Tuesday, April 15, 2014

Today's Links

1---Corporate Profits Grow and Wages Slide, NYT

CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years.
The Commerce Department last week estimated that corporations earned $2.1 trillion during 2013, and paid $419 billion in corporate taxes..... The effective corporate tax rate was nearly 55 percent, in sharp contrast to last year’s figure of under 20 percent....

The effective rate has been below 20 percent in three of the last five years. Before 2009, the rate had not been that low since 1931.
The statutory top corporate tax rate in the United States is 35 percent, and corporations have been vigorously lobbying to reduce that, saying it puts them at a competitive disadvantage against companies based in other countries, where rates are lower. But there are myriad tax credits, deductions and preferences available, particularly to multinational companies, and the result is that effective tax rates have fallen for many companies.
The Commerce Department also said total wages and salaries last year amounted to $7.1 trillion, or 42.5 percent of the entire economy. That was down from 42.6 percent in 2012 and was lower than in any year previously measured....

The accompanying charts compare President Obama’s administration with each of his predecessors, going back to Herbert Hoover. After-tax corporate profits in President Obama’s five years in office have averaged 9.3 percent of G.D.P. That is a full two percentage points higher than the 7.2 percent averages under Lyndon B. Johnson and George W. Bush, previously the presidents with the highest ratios of corporate profits.
The stock market has reflected that strong performance. Through the end of March, the Standard & Poor’s 500-stock index was up 133 percent since Mr. Obama’s inauguration in 2009. Of the 13 presidents since 1929, only Bill Clinton and Franklin D. Roosevelt saw a larger total increase

2---Abenomics: Are the good times over?, Testosterone Pit

3---Abenomics: 10-year JGB: No buyers, Reuters

The BOJ's next policy meeting is on April 30, when it will update its economic forecasts.
The BOJ's huge government bond purchases put the central bank's holdings over 200 trillion yen ($1.96 trillion), some 20 percent of outstanding issuance, data showed this week. This has sucked so much liquidity out of the market that the benchmark 10-year bond went untraded for almost two days, the first time in 13 years.

4---Why are car sales booming when US labour force participation  is at its lowest level since 1978?, Pieria

...according to Bloomberg, three-month rolling US auto sales are now only about 3% off their pre-crisis levels. On the other hand, US labour force participation is down to 63% while duration of unemployment remains fairly high.
So, if the country’s labour force participation is at its lowest level since 1978, how can car sales be very nearly back to their boom-year levels? The answer would seem to lie in the ease with which almost anyone in the US can obtain a loan to buy a car – with a great example of this detailed in the Bloomberg Business Week article Subprime loans are boosting car sales

5---Interest Rates and the Budget Outlook, Paul Krugman

the IMF, declaring that there is a long-term downward trend in real interest rates, that secular stagnation is a real risk, and that rates not much higher than what we see now may be the new normal.

6---CIA Chief visits Kiev to direct crackdown against pro-Russian civilians, wsws

In the clearest sign of intensifying US involvement in the Ukraine crisis, the White House admitted—after vehement denials—that CIA Director John Brennan flew into Kiev over the weekend. Brennan arrived, under a false name, for discussions on how to further exploit the crisis that the US and its allies deliberately triggered by orchestrating the February coup.

Russian Foreign Minister Sergey Lavrov demanded an explanation about the nature of the undercover visit, and deposed Ukrainian President Viktor Yanukovych accused Brennan of ordering a crackdown on protests in the east of the country.

The CIA initially ridiculed these accusations as “completely false.” Yesterday, however, White House spokesman Jay Carney declared: “We don’t normally comment on the CIA director’s travel, but given the extraordinary circumstances in this case and the false claims being leveled by the Russians at the CIA, we can confirm that the director was in Kiev as part of a trip to Europe.”
... The CIA has a documented record of orchestrating coups, plots and assassinations around the world, including in Indonesia in 1965–66 and Chile in 1973.

Brennan, nominated by Obama to take over as CIA chief after Obama’s 2012 re-election, is known for his close involvement in the US occupation of Iraq, the CIA’s use of torture against detainees, and US drone assassinations, including of American citizens. He is currently embroiled in a scandal over CIA spying on staff members of a US Senate committee reviewing the agency’s program of detention and “enhanced interrogation” under President George W. Bush.

Following Brennan’s discussions in Kiev, interim Ukrainian President Oleksandr Turchynov declared that the country was now “at war” with Russia. The head of Ukraine’s state security service (SBU), Valentyn Nalyvaichenko, ratcheted up the warnings of violence against the demonstrators now occupying official buildings in at least ten eastern Ukrainian cities—threatening to “annihilate them.”...

Yesterday’s Washington Post editorial declared: “It may be too late to prevent war in eastern Ukraine.”
The Wall Street Journal editorialised that “the Russian invasion of eastern Ukraine may already be underway,” adding that “the US ought to drop its illusion that Mr. Putin is interested in diplomacy.” Putin’s real goal, it alleged “is to redraw the postwar map of Europe to Russia’s advantage, with faux diplomacy if he can, by force if necessary.”

7---2014: Rough year for housing, HW

The next couple of quarters may be rough going for the housing and finance industry.
Housing prices and mortgage activity will stay highly sensitive to the Federal Reserve interest rate policy and guidance because of a weak job market, affordability challenges and the declining pool of first-time homebuyers.
Worse still, home price appreciation may level off and even dip into negative territory by the third quarter of 2014.

"Housing price appreciation (is) already on the decline, with only six cities in the Case-Shiller index showing strength in recent indexing – Dallas, Las Vegas, Miami, San Francisco, Tampa, and Washington,” says Tom Showalter, chief analytics officer at Digital Risk, which handles $8 billion in loan volume monthly. “Moreover, while home prices have increased, at least 25% of all homes are still under water."

December home sales showed that 40% of sales were all cash – suggesting strong investor participation. Originations are also at a 14-year low.
"As investors leave market, there is little evidence that typical retail buyer will take up the slack," Showalter said.....

“As a large portion of home purchases have been driven by speculating institutional and private investors the last two years, there could be a pull back. Let's hope the Fed is not right in its long-term outlook,” D’vari said.
Showalter said the writing is on the wall.

These issues have been compounded by the fact that “many banks and lenders are exiting mortgage lending as application rates hit ten year lows, complemented by increasing regulatory burdens and penalties, and increasing capital requirements.  New Basel III regs now require 5% capital ratios for mortgage lending, a requirement that is largely punitive," Showalter said. “The ultimate causes have nothing to do with the weather. Rather the issues are weak job market, flat consumer income and excessive regulation

8--Credit card delinquency rate is at its lowest recorded point since it has been tracked, FRED

9---Belgium loads up on US Treasuries. (More Fed fraud), zero hedge

10---Home Sellers’ Asking Prices Hit Five-Year High, wsj
If housing demand has softened, someone forgot to tell home sellers.
Sellers have pushed asking prices on their homes to a five-year high, but they are facing slightly more competition than they were one year ago.

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