Corporate Bond Funds Pick Up Big Money Flows

A conservative risk approach to equities

Is it me or are stories like this on the rise ?

The title was so funny…who even cares about the oped piece on a Friday afternoon ?

Congrats 

Put aside pre conceived notions of those who have not had work for a year or more. Learn about the real people suffering this blight…

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Thank you, Chairman Johnson, Ranking Member Shelby, and members of the Committee for inviting me today to talk about the economic situation in Europe and actions taken by the Federal Reserve in response to this situation.

For two years now, developments in Europe have played a critical role in shaping the tenor of global financial markets. The combination of high debts, large deficits, and poor growth prospects in several European countries using the euro has raised concerns about their fiscal sustainability. Such concerns were initially focused on Greece but have since spread to a number of other euro-area countries, leading to substantial increases in their sovereign borrowing costs. Pessimism about these countries’ fiscal situation, in turn, has helped to undermine confidence in the strength of European financial institutions, increasing the institutions’ borrowing costs and threatening to curtail their supply of credit. These developments have strained global financial markets and weighed on global economic activity.

In the past several months, European leaders have taken a number of policy steps that have helped reduce financial market stresses. In early December, the European Central Bank, or ECB, reduced its policy interest rate, cut its reserve requirement, eased collateral rules for its lending, and, perhaps most important, began providing three-year loans to banks. Additionally, European leaders announced and have started to implement proposals to strengthen fiscal rules and European fiscal coordination, as well as to expand the euro-area financial backstop. These steps are positive developments and signify the commitment of European leaders to alleviate the crisis.

Since early December, borrowing costs for several vulnerable European governments have declined, funding pressures for European banks have eased, and the tone of investor sentiment has improved. However, financial markets remain under strain. Europe’s authorities continue to face difficult challenges as they seek to stabilize their fiscal and financial situation, and it will be critical for them to follow through on their policy commitments in the months ahead.

Here at home, the financial stresses in Europe are undoubtedly spilling over to the United States by restraining our exports, weighing on business and consumer confidence, and adding to pressures on U.S. financial markets and institutions. Of note, foreign financial institutions, especially those in Europe, continue to find it difficult to fund themselves in dollars. A great deal of trade and investment the world over is financed in dollars, so many foreign financial institutions have heavy borrowing needs in our currency. These institutions also borrow heavily in dollars because they are active in U.S. markets, purchasing government and corporate securities and lending to households and firms. As concerns about the financial system in Europe mounted, many European banks faced a rise in the cost and a decline in the availability of dollar funding. Difficulty acquiring dollar funding by European and other financial institutions may ultimately make it harder and more costly for U.S. households and businesses to get loans. Moreover, these disruptions could spill over into the market for borrowing and lending in U.S. dollars more generally, raising the cost of funding for U.S. financial institutions. Although the breadth and size of all of these effects on the U.S. economy are difficult to gauge, it is clear that the situation in Europe poses a significant risk to U.S. economic activity and bears close watching.

Swap Lines with Other Central Banks
To address these potential risks to the United States, as described in an announcement on November 30, the Federal Reserve agreed with the European Central Bank (ECB) and the central banks of Canada, Japan, Switzerland, and the United Kingdom to revise, extend, and expand its swap lines with these institutions.1 The measures were taken to ease strains in global financial markets, which, if left unchecked, could significantly impair the supply of credit to households and businesses in the United States and impede our economic recovery. Thus far, such strains have been particularly evident in Europe, and these actions were designed to help prevent them from spilling over to the U.S. economy.

Three steps were described in the November 30 announcement. First, we reduced the pricing of drawings on the dollar liquidity swap lines. The previous pricing had been at a spread of 100 basis points over the overnight index swap rate.2 We reduced that spread to 50 basis points. The lower cost to the ECB and other foreign central banks enabled them to reduce the cost of the dollar loans they provide to financial institutions in their jurisdictions. Reducing these costs has helped alleviate pressures in U.S. money markets generated by foreign financial institutions, strengthen the liquidity positions of European and other foreign institutions, and boost confidence at a time of considerable strain in international financial markets. Through all of these channels, the action should help support the continued supply of credit to U.S. households and businesses.

Second, we extended the authorization for these lines through February 1, 2013. The previous authorization had been through August 1, 2012. This extension demonstrated that central banks are prepared to work together for a sustained period, if needed, to support global liquidity conditions.

Third, we agreed to establish, as a precautionary measure, swap lines in the currencies of the other central banks participating in the announcement. (The Federal Reserve had established similar lines in April 2009, but they were not drawn upon and were allowed to expire in February 2010.) These lines would permit the Federal Reserve, if needed, to provide euros, Canadian dollars, Japanese yen, Swiss francs, or British pounds to U.S. financial institutions on a secured basis, much as the foreign central banks provide dollars to institutions in their jurisdictions now. U.S. financial institutions are not experiencing any foreign currency liquidity pressures at present, but we judged it prudent to make arrangements to offer such liquidity should the need arise in the future.

I would like to emphasize that information on the swap lines is fully disclosed on the Federal Reserve’s website–through our weekly balance sheet release and other materials–and information on swap transactions each week is provided on the website of the Federal Reserve Bank of New York.3

I also want to underscore that these swap agreements are safe from the perspective of the Federal Reserve and the U.S. taxpayer, for five main reasons:

•First, the swap transactions themselves present no exchange rate or interest rate risk to the Fed. Because the terms of each drawing and repayment are set at the time that the draw is initiated, fluctuations in exchange rates and interest rates that may occur while the swap funds are outstanding do not alter the amounts eventually to be repaid.
•Second, each drawing on the swap line must be approved by the Federal Reserve, which provides the Federal Reserve with control over use of the facility by the foreign central banks.
•Third, the foreign currency held by the Federal Reserve during the term of the swap provides added security.
•Fourth, our counterparties in these swap agreements are the foreign central banks. In turn, it is they who lend the dollars they draw from the swap lines to private institutions in their own jurisdictions. The foreign central banks assume the credit risk associated with lending to these institutions. The Federal Reserve has had long and close relationships with these central banks, and our interactions with them over the years have provided a track record that justifies a high degree of trust and cooperation.
•Finally, the short tenor of the swap drawings, which have maturities of at most three months, also offers some protection in that positions could be wound down relatively quickly were it judged appropriate to do so.
The Federal Reserve has not lost a penny on any of the swap line transactions since these lines were established in 2007, even during the most intense period of activity at the end of 2008. Moreover, at the maturity of each swap transaction, the Federal Reserve receives the dollars it provided plus a fee. These fees add to overall earnings on Federal Reserve operations, thereby increasing the amount the Federal Reserve remits to taxpayers.

Conclusion
The changes in swap arrangements that I have discussed have had some positive effects on dollar funding markets. Since the announcement of the changes at the end of November, the outstanding amount of dollar funding through the swap lines has increased substantially, to more than $100 billion, and several measures of the cost of dollar funding have declined.

That being said, many financial institutions, especially those from Europe, continue to find it difficult and costly to acquire dollar funding, in large part because investors remain uncertain about Europe’s economic and financial prospects. Ultimately, the easing of strains in U.S. and global financial markets will require concerted action on the part of European authorities as they follow through on their announced plans to address their fiscal and financial difficulties. The situation in Europe is continuously evolving. Thus, we are closely monitoring events in the region and their spillovers to the U.S. economy and financial system.

Thank you again for inviting me to appear before you today. I would be happy to answer any questions you may have.

Linsanity fo’ sho’

Congrats WFC

It’s the little things our politicians doe for us….

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Stocks continued their 2012 surge Thursday, with the Dow breaching 12,900 and the S&P 500 hitting its highest level in nine months. The Nasdaq rose to a level not seen since the dot com bubble more than a decade ago. Commodities also continued their 2012 trend, with a mixed session highlighted by strength in energy and weakness in agricultural commodities.

The recent action — broad strength in stocks, mixed performance in commodities — belies the conventional wisdom that all “risk assets” are moving in tandem.

There is rotation happening within the commodity sector but, broadly speaking, it should be another banner year for hard assets, according to Frank Holmes, CEO and CIO of U.S. Global Investors.

In addition to continued demand from emerging markets and signs of life in the U.S. economy, Holmes notes global central banks have embarked on another easing cycle.

Indeed, Morgan Stanley’s economics team declares “the great monetary easing (part 2), is in full swing,” noting 16 major central banks have eased policy since the fourth quarter, including the U.S. Fed, Bank of Japan, European Central Bank, Bank of England and the central banks of Sweden, China and India.

“In response to a slowing global economy and further downside risks emanating from the possibility of an escalating Eurozone debt crisis, central banks all over the world…have been deploying their arsenal for a while now, and should continue to do so,” Morgan’s team writes. “The result is aggressive monetary easing on a global scale.”

Based partially on this easy money, as well as fear of supply disruptions, more capital expenditures in the U.S. and normal seasonal patterns, Holmes is most bullish on oil and gas right now.

POTENZA, Italy (Reuters) – Italian police said on Friday they had seized about $6 trillion of fake U.S. Treasury bonds in Switzerland, and issued arrest warrants for eight people accused of international fraud and other financial crimes.

The operation, co-ordinated by prosecutors from the southern Italian city of Potenza, was carried out by Italian and Swiss authorities after a year-long investigation, an Italian police source said.

The fake securities, more than a third of U.S. national debt, were seized in January from a Swiss trust company where they were held in three large trunks.

The eight alleged fraudsters are accused of counterfeiting bonds, credit card forgery, and usury in the Italian regions of Lombardy, Piedmont, Lazio and Basilicata, police said.

The Swiss Federal Prosecutor’s office said Zurich state prosecutors had worked on the investigation at the request of the Italian prosecutor. The Swiss handed over their findings in July of last year.

In 2009, Italian financial police seized $742 billion of fake U.S. bearer bonds in the northern Italian town of Chiasso, near the Swiss border.

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Oil climbed in New York, heading for the biggest weekly gain this year, as signs of an improving U.S. economy and progress on a bailout for Greece bolstered the outlook for fuel demand. Brent touched an eight-month high.

West Texas Intermediate crude rose as much as 1.2 percent today and is up 4.9 percent this week. A gauge of U.S. leading indicators probably advanced in January, economists said before the report today. European governments may cut interest rates on emergency loans to Greece and use European Central Bank funds to plug a financing gap, two people familiar with discussions said.

“We’ve had a strong week and there’s strong upward momentum,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The headlines are what’s driving this market and if they point to a better economy, prices will rise. It looks like a Greek deal is going to finally get done.”

Oil for March delivery rose $1.16, or 1.1 percent, to $103.47 a barrel at 9:29 a.m. on the New York Mercantile Exchange. The contract reached $103.57, the highest level since Jan. 5. Futures are headed for the biggest weekly gain since Dec. 23.

Brent oil for April settlement dropped 43 cents, or 0.4 percent, to $119.68 a barrel on the London-based ICE Futures Europe exchange. The contract touched $120.70, the highest level since June 15.

via NY POST 

Apple juice in sippy cups is so last year!

Today’s fashionable New York City tots are going wild for a hot new trend in preschool potables — the babyccino!

Across Brooklyn, coffee shops have been attracting crowds of hipster moms and their pampered offspring by offering tiny cups of decaffeinated cappuccino suitable for little kids with adult palates.

“They just really like the taste of coffee,” said Barbara Albinus, who takes her 6-year-old girl and 9-year-old boy to the Cafe Regular in Park Slope for coffee. “I drink coffee every day of the year, so they like it, too.

THE BROOKLYN PAPER

JOE JR.: Shirley Worcester, 2, catches up on her reading while sipping a steamed-milk-only “babyccino” at Sit and Wonder in Park Slope.

“I only let them have it once in a while,” she said. “They’re already jumping off the walls [anyway].”

Cafe Regular barista Seth Lombardi said that on weekends, junior java junkies flood the place.

“We kind of have a joke around here on weekends,” Lombardi, 30, told The Post. “We greet people by saying: ‘Welcome to Cafe Regular day care. Are you dropping off or picking up?’ ”

The Root Hill coffee shop in Gowanus was taking the “day care” vibe a step further yesterday, playing a video of the animated film “Shrek” on a screen while several kids and their moms sipped beverages.

“I order coffee from here just about every day, and my son likes to have some when he’s with me. I guess he just acquired the taste over time,” said Melissa Foster, 41, whose 7-year-old son, Michael, was drinking a small iced babyccino.

The kiddie coffee cult is cropping up at Brooklyn coffee shops from Fort Greene to Prospect Heights.

Coffee-shop workers said babyccinos come in the decaf coffee variety and in a variety that is only steamed milk. The second is popular with kids as young as 2.

Natalie Ekberg, a barista at Root Hill, said the coffee drinks are to Brooklyn kids what Happy Meals are to children across the rest of America.

“A lot of kids come in here with their parents after school and actually ask for the decaf babyccino by name,” she said.

One of the top babyccino joints is Sit and Wonder in Park Slope.

“Our children love babyccinos!” Eric Worcester told The Brooklyn Paper after getting the steamed-milk-only version of the beverage for his children — Evelyn, 5, and Shirley, 2.

But doctors worry about the coffee trend.

Dr. Wendy Slusser of the Mattel Children’s Hospital UCLA, said both decaf and regular coffee have a compound that robs kids of iron.

“Even kids with mild anemia, they might not pass out, but they might not perform as well in school or learn as well,” she said.

Not all Brooklynites are buzzed on the kiddie coffee trend.

“Having coffee drinks for kids? I just don’t understand that,” said Rebecca Grosso, 29, a customer at Cafe Regular.

Another customer, Christine Lubin, 30, of Park Slope, added, “Park Slope parents can be pretty righteous, so this doesn’t surprise me.

“I mean, why wouldn’t you get your kids hooked on fashionable coffee drinks?”

Read more: http://trade.cc/amyn

As part of doing business with the federal government, large U.S. corporations receive annual multi-million-dollar contributions to their private pension funds.

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See what the differences are….

The fallacy of the lack of volume in the markets….

“Rail data has been volatile these last few weeks, but the trend remains firmly positive, though consistent with only a modestly expanding economy.  This week’s data was a bit mixed with carloads posting a modest gain and intermodal declining a bit.  The AAR has details:

“The Association of American Railroads (AAR) today reported an mixed weekly rail traffic for the week ending February 11, 2012, with U.S. railroads originating 279,501 carloads, up 1.7 percent compared with the same week last year. Intermodal volume for the week totaled 227,207 trailers and containers, down 0.4 percent compared with the same week last year.

Twelve of the 20 carload commodity groups posted increases compared with the same week in 2011, with petroleum products, up 29.9 percent; crushed stone, sand and gravel, up 27.2 percent, and metallic ores, up 23.7 percent. The groups showing a significant decrease in weekly traffic included nonmetallic minerals, down 26.3 percent, and farm products excluding grain, down 21.5 percent.

Weekly carload volume on Eastern railroads was down 4.1 percent compared with the same week last year. In the West, weekly carload volume was up 5.7 percent compared with the same week in 2011.

For the first six weeks of 2012, U.S. railroads reported cumulative volume of 1,708,847 carloads, up 1.3 percent from last year, and 1,337,434 trailers and containers, up 3.7 percent from last year.”

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Identity theft and phishing top the federal U.S. tax service’s list of “dirty dozen” scams, which tend to peak this time of year as millions of Americans gear up to file their tax returns.

“Scam artists will tempt people in person, online and by email with misleading promises about lost refunds and free money. Don’t be fooled by these scams,” Internal Revenue Service(IRS) Commissioner Doug Shulman said in a statement.

While the “dirty dozen” schemes are common year round, many occur most frequently during tax filing season, the IRS said. The filing deadline for 2011 taxes is April 17.

The IRS did not give figures in its annual list for the amount stolen or not paid through scams.

Identity theft occurs when thieves use a taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.

The IRS blocked more than $1.4 billion from going to the wrong person last year through identity theft, the statement said.

Phishing is usually carried out through an unsolicited email or a fake website to lure potential victims and prompt them to provide personal and financial information.

“Armed with this information, a criminal can commit identity theft or financial theft,” the statement said.

Among other scams, about 30,000 people have voluntarily disclosed foreign financial accounts since 2009 under a program to pay taxes on money returned to the United States.

The program was reopened this year. The IRS has collected about $3.4 billion under the 2009 program, and another $1 billion in upfront payments under a 2011 program.

The “dirty dozen” list is rounded out by:

• fraud by return preparers;

• scams promising “free money” from the IRS or tax schemes involving Social Security;

• false or inflated income and expenses;

• false claims for refunds from Form 1099, which reports income other than wages, salaries and tips;

• frivolous arguments;

• falsely claiming zero wages;

• abuse of charitable organizations and deductions;

• disguised corporate ownership;

• misuse of trusts.

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