Wednesday, January 22, 2014 - A Mixed Bag

A Mixed Bag

by Sinclair Noe

DOW – 41 = 16,373
SPX + 1 = 1844
NAS + 17 = 4243
10 YR YLD + .04 = 2.86%
OIL + 1.69 = 96.66
GOLD – 3.80 = 1237.80
SILV - .07 = 19.90

Another mixed day on Wall Street. It’s earnings season. IBM reported quarterly revenue that missed estimates for the fourth straight quarter, due to a steep fall in demand for servers and storage products in emerging markets such as China. IBM thinks part of the reason for declining revenue was backlash from emerging economies against US government spying. IBM was down enough to drag the Dow Industrials into negative territory for the day.

Coach, the handbag maker, was the biggest loser in the S&P 500 after posting disappointing sales in North America. United Technologies, the air conditioner and elevator company, reported higher fourth-quarter profit that topped Wall Street estimates, though revenue fell shy of expectations. Norfolk Southern posted a 24 percent rise in quarterly income.

After the close, Netflix reported higher profit for the fourth quarter as the company added 2.3 million customers to its TV and movie streaming service in the United States.

A mixed bag of earnings today. Not much to cause the bulls or the bears to run.

Target Corp said it will stop offering health coverage to part-time workers, citing new public insurance exchanges floated by the US government. Less than 10 percent of the company's 361,000 employees currently participate in the insurance plan that is being discontinued. Target is not the first or the last company to take this position.

The winter storm blanketing most of the Midwest and East Coast pushed natural gas prices to their highest level in nine months on Wednesday. February natural gas jumped 26 cents, or 6 percent, to $4.689 per thousand cubic feet. The last time natural gas prices were this high was late April 2013. Americans who use propane to heat their homes are scrambling to deal with sharply higher prices and a limited access to the fuel. Domestic production has increased to an estimated 17.8 billion gallons in 2013, from 15.2 billion gallons in 2008, but offsetting the increased production is a robust export market. The country exported an estimated 4.3 billon gallons of propane last year, compared to 800 million gallons in 2008. The tighter supply has led to wholesale price increases, to $2.20 a gallon from $1.10 a gallon a year ago. Prices for retail customers have risen to nearly $3 a gallon from $1.90 a year ago.

According to data released by the IRS, conversion from tax-deferred individual retirement accounts to Roth IRAs increased ninefold in 2010, to $64.8 billion. That was the first year when a $100,000 income limit on eligibility to convert was eliminated - and it marked the first time the amount of assets converted to Roths exceeded contributions. The higher your income, the more likely you are to convert to a Roth. Paying taxes now rather than later isn't beneficial if you expect to be in a lower tax bracket when you begin drawing down funds in retirement.

Mohamed El-Erian is stepping down as head of the asset-management firm Pimco. Bill Gross, who founded Pimco and serves as its co-chief investment officer with El-Erian, said he was in disbelief when the chief executive told him of his intentions several weeks ago. El Erian will stay on as an adviser to Pimco’s parent company, Allianz. The past year was difficult for bond fund managers and Pimco, the largest of the bond funds, saw huge outflows.

Warren Buffett is offering a $1 billion prize to anybody who can fill out a perfect March Madness bracket. The prize would be paid out in 40 annual installments of $25 million, or a one-time lump sum of just $500 million. The first 10 million people to enter the contest will be eligible for the ludicrous grand prize. If there’s a tie, they’ll split. The odds of a perfect basketball bracket are staggering; 9.2 quintillion to one. Apparently there has never been a documented perfect bracket. Madness just got crazier.

The Center for Economic Policy and Research has run some numbers on how much the housing bubble and the collapse cost. Based on Congressional Budget Office data looking at GDP growth going back to 2008, the dollar losses through 2013 are at $7.6 trillion, in 2013 dollars; or about $25,000 for every person in the country. This is just economic losses, it does not include any effort to quantify the pain that workers or their families have suffered from being unemployed or losing their homes. The numbers are speculative but likely a good guess.

Years of banking crises, credit droughts and economic uncertainty have prevented businesses investing for the future. Instead, they have clipped costs, wages and jobs and built up huge stockpiles of cash rather than investing in new plants, staff, updated technology, equipment or acquisitions. According to Thomson Reuters data, companies around the world held almost $7 trillion of cash and equivalents on their balance sheets at the end of 2013 - more than twice the level of 10 years ago. Capital expenditure relative to sales is at a 22-year low and some strategists reckon the typical age of fixed assets and equipment has been stretched to as much as 14 years from pre-crisis norms of about 9 years. At some point, the thinking goes, all that corporate cash will come flooding into the economy. Maybe.

Merrill Lynch surveyed fund managers, and a record number think companies are under-investing and most respondents want firms to deploy their cash on capital expenditures. Sounds good, but there is no obvious catalyst for such a move.

Treasury Secretary Jack Lew sent a letter to House Speaker John Boehner warning that the country would likely exhaust the extraordinary measures used to stay beneath the debt limit by late February. In a previous letter to Boehner, Lew had projected the deadline might not be hit until early March. In the deal reached in mid-October to end the government shutdown, lawmakers extended the nation's debt limit into the first week of February. It was always understood that Treasury could take extraordinary measures to extend the deadline even further. But in his note to Boehner, Lew made clear that those tools weren't as potent as they have been in previous debt limit crises, partly because of limits on borrowing capacity and partly because of financial constraints that are unique to the month of February.

But now Secretary Lew writes: "The length of time that the extraordinary measures can extend the nation's borrowing authority is significantly shorter than it was in 2011 and 2013. This is in large part because the government experiences large net cash outflows in the month of February, due to tax refunds. For example, in 2013, the government experienced net cash outflows of approximately $230 billion in the month of February, as compared to average net outflows of $45 billion in the other months of the year.”

House GOP leaders have stated that they won't simply vote to extend the debt limit without receiving something in return. The White House, meanwhile, has steadfastly refused to negotiate over raising the debt limit. So it appears we are headed for another showdown, and it is approaching much faster than you thought.

This is Day Two of the World Economic Forum in Davos, Switzerland. Over 2,500 Presidents, Prime Minsters, CEOs, Celebrities, Academics, and moneyed elites, will be holed up in a small and posh mountain resort in Switzerland to discuss, in the words of the WEF, "improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas."

This year's theme is "The Reshaping of the World: Consequences for Society, Politics and Business." A few words from the preamble are worth noting: "political, economic, social and, above all, technological forces... are shifting power from traditional hierarchies to networked hierarchies." That means the false idea of reducing democracy to the singular act of voting every few years is over. People are begging to assert participatory democracy and exercise people power, using many new technologies and methods of interconnection, as levels of confidence in political leadership are dangerously declining around the world.  The WEF warns its members that we are witnessing a shift of power. But those attending the WEF are largely focused on the symptoms of various crises not the causes or the cures.

The WEF's 2014 Global Report helps set the agenda and prioritization for the great and the good to discuss. Financial risk, unsurprisingly, still ranks at number one, followed by high unemployment or underemployment. Water crises come in third place with climate at fifth, behind severe income disparity. There is therefore a growing recognition that economy, ecology and equity are all in crisis; that they are all fundamentally interconnected. None can be solved without solving the others. For example, the water scarcity crisis is driven, in part, by the expansion in coal. Go to West Virginia if you need proof.

The big question for 2014 will be how the plutocrats respond. Some are still in denial. Today's economy is going so well for those at the very top that it can be hard to see how badly it is working for those in the middle and at the bottom.

Monday, October 07, 2013 - Already Bankrupt

Already Bankrupt

by Sinclair Noe

DOW – 136 = 14, 936

SPX – 14 = 1676
NAS – 37 = 3770
10 YR YLD - .02 = 2.63%
OIL - .67 = 103.17
GOLD + 11.20 = 1323.40
SILV + .61 = 22.45

The markets gave up Friday's gains. The political dysfunction is hurting; right now it's just the economic uncertainty; that's a phrase I hate because businesses always face uncertainty but the shutdown and the looming debt ceiling are significant uncertainties. Let's start with the debt ceiling. Businessweek is describing it as “an economic calamity like none the world has ever seen.”

Here's the not so rosy scenario: “Failure by the world’s largest borrower to pay its debt -- unprecedented in modern history -- will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse. “

Sure, if the US misses a payment it would be much bigger than 2008 because the US government is so much bigger and more interconnected than Lehman Brothers; and after the collapse of Lehman, the government stepped in to clean up the mess. Who cleans up the mess when the mess is the US government?

Warren Buffett says the politicians should not use the debt limit as a weapon in policy debates. From a Fortune magazine article last week, Buffett said: “It should be like nuclear bombs, basically too horrible to use.” Or as Senator Ted Cruz calls them: “Half measures.”

Just a reminder that in 2011, back when there was just a little talk about default without an actual default, just a hint, it wiped out $6 trillion of value from global stocks. Investors, structured vehicles, collateral agreements, derivatives contracts and other trading covenants have ratings-based rules that could force the replacement of Treasuries in a trade or portfolio.

Some people speculate it would push interest rates higher, others guess it might push rates down, but nobody knows for sure. The scarier scenario is that everything just freezes; it wouldn't matter whether rates are up or down because nobody can make a deal. Once the system starts to break down related to settlement and payments, then liquidity disappears.

Treasury Secretary Jack Lew has said the government will have only $30 billion of cash left by Oct. 17 to meet its commitments. Those can run as high as $60 billion a day, which means the Treasury will need to borrow more to meet its liabilities. The Treasury has $120 billion of short-term bonds coming due on Oct. 17.

About half of the US debt is held by foreign governments, central banks and other overseas investors. China is the largest holder of US Treasuries, with about $1.3 trilllion; they are not happy. A new idea is taking hold among House Republicans that perhaps breaching the debt ceiling isn't such a terrible idea after all. One form this takes is the patently absurd remarks of Rep. Ted Yoho (R-Fla.) who muses that "I think, personally, it would bring stability to the world markets." So, that's one politician who just certified he is insane.

A slightly less insane idea is to prioritize payments, but there are some problems with that: Treasury is not authorized to unilaterally decide to pay certain bills and not others. If it were, the constitutional order would completely collapse. Obama could just not cut the checks for farm subsidies or missile defense programs he opposes.  Because payment prioritization is illegal, Treasury's payment system is not designed to allow prioritization to happen. The systems "are designed to make each payment in the order it comes due." Of course systems could always be changed. But they can't just whip up an entirely new computer system in the next two weeks.

A German newspaper summed it up quite nicely: "At the moment, Washington is fighting over the budget and nobody knows if the county will still be solvent in three weeks," the paper concludes. "What is clear, though, is that America is already politically bankrupt."

As for the government shutdown, over the weekend the House voted to retroactively pay the roughly 800,000 furloughed federal workers; the measure still requires a Senate vote. So, the shutdown is no longer about expense because all the workers will be paid eventually; this just means that the government is not going to receive revenue, and that there will still be pain for the furloughed workers and the communities they live in. This has broken down to nothing but stupidity, plain and simple, with a side order of cruelty.

On Sunday, Speaker John Boehner’s talk hardened. He insisted he does not have the votes to get anything through unless the Democrats make concessions to get those measures passed. Obama has refused to do so. More worrisome, Boehner is changing his demands. Earlier, it was to delay implementation of Obamacare a year. Yesterday, there was no mention of Obamacare; the bone of contention was now out of control spending and debt. I’m not sure this is an actual change in position but in messaging, with the fight now moving to the debt ceiling.

And so today, President Obama made an unscheduled visit to the Federal Emergency Management Agency in his latest bid to draw attention to the effects of the government shutdown and to challenge Speaker John Boehner’s claim that he does not have enough votes to pass a measure to finance the government.

“The House should hold that vote today,” Mr. Obama said. “If Republicans and Speaker Boehner are saying there are not enough votes, then they should prove it. Let the bill go to the floor and let’s see what happens. Just vote. Let every member of Congress vote their conscience and they can determine whether or not they want to shut the government down. My suspicion is, my very strong suspicion is, that there are enough votes there.”

Turning up the pressure, Mr. Obama added, “The reason that Speaker Boehner hasn’t called a vote on it is because he doesn’t apparently want to see the government shutdown end at the moment, unless he’s able to extract concessions that don’t have anything to do with the budget.”

Chief Justice John Roberts and the Supremes will take the bench as scheduled today, ignoring the shutdown of much of the rest of the federal government. The Supreme Court has agreed to hear an array of cases of interest to employers and workers, manufacturers and financiers, and anyone else concerned about the intersection of commerce, law, and society.

The court today will hear arguments on whether federal securities law precludes certain class actions filed by investors who invoke state law. The case has added sizzle because it involves investors suing various defendants for losses related to R. Allen Stanford’s $8 billion Ponzi scheme. A lower court said that a federal statute, the Securities Litigation Uniform Standards Act, did not forbid state-law class actions in this context. 

Separately, the justices will resolve whether the corporate target of a state’s consumer-protection lawsuit can get the dispute moved from state court to federal court. The question sounds hyper-technical, but it matters. Defendants in consumer-protection cases prefer to litigate in federal courts, which are widely perceived as less plaintiff-friendly. This case involves Mississippi’s suit challenging alleged price fixing by manufacturers of flat-screen display panels. 

In recent years, the federal appeals court in Washington DC has issued a series of rulings making it difficult for the Environmental Protection Agency to curb power plant pollution that crosses state lines. The EPA is asking the Supreme Court to overturn a 2012 decision by the US Court of Appeals that struck down an agency rule that required upwind states in the East, Midwest, and South to reduce emissions of nitrogen oxides and sulfur dioxide to help downwind states meet national ambient air quality standards.

The Supreme Court refused to hear Argentina’s appeal of a lower court’s decision in favor of hedge funds that held bonds on which the country had defaulted. As is their custom, the justices offered no reasons for turning down the appeal. The appeal was from an interim decision last year from the United States Court of Appeals for the Second Circuit, in New York, and the justices may yet have an opportunity to consider whether to hear a separate appeal from the lower court’s final decision, issued in August. The case was brought by bondholders who were owed more than $1.3 billion and who refused to accept reduced payments after Argentina’s default in 2001. Most of the nation’s other creditors accepted such payments in later debt swaps. The Second Circuit ruled that Argentina had violated a contractual promise to treat all bondholders equally.

This case may actually set a precedent for US. 

Friday, August 23, 2013 - QE Giveth and QE Taketh

QE Giveth and QE Taketh

by Sinclair Noe

DOW + 46 = 15,010
SPX + 6 = 1663
NAS + 19 = 3657
10 YR YLD - .08 = 2.82%
OIL + 1.39 = 106.42
GOLD + 21.70 = 1398.80
SILV + .90 = 24.18


Yesterday, the Nasdaq crashed for about 3 hours; trading was halted; we still don't know why. It now has a snappy name, the Flash Freeze. It happened after shares of Apple got stuck at $498, then everything froze. In time we'll hear a good story about why it happened. My best guess for now is that it has to do with high frequency traders; the algo traders have a tendency to clog the trading pipes with all their bids, offers, and canceled orders as they try to scalp and front run trades. The market exchanges claim the high frequency traders provide liquidity, but I didn't see any liquidity for about 3 hours yesterday; zip, nada.

The markets had a pleasant and quiet day today, following a couple of weeks of fretting about Fed taper. America has created a whopping entitlement for the biggest Wall Street banks and their top executives, who, unlike most of the rest of us, are no longer allowed to fail. They can borrow from the Fed at almost no cost, then lend out the money at 3 percent to 6 percent or 30 percent; or they can take the money and gamble in markets they have rigged: derivatives, interest rates, energy, aluminum. It's all rigged; the big wheel spins round and round and the little ball always falls in the same spot. All told, Wall Street's entitlement is the biggest offered by the federal government, even though it doesn't show up in the budget. And it's not even a public good. It's just private gain.

And this whole idea of a taper, according to the primary dealers in the Federal Reserve banking system the taper is likely to start in September and wind down by the middle of 2014; well, it's not a done deal, and even if it is done there might be unintended consequences. Today, Christine Lagarde, the head of the International Monetary Fund, speaking at the Fed's Jackson Hole soiree, she noted that central bank policies “in one corner of the world can reach all corners.”

There’s little question that the Fed’s unprecedented flood of cash into the financial system since the financial crisis has rippled across the globe. Earlier that sometimes prompted complaints from developing nations that there was too much capital flowing into their markets, bringing inflationary pressures and hurting exports as their currencies rose in value. Now the concern for Lagarde and many others is on the other side and the increased risks of a sharp economic slowdown in emerging markets.

Bearish sentiment has gripped emerging markets in recent weeks. Cash is flowing out, pushing down the values of stocks, bonds, and currencies in India, Indonesia, and elsewhere; the Indian rupee has thrown itself off a cliff. Brazil's problems have been well documented and are boiling over. China's long guaranteed growth is unsure but likely quite a bit slower. Europe is starting to show signs of life but don't look for a V-shaped recovery; there are too many imbalances between the various economies of the Euro-zone. There's still too much debt, and too much bad debt, and the demographics are worse than in the US. Lagarde is correct on one point, the US economy doesn't operate in a vacuum.

And then there is the whole question of whether the Fed's QE has actually worked. There is little question that it has had an effect, but has it worked?

A secondary goal of QE is to accelerate the housing recovery. There are some signs that has happened. Home prices bottomed out in 2012 and have been rising by double-digits, year over year. Existing home sales are up 17% from last summer. But new home sales figures out this morning fell to a 9-month low. That might be a fluke, but it might also be the first tangible sign that rising mortgage rates are slowing the housing recovery before it gathers much momentum. It's hardly a ringing endorsement for tighter money.

The primary goal of QE is to prop up the banks, and to this end the Fed has done quite well. Refi's soared earlier in the year, and that is a big moneymaker for the banks. They write the refi's, extract the fees and dump the mortgages onto the lap of the government owned Fannie Mae and Freddie Mac. Refi's accounted for 70% of all mortgage lending in the first half of this year, but now they're drying up. Mortgage rates have jumped a full percentage point since early May. Wells Fargo Bank is the biggie in mortgage lending, and the refi business is down 50%, so they're firing 2,300 workers. QE giveth, and QE taketh away.

Elsewhere, retail sales aren't shining; even Wal-Mart is struggling. Car sales are up, but so are gas prices, and newer cars are more fuel efficient, so you buy a new car and cut your gas bill – it's a wash.For the Fed, the trick is to put the brakes on QE in the early stages of an economic rebound, because waiting too long could flood the economy with too much money, causing inflation, asset bubbles or worse. Yet it’s remarkably tricky to know in real time where the economy is headed, which is why the Fed and many other forecasters have misjudged the recovery during the past few years.

And then don't forget the Fed's dual mandates of price stability and maximum employment. We do not have maximum employment; not even close. Maybe it's too much to expect the Fed to deliver jobs; certainly it is too much to expect the Fed to deliver jobs with the tools of QE. Maybe it would be easier if the Fed just waits until they hit their target of 6.5% unemployment; clear, clean, and unambiguous

 It’s understandable that everybody wants more clarity, especially as we approach the end of the Bernanke era. But the Fed itself probably doesn’t know what it’s going to do, given the conflicting picture painted by all the data it looks at. And when the Fed finally does change policy, it will probably be incremental, and I'm not confident it has been priced in, not yet; that cake hasn't been baked yet.

Speaking of half-baked; financial reform has been on a back burner for years. Earlier this week President Obama called the regulators to the White House for a progress report, something, anything that might provide assurances that there won't be a repeat of 2008. Administration officials and some lawmakers have expressed frustration that the Dodd-Frank act, remain unenforced as an alphabet soup of federal agencies wrangle over how to adopt it, and the bank lobbyists constantly try to rewrite it.

Last month, Treasury Secretary Jack Lew complained in a speech that the regulators were moving too slowly to confront the dangers of banks that are so large that governments cannot allow them to fail for fear of bringing down the economy. The administration has said it wants to end the era of Too Big To Fail; they have stated flatly that there will be no more bank bailouts, but they still don't have the actual reforms in place. For too long, financial watchdogs were asleep on the job, allowing Wall Street megabanks to become too complex to manage and regulate and ‘too big to fail. As the banks have returned to profitability there has been growing impatience with the pace of bank regulation.

The banks have been feeding at the trough of QE, and now the Fed is talking about removing QE. This means the banks had damn well better be strong enough, they had better set aside enough reserves to weather problems. It wouldn't look good to pull away QE, have a big bank fail, and then have to go through this whole bailout process all over again. And make no mistake, QE1, QE2, and QE3 have all been an ongoing, drawn out bailout for the banks.

If we could ever get past the fear of another global financial meltdown scenario, maybe we could take all the trillions of dollars that have been funneled to the banskters, and instead funnel that money onto Main Street. Theoretically of course.

Speaking of half-baked; Congress is in recess, so they haven't been messing things up. Actually, this Congress hasn't done anything even when they are in session. This has been the most gridlocked Congress in decades. When they get back from recess they might actually do something; and that is not necessarily a good thing. There is a decent chance Congress might close down government. Yesterday,  about a third of the Republican caucus sent a letter to House Speaker John Boehner and Majority Leader Eric Cantor urging them to oppose any annual spending bills that include funding for Obamacare.

Today Boehner responded by saying that when Congress reconvenes on September 9 after the summer break, “Our intent is to move quickly on a short-term continuing resolution that keeps the government running and maintains current sequester spending levels."

This weekend you'll likely hear quite a bit about the 50^th Anniversary of the March on Washington; it was August 28, 1963, and it was actually called the “March on Washington for Jobs and Freedom”. The march was intended to raise awareness of civil rights and economic issues, because social and economic justice are just branches of the same tree.

Monday, June 17, 2013 - Preaching, Practicing, and Doing

Preaching, Practicing, and Doing

by Sinclair Noe

DOW + 109 = 15,179
SPX + 12 = 1639
NAS + 28 = 3452
10 YR YLD + .05 = 2.17%
OIL + .07 = 97.92
GOLD – 6.80 = 1385.70
SILV - .24 = 21.94

President Obama is in Northern Ireland today, part of a three-day European tour that includes a G-8 summit meeting. Maybe we could call this the “Practice what I preach, not what I practice Tour”. Obama kicked off the tour with a speech in Belfast to celebrate Northern Ireland's peace process; later he'll talk with Euro leaders, including Russian President Putin about lifting a European arms embargo to arm Syrian rebels.

The G-8 summit generally deals with economic issues, and tops on the list will be tax evasion. The Brits, lead by David Cameron and George Osborne will pressure for a comprehensive deal to include developing countries while preventing developed countries from trying to water down proposals. The two big ideas include having the beneficial ownership of offshore accounts made public and then having the G-8 countries commit to a global agreement on exchange of tax information that developing countries can join. The concern for poorer countries is that the G8 will deliver a "gold standard" for itself but offer a less satisfactory agreement for poor countries, which lose three times as much in tax evasion as they gain from aid.

The Syrian conflict might actually be a positive for pushing through a deal on tax havens. It is unlikely there will be an agreement on Syria, and so the G-8 might push through something on tax evasion to be seen as having accomplished something. Of course, a deal on tax evasion is not a good bet. The issue is much more prominent in Euro-land, where multinational companies like Google and Apple and Starbucks have been playing the system and stiffing taxpayers. The mega corporations tend to stiff US taxpayers as well, but we haven't raised a ruckus about it. In Euro-land, it's a hot topic. Don't be surprised if the G-8 does little more than agree to discuss it in the future.

There will also be talk about a transatlantic trade deal between the European Union and the US, but then there has been talk about a deal for years. The US and the EU already trade about $1 trillion a year in goods and services and invest another $4 trillion in each others economies, and most of that is already free of tariffs; a trade deal would look to eliminate the rest. As you might suspect, there are multiple industries that want to protect their turf.

Then there is the idea of how to stimulate economic growth. A couple of months ago, Treasury Secretary Jack Lew talked to Euro-leaders and urged them to avoid austerity. Last week, the International Monetary Fund said an excessively rapid and ill-designed deficit reduction plan had hampered a tepid recovery in the US economy. Against that backdrop, the Federal Reserve FOMC is meeting this week in Washington.

The time is nearing for the Federal Reserve to scale back its program of Quantitative Easing to support the economy, which involves buying $85 billion in bonds each month. It's clear that QE can't go on forever, but divisions remain over when it will start tapering its bond purchases. At some point there will be an exit, and the Fed will almost certainly provide plenty of warning, well in advance of any exit.

The central bank’s Federal Open Market Committee will meet on Tuesday and Wednesday, and issue a statement at the conclusion on Wednesday, followed shortly after by a news conference by the Fed chairman, Ben Bernanke.

How does the Fed announce an exit of QE, while the President is in Europe urging the G-8 to avoid austerity? It will be a balancing act that involves a fair bit of shaming the Congress for failure to deliver fiscal policy, combined with a fair bit of cheer leading for the strength of the US economy. A positive economic assessment from the Fed might also serve as a gift wrapped present for the remainder of the G-8, who appear to be in a race to drop the value of their currencies.

The Fed's primary challenge is to drive home the idea that while the economy may be improving, there is still uncertainty surrounding the bond-buying outlook. Central bankers also need to repeat what they’ve been saying in speeches: Smaller bond buying won’t represent a tightening in monetary policy, just a reduction in the amount of stimulus the Fed is delivering. It’s a crucial point, and how they deliver the message will determine, in part, how the bond market responds. So, it is now widely anticipated that the Fed will fine tune it's monetary policy this week. Or they might not do anything. Stay tuned.

The Supreme Court announced a couple of rulings this morning.

First, the court struck down an Arizona law that required people registering to vore in federal elections to show proof of citizenship. In a 7-2 vote, the court, in an opinion written by conservative Justice Antonin Scalia, ruled the voter registration provision of the 2004 state law was trumped by a federal law, the 1993 National Voter Registration Act.

The other decision announced today says federal regulators can sue drug companies for antitrust violations when brand-name drug makers pay generic competitors to keep cheaper, rival copies of a drug off the market.

In a decision that shifts the balance of power in the drug business, manufacturers will now have to defend the agreements against charges that they violate anticompetition laws, perhaps exposing the companies to a greater likelihood of aggressive competition from generic drugs and to lawsuits from drug retailers and wholesalers, insurers and others. Consumers also could benefit from sharply lower drug costs.

The court did not address whether the agreements, called pay-for-delay or reverse payments, were presumptively unlawful. But it laid out a number of possibilities under which the contracts could be attacked by antitrust officials.

The case pitted a company’s constitutional right to protect its intellectual property, through reliance on a patent that excludes competitors, against antitrust law, which holds that a company cannot unfairly exclude others from legitimately entering a business with a rival product.

According to affidavits filed in a Massachusetts lawsuit against Bank of America, the bank routinely denied qualified borrowers a chance to modify their loans to more affordable terms and paid cash bonuses to bank staffers for pushing homeowners into foreclosure.

In sworn testimony, six former employees describe what they saw behind the scenes of an often opaque process that has frustrated homeowners, their attorneys and housing counselors.  They describe systematic efforts to undermine the program by routinely denying loan modifications to qualified applicants, withholding reviews of completed applications, steering applicants to costlier "in-house" loans and paying bonuses to employees based on the number of new foreclosures they initiated. 

Five big banks-including Bank of America-settled a sweeping complaint with 49 states and several federal regulators about their foreclosure and loan modification practices. 

Bank of America agreed to abide by HAMP program guidelines, which require it to modify loans for qualified buyers, when it accepted $25 billion in bailout funds from the government in 2008 following the housing collapse. In return for the financial lifeline, the bank agreed to help millions of struggling homeowners by rewriting mortgages with more affordable terms. As an added incentive, the government agreed to pay a cash bonus for every loan that was modified successfully. But, according to the former employees, while the bank was lying to borrowers, it was also falsifying its performance when reporting to the government the number of loans that had been modified. 

Later this week, a monitor assigned to track the bank's practices will issue a report that's expected to cite ongoing violations of those new rules.

What does it take to get people off the couch? Who knows? We don't seem to protest much in the US anymore. It's common elsewhere around the world. The BBC reports more than 1,000 public protests per month in Egypt so far this year. A few hundred marched in Hong Kong shouting  “Shame on NSA! Defend freedom of speech!” They carried signs written in Chinese and English and wrapped in plastic to keep out the rain. “Protect Snowden!” In Indonesia at least 4,000 people took to the streets today to protest the governments plan to raise the subsidized price of fuel. Tens of thousands of people held a rally near Malaysia’s capital against alleged electoral fraud. Around 7,500 people participated in anti-nuclear protests in Tokyo. Yemeni security officials say thousands have protested in the capital against “excesses” by security forces, calling for the overthrow of the president and national security apparatus. Greeks set up an encampment outside th state broadcaster, Hellenic Radio and Television, after it was shut down by the Prime Minister. Some 15,000 people protested in Bulgaria yesterday about the appointment of a new national security chief. More than 3,000 Chinese villagers have maintained a 24-hour silent vigil for the past 12 days over a coal mine, which they say has devastated the ground near their homes, swallowed up a road, and left cracks in their houses. Thousands of Canadians marched in downtown Montreal on Saturday to protest changes in employment insurance. Portuguese teachers are on nationwide strike, right during final exams. And thousands of Brazilians protested increased bus and subway fares in Sao Paulo and Rio de Janeiro. Those protests have been going on for ten days, and police have been firing tear gas canisters and rubber bullets at the crowds.

The world is an edgy place these days.

Wednesday, April 10, 2013 - The Real Question on the Economy

The Real Question on the Economy

by Sinclair Noe

DOW + 128 = 14, 802
SPX + 19 = 1587
NAS + 59 = 3297
10 YR YLD +.06 = 1.80%
OIL +.35 = 94.55
GOLD – 25.70 = 1560.30
SILV - .33 = 27.75

The Federal Reserve released the minutes of their Federal Open Market Committee meeting held March 19-20. The minutes leaked out 5 hours early. The Fed inadvertently sent the report to congressional aides and trade organizations yesterday, and since the details are actually trade-able information, they had to make it public quicker than not. Make no mistake, this was a serious breach of protocol.

Once the minutes were made public, it depressed bond prices, mainly because of disagreements among the Fed's 19 policymakers about carrying on with buying $85 billion in Treasury and mortgage bonds per month to stimulate the economy. Of the 12 officials who have a vote on monetary policy this year, "a few" expected to taper the purchases around midyear and to end them later this year. "Several others thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end.” Proving once again that the prognosticating skills of the Federal Reserve are roughly equal to the singing skills of a fish on a bicycle.

Just like the release of the minutes, their ideas about exiting QE seem a bit premature, especially in light of last week's jobs report, which you recall, was a stinker. And yesterday we talked about job cuts at the big banks; here's the actual quote from a Bloomberg news article: “Rising stock prices, rebounding profits, restored dividends and a growing economy are signaling to US banks it's time for more job cuts.”

The FOMC did have a revelation; for the first time they recognized that $1.1 trillion in unpaid student loans might just constitute a wee bit of a problem for the economy. Rates on the majority of student loans taken out by undergraduates from the Education Department have remained since 2006 fixed by law at 6.8 percent. The spread between the two, which is an appropriate way to measure relative rates, since student loans are generally repaid in about 10 years, has ranged from 4.5 percentage points to 5.27 percentage points since August 2011, the highest gap on record.

And the final report from the FOMC is to stay the course of Quantitative Easing until unemployment hits 6.5% or inflation hits 2.5%; so, nothing really changed. What it reveals is the Fed is getting nervous about watching their balance sheet balloon to $4trillion or more; they're nervous about asset bubbles; they're nervous about how to exit without crashing the party; and they're nervous because this really is a grand experiment in central banking.

Anyway, the stock market moved higher today, and perhaps the best reason I can offer for the big, record breaking day on Wall Street is just that the trend is up.

President Obama sent a $3.8 trillion budget to Congress today calling for more tax revenue and slower growth for Social Security benefits. The president is proposing to replace across-the-board sequester cuts with $1.8 trillion in additional specific deficit reduction over 10 years that includes collecting more taxes from the wealthy and trimming some federal programs. For the first time, Obama is including in his budget an offer made last year to congressional Republicans to change the cost-of-living calculation to a Chained CPI formula for Social Security and tax brackets, which would increase benefits more slowly and subject more income to taxation.

The president’s plan to raise taxes on wealthy individuals and to close loopholes for corporations drew immediate condemnation from Republicans. Actually, the Republicans are licking their chops at the Chained CPI on Social Security. They're already characterizing the President's plan as a way to "save” Social Security, they're just not going to go along with his tax increases. And the plan to change the Social Security formula drew fire from fellow Democrats. I'm not sure what classes Obama actually took at Harvard, but I think he missed Negotiating 101. He apparently wants to show a willingness to compromise, but the Republicans seem unwilling to take yes for an answer.

Now, I'm thinking back to maybe last week, when Obama sent new Treasury Secretary Jack Lew to Brussels to tell the Europeans to ease up on austerity because its bad for growth; or at least it's bad for growth in Europe but apparently it's good for the US. Austerity is an anti-growth policy. It frequently makes the debt-to-GDP ratio larger because it causes such a large fall in GDP, but it's bad for Europe and good for the US. Must have missed that class on Consistency 101.

Now, if you're neck brace hasn't already gone flying off due to the tremendous torque exerted by today's news, let's put a cherry on top. Obama is proposing a new $2 billion infrastructure investment or jobs program that can overcome the damage to the economy caused by austerity in the form of a combined $300 billion in reduced spending and increased tax revenues.

Anyway, let's get back to the Federal Reserve minutes on how they will continue to juice the economy and the president's budget, which nobody likes and is likely DOA, and let's ask – what's wrong with this picture?

If the economy is getting better, then why does poverty in America continue to grow so rapidly?  Yes, the stock market has been hitting all-time highs recently, but also the number of Americans living in poverty has now reached a level not seen since the 1960s.  Yes, corporate profits are at levels never seen before, but so is the number of Americans on food stamps.  Yes, housing prices have started to rebound a little bit, but there are also more than a million public school students in America that are homeless.  That is the first time that has ever happened in U.S. History. Do we measure our economic progress by the false stock market bubble that has been inflated by the Fed's money dump on their Wall Street cronies, or should we measure our economic progress by how the poor and the middle class are doing?

Even as the markets hit new highs, the most explosive growth is in poverty; now at the highest levels since the 1960s. One out of every six Americans now live in poverty; 146 million are considered poor or low income; one in every five children live in poverty; one in five households with children are considered food insecure – meaning the kids are going hungry; and nearly 3 million children in this country live on less than $2 dollars a day, which is the global standard for extreme poverty.

At some point, maybe the President and the Republicans and the Federal Reserve could just stop for a moment and ask the question: What's the economy for anyway?

A side note: I've been talking about cyber attacks as a major trend for a couple of years now. Obama's budget proposes to boost Defense Department spending on cyber efforts to $4.7 billion, $800 million more than current levels, even as it plans to cut the Pentagon's overall spending by $3.9 billion; the idea is to protect computer networks from internet base attacks. Intelligence officials said last month that cyber attacks and espionage have supplanted terrorism as the top security threat facing the United States.

This was one of the trends I talked about at the recent Wealth protection Economic Conference. If you would like to hear the entire Conference, including nine CDs, or the MP3 recordings are now available. Contact Resource Consultants at 800-494-4149 for purchase information. 

Friday, January 11, 2013 - Meet the New Boss

Meet the New Boss

by Sinclair Noe

DOW + 17 = 13,488
SPX -.07 = 1472
NAS + 3 = 3125
10 YR YLD - .02 = 1.88%
OIL -.06 = 93.76
GOLD – 12.10 = 1663.70
SILV - .42 = 30.54

Within a few days, Tim Geithner will be gone from the Treasury. Geithner was at the center of the financial crisis, first in his role as President of the Federal Reserve Bank of New York and in 2009 as Treasury Secretary. In a recent exit interview he said: “It was a very bad crisis. No playbook. No road map. No clear precedent. If we had a different set of constraints, particularly in fiscal policy, then I think that the economic outcome could have been modestly better.”

To be fair, Geithner was handed a mess, and to his credit he did not turn it into a catastrophe, and there were constraints. Still, Geithner's tenure at Treasury has been a little less than satisfying. The Too Big to Fail banks are bigger than ever; they operate with an explicit public guarantee, and despite Geithner's dissatisfaction with constraints placed on him, he did little to challenge the banksters. Geithner quashed proposals to seize bonuses, impose new taxes or otherwise punish bankers. He claimed that it would have destabilized the banks; instead he created a moral hazard and a two-tiered system of justice; Too Big to Fail became Too Big to Jail and the result is the banksters now operate with impunity. At the same time Geithner was making sure the big banks weren't destabilized, it was far too easy to overlook the lack of stability on Main Street, as families lost their homes. Programs to modify the loans of American facing foreclosures were impotent at best. Geithner sought to incentivize banks to provide mortgage relief; what was needed was a swift kick.

Geithner will be replaced by Jack Lew. Both Geithner and Lew should be applauded for their decades of commitment to public service; they are both intelligent men, but it's disheartening that the President has once again tapped Wall Street for a key economic advisor. Back in 2006, Lew was the chief operating officer of Citigroup's Alternative Investment Unit, a proprietary trading group that oversaw a hedge fund that bet on the housing market to collapse. It's hard to imagine Lew is prepared to stand up to the banksters and fight for policies that protect working families. We need a treasury secretary who will work hard to break up too-big-to-fail financial institutions so that Wall Street cannot cause another massive financial crisis.

And so, this week we have federal regulators proudly announcing an $8.5 billion dollar settlement with 10 big banks in a deal that papers over a sham review of foreclosed loans. The original idea was to provide a review process; independent analysts would go over each mortgage loan and make sure the efforts at loan modification hadn't been bungled; make sure the paperwork wasn't deficient; make sure the fees weren't excessive; make sure the wrong family wasn't being kicked to the street; and make sure the banks weren't robo-signing reams of foreclosure documents without checking for accuracy. But the analysts and consultants didn't really work for the people; they worked for the banks. The reviews that were supposed to detect foreclosure shams were nothing more than a sham.

The comptroller’s office said that it had identified 654,000 potentially problematic foreclosures, a combination of 495,000 claims submitted by borrowers and 159,000 files that the consultants flagged for review. The regulator said it was still determining the number of reviews completed, but the consultants said that only a third of the loans were fully reviewed. Now that the review program is being shut down, we'll never really know the full extent of wrongdoing.

And because the regulators don't know how many borrowers were actually harmed, this week's settlement will be spread out among 3.8 million borrowers; some who don't deserve anything, and not enough for those who were truly aggrieved. And for the 10 banks involved, no clawbacks of fees and profits, and no admission or denial of guilt.

And just last month, HSBC was fined $1.9 billion for money laundering. There were no criminal charges against any individuals, even though the bank admits to laundering billions for Mexican drug cartels, violating the Bank Secrecy Act and also the Trading with the Enemy Act. There were no criminal prosecutions against the bank either. The money laundering was brazen. The bank gave special boxes to the drug cartels, so they could fit their cash deposits through the bank tellers' windows. Other bank employees directed terrorist groups on how to circumvent sanctions. Apparently the rationale of the government for not pursuing criminal cases against individuals at the bank was that to do so when the individuals were employees of such an important bank, might threaten the stability of the financial system.

Money laundering is taking the proceeds of crime, “illegitimate” money, and bringing it into the legitimate financial system so that the criminals can use that money without being tied to those terrible crimes – crimes like manufacturing and distributing drugs, selling people into the sex trade, trafficking in illegal weapons, and terrorist attacks against our troops, our embassies, and our country. This is not mere money we are talking about; it is the daily gang violence on the streets of our cities and towns, it is the increased likelihood that your children will be offered drugs in their schools, it is the abduction of children and selling them into the sex trade; it's the killing and maiming of troops in Afghanistan; the violence and political unrest around the world – all made possible by the banks. And not just HSBC.

HSBC Bank USA was already under a written agreement from 2003-2006 with US regulators to correct deficiencies in its anti-money laundering regime.  In a strikingly similar case, Wachovia was found to have allowed as much as $420 billion through its banks without money laundering controls.  $110 million of that was linked directly to Mexican drug cartels, just like the HSBC case.  Wachovia was fined $160 million, $110 million of which was just coughing up the ill-gotten gains and not an actual penalty.  Not one person was prosecuted.  Recently, Standard Chartered Bank was fined $667 million, and ING Bank was fined $619 million, for engaging in the same criminal activity HSBC was engaged in when it doctored wire transfer information in order to clear transactions from countries barred from accessing the U.S. financial system, like Iran. Again, not a single person is being prosecuted in those cases. If it sounds like a lot of money in fines, just consider that this morning, Wells-Fargo posted fourth quarter earnings of more than $5 billion – far more than the fines imposed on the banks I just mentioned.

And we find this acceptable because the regulators and politicians are afraid to force the banks to conduct business honestly and sensibly. Better to allow the banks to lubricate the transactions of drug cartels and terrorists than face a possible bank closure that might challenge the global banking system.

More than 4 years after the financial crisis nearly imploded the global financial system, a committee of central bankers and regulators from more than two dozen countries, including the United States, has disappointingly given in to lobbying by big banks; watering down rules meant to strengthen the global financial system. After the meltdown, it just made sense that the banks should set aside enough reserves to cover possible and potential losses. The committee unanimously rolled back the so-called Basel III rules that were adopted in 2010 to make them “more realistic”.

The banks argued that requiring them to hold most of their liquid reserves as cash and government securities would restrict their ability to lend to small businesses and consumers because they would have less money to lend. Instead of holding cash reserves or Treasury bonds in reserve, the banks want to be able to hold stocks, or mortgage-backed securities.

Large banks are second to none among institutions in arguing against regulations, no matter how reasonable and valuable in protecting both the public and the banks themselves against unwise behavior. The problem is that the new assets defined as liquid are precisely those that banks found difficult to value and trade in 2008. Relying on mortgage-backed securities to provide liquidity during a crisis is a recipe for disaster, and just stunningly stupid.

The reality is that the banks know that in a crisis they would receive emergency loans and capital from central banks and their governments, so why tie up their reserves with assets that provide only modest returns? And because the banks know they are Too Big to be allowed to fail, they dictate policy in ways that put the world at greater risk of another crisis.

Eighty years ago this month, Ferdinand Pecora, the former assistant district attorney for New York City, was appointed chief counsel for the US Senate Committee on Banking and Currency. In subsequent months, the hearings of the Pecora Commission featured many sensational revelations about the practices that led to the 1930’s financial crisis.

The Commission’s investigation led to far-reaching reform – most famously, the Glass-Steagall Act, which separated commercial and investment banking. But Glass-Steagall didn’t stop there. It created federal insurance for bank deposits. With unit banking (in which all operations are carried out in self-standing offices) viewed as unstable, banks were now permitted to branch more widely. Glass-Steagall also strengthened regulators’ ability to clamp down on lending for real-estate and stock-market speculation. Glass-Steagall separated the banks' deposit-taking and securities underwriting activities. If a bank wanted to gamble, they could, but they couldn't gamble with depositors' money; and if the bankers lost their bet, they lost their own money; they had skin in the game.

The hearings also led to passage of the Securities Act of 1933 and the Securities Exchange Act of 1934. Securities issuers and traders were required to release more information, and were subjected to higher transparency standards. The notion that capital markets could self-regulate was decisively rejected. The contrast with today is striking.

We have a watered down Dodd-Frank Act, largely written by the bankers. We have watered down Basel III rules. And we have banks acting illegally, conspiring with drug cartels and terrorists; and doing so with impunity. And there are stacks upon stacks of illegally laundered dollars bearing the signature of Timothy Geithner, and soon they will bear the loopty-loop signature of Jack Lew.

Wednesday, January 09, 2013 - Miscellaneous Financial News

Miscellaneous Financial News
by Sinclair Noe

DOW + 61 = 13,390
SPX + 3 = 1461
NAS + 61 = 13,390
10 YR YLD -.02 = 1.85%
OIL +.01 = 93.16
GOLD – 2.80 = 1659.00
SILV - .05 = 30.46

AIG, the insurance company won't join ex-CEO Maurice "Hank" Greenberg's lawsuit against the US government over the insurance giant's financial crisis bailout. Greenberg has filed a $25 billion lawsuit accusing the government of violating shareholders' rights by bailing out AIG, because the terms of the bailout weren't as cushy as Greenberg wanted. Thank you, AIG.

Earlier this week I told you about an $8.5 billion settlement announced between the Federal Reserve and the Office of the Comptroller of the Currency with 10 big mortgage services, including Citigroup, JPMorgan and Wells Fargo over botched foreclosure claims. Now, Goldman Sachs and Morgan Stanley and other banks are expected to agree to a $1.5 billion settlement with the regulators sometime this week. The other banks haven't been officially identified but best guess is that the group includes HSBC, Ally, EverBank, and OneWest Bank.

Goldman got into the mortgage servicing business by purchased Litton Loan Servicing and Morgan Stanley bought Saxon Capital. The Fed has ordered both firms to conduct case by case reviews of foreclosures after widespread mistakes were discovered in how the firms processed home seizures.

Meanwhile, Morgan Stanley plans to cut about 1,600 jobs, nearly 3 percent of its workforce. The cuts will focus on senior ranks at the bank. About half of the cuts will be in the U.S. Morgan Stanley's investment banking unit has been asked to cut about 6 percent of its staff.

Remember when the government offered an amnesty program for people who were evading taxes by holding funds in Swiss bank accounts; admit it, pay the tax plus penalties and all will be forgiven. Well, there was a hitch; taxpayers whose identities become known to the IRS before the clients come forward voluntarily are generally not eligible for the reduced fines and penalties.

UBS, the Swiss banking giant came under criminal investigation for its work selling tax-evasion services to wealthy Americans. Three years ago, UBS entered into a deferred prosecution agreement, agreed to pay a $780 million fine and later turned over more than 4,000 client names. More than four dozen American clients of Swiss and Swiss-style banks have been charged or indicted in recent years; today a 79 year old Florida woman pleaded guilty to criminal charges of tax evasion through accounts at UBS. She faces six years in prison, but probably won't face that much. She actually tried to enter a voluntary disclosure program with the Internal Revenue Service that would have allowed her to pay reduced fines and penalties, but the IRS already had her name.

The government will stop sending out Social Security checks as on March 1^st. No more paper checks. Instead, the Treasury Department will distribute funds electronically, either via direct deposit or on a prepaid "Direct Express" card. Most Social Security benefit recipients already receive their payments electronically, but 5 million checks are mailed each month. Over the next ten years, the move away from paper checks is expected to save about $1 billion.

As you have likely heard, President Obama plans to put Tim Geithner out of his misery tomorrow by nominating Jack Lew for Treasury Secretary. Lew is known for being Obama’s White House Chief of Staff and also for a truly bizarre signature. And, should he be confirmed and subsequently have his name printed on a bunch of dollar bills, Lew will likely be forced to come up with something that actually looks like it spells a name and not a Jackson Pollack painting.

US oil production topped seven million barrels per day for the first time since March, 1993 and is nearly 20 percent above the amount produced at this time last year. The latest weekly data from the Energy Information Administration shows that imports fell as domestic production continues to increase. The government now predicts the US industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in US production to the point where the US is expected to pass Saudi Arabia in crude production by 2020.

At the same time, the industry is developing more pipeline capacity to carry crude from storage in Cushing, Okla. to the Gulf Coast refining areas. That should continue to drive the trend, create more refined product for the US and export markets, and the EIA says that should bring down oil prices over the next several years.

That's the good news. The bad news is that we're still burning fossil fuels, and the climate is getting hotter, not just warmer – hotter. The average temperature in the continental US last year was 55.3 degrees; that's a full degree higher than the previous record. Last year’s weather in the United States began with an unusually warm winter, with relatively little snow across much of the country, followed by a March that was so hot that trees burst into bloom. The soil dried out in the March heat, helping to set the stage for a drought that peaked during the warmest July on record. The drought covered more than 60% of the nation; comparable to a severe drought in the 50's and almost as bad as the Dust Bowl days of the 1930's. The drought killed corn and soybean crops, and forced ranchers to thin their herds. The Mississippi River's levels dropped so much that barge traffic backed up and even came to a standstill; stretches of it are deserted like a 'ghost town,' and some of it could be closed altogether as it heads below 3 feet in depth.

Don't forget the tornadoes, the Hurricanes (Isaac and Sandy), derechos, and of course, wildfires. Plain and simple, we need a cold winter with lots of snow, and then we'll need lots of rain to counter the drought. If we don't get it, then 2012 might seem mild. The drought of 2012 likely sliced one percent off the GDP. The nation was hit by 11 environmental catastrophes that cost at least $1 billion in losses. Climate is extremely complex. We may yet see some cold years. There is some thinking that the melting of ice at the poles could temporarily cool the oceans and reduce temperatures for a while. But the longer term trend is not only toward hotter, it is toward a kind of hotter that human beings may find it difficult to survive.

The Baseball Writers' Association of America's ballot for this year's Hall of Fame class listed 37 players, including 24 new candidates, including Barry Bonds – the all time leader in home runs, and Roger Clements – a seven-time Cy Young Award winning pitcher. To be inducted, a player must receive a vote on at least 75 percent of the ballots returned. The Baseball Hall of Fame's Class of 2013 will not have any new inductees from the ranks of the recently retired. It's a dark day in Cooperstown and steroids are the reason.

The Consumer Electronics Show is wrapping up in Las Vegas. If you were waiting for a 110 inch, high definition flat screen TV, it made its debut this week. On the other end of the spectrum was a smart watch; it syncs up with your smartphone so you can get emails, and text and other messages on a 1-and-a-quarter-inch screen. There were cameras everywhere; on top of bicycle helmets, built into racing goggles. There were pouches to let you use your smartphone underwater. There were 3D printers. They've developed mind over matter devices, or at least you can use your mind to transmit signals to electronics that will then move themselves. All you Jedi warriors need to start your training. And then there was one booth selling antennas; yep, big old fashioned television antennas.

The Partnership for Civil Justice Fund obtained a Freedom of Information Act request that revealed the FBI coordinated at length with local law enforcement, private financial institutions, the Federal Reserve and other government agencies to monitor the Occupy Wall Street movement’s activities. One of the things I learned was that the Federal Reserve System has its own commissioned law enforcement arm, the Federal Reserve Police, which is allowed to operate in uniform or plainclothes. Apparently, the FBI treated the Occupy movement as a potential criminal and terrorist threat even though the agency acknowledges in documents that organizers explicitly called for peaceful protest and did "not condone the use of violence" at occupy protests. The idea was apparently to crackdown on the Occupy movement, and it seems to have worked. Meanwhile, how many of the banksters ended up in jail? And a funny thing happened while all those private and federal law enforcement types merged together to crush some protesters in the park...,

Someone here at the radio station today told me her Bank of America credit card was being replaced. She talked to the bank and they said there was a problem with hackers. I don't know if there is a direct connection but at least nine financial institutions have been hit by hackers since September; more attacks are expected. And part of what makes them suspicious is that they seem calculated not to steal account data or money, but instead to disrupt the banking system. Government officials say Iran is behind the attacks. The distributed denial of service attacks, which seek to overload an online system's ability to respond to requests, targeted Bank of America, Citigroup, Wells Fargo, U.S. Bancorp, PNC, Capital One, BB&T, HSBC, and Fifth Third Bank. You might want to make sure your credit cards are still working.