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Monthly Archives: December 2012

Ex TARP Watchdog: Huge AIG Bailout Profit ‘Misleading’

“Merry Christmas, America, the U.S. government is about to close the books on its AIG bailout with a big profit. Please just ignore the immeasurable costs.

The Department of the Treasury said on Tuesday that it planned to sell its remaining 16 percent stake in American International Group for $7.6 billion, which by the department’s count means taxpayers will turn a $22.7 billion profit on the $182 billion bailout.

The Treasury often tries to put the best spin possible on its bailout costs. And as night follows day, bailout watchdogs often disagree with the Treasury. Sure enough, Neil Barofsky, the former special inspector general of the government’s bailout program for AIG, banks and automakers, known as the Troubled Asset Relief Program, warned that the department’s AIG final profit tally relies on fancy accounting.

In an email to The Huffington Post, Barofsky called the government’s profit estimate “misleading” because nearly a third of the AIG stock that the Treasury is selling came from the Federal Reserve, not from the Treasury’s bailout program. What’s more, Barofsky says, the taxpayer stands to lose money from a waiver it gave to AIG on billions in future tax payments.

But other than that, Barofsky conceded, the AIG bailout was not a disaster for the taxpayer profit-and-loss-wise.

A Treasury spokesman referred The Huffington Post to past statements by Barofsky in which he said a full accounting of the government’s profit would have to include both Fed and Treasury investments in AIG.

Current Special Inspector General for the Troubled Asset Relief Program Christy Romero did not immediately take issue with the government’s numbers, though her office has questioned the Treasury’s bailout-profit claims in the past. A spokesman for her office said she would make a full accounting after the stock sales….”

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BoA: WTI Could Hit $50 Over the Next Two Years


“U.S. oil prices could sink to $50 a barrel at some point over the next two years, according to analysts at Bank of America Merrill Lynch.

But don’t expect a corresponding drop in gas prices.

Merrill analysts expect U.S. oil prices to still average about $90 a barrel over the same time period. Global oil prices meanwhile, which more closely dictate the price of gasoline in the United States, are expected to remain high as growth in global oil supplies lags population growth and economic output.

The drop in U.S. oil prices would likely be temporary, caused by the difficulty in moving huge amounts of new oil from places like North Dakota’s Bakken shale or Texas’ Eagle Ford to market. Already, all the new production has led to a glut of oil in the region.

“No one expected output to grow by a million barrels per day last year,” Francisco Blanche, Merrill’s head of commodity research, said at a press briefing in New York. “No one.”

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Financial Times: Sales of Gold Coins Soar

“As the country gets closer to falling off the fiscal cliff, sales of U.S. gold coins have already shot up in a rocket.

Sales of American Eagle gold coins soared 131 percent in November, rising sharply after the election, according to the Financial Times.

The reason: Fear and disenchantment with Washington. The coin buyers see more gridlock in Washington as the fiscal cliff approaches and more quantitative easing from the Federal Reserve. ”

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WSJ: Treasury Plans ‘Extraordinary’ Measures as US Nears Debt Limit

“The United States isn’t only pushing full-steam ahead toward a fiscal cliff, but the country is also close to hitting its debt ceiling just like it was in 2011, and the Treasury Department is busy prepping “extraordinary” measures to stave off a default, The Wall Street Journal reported.

As of Friday, the United States was running about $67 billion under its $16.394 trillion debt ceiling, The Journal reported, and at the rate the country borrows and spends, the government will hit the limit shortly.

Congress must lift the debt ceiling, which won’t be easy considering that in 2011 the country lost its coveted triple-A credit rating when political brinkmanship prevented lawmakers from raising the borrowing limit until the very last minute, spooking ratings agencies.”

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$WMT CEO: Fiscal Cliff Fears to Hurt Holiday Shopping

“A large portion of American consumers now know about the fiscal cliff and a sizable number of them expect the debate over it to curb their holiday spending, according to the chief executive of Wal-Mart Stores Inc.

In the week before last month’s U.S. presidential election, only 25 percent of its core U.S. shoppers knew what the term fiscal cliff meant, CEO Mike Duke told a gathering on Tuesday in New York.

“One week after the election, it was up to 75 percent,” said Duke, adding that 15 percent of those customers said the debate in Washington would affect what they spend for Christmas.

Wal-Mart, the largest retailer in the United States and the world, polls its shoppers regularly.

The latest poll could bode poorly for retailers like Wal-Mart, which rely on the year-end holiday shopping season for an outsized portion of their annual revenue.”

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Baltic Dry Plunges By Over 8% Overnight, Most Since 2008

“It has been a while since we looked at the Baltic Dry Index, which when normalizing for the excess glut in dry container ship supply (such as right now – 5 years after all the excess supply in the industry – has long been normalized), continues to be one of the best concurrent indicators of global shipping and trade. We look at it today, moments ago it just posted an epic 8.2% plunge, crashing from 900 to 826, or the biggest drop since 2008!…”

Full article and chart porn

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State of the Economy: Hit the Bricks Kid…I mean Soon to Be Old Man

“….Older workers like Johnson are staffing fast-food grills and fryers more often, according to data from the U.S. Census Bureau’s Current Population Survey. In 2010, 16- to 19-year-olds made up 17 percent of food preparation and serving workers, down from almost a quarter in 2000, as older, underemployed Americans took those jobs.

“The sheer number of adults in the industry has just exploded” because fast-food restaurants “not only survived, but thrived during the economic recession,” said Saru Jayaraman, director of the Food Labor Research Center at the University of California at Berkeley….”

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Honda Recalls More Than 800k Minivans and SUVs

“DETROIT (AP) — Honda is recalling more than 870,000 minivans and SUVs worldwide because they can roll away even though drivers have removed the keys from the ignition.

The recall announced Wednesday affects older-model vehicles sold mainly in the United States. They were big sellers with families because of their ample space and reputation for quality.

Here are details of the recall:

MODELS AFFECTED: 347,000 Honda Odyssey minivans and 277,000 Pilot SUVs from the 2003 and 2004 model years. Also 247,000 Acura MDX SUVs from the 2003 through 2006 period. All have automatic transmissions. More than 807,000 were sold in the U.S.

THE PROBLEM: The mechanism that locks the key in the ignition while the vehicles are in gear can wear out. When that happens, drivers of the vans and SUVs are able to remove keys without shifting into park. Some have left the vehicles, which have rolled off unexpectedly while in gear. The U.S. safety regulators began investigating the problem in October after owners filed 43 complaints with the National Highway Traffic Safety Administration. Owners reported 16 crashes due to the problem.


Two people were hurt in the crashes, according to NHTSA’s database. In the most serious case, the driver reported a broken leg after being run over by a 2003 Odyssey. The driver parked the van in a sloped driveway and after leaving the Honda, the van started to roll backward. The driver tripped while trying to stop the van. “I had an open fracture of my fibula (lower leg bone) and crush injuries on my shin area,” the driver reported. NHTSA does not identify drivers who file complaints.

THE FIX: Dealers will repair the ignition interlock system free of charge. Owners will get notices starting in February.”

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DIMON: The Table Is Set For Booming 4% Growth And 200K Jobs — And Here’s What It Would Take To Get There

“Jamie Dimon just wrapped up his appearance at the DealBook conference.

Our notes are below, but the gist is this: We’re very close to a booming economy of 4% growth, and 200K new jobs per month. We just need to do some basic fiscal stuff, and not screw it up.


We’re taking notes during his Q&A. Anything not in direct quotes.

— Says odds are politicians will do something between December 21 and December 28.

— On the impact of going over the cliff it might not be horrible… but it might be.

— ‘We are one decision away from restoring our moral and fiscal authority in the world…. let’s just do it.”

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Joy Global Sees No Immediate Recovery in Mining Equipment Demand

Joy Global Inc. (JOY), the world’s fourth- largest mining equipment maker, said it doesn’t see an immediate recovery in orders after mining companies in the U.S. and China cut capital spending.

Earnings excluding restructuring costs in the year through October will be $5.90 to $6.50 a share, the Milwaukee-based company said today in a statement. The average of 21 analysts’ estimates compiled by Bloomberg was for $6.65. The company forecast sales of $4.9 billion to $5.2 billion, compared with the $5.17 billion average of 20 estimates.

“We are setting our plans for 2013 on the basis that current market conditions continue,” Chief Executive Officer Mike Sutherlin said in the statement. “Although there is upside potential in our markets, the timing is uncertain.”

Joy, which got 51 percent of its revenue from the U.S. in fiscal 2011, has suffered as domestic coal producers cut tens of millions of tons of output and shut mines this year after some power stations switched to cheaper natural gas. A slowdown in Chinese economic growth also curtailed coal production there.”

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Corporate Taxes on Table in Cliff Talks

“The White House has told Republicans it would include an overhaul of the corporate-tax code as part of any deal to reduce the deficit, people familiar with the talks said, a move to court business groups as budget negotiations intensify.

Corporate taxes hadn’t until now been part of budget talks aimed at averting spending cuts and tax increases set for January. Much of the focus has instead been on the expiring individual income-tax rates.

The offer from the White House came amid a fresh round of proposals from both sides, as President Barack Obama and House Speaker John Boehner exchanged counteroffers to address the so-called fiscal cliff. Big gaps remain between Democratic and Republican negotiators, and while talks are continuing, there is no guarantee a deal will be struck, with or without a corporate-tax revamp.

The White House’s corporate-tax suggestion wasn’t specific, according to officials familiar with the offer, other than committing to overhaul the corporate tax code in 2013. White House officials, in making the suggestion, cited a corporate-tax plan the administration unveiled in February but said they weren’t wedded to any specifics….”

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$AAPL Tests TV Designs

“TAIPEI—Apple Inc. AAPL +2.14% is working with component suppliers in Asia to test several TV-set designs, people familiar with the situation said, suggesting the U.S. company is moving closer to expanding its offerings for the living room.

Officials at some of Apple’s suppliers, who declined to be named, said the Cupertino, Calif.-based company has been working on testing a few designs for a large-screen high-resolution TV.

Two people said Hon Hai Precision Industry Co., 2317.TW +0.63% which assembles the iPhone and iPad, has been collaborating with Japan’s Sharp Corp.6753.TO +7.80% on the design of the new television.

“It isn’t a formal project yet. It is still in the early stage of testing,” said one of the people.

Apple, which works with suppliers to test new designs all the time, has been testing various TV prototypes for a number of years, according to people familiar with the efforts. The company generally tests and develops products internally before doing so with outside suppliers….”

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Analysis: More Pressure on Global Wages Could Backfire

“(Reuters) – If rising income gaps are at least partly responsible for the global credit crisis, governments and companies should be wary of squeezing wages yet again to help rebuild their finances.

In the long buildup to the global financial crisis, households took on debt to offset the gradual fall in their incomes and consumption relative to the more wealthy.

But as they’ll get little or no help from easy credit today, driving wages down even more risks a cratering of household consumption and a severe test of social cohesion.

A renewed public focus on decades of widening wealth and wage inequality in the United States, Britain and other developed and developing economies has been one of the most durable legacies of the five-year-old credit crisis.

Work by Nobel Laureate Joseph Stiglitz’ on the 1 percent of U.S. super-rich, “Occupy” protest movements around the world and electoral swings to the left have all spotlighted what business, finance or government elites now realize they can’t ignore.”

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$COST Beats Estimates, Profits Up 30%

“Costco Wholesale posted a 30 percent rise in quarterly profit, beating expectations, as the largest U.S. warehouse club chain saw sales rise and got a lift from higher membership fees.

Costco earned $416 million, or 95 cents per share, in its fiscal first quarter that ended in November, compared with $320 million,or 73 cents per

share, last year. Quarterly net sales rose 9.5 percent to $23.2 billion. Analysts, on average, were expectingfirst-quarter earnings of 93 cents per

share, before special items, on revenue of $23.7 billion,according to Thomson Reuters I/B/E/S.

Comparable store sales rose 7 percent, including the impact of fuel prices. Excluding the impact of fuel and foreign currencies, Costco recorded comparable

store sales of 6 percent for the quarter. Membership fee revenue rose 14.3 percent to $511 million, Costco said. The Issaquah, Washington-based chain raised fees for most U.S.and Canadian members 10 percent on Nov. 1. Members pay up to $110 per year to shop at Costco’s cavernous stores and on its website where they can buy everything from carrots to kayaks. The fee revenue pads Costco’s bottom line and allows it to offer low prices and take in thin profit margins on items it sells.”

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TMALL Set to Overtake $AMZN by 2016

“Shanghai resident Grace Tng buys almost everything she needs online, from groceries to makeup, as she finds it more convenient than going to a store.

The 29-year-old arts curator who moved to the Chinese city 18 months ago from Singapore says she shops on the internet a lot more now than when she was living in the city state.

“In China, I think almost anything can be found online,” Tng told CNBC. “Here there are little shops all along the streets and I may not be able to get everything at one go, so shopping online is actually more convenient for me.”

Tng is one of millions of shoppers in China who are turning to the web, fueling a booming $64 billion online retail market.

Increasing internet subscribers and mobile phone users along with rising incomes and an influx of foreign consumer products into China have led to a rapid expansion of the e-commerce market, which was virtually non-existent half a decade ago.

An example of this boom is Tmall, China’s business to consumer or B2C website, which according to market research firm Euromonitor International, will overtake U.S. online retail giant Amazon in sales to become the world’s largest internet retailer by 2016. Tmall sales are projected to hit $100 billion that year, compared to $94 billion for Amazon.

Tmall, run by China’s second-largest Internet company Alibaba Group, has already overtaken popular consumer to consumer (C2C) portal or online auctioneer, eBayin sales this year, according to Euromonitor. Tmall’s sales are projected to hit $32.5 billion in 2012, compared to $27.7 billion for eBay.”

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