General sent to the Speaker of the House a couple years ago, is the argument that Section 3 -- let me make sure I got that right -- Section 3 of the Defense of Marriage Act is unconstitutional. That is a position, broadly speaking, that a lot of Republicans agree with. It's not unprecedented for an administration to take that position. That's the position that's being argued before the Supreme Court today. It's a position that has a lot of support from people in both parties. But we'll see what the outcome looks like from the Supreme Court. Q But President Obama has endorsed signing statements; he's issued signing statements saying, I believe this law or this part of the law to be unconstitutional so I'm not going to enforce it. So as you say we will enforce laws that we believe to be unconstitutional, he's also said he won't enforce some laws that he believes to be unconstitutional. MR. EARNEST: Well, I'm not sure that that's exactly what the signing statements have said. But in terms of what our legal posture is for these things, I'd refer you to the Department of Justice. They have done the legal analysis required to reach the conclusion that it is unconstitutional. They also are the ones that are responsible for enforcing these laws. So I'm not going to prejudge what the Department of Justice may have to say about this, based on their own analysis. But what I can tell you is that the argument that the administration has put forward before the Supreme Court today is an indication that our lawyers have concluded that Section 3 of the Defense of Marriage Act is unconstitutional. Yes, Roger. Q On the Fiscal '14 budget, do you guys have a date yet? MR. EARNEST: (Laughter.) What day of the week is this? Is it Wednesday? I'll see at least -- Q Jay said you would tell. MR. EARNEST: I anticipate we'll get this question at least two more times before the end of the week. I don't have a specific date to allow you to mark anything on your calendar just yet, Roger, beyond the week of April 8th. Q But you will give us a date eventually? MR. EARNEST: Eventually, we'll probably have to, unless we could spread out the budget rollout over the course of five full days, which I think everybody in here would be disappointed about except Roger. (Laughter.) Q Why is it taking so long to set a date? MR. EARNEST: Well, I didn't say we hadn't set a date. Q So tell it. MR. EARNEST: I just said I wasn't going to tell you what date it is. But it'll be the week of April 8th. Q What's that about? MR. EARNEST: It'll be the week of April 8th. Q What's the big secret? What's the -- MR. EARNEST: Well, because we're going to have a planning process and we're working through it. So it'll be April 8th. The week of April 8th. (Laughter.) Q One more, Josh. When the President does send up the Fiscal '14 budget -- MR. EARNEST: Yes, the week of April 8th. (Laughter.) Q -- the week of April 8th, sometime next month -- MR. EARNEST: Sometime next month. Q -- the Pentagon is going to be asking for $8.4 billion to continue development and purchase of the F-35 fighter. That's a project that's seven years behind schedule and 70 percent over its initial cost estimates. Does the President support that project? MR. EARNEST: Well, I don't want to -- because the budget is going to be rolled out in just a couple of weeks, I don't want to get ahead of what may or may not be included in the budget. So those are the kinds of questions that are perfectly legitimate, and one that we'll be in a position to answer after the budget has been rolled out. And we'll have a detailed answer for you at that point. Q He has supported it in the past, right? MR. EARNEST: I don't have previous years' budgets in front of me, so I don't know how to compare them to previous ones. But we can certainly have OMB take a look at that for you. Stephen. Q What kind of level of concern is there or engagement in the White House right now about the situation in Guantanamo Bay? The military says 31 inmates are on hunger strike. Defense lawyers say that number is higher. Is the President concerned about this? Is there any dialogue with the military about this in the White House? MR. EARNEST: Stephen, I can tell you that the White House and the President's team is closely monitoring the hunger strikers at Guantanamo Bay. For details about what's actually happening there, I would refer you to the Department of Defense. But I can tell you that the administration remains committed to closing the detention facility at Guantanamo Bay. Progress has been made under this and the previous administration. But given the legislation that progress has put in place it's clear that it's going to take some time to fully close the facility. The other thing that I've seen from news reports is that there are representatives from the Red Cross that will be visiting the facility sometime this week -- I don't know if it's today or tomorrow. That is part of a routine agreement that we have with the Red Cross, where we give them full access so that they can take a look at what's happening at the prison there. Q Is there any sense that somewhat -- the situation there is the result of the fact that Congress has stopped funding to transfer people who have already been cleared for release? MR. EARNEST: To be honest with you, I wouldn't want to judge about what these individuals may or may not be thinking or what may be motivating their actions there. So, again, I'd refer you to the Department of Defense. They may have a better assessment there than I do. April. Q Josh, two questions. The Pierson appointment -- what does that do for the Service right now, especially after the Colombian prostitute scandal? MR. EARNEST: How so? Q She's the first woman to be appointed -- MR. EARNEST: She is. Q Okay, thank you for agreeing. (Laughter.) She's the first woman to be appointed. But, I mean, there was a prostitute scandal with women, with men, and with prostitutes that are women in Colombia. So, I mean, you asked me, so I'm breaking it down very basic for you -- MR. EARNEST: Okay, I appreciate that. Q -- so you can help me get me an answer. (Laughter.) MR. EARNEST: Well, April, what I can tell you is that Director Sullivan, in the immediate aftermath of the events that you so colorfully described -- Q You asked for it. MR. EARNEST: -- took immediate steps to ensure that the safety of the President had not been affected. The allegations of misconduct were investigated, and swift action was taken against those Secret Service personnel who had engaged in that misconduct. And I know that there were several members of the Secret Service who, as a result of this misconduct, either left the Secret Service or lost their job. So it's pretty clear that there were -- that Director Sullivan, in the immediate aftermath of this event, took swift action both in terms of investigating what had happened, ensuring that the President's safety was never jeopardized, and ensuring that new protocols were put in place to reduce the likelihood that something like this would ever happen again. Now, it's also relevant, it seems to me, that the new director has some leadership experience at the agency. She also has some experience in human resources and training, and would be able to, as she leads the agency, to ensure that the protocols that Director Sullivan has put in place are continued and, if necessary, strengthened. Q Were you trying to send a message with this appointment of a female who has strong leadership in the light of all of this and other allegations? MR. EARNEST: Well, I think the President was pretty direct in the paper statement that we distributed from him yesterday about why she was chosen for the job. And certainly her leadership skills and her character and her 30 years of experience at the United States Secret Service are the reasons why she was chosen. Q And I want to ask you another question. I hope you have it on paper as well. Tomorrow, the President meets with African leaders. Could you give us a readout as to why this meeting -- why now? MR. EARNEST: You're asking a very good question but I'm not prepared to answer it right now. But if you want to touch base later this afternoon, maybe you and I can record an interview or we can make sure that your listeners are aware just what the President is up to tomorrow. Q I would love to, thank you. MR. EARNEST: Okay, sounds good. Zach. Q Thanks, Josh. A question related to the Affordable Care Act, which you mentioned earlier. First of all, the reduction in health spending, you mentioned earlier, is it the White House's position that that's the result of the Affordable Care Act or the administration's policies? And then, a second question is, the administration requested more funding for ACA implementation, and the CR didn't get it, of course. Are you concerned that the program is underfunded and it's going to make it difficult to roll out in full form in about seven months? MR. EARNEST: Well, in terms of the impact that the Affordable Care Act has had on health care costs, I think I'd actually refer you to the Congressional Budget Office, that they've actually noted that based on their nonpartisan independent analysis, that once the Affordable Care Act takes effect it will increase competition, drive down costs, and result in average premiums being lower than they are today for the exact same benefits. So I think that is a pretty clear assessment from a nonpartisan group as opposed to a study that was funded by the health insurance industry -- but a pretty clear assessment from a nonpartisan group about what impact the Affordable Care Act is going to have on the budgets of families all across the country. Q Just to clarify -- the slowdown you said earlier from the White House post, that's not -- is that the result of the Affordable Care Act? MR. EARNEST: I guess I'm not quite sure what you're referring to. Q I think earlier you said there had been a slowdown in health spending since 2009-2011, in response to Brianna's question. MR. EARNEST: Oh, yes. Q And I was wondering, are you saying that's the result of the administration's policies? Or is that a separate issue? MR. EARNEST: Well, this was an analysis that was conducted by the CEA, so we can maybe get you some more details on that analysis if you'd like. But I do think that it is probably not a coincidence that after the Affordable Care Act was passed, that we have seen growth rates slow to the lowest levels on record. Q And then the second question was, is the ACA underfunded, and is that going to make more difficult the implementation of the program? MR. EARNEST: I do not -- I have not been told. I do not anticipate at all any delay in the successful implementation of the Affordable Care Act. There are some deadlines coming up later this year, and the expectation is that we'll have these marketplaces set up and ready to roll and begin covering people by January 1st. So there are some important deadlines to be met, and I have no reason to believe that those deadlines won't be met. Mike. Q Do you have anything on the TennCare decision? The Governor in Tennessee has decided that rather than actually expanding Medicare, as is allowed under the Affordable Care Act, he's going to take the money and use it to help people purchase insurance on their own. However, in order to do that, he obviously needs permission from the administration, which he doesn't have yet. Have you folks taken a look at that? Are you leaning towards that or against? Or anything you can -- MR. EARNEST: I saw that news right before I came out here. The Department of Health and Human Services is responsible for working with states as they implement the Affordable Care Act, so I'd direct your question to Health and Human Services and they may be able to give you a clearer sense of whether or not they'll be able to find a workable solution with the state of Tennessee. Q And just very quickly on the budget -- I just got an email here from the Speaker's office. It says it's 12 days until you release your budget. Did you tell them when you're releasing the budget? (Laughter.) MR. EARNEST: Maybe we have a mole. No, we have not told them when we're going to release the budget. But they've been paying attention to the briefings and know that it's the week of April 8th. Alexis. Q Back to immigration for a second. You brought up Senator McCain and Senator Flake's and Bennet's and Schumer's visit to the border. I just want to clarify -- your impression is that what they're trying to do there is to showcase the achievements of the Obama administration on border security? MR. EARNEST: I don't want to speak for them. I'm not sure what they're planning to showcase. What I was actually observing is what I think they'll see when they get to the border. What they'll see is the results of the significant investment and commitment that this administration has made to securing the border. So we've -- there are 22,000 personnel on the border. There are -- I'm just going to look for -- these are some good statistics about what they might see while they're there. There are some unprecedented investments in technology and infrastructure that have resulted in the construction of 651 miles of fencing; the deployment of mobile surveillance units, of thermal imaging systems; and more than 125 aircraft, including six unmanned aircraft systems, patrolling the Southwest border. And this is all part of why the border is now more secure than it ever has been. Q Can you give us any information about who from the administration is helping guide them through the Arizona border to give them the field trip? MR. EARNEST: That's a good question. I assume that it's Border Patrol personnel who will be helping to guide the tour. But in terms of who exactly it is -- Q And then also, to follow up -- because Senator McCain has indicated to the media "how challenging the border is" in interviews, and because also Senator Leahy has also described his concern about the time, the calendar as it's going along with his committee, I want to get back to the question: Is there a time period in which the President will say, I want to jettison -- I want to add some momentum to this, and I have a bill in my pocket and I'm ready to put it out there? MR. EARNEST: Well, I would point out that Senator McCain has many times expressed his view of the difficulty of trying to secure the border. At the same time, I think that even he has acknowledged in recent months the progress that's been made there in terms of the commitment of resources and the impact that's had on the border. I know that because of our efforts, that apprehensions continue to decrease and seizures actually are increasing. So that's a pretty good indication that the measures that we're taking along the border to secure it are having a tangible impact on the law enforcement efforts that are underway there right now. So that part of it is clear. In terms of what impact this has on the legislative process, it's our view that they're making progress, and we're pleased that they're making progress. The President has also been clear that if that progress stalls, we'll be prepared to act, and we'll be prepared to act in a way that will move the process along. But right now there's not a need for that. Right now we're in a place where members of the Senate on both sides -- Democrats and Republicans -- are working constructively to try to find some common ground to put in place a policy that will finally fix our broken immigration system, and we're encouraged by that progress. So, Amy, I'm going to give you the last one. MR. EARNEST: Amy, go ahead. Q There have been a string of senators who have come out and supported gay marriage this week, and I wonder if the President has sort of weighed in on that, and if he feels somewhat responsible for kind of clearing the way for these people to come out. MR. EARNEST: Well, I -- so to speak, I guess. I got asked this question a couple of weeks ago, after Senator Portman made his announcement about his changing view on this issue. I haven't talked to the President about any of the specific announcements that have been made by other senators in recent days on this issue, but I do think it's a testament to something I referred to a couple of weeks ago when asked about this. We're seeing a pretty significant change in this country, where an issue related to equality and fairness is getting more prominence. And I think it is a testament to the character of this country that we are moving in a direction where we will better fulfill some of the founding principles of the country -- in terms of treating everybody fairly and equally. And what's notable, I think, about this circumstance is it's happening really fast. We're seeing history change right before our eyes. That's a notable event. And I think the President himself, when he talked about his own changing perspective on this issue, acknowledged the rapid nature of that change and how significant it was for the country. But in terms of response to specific changes, I haven't talked to him about that. So, thanks, everybody. END 1:25 P.M. EDT
Guest Post: The Tailwinds Pushing The U.S. Dollar Higher
Submitted by Charles Hugh-Smith of OfTwoMinds blog, If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher. I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. For a variety of reasons, many observers expect the dollar to decline against other currencies and gold, the one apples-to-apples measure of a currency's international purchasing power. The tailwinds pushing the dollar higher are less intuitively appealing than the reasons given for its coming decline: 1. The Federal Reserve printing another trillion dollars (expanding its balance sheet) will devalue the dollar because money supply is expanding faster than the real economy. 2. The Fed is printing money with the intent of devaluing the dollar to make U.S. exports more competitive globally and thereby boost the domestic economy. Let's examine each point. 1A. If much of the Fed's new money ends up as bank reserves, it is "dead money" and not a factor in the real economy. Fact: money velocity is tanking: 1B. Money is being destroyed by deleveraging and writedowns. This is taking money out of the real economy while the Fed's new money flows to banks. 1C. The purchasing power of the dollar is set by international supply and demand, not the Fed's balance sheet or the domestic money supply. As for point 2: 2A. Exports are 13% of the economy. A stronger dollar would reduce the cost of oil, helping 100% of the economy, including exporters. Why would the Fed damage the entire economy to boost exports from 13% to 14% of the domestic economy? It makes no sense. 2B. Most U.S. exports are either must-have's (soybeans, grain, etc.) that buyers will buy at any price because they need to feed their people (and recall that agricultural commodities often fluctuate in a wide price band due to supply-demand issues, so if they rise 50% due to a rising dollar, it's no different than price increases due to droughts) or they are products that are counted as exports but largely made with non-U.S. parts. How much of the iPad is actually made in the U.S.? Basically zero. Is it counted as an export? Yes. How much of a Boeing 787 airliner is actually manufactured in the U.S.? Perhaps a third. Sorting out what is actually made in the U.S. within complex corporate supply chains is not easy, and the results are often misleading. 2C. Many exports are made and sold in other countries by U.S. corporations, and so the sales are booked in the local currency. The dollar could rise or fall by 50% and most of the U.S. corporate supply chain and sales would not be affected because many of the goods and services are sourced and sold in other nations' currencies. The only time the dollar makes an appearance is in the profit-loss statement at home. Americans tend not to know that up to 75% of U.S. corporations' revenues are generated overseas, in currencies other than the dollar. This may be part of Americans' famously domestic-centric perspective. 2D. Most importantly, the American Empire needs to control and issue the global reserve currency. The Fed is a handmaiden to the Empire; the Fed's claims of independence and its "dual mandate" are useful misdirections. Some analysts mistakenly believe that Fed policies are aimed at boosting the relatively modest export sector (which we have already seen is a convoluted mess of globally supplied parts, sales in other currencies, etc.) from 13% to 14% of the domestic economy. This overlooks the fact that the most important export of the U.S. is U.S. dollars for international use. I explained some of the dynamics in Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012) and What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012). Which is easier to export: manufactured goods that require shipping ore and oil halfway around the world, smelting the ore into steel and turning the oil into plastics, laboriously fabricating real products and then shipping the finished manufactured goods to the U.S. where fierce pricing competition strips away much of the premium/profit? Or electronically printing money and exchanging it for real products, steel, oil, etc.?I think we can safely say that creating money out of thin air and "exporting" that is much easier than actually mining, extracting or manufacturing real goods. This astonishing exchange of conjured money for real goods is the heart of the "exorbitant privilege" that accrues to the issuer of the global reserve currency (U.S. dollar). It's important to put the Fed's $3 trillion balance sheet in a foreign-exchange (FX) and global perspective: - The FX market trades $3 trillion a day in currencies. - Global financial assets are estimated at around $210 trillion. The Fed's balance sheet is 1.5% of global assets. The key to understanding the dollar and Triffin's Paradox is that as the global reserve currency, the dollar serves both domestic and international markets. Of the two, the more important market is the international one. To act as the global reserve currency, a currency must be exported in sufficient size to facilitate the gargantuan trade in a $60 trillion global GDP/ $210 trillion global economy. There are only two ways to export enough currency to be remotely useful: 1. Run massive trade deficits, i.e. import goods and export dollars. 2. Loan massive quantities of dollars to nations that will place the dollars in international circulation. The famous Marshall Plan that helped Western Europe rebuild its economies was just that: a series of large loans of dollars to dollar-starved economies. This was necessary because the U.S. was running trade surpluses in the postwar era and was therefore not exporting dollars. This leads to a startling but inescapable conclusion: no exporting nation can issue the global reserve currency. That eliminates the European Union, China, Japan, Russia and every other nation running surpluses or modest deficits. Many commentators are drawing incorrect conclusions from various attempts to bypass the dollar in settling trade accounts. For example, China is setting up direct exchanges where buyers and sellers can exchange their own currencies for renminbi, eliminating the need for intermediary dollars. This is widely interpreted as the death knell for the dollar. But this misses the entire point of the reserve currency, which is that it must be available in quantity for everyone to use, not just those doing business with the domestic economy of the issuing nation. Here's a practical example. The $100 bill is "money" everywhere in the world, recognizable as both a medium of exchange for gold, other currencies, goods and services, and as a store of value that is priced transparently (often on the black market). For the Chinese renminbi/yuan to replace the dollar as the global reserve currency, China would need to "export" enough currency to grease trade large and small worldwide, and enough electronic money to act as reserves that support domestic lending in nations holding the reserve currency. This is yet another poorly understood function of the reserve currency: it acts as foreign exchange reserves, backing up the holder's currency, and as reserves in its central bank that act as collateral for its domestic issuance of credit. In other words, the U.S. has issued and exported trillions of dollars because this is the necessary grease for global trade, currency stability and issuance of credit by nations holding dollars. The U.S. didn't run massive trade deficits by accident: it needed to "export" more dollars as the volume of global trade expanded. Issuing credit and loans in dollars wasn't enough, so the U.S. exported dollars in exchange for commodities and goods. For China to issue the global reserve currency, it would have to decouple the yuan from the U.S. dollar and start running deficits on the order of $500 billion a year. Many observers think China is preparing to back its currency with gold, and they mistakenly conclude (yet again) this would be the death knell for the dollar. But they haven't thought through how currencies work: their value is ultimately set like everything else, by supply and demand. In an export-dependent country like China, a gold-backed currency would not be exported in quantity--it wouldn't be "exported" at all, because China "imports" others' currencies in exchange for goods. Assuming some of the gold-backed currency was exported, it would quickly end up in savings accounts or bank vaults, being a proxy for gold. There will be none available for facilitating trade in the $210 trillion global economy. This dual nature of money trips up many analysts. Establishing a currency that is "as good as gold" but not exporting it in quantity means it will be hoarded as a store of value and be unavailable to facilitate trade. Money has to act both as a store of value and as a means of exchange. This is why U.S. $100 bills are carefully stored in plastic in distant entrepots of the world, safeguarded as real money, available as a store of value and as a means of exchange. Currencies can be exchanged in a Forex (FX) marketplace, but the reserve currency is the "winner take all" in the real world. If you hold out an equivalent sum in various currencies around the world, the trader in the stall will likely choose the $100 bill because he is not sure of the value of the other funny-money in his home currency and he knows he can easily exchange the $100 everywhere. The other currencies might trade on the FX market at some percentage of the dollar, but in the real world they are effectively worthless because there isn't enough of them available to establish a transparent, truly global market. To do that, a nation has to export monumental quantities of their currency and operate their domestic economy in such a fashion that the currency is recognized as being a store of value. In a very real sense, every currency is a claim not on the issuing central bank's balance sheet but on the entire economy of the issuing nation. All this leads to two powerful tailwinds to the value of the dollar. One is simply supply and demand: as the global economy slides into recession, trade volumes decline, and the U.S. deficit shrinks. (It's already $250 billion less than was "exported" in 2006.) That will leave fewer dollars available on the global market. In the case of the U.S., which exports large quantities of what the world needs (grain, soy beans, etc.) while buying mostly stuff that is falling in price in recession (oil, surplus manufactured goods, etc.), the trade deficit could decline significantly. (It is currently around $40 billion a month.) And what does a declining trade deficit mean? It means fewer dollars are being exported. The global GDP is about $60 trillion, of which about 25% is the U.S. economy. Into this vast sea of trade, the U.S. "exports" about $500 billion in U.S. dollars via the trade deficit. Put in perspective, it isn't that big compared to the machine it is lubricating. So what happens when there are fewer dollars being exported? Demand for existing dollars goes up, pushing the "price/cost" of dollars up--basic supply and demand. The second tailwind is the demand for dollars from those exiting the euro and yen.The abandonment of the euro is already visible in these charts, courtesy of Market Daily Briefing: Peak Euros. We can anticipate this desire to transfer euros and yen into dollars will only increase as those currencies depreciate. Let's say, just as an example, $5 trillion in euros starts chasing $1 trillion in available U.S. dollars. What will that do to the value of the dollar? Some ask why those selling euros won't buy Chinese yuan. Where are you going to find $1 trillion in yuan? It isn't even convertible on an open market, and since China is an importer of currency, there isn't 1 trillion yuan floating around the global marketplace to buy even if you wanted to. Many people scoff when I suggest the dollar could rise 50% (i.e. the DXY dollar index could climb from its current level around 80 to 120) or even 100% (DXY = 160) in the years ahead. I know it's the highest order of sacrilege to even murmur this, but if global demand for dollars picks up, the Fed isn't printing nearly enough to dent the rise in the dollar. As a lagniappe outrage, consider the domestic fallout from a decline in U.S. stocks and the U.S. economy. The Fed's precious horde of political capital will leak away, and its ability to print more money will be proscribed by political resistance and a loss of faith in the Fed's claimed omnipotence. Any reduction in Fed printing would only limit the quantity of dollars available to global buyers, further pushing up its price on the open market.
Роснефть обломала спекулянтов
Совет директоров «Роснефти» одобрил привлечение займов почти на $10 млрд у структур ТНК-ВР, сообщилагоскомпания.Это известие обрушило капитализацию «ТНК-BP холдинга» — публичной компании, владеющей почти всеми российскими активами группы. На Московской бирже ее обыкновенные акции упали на 25,63%, привилегированные — на 24,29%, капитализация компании составила 545,5 млрд руб. ($17,7 млрд). Очевидно, что никаких дивидендов ТНК-BP теперь платить не будет, констатирует содиректор аналитического отдела «Инвесткафе» Григорий Бирг. «В жесткой и циничной форме миноритарных инвесторов ТНК-BP поставили перед фактом, что стоимость их акций близка к нулю», — возмущен управляющий директор по инвестициям одного из крупнейших миноритариев «ТНК-BP холдинга» — ТКБ BNP Paribas Investment Partners Владимир Цупров.p.s. Не пойму зачем так нервничать, когда не вписываешься в рынок :)Совет директоров «Роснефти» одобрил привлечение займов почти на $10 млрд у структур ТНК-ВР, сообщила госкомпания. У «ТНК-ВР холдинга», «ТНК-ВР менеджмента», «Верхнечонскнефтегаза» и «ТНК-Увата» будет привлечено 152 млрд руб. сроком до пяти лет (около $4,9 млрд). Также сроком до пяти лет одобрен заем у TNK-BP International Limited, TNK Industrial Holding Limited, TNK-BP Finance S.A. и TOC Investments Corporation на общую сумму $4,8 млрд. Совет состоялся 21 марта. В тот же день «Роснефть» завершила расчеты и стала обладателем 100% акций головной структуры ТНК-BP — TNK-BP Ltd.Это известие обрушило капитализацию «ТНК-BP холдинга» — публичной компании, владеющей почти всеми российскими активами группы. На Московской бирже ее обыкновенные акции упали на 25,63%, привилегированные — на 24,29%, капитализация компании составила 545,5 млрд руб. ($17,7 млрд). Очевидно, что никаких дивидендов ТНК-BP теперь платить не будет, констатирует содиректор аналитического отдела «Инвесткафе» Григорий Бирг. «В жесткой и циничной форме миноритарных инвесторов ТНК-BP поставили перед фактом, что стоимость их акций близка к нулю», — возмущен управляющий директор по инвестициям одного из крупнейших миноритариев «ТНК-BP холдинга» — ТКБ BNP Paribas Investment Partners Владимир Цупров.Представитель «Роснефти» ничего предосудительного в займах у ТНК-BP не видит. Сделка, по его словам, «осуществляется в рамках управления временно свободными денежными средствами дочерних обществ»: «Это стандартная практика, применяемая в "Роснефти", а теперь и в объединенной компании, которая позволяет обеспечить эффективное управление свободной ликвидностью». О такой возможности инвесторов еще в октябре предупреждал президент «Роснефти» Игорь Сечин. Он сказал, что наличность ТНК-BP пойдет на погашение долгов госкомпании: «Это наши деньги».«Роснефть» действительно время от времени занимает крупные суммы у «дочек». Осенью ее совет директоров одобрил привлечение займов (в том числе и для покупки 100% ТНК-ВР) у 47 дочерних компаний на 93,4 млрд руб. (с учетом процентов). Другой вопрос, что все крупнейшие активы «Роснефти» являются ее филиалами или 100%-ными «дочками».Если сумма кредитов превышает 50% стоимости активов акционерного общества, то для их выдачи требуется одобрение собрания акционеров, напоминает аналитик ИФК «Солид» Дмитрий Лукашов. «Полагаю, что юристы "Роснефти" распределили сейчас кредиты по "дочкам" ТНК-ВР таким образом, чтобы не было необходимости проводить собрания», — продолжает он. Лукашов отмечает, что совокупная стоимость активов ТНК-ВР согласно годовой отчетности по МСФО за 2012 г. составила $43,3 млрд: «Таким образом, $10 млрд составляют 23% от активов».Видно, что «Роснефть» решила играть жестко и может использовать и другие «креативные» методы для извлечения кэша из «ТНК-BP холдинга», сетует старший портфельный менеджер по развивающимся рынкам Dexia Asset Management Филипп Скреви. А исполнительный директор Templeton Emerging Markets Group Марк Мобиус сообщил «Ведомостям», что группа миноритарных акционеров «ТНК-ВР холдинга», владеющих 5% акций компании, объединяется для отстаивания своих интересов. От дополнительных комментариев он отказался.Нынешняя ситуация — не сюрприз, а лишь очередная иллюстрация того, с каким вопиющим пренебрежением некоторые российские официальные лица относятся к иностранным портфельным инвесторам, говорит главный стратег по развивающимся рынкам Deutsche Bank Джон Пол Смит. Любые позитивные новости макроэкономического характера полностью подрываются такими историями. «Российский рынок и так имеет огромный дисконт к другим развивающимся рынкам, — констатирует Смит. — Но реальное беспокойство вызывает то, что, если экономика Китая начнет замедляться, а цены на энергоносители пойдут вниз, можно ожидать, что правительство России начнет использовать часть публичных компаний как источник денег для защиты экономики».Крупные позиции в «ТНК-BP холдинге» было очень сложно продать после первых заявлений Сечина, объясняет топ-менеджер крупного фонда. Потому что это можно было сделать только с серьезным дисконтом, т. е. в полной уверенности, что реализуется худший сценарий. Все же инвесторы ожидали лучшего отношения, говорит собеседник «Ведомостей».«Действительно, все деньги их, — признает он. — Но можно было все сделать по-человечески, например просто конвертировать [акции "ТНК-BP холдинга" в "Роснефть"]».У «Роснефти» нет перед миноритариями обязательств выкупить или обменять акции «ТНК-BP холдинга» на свои, продолжает Скреви. Но теперь она крупнейшая мировая публичная нефтяная компания, инвесторы будут внимательно следить за ее действиями и по ним судить об инвестиционном климате в России, резюмирует Скреви.Источник: http://www.vedomosti.ru/companies/news/10472301/rosneft_beret_svoe#ixzz2Oi4BWCsZ
The Harder They Come, The Harder They'll Fall...
Markets are remarkably schizophrenic about where risk is flowing... and where it isn't. For example, ConvergEx's Nick Colas notes, the CBOE VIX Index is up from 12.3 a month ago to a close of 14.0 yesterday. And other risk assets such as Emerging Markets, U.S. Small Caps, Energy names, and developed economy international stocks all show higher 'VIXs' over the same 30 day period. But... and it's a big 'But'... just as many sectors/asset classes in our tracking universe show declines in their 'VIXs'. The most pronounced are domestic Consumer Discretionary, Utilities, and Tech names as well as precious metals and High Yield Corporate bonds, where Implied Vols are 6-17% lower this month and in most cases are at/near 52 week lows. If you are looking for spots where volatility might make a comeback, these are good places to start. This market reminds us of an old joke: Question: What do you call a person who is both ignorant and apathetic? Answer: I don't know and I don't care. Via Nick Colas, ConvergEx: That little joke could easily describe the state of both cash equities and listed options at the moment. Just look at the last few trading days. You have a Eurozone country – tiny Cyprus, rich with supposedly illicit Russian cash, evidently – threaten to tax depositors as part of a financial system bailout package. Only the most plugged in market observers even had a whiff this was coming just a week ago. It is a monumentally bad idea, if only because the safety of deposits is a cornerstone concept in modern banking. It reminds me of an old Woody Allen line from Love and Death: "If it turns out that there is a God, I don't think that he's evil. I think the worst you can say about him is that basically he's an underachiever." And yet despite this unexpected and unsound policy step, global markets have not taken the bait into a fresh round of panicky selling, as they have so many times over the past four years. The CBOE VIX Index can't seem to hold 15, quite a distance from its long run average of 20. Stocks sold off early in the trading day, only to catch a bid at levels above yesterday's lows. The Dow actually closed up on the day. Yes, it might be that investors will regret not taking the easy out in coming days. The old trading floor aphorism, "Instead of yelling, you should be selling" may yet prove correct. But peel back the volatility "Onion" a few layers, and you'll find that markets aren't quite as sleepy as the last few days might indicate. Every month we borrow a page from the options pricing world and look at the changes in Implied Volatility for a host of asset classes and industry sectors. Those measurements are essentially the "VIX of" everything from gold and silver to tech stocks and emerging market equities. By looking at the listed options pricing for a range of Exchange Traded Funds which track these investments, we can watch the ebbs and flows of risk perceptions across disparate asset types and sectors. There are a few graphs immediately after this note, but here is a summary of our findings: Several asset types have followed the CBOE VIX Index higher over the past month. Emerging Markets "VIX" is up 17% over the same period. The Implied Volatility of domestic Small Cap Stocks is up 7%. The "VIX" for developed economy foreign stocks, as measured by the Europe/Asia/Far East (EAFE) index, is likewise 6% higher over the past 30 days. Among industry sectors, the "VIX" for Energy names is up the most (+7%), followed by U.S. Material stocks (+5%) and Consumer Staples, Industrials, and Health Care equity "VIX" (+1-3%). Just as many of the asset types/sectors where we follow monthly changes in Implied Volatility have shown a decline in their "VIX" as those where that measure has increased. The score is 9 down, 9 up, and one essentially unchanged. That is an odd setup, given that 16 of these investment types saw positive returns over the last month. In general, Implied Volatility and returns are supposed to be inversely correlated. This month, not so much… The "Biggest Losers" in terms of Implied Volatility this month were U.S. High Yield Corporate bonds (down 17%), gold/silver (down 11-12%), and then U.S. Consumer Discretionary, Utilities, and Tech stocks (down 6-9%). The only two that broke significantly from the usual Implied Vol/return relationship were the precious metals, with gold essentially unchanged on the month and silver down 3%. The rhyme and reason behind these moves is hard to tease out, so let's conclude by focusing on the true anomalies – the new lows for the "VIX of" our sample universe. Three assets pop out based on that parameter: High Yield Bonds. The "VIX of" this asset class is stumbling along at/near new lows despite worries about "Junk" bonds as a dangerous parking lot for yield-hungry cash. Historical volatility is clearly the anchor here, with this asset class virtually somnambulant over the past 10/20/30 days. Look deeper into the history of this asset class, however, and you'll see that it more often trades like equity than it does a reliable payer of coupons. The sleepy Implied Vols here are a clear – and dangerous – anomaly. Gold and Silver: The biggest "Tell" (at least to my eye) that no one is truly worried about Cyprus is the fact that gold and silver haven't ripped higher. Now maybe we've entered a new phase in social history where gold is no longer valued during periods of social duress and questions over fiat currency. I doubt it, however, since it would be the first such event since the advent of writing. About 5,000 years ago. The "VIX of" gold hovers at one year lows, and the historical volatility is pretty dead as well. As of Monday, 10 day volatility was 7% and down from the 30 day volatility of 13%. Silver's story is much the same. I think the only logical conclusion to the data here, full of oddball inconsistencies, is that we are simply treading water in both stock and equity markets. My bias is to believe that the strength of the tape over the last few days indicates we are going to have a pretty positive close to month. The lack of real interest on the part of the options market to bid up the cost of insurance (Implied Volatility) may not fit neatly into a bullish argument, but this is (for the moment) the hand we've been dealt. Shaking the market of its complacency – that sub-15 VIX, for example – isn't going to be easy. And over the near term, the path to the upside is both easier and increasingly contrarian. And how often do you get that combination? Enjoy it while you can.
Mass Panic In Cyprus: The Banks Are Collapsing And ATMs Are Running Out Of Money
Michael SnyderActivist Post European officials are openly admitting that the two largest banks in Cyprus are "insolvent", and it is now being reported that Cyprus Popular Bank only has "enough liquidity to cover the next few hours". Of course all banks in Cyprus are officially closed until Tuesday at the earliest, but there have been long lines at ATMs all over Cyprus as people scramble to get whatever money they can out of the banks.Unfortunately, some ATMs appear to be "malfunctioning" and others appear to have already run out of cash. You can see some photos of huge lines at one ATM in Cyprus right here. Some businesses are now even refusing to take credit card payments. This is creating an atmosphere of panic on the streets of Cyprus. Meanwhile, the EU is holding a gun to the head of the Cyprus financial system. Either Cyprus meets EU demands by Monday, or liquidity for the banks will be totally cut off and Cyprus will be forced out of the euro. It is being reported that European officials believe that the "economy is going to tank in Cyprus no matter what", and that it would be okay to let the financial system of Cyprus crash and burn if politicians in Cyprus are not willing to do what they have been ordered to do. Apparently European officials are very confident that the situation in Cyprus can be contained and that it will not spread to other European nations. Unfortunately, European officials are losing sight of the bigger picture. If the largest banks in Cyprus are allowed to fail, it will be another "Lehman Brothers moment". The faith that people have in banks all over Europe will be called into question, and everyone will be wondering what major European banks will be allowed to fail next. google_ad_client = "pub-1897954795849722"; /* 468x60, created 6/30/10 */ google_ad_slot = "8230781418"; google_ad_width = 468; google_ad_height = 60; Meanwhile, European officials have already completely shatteredconfidence in deposit insurance at this point. Everyone now knows that when there is a major bank failure that depositors will be expected to share in the pain. Expect to see "bank jogs" all over southern Europe over the coming weeks. The banks in Cyprus had been scheduled to reopen on Tuesday, but very few people expect that to actually happen at this point. In fact,Bloomberg is reporting that EU officials are actually thinking about shutting down the two biggest banks in Cyprus and freezing their assets...Finance ministers for the 17 euro countries are considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, said the four officials, who asked not to be named because the talks are ongoing. The ministers are holding a teleconference tonight. Cyprus Popular Bank Pcl (CPB) and the Bank of Cyprus Plc would be split to create a so-called bad bank, one of the officials said. Insured deposits -- below the European Union ceiling of 100,000 euros ($129,000) -- would go into a so-called good bank and not sustain any losses, while uninsured deposits would go into the bad bank and be frozen until assets could be sold, said the four officials. Losses to unsecured creditors, including uninsured depositors, could reach 40 percent under the plan, which has support from the International Monetary Fund and the European Central Bank. The proposal, a version of which was rejected last week, is considered a better option than taxing insured deposits or allowing Cypriot banks to collapse in a disorderly fashion if they lose access to ECB aid, the officials said.Such a scenario would be an utter disaster. How would you feel if you woke up someday and 40 percent of your life savings was suddenly gone?According to Greek newspaper Kathimerini, European officials are also openly discussing the possibility of a Cyprus exit from the eurozone if a suitable bailout agreement is not worked out...The possibility of Cyprus exiting the eurozone was discussed during teleconference involving technocrats from the Euro Working Group on Wednesday, Kathimerini understands. A reliable source told Kathimerini that the technical implications of a euro exit, as well as the adoption of capital controls were debated by the Euro Working Group officials during the teleconference.As I mentioned above, European officials seemed resigned to the fact that there will be an economic collapse in Cyprus "no matter what", and so letting Cyprus leave the euro would not make that much of a difference. Either way, the banks are going to have to be "reorganized" and capital controls will be imposed...In detailed notes of the call seen by Reuters, the group's chair Austria's Thomas Wieser said: "The economy is going to tank in Cyprus no matter what. Restrictions on capital will probably be imposed."Never before have we seen European officials impose such a harsh ultimatum with such a short deadline. It is almost as if they want to boot Cyprus out of the euro. The following comes from a recent CNBC report...In stark twin warnings on Thursday, the European Central Bank said it would cut off liquidity to Cypriot banks and a senior EU official made clear to Reuters that the bloc was ready to see the bankrupt island banished from the euro in the belief it could then contain damage to the wider European economy.And European officials are even publicly talking about the possibility that Cyprus will soon need to start using "their own currency"...In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro. "If the financial sector collapses, then they simply have to face a very significant devaluation and faced with that situation, they would have no other way but to start having their own currency," the EU official said.This is absolutely shocking. Everyone always thought that Greece would be the first to leave the euro, but now it looks like it might be Cyprus. However, there is still a chance that Cyprus may find a way to comply with EU demands. Politicians in Cyprus are frantically searching for a way to raise the needed cash without raiding private bank accounts. The following is what CNN is saying about the latest efforts...Leaders of Cyprus' political parties agreed Thursday to create an "investment solidarity fund," which would issue bonds backed by state and church assets. The plan was due to be discussed by the Cypriot government and parliament on Thursday evening, but few details were available and it was not clear how much the fund would be worth.According to Reuters, other proposals have been under consideration as well...The government said a "Plan B" was in the works. Officials said it could include: an option to nationalize pension funds of semi-government corporations, which hold between 2 billion and 3 billion euros; issuing an emergency bond linked to future natural gas revenues; and possibly reviving the levy on bank deposits, though at a lower level than originally planned and maybe excluding savers with less than 100,000 euros.At this point it is unclear whether any of those proposals will turn out to be acceptable to European officials. In fact, the tone of European officials has noticeably changed from previous bailout efforts. They now seem much more willing to play hardball. For example, just check out what German Finance Minister Wolfgang Schaeuble is saying about the situation in Cyprus...German finance minister Wolfgang Schaeuble told the ZDF public broadcaster on Tuesday night (19 March) he "took note with regret" of the Cypriot parliament's rejection of the bailout deal, but insisted that the terms will stay the same. Asked if the eurozone was willing to let Cyprus go bust, he answered: "Well, we are much more stable in the eurozone - we took measures to protect ourselves from the risks of contagion ... but I don't want to have any of this." He added: "It is a serious situation, but this cannot lead to a decision that makes absolutely no sense, to rescue a business model that has failed. Cyprus has a banking sector that is totally oversized and this made Cyprus insolvent. And nobody outside Cyprus is to blame for it."Schaeuble knows that the EU is holding all of the cards and that Cyprus is doomed without their help..."The Cypriot state cannot fund itself on the markets. Its two largest banks are insolvent and are being kept afloat with emergency funding from the ECB, but only on the condition that there will be a long-term rescue programme. If this condition is no longer met, Cyprus will no longer be solvent and this is something Cypriot decision makers must know"But the truth is that the EU can't really afford to allow major banks to fail or for a single member to leave the eurozone. If either of those things happen, the confidence game that has been holding the European financial system together will begin to rapidly evaporate. If the EU thinks that they can abandon Cyprus without the crisis spreading to the rest of southern Europe they are just being delusional. At least there are a few politicians in Europe that understand what is happening. Nigel Farage, a very outspoken member of the European Parliament, is telling people to get their money out of banks in southern Europe as quickly as they can. He is warning that a great collapse of the European financial system is coming and that people need to get prepared for it... So what do you think? Do you believe that we are on the verge of a major financial collapse in Europe? Please feel free to post a comment with your thoughts below...This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. 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