Sunday, July 21, 2013

Today's links

1---Is This A 2007 Redux?, Street Talk Live
Margin-Debt-SP500-071913

 

2---As Layoffs Rise, Stock Buybacks Consume Cash (archive), NYT 2011

share buybacks have not fulfilled their stated purpose of rewarding investors over the last decade, experts say. “It’s a symptom of a deeper problem, which is a lack of investment in the long term,” said William W. George, a Harvard Business School professor and former chief executive of Medtronic, a medical technology company. “If we’re not investing in research, innovation and entrepreneurship, we’re going to be a slow-growth country for a decade.”
      
Liberal critics insist the trend is another example of top corporate executives raking in an inordinate share of the nation’s wealth, even as their employees suffer.
      
“It’s an extraordinarily unimaginative way to use money,” said Robert Reich, a former secretary of labor under President Clinton who now teaches public policy at the University of California, Berkeley. After diving in the wake of the financial crisis, buybacks have made a remarkable comeback in recent years, with $445 billion authorized this year, the most since 2007, when repurchases peaked at $914 billion.
But spending on capital investments like new plants and infrastructure has stagnated more broadly in corporate America, confounding efforts by the Obama administration to spur economic growth. ...      
The principle behind buybacks is simple. With fewer shares in circulation, earnings per share can rise smartly even if the company’s underlying growth is lackluster

3---The Official Unemployment Rate Is Wrong, Says Guy Who Used To Calculate It, mark gongloff

You can't believe the government's numbers on employment. Take it from the guy who used to run the government's numbers on employment.

Keith Hall, the former head of the Bureau of Labor Statistics, which produces the federal government's monthly jobs report, told New York Post columnist John Crudele that the official unemployment rate of 7.6 percent is wrong and might be too low by 3 percentage points, according to Crudele's column on Thursday.


What he is saying is that the unemployment rate doesn't capture all of the people sitting on the sidelines in despair of finding a job. The employment-population ratio, the percentage of the working-age population actually working, sits at 58.7 percent, Hall notes, well below a peak of 63 percent before the recession and the lowest rate since the early 1980s. This suggests to Hall that there are a lot of people not showing up in the official unemployment rate.

I'd personally focus on the labor-force participation rate, which includes people working and looking for work. This has been at about 63 percent in recent years, well below the 66 percent that prevailed before the recession. That may not sound like a big difference, but that extra 3 percent would take the number of officially unemployed people up to about 18 million from 12 million.

And that would jack the unemployment rate up to about 11 percent. Which, yikes.

4---Richard Koo: Still no demand for funds, value walk

Abenomics may boost sentiment via asset prices, but is not creating demand for funds To summarize, the rise in general prices due to Abenomics is viewed as an unfavorable development by most people in Japan, but the increase in certain asset prices has clearly been a positive for the Japanese economy.
 
While sentiment has improved dramatically, however, the slump in private loan demand that has been the greatest bottleneck in Japan’s economy over the last two decades continues, as reported at a Bank of Japan branch managers’ meeting in July. Deposits at Japanese banks are increasing, but lending is not.
As long as the private sector is not borrowing money—and is in fact saving enthusiastically—at a time of zero interest rates, Japan cannot put the balance sheet recession completely behind it.

Richard Koo: Measures to boost private investment finally being considered In Japan

The second “arrow” of Abenomics, fiscal stimulus, which is needed when the private sector is saving but not borrowing, has already been released in the form of a supplementary budget early in 2013. While this has not received as much attention as the BOJ’s monetary accommodation, I think it has contributed significantly to the overall improvement in the economy and sentiment
 
 
Germany is currently running the largest trade surplus in the world, while the deficits of peripheral Europe are being squeezed down through unemployment – which is certain to remain high for many more years. ...
 
The graph makes it pretty clear that the surge in European surpluses, which was largely matched before the crisis by the surge in deficits in peripheral Europe, is expected to be maintained even as surpluses in China and Japan, the other leading surplus nations, have dropped dramatically, but since these northern European surpluses can no longer be counterbalanced by deficits within peripheral Europe given how indebted and troubled are their European trade partners, the hope is simply to force them abroad. In a world with weak demand and deteriorating trade relationships, in other words, the northern Europeans have decided that rather than boost domestic demand they will resolve their domestic problems by absorbing far more than their share of global demand, to the tune of 2-3% of Europe’s GDP.

This is absurd. If they succeed it will only be temporarily and at the expense of their already-suffering trade partners, and as a consequence it will just be a question of time before global trade relationships get even nastier than they have been. Of course if trade relationships deteriorate enough, and so force the imbalances back onto Europe, the result will be a surge in German unemployment with no corresponding relief in unemployment in the periphery.

Away from Europe the US continues slowly to adjust but I worry that this adjustment will be derailed by a weaker external sector. Meanwhile Japan is still struggling with its debt burden and seems to have no real way of resolving it except by forcing down the currency and interest rates, both of which mean that household sector is expected to reduce consumption to support the debt burden without, it seems, any corresponding increase in investment. In China the good news is that the rebalancing process seems to have become more determined than ever before in the past, although as of yet there has been minimal rebalancing at the expense of a significant reduction in growth rates. This I expect will continue to be the case, but European trade policies are going to put additional pressure on China’s adjustment.

6--Understanding Earnings, dash of insight

7--The 4 recession indicators, doug short


8---Sell signal from key market indicator, Marketwatch
Commentary: Famous ‘High Low Logic Index’ is no longer bullish

9--Lend to spend: China loosens grip on interest rate regime, RT

10--China's US Treasury Holdings hit record $1.3 trillion, RT

11---Hugo Chavez, Postcards from the Revolution

Hugo Chavez was beloved by millions around the world. He changed the course of a continent and led a collective awakening of a people once silenced, once exploited and ignored. Chavez was a grandiose visionary and a maker of dreams.

An honest man from a humble background who lived in a mud hut as a child and sold candies on the streets to make money for his family, Chavez dreamed of building a strong, sovereign nation, independent of foreign influence and dignified on the world scene. He dreamed of improving the lives of his people, of eradicating the misery of poverty and of offering everyone the chance of a better life – the “good life” (el buenvivir), as he called it.

President Chavez made those dreams come true. During his nearly fourteen years of governance, elected to three full six-year terms but only serving two due to his untimely death, Chavez’s policies reduced extreme poverty in Venezuela by more than 75%, from 25% to less than 7% in a decade. Overall poverty was reduced by more than 50%, from 60% in 1998 when Chavez first won office to 27% by 2008. This is not just numbers, this translates into profound changes in the lives of millions of Venezuelans who today eat three meals a day, own their homes and have jobs or access to financial aid.

But the dreams don’t stop there. Chavez dreamt of a nation filled with educated, healthy people, and so he established free, quality public education from preschool through doctoral studies, accessible to all. In fact, for those in remote areas or places without educational facilities, schools were built and mobile educational facilities were created to bring education to the people. Chavez also created a national public health system offering universal, free health care to all, with the help and solidarity of Cuba, which sent thousands of doctors and medical workers to provide quality services to the Venezuelan people, many who had never received medical care in their lives.

To strengthen and empower communities, Chavez propelled policies of inclusion and participatory governance, giving voice to those previously excluded from politics. He created grassroots community councils and networks to attend to local needs in neighborhoods across the nation, placing the power to govern in the joint hands of community groups. His vision of diversifying his nation and developing its full potential transformed into railways, new industries, satellite cities and innovative transport, such as MetroCable Cars soaring high into the mountains of Caracas to connect people with their steep hillside homes and the bustling city.

The centuries-old dream of Independence hero Simon Bolivar to build a unified “Patria Grande” (Grand Homeland) in South America became Chavez’s guiding light and he held it high, illuminating the path he paved. Chavez was a driving force in unifying Latin America, creating new regional organizations like the Union of South American Nations (UNASUR), the Bolivarian Alliance for the Peoples of Our America (ALBA) and the Community of Latin American and Caribbean States (CELAC). These entities have embraced integration, cooperation and solidarity as their principal method of exchange, rejecting competition, exploitation and domination, the main principles of US and western foreign policy.

Chavez inspired a twenty-first century world to fight for justice, to stand with dignity before bullying powers that seek to impose their will on others. He raised his voice when no others would and had no fear of consequence, because he knew that truth was on his side.

Chavez was a maker of dreams. He recognized the rights of the disabled, of indigenous peoples, all genders and sexualities. He broke down barriers of racism and classism and declared himself a socialist feminist. He not only made his own dreams come true, but he inspired us all to achieve our fullest potential.

Don’t get me wrong, things are not perfect in Venezuela by any stretch, but no one can honestly deny that they are much better than before Hugo Chavez became President. And no one could deny that President Hugo Chavez was larger than life.

The first time I flew on President Chavez’s airplane he invited me to breakfast in his private room. It was just me and him. I was nervous and felt anxious and rushed to tell him about the results of my investigations into the United States government role in the coup d’etat against him in 2002. After all, that’s why I was on the plane in the first place. I had been invited to participate in his regular Sunday television show, Alo Presidente (Hello Mr. President) to present the hundreds of declassified documents I had obtained from US government agencies through the Freedom of Information Act (FOIA) that exposed US funding of coup participants. The date was April 11, 2004, exactly two years after the coup that nearly killed him and sent the nation into spiraling chaos.

As I began pulling out papers and spreading documents on the table that separated us, he stopped me. “Have you had breakfast yet”, he asked. “No”, I said, and continued fiddling with the revealing paper before me. “We can discuss that later”, he said, “for now, tell me about yourself”. “How is your mother”, he asked me, as though we were old friends.

A flight attendant came through the door of his private room with two trays and placed them on the table. I quickly gathered up the documents. “Let’s eat”, he said. I started to protest, trying to explain that his time was so limited I wanted to take advantage of every minute. He stopped me and said, “This is a humble breakfast, a breakfast from the barracks, what I most love”. I looked at the tray for the first time. On it was a small plate with an arepa, a typical Venezuelan corn patty, a few shreds of white cheese, a couple of pieces of cantaloupe and some anchovies. Beside the plate was a small cup of black coffee. No frills and not what you would expect on a presidential airplane.

“After all, I am just a soldier”, he added. Yes, Chavez, you are a soldier, a glorious soldier of a dignified, proud and kind people. And you are a maker of dreams for millions around the world.

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