By 2030!
Horseshit.
Comments »Monthly Archives: March 2012
5 Charged With Insider Trading After Alcoholics Anonymous Confession
WASHINGTON (AP) — The Securities and Exchange Commission says it is charging two financial advisors and three others connected to them with insider trading for more than $1.8 million in illegal profit gained from confidential information gleaned through an Alcoholics Anonymous relationship.
Read the rest here.
Comments »California’s Greek Tragedy
By MICHAEL J. BOSKIN and JOHN F. COGAN
Long a harbinger of national trends and an incubator of innovation, cash-strapped California eagerly awaits a temporary revenue surge from Facebook IPO stock options and capital gains. Meanwhile, Stockton may soon become the state’s largest city to go bust. Call it the agony and ecstasy of contemporary California.
California’s rising standards of living and outstanding public schools and universities once attracted millions seeking upward economic mobility. But then something went radically wrong as California legislatures and governors built a welfare state on high tax rates, liberal entitlement benefits, and excessive regulation. The results, though predictable, are nonetheless striking. From the mid-1980s to 2005, California’s population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000.
California’s economy, which used to outperform the rest of the country, now substantially underperforms. The unemployment rate, at 10.9%, is higher than every other state except Nevada and Rhode Island. With 12% of America’s population, California has one third of the nation’s welfare recipients.
Partly due to generous union wages and benefits, inflexible work rules and lobbying for more spending, many state programs and institutions spend too much and achieve too little. For example, annual spending on each California prison inmate is equal to an entire middle-income family’s after-tax income. Many of California’s K-12 public schools rank poorly on standardized tests. The unfunded pension and retiree health-care liabilities of workers in the state-run Calpers system, which includes teachers and university personnel, totals around $250 billion.
Meanwhile, the state lurches from fiscal tragedy to fiscal farce, running deficits in good times as well as bad. The general fund’s spending exceeded its tax revenues in nine of the last 10 years (the only exceptions being 2005 at the height of the housing bubble), abetted by creative accounting and temporary IOUs.
Now, the bill is coming due. After running a $5 billion deficit last year and another likely deficit this year, Gov. Jerry Brown’s budget increases spending next year by $7 billion and finances the higher spending with income and sales-tax hikes. Specifically, he’s proposing a November ballot initiative raising the state’s top income tax rate to 12.3%, making it the nation’s highest, and raising the basic state sales tax rate, already the nation’s highest, to 7.75% from 7.25%.
Read the rest here.
Comments »No, You Don’t Get to Have a Private Stock Market, Sorry
By Josh Brown
- Josh Brown
Ya gotta admire the spirit of this whole thing – “The rules of the regular stock market and going public are too restrictive and annoying. So let’s just make our own stock market based on the West Coast where only us venture guys and founders and our employees can trade amongst each other.”
Read the rest here.
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Private Equity’s Foreclosures for Rentals Net 8%: Mortgages
By Edward Robinson – Mar 13, 2012 12:47 PM ET
Bloomberg Markets Magazine
Ken Major climbs the steps of a county courthouse in a San Francisco suburb with $500,000 in cashier’s checks in one hand and a list of addresses in the other. Major is a buyer for Waypoint Real Estate Group LLC, an Oakland-based investment firm that’s scooping up foreclosed homes in California.
On this December afternoon, he joins a dozen house flippers as an auctioneer starts hawking the latest batch of defaulted properties to hit the market. Major bids on a three-bedroom house in Antioch, and after other buyers counter, he wins at $147,600.
March 13 (Bloomberg) — Colin Wiel, co-founder of Waypoint Real Estate Group LLC, talks about the rental market for single-family homes in California and technology that allows Waypoint to manage home rentals in a similar way to multi-family apartment units. He spoke on Feb. 9 in San Francisco. This topic will be in the April issue of Bloomberg Markets magazine. (Source: Bloomberg)
“We got it,” he mutters into a mobile-phone mic dangling from his ear. The house was valued at more than $400,000 in 2006, Bloomberg Markets magazine reports in its April issue.
Waypoint, a private-equity real-estate fund with $150 million in assets, is pioneering a new approach to making money from the housing crash. Since 2007, investors have been trolling the cratered suburbs stretching from California to Florida (SPCSMIA) for cheap houses to flip. And firms such as PennyMac Mortgage Investment Trust have sought value in subprime-mortgage-backed securities.
Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith LP in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada.
Read the rest here.
Comments »Citigroup, SunTrust Banks Capital Plans Fail Fed Stress Tests
By Donal Griffin – Mar 13, 2012 5:50 PM ET
Citigroup Inc. (C), the lender that took the most government aid during the financial crisis, will resubmit its capital plan to regulators after failing to meet some minimum standards in Federal Reserve stress tests.
SunTrust Banks Inc. (STI), Ally Financial Inc. and MetLife Inc. also fell short by at least one measure under the central bank’s most dire economic scenario, according to results released by the Fed today. Ally also intends to resubmit its plan, the company said in a statement.
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Comments »Would a Higher Top Tax Rate Raise Revenues?
By BRUCE BARTLETT
On Friday, Prof. Allan Meltzer of Carnegie Mellon University, a well-known conservative economist, offered a commentary in The Wall Street Journal arguing against policies to equalize the distribution of income.
His key piece of evidence is the chart below, from a study by the Swedish economists Jesper Roine and Daniel Waldenstrom, that shows the share of income accruing to the top 1 percent of earners in seven Western democracies. They all follow the same trend line, Professor Meltzer says, and it proves that “domestic policy can’t be the principal reason for the current spread between high earners and others.”
Jesper Roine and Daniel Waldenstrom, “The Evolution of Top Incomes in an Egalitarian Society; Sweden, 1903–2004,” Research Institute of Industrial Economics
Leaving aside the fact that the ultrarich have gained far more in the United States than any other country in his sample and that there is no upward trend at all in the Netherlands, he seems to have missed an important implication of his own conclusion.
If the rich are going to continue to get richer in low-tax countries and high-tax countries alike, then it must mean that high tax rates have far less of a disincentive effect on the rich than conservatives like Professor Meltzer continually proclaim.
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Comments »20 Twitter Feeds all Financial Advisers Should Follow
EXODUS: California Tax Revenue Plunges by 22%
State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka”, i.e., ‘I have found it’. But what Chaing is finding as Controller is that California’s economy as measured by tax revenues is still tanking. Compared to last year, State tax collections for February shriveled by $1.2 billion or 22%. The deterioration is more than double the shocking $535 million reported decline for last month. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.
While California Governor Brown promises strong economic growth is just around the corner, Chaing proves that the best way for Sacramento politicians to hurt the economy and thereby generate lower tax revenue, is to have the highest tax rates in the nation.
California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.
The State Controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes. Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out. But the Controller’s report shows personal income tax collections fell by $325 million, or 16% versus last year. Furthermore, leap year would have added another day for retail sales and use tax collection, but those revenues also fell during February-by an even larger $813 million, 25% decline from 2011.
The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.
Derisively referred to as “Taxifornia” by the independent Pacific Research Institute, California wins the booby prize for the highest personal income taxes in the nation and higher sales tax rates than all but four other states. Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst state tax burden in the U.S.
Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26% more than in 2010 and five times as many as in 2009. According SLC President, Joe Vranich: the “top ten reasons companies are leaving California: 1) Poor rankings in surveys 2) More adversarial toward business 3) Uncontrollable public spending 4) Unfriendly business climate 5) Provable savings elsewhere 6) Most expensive business locations 7) Unfriendly legal environment for business 8) Worst regulatory burden 9) Severe tax treatment 10) Unprecedented energy costs.
Vranich considers California the worst state in the nation to locate a business and Los Angeles is considered the worst city to start a business. Leaving Los Angeles for another surrounding county can save businesses 20% of costs. Leaving the state for Texas can save up to 40% of costs. This probably explains why California lost 120,000 jobs last year and Texas gained 130,000 jobs.
Read the rest here.
Comments »The Bulls Smoke the Bears, Inhale, and Hold It In Late Day Trade
The market got off to a good start, but heated up after the Fed statement on interest rate policy…which was left unch. The fed said the economy is expanding moderately and that oil and other commodities will push inflation higher temporarily.
Then in late day trade JPM announced they got a clean bill of health from the stress tests and was allowed by the fed to raise their dividend 20%. JPM also announced a whopping $15 billion stock buy back program and the markets took off in the last 45 minutes of trade; effectively smoking the bears.
DOW UP 220
NASDAQ UP 56
S&P UP 25
OIL UP $0.35
GOLD DOWN $28
The Clam Anthem:
[youtube://http://www.youtube.com/watch?v=gMyH4XTlVgs 450 300] Comments »Zynga Announces Dilution 90 Days After Going Public
FLASH: Market Pops as Some Stress Test Results are Released
JPM Ups Dividend & Announces Buyback After a Clean Bill of Health From Stress Test Results
FLASH: CTFC Sues MBF Clearing Corp for Not Separating Customer Funds
In trying to protect customer from LEH fallout they shuffled funds in and out of accounts to protect customers funds….
Comments »Gold Sells Off While Equities Pop Some More After the Fed Statement
DUH: Fed Keeps Rates Unch; Largely The Same Policy Statement as Before, but Inflation is Heading Higher Temporarily
“The U.S. Federal Reserve on Tuesday acknowledged recent signs of strength in the economy and said recent financial market strains have eased, offering few clues on the chances for further monetary easing.
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CNBC.com
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The U.S. central bank described the economy as “expanding moderately,” unchanged from its January statement and said growth still faced significant downside risks.
Policymakers said the job market had improved but unemployment remains high, reiterating its expectation that rates would remain near zero until at least late 2014.
A quickening in the pace of U.S. jobs growth and a sharp drop in the unemployment rate to 8.3 percent from 9.1 percent in August has led some economists to rein in their expectations for a further easing of monetary policy.
The Fed said a recent spike in energy costs would likely push up inflation but only in the short run. Richmond Fed President Jeffrey Lacker again dissented against the decision, since he did not expect economic conditions to warrant ultra-low rates until late 2014….”
Comments »Fitch Upgrades the Credit Rating of Greece…LOL
JPM Pays the Feds $45 Million to Settle Hidden Fee Fraud Case Against Veterans
New Jobs Creation Bill May Get Rid of Shareholder Protection
“U.S. legislation that would roll back securities disclosure and governance rules in the name ofjob creation is being attacked by consumer advocates and former regulators as an evisceration of investor protections in place since the 1930s.
The package of bills awaiting Senate action after receiving broad bipartisan support in a House vote last week would destroy safeguards dating as far back as the laws that created the Securities and Exchange Commission, according to Lynn E. Turner, a former SEC chief accountant.
“It won’t create jobs, but it will simplify fraud,” Turner said in an interview last week. “This would be better known as the bucket-shop and penny-stock fraud reauthorization act of 2012,” he said, referring to practices banned under securities law.
The Republican-led House, in a show of election-year comity, voted 390-23 to approve measures that would among other things undo a ban on closely held firms soliciting investments, increase the number of investors such firms can have and exempt newly public companies with less than $1 billion in revenue from some reporting requirements of the Dodd-Frank and Sarbanes-Oxley laws. President Barack Obama has backed the legislation as a way to help spur job creation, and Senate Democrats have said they will move quickly on their own version.
“What we’re trying to do is to regain the confidence of the people that sent us here,” House Majority Leader Eric Cantor, a Virginia Republican, said after the March 8 vote….”
Comments »Quitting While They’re Behind: Some Hedge Funds are Throwing in the Towel
THE past few years have been “as miserable as I can remember”, says Johnny Boyer of Boyer Allen Investment Management, a British hedge fund focused on Asia. The fund, which looked after $1.9 billion at its peak, faced the prospect of spending the next few years trying to claw its way back to pre-crisis asset levels. Instead the founders decided to shut the fund and give investors their money back.
Others have also had enough. “I’ve been doing this for 15 years and I’ve never seen as many people give up as in the last three months,” says Luke Ellis of Man Group, a large listed fund. This trend is distinct from the round of closures in 2008. Then, managers were hit by investors’ redemptions and had no choice but to close; today many are electing to walk away.
For some managers, the markets have become too stressful. Running a hedge fund today is “three times as much work for a third of the fun,” says one. But many are motivated by economics. Hedge funds typically get paid a 2% management fee on assets to cover expenses and a 20% performance fee on the returns they achieve for investors. Most funds do not earn performance fees unless they outperform their peak level or “high-water mark”. At the end of 2011, 67% of hedge funds were below their high-water marks, according to Credit Suisse, and 13% have not earned a performance fee since 2007 or earlier.
Funds can survive off a management fee for a couple of years, but four is a long time to go hungry. Most managers were banking on a recovery in 2011 but the average hedge fund slid by 5.2%—much worse than the S&P 500, which returned 2%. Poor performance is causing changes in the way the industry markets itself (see article). It also means many funds will have to wait even longer to earn a performance fee again. According to Morgan Stanley, 18% of hedge funds are more than 20% below their high-water marks.
Smaller funds have been more likely to close than their larger peers. That’s partly because it used to be possible to run a hedge fund with $75m under management. Today funds need at least double that amount because administrative and compliance costs are higher than ever. Larger funds also depend less on performance fees because their management fees bring in so much cash. John Paulson, a hedge-fund giant whose flagship fund was clobbered last year, has pledged to make up investors’ losses but his fund is so large that he can easily afford to carry on. That risks distorting the original point of hedge funds—that they are small, limber operations which come and go often (see chart).
For investors, it is generally a good thing if underperforming managers are returning cash and not milking them for fees. But others worry that high-water marks could skew funds’ investing decisions. Managers who have not earned a performance fee in years could take bolder bets to get back into the black. Leverage levels have been creeping up. Some may prefer to go out with a bang, not a whimper.
