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Monthly Archives: January 2013

The Pawn Business Booms in Macau Signaling More Gains for Casinos

“Across the way from casino mogul Stanley Ho’s Grand Lisboa in Macau, flashing neon lights lure cash-strapped gamblers to pawn their Rolexes and other trinkets and take another tilt at the gaming tables.

In almost any other city, these “receptacles of misery and distress,” as Charles Dickens termed pawnshops, thrive in times of economic downturn. Not in Macau, where they help fuel a casino market that’s six times the Las Vegas Strip by enabling the mainland Chinese who crowd the gaming tables to sidestep China’s currency controls….”

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Billionaire Leon Black Will Invest in Mining Operations Based on Cheap Evaluations

“Billionaire Leon Black’s Apollo Global Management LLC (APO) is among the private-equity firms gearing up to invest in mining after valuations fell and a decline in financing left some companies short of cash.

Apollo, which is setting up its first natural-resources fund, is assessing at least four potential mining deals, said Gareth Turner, a senior partner in London. Commodity trader Trafigura Beeher BV is planning its first metals and mining private-equity deals and firms Denham Capital Management LP and Waterton Global Resource Management say they have billions of dollars to deploy in the industry…”

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Slower Than Expected Inflation Knocks the Aussie Dollar Down


Australia’s dollar dropped, halting a two-day gain, after data showed consumer prices increased last quarter by less than economists forecast, giving the Reserve Bank scope to cut borrowing costs further.

The so-called Aussie fell against all but one of its 16 major counterparts after the Bureau of Statistics said the consumer price index advanced 0.2 percent from the previous three months, compared with the median forecast of economists in a Bloomberg News survey of a 0.4 percent increase. The trimmed mean gauge of core inflation rose 0.6 percent from the previous quarter, compared with a forecast gain of 0.7 percent.

The inflation data “does allow the RBA to ease further if it seems necessary,” said Annette Beacher, head of Asia-Pacific research for TD Securities Inc. in Singapore. “The Australian dollar has fallen on the headline just because the outcome was marginally lower than consensus.”

Australia’s dollar dropped 0.3 percent to $1.0538 as of 4:09 p.m. in Sydney from the close yesterday. It fell 0.6 percent to 93.21 yen. New Zealand’s dollar traded little changed at 84.05 U.S. cents and slid 0.3 percent to 74.34 yen.

Yields on Australia’s 10-year government bonds declined six basis points, or 0.06 percentage point, to 3.3 percent.

Traders see about a 47 percent chance the Reserve Bank of Australia will lower its key rate by a quarter percentage point to a record low 2.75 percent at a Feb. 5 meeting, little changed from yesterday, interest-rate swaps data compiled by Bloomberg show….”

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Higher Food Prices Hike Inflation in South Africa

“South African inflation accelerated to a seven-month high of 5.7 percent in December as food prices rose, supporting expectations the Reserve Bank will keep borrowing costs unchanged tomorrow.

The inflation rate climbed from 5.6 percent in November, Pretoria-based Statistics South Africasaid on its website today. The median estimate in a Bloomberg survey of 23 economists was 5.7 percent. Prices advanced 0.2 percent in the month.

All 21 economists surveyed by Bloomberg predict the Reserve Bank will keep the benchmark repurchase rate at 5 percent tomorrow to support the economy while curbing price pressures from a weaker rand and rising food costs. The central bank’s goal is to keep inflation within a range of 3 percent to 6 percent.

“Food prices have been creeping higher, housing, fuel and power and transport have been pressured, but core inflation remains well-behaved,” Razia Khan, the London-based head of Africa economic research at Standard Chartered Plc, said in e- mailed comments. “With a substantial negative output gap, policy will remain accommodative for some time. We seeinterest rates on hold throughout 2013.”

The rand has dropped 4.6 percent against the dollar since the beginning of the year, the worst performer of 16 major currencies tracked by Bloomberg. The price of wheat increased 4 percent on the South African Futures Exchange in the period….”

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The Yen Rises as Stimulus is Deferred

“The yen strengthened for a third day after the Bank of Japan deferred new monetary stimulus. Standard & Poor’s 500 Index futures were little changed before lawmakers vote on the debt limit, while Portuguese bonds gained as the country prepared to return to the bond market.

Japan’s currency rose 0.5 percent to 88.31 per dollar at 6:35 a.m. in New York, poised for its first three-day increase since November. S&P 500 futures lost 0.1 percent and the StoxxEurope 600 Index swung between gains and losses. Portugal’s 10- year yield fell six basis point to 5.83 percent and credit- default swaps on the country dropped to the lowest in 27 months. Raw sugar slumped to a 29-month low and zinc jumped 1.1 percent.

The yen will weaken against the U.S. currency by the end of the year, as the BOJ’s decision to hold off on fresh stimulus puts pressure on the government to revive growth through fiscal measures, according to a Bloomberg survey of strategists. U.S. House Republicans vote today on lifting the nation’s debt ceiling through mid-May. Portugal is preparing to sell five-year notes in its first bond offering since requesting a bailout in April 2011, following Ireland’s return as borrowing costs fall.

“The yen currently is in an upward correction phase after it weakened rapidly in the past two months,” said Noriaki Murao, managing director of the marketing group at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The market was somewhat disappointed in that no deadline has been set for the inflation target and that the open-ended asset purchases don’t start until 2014.”

The yen strengthened against all but one of its 16 major counterparts, gaining 0.3 percent per euro. Europe’s shared currency added 0.1 percent to $1.3337….”

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$IBM Beats on Top and Bottom Line

“Fourth-Quarter 2012:

  • Diluted EPS:
    • GAAP: $5.13, up 11 percent;
    • Operating (non-GAAP): $5.39, up 14 percent;
  • Net income:
    • GAAP: $5.8 billion, up 6 percent;
    • Operating (non-GAAP): $6.1 billion, up 10 percent;
  • Gross profit margin:
    • GAAP: 51.8 percent, up 1.8 points;
    • Operating (non-GAAP): 52.3 percent, up 2.1 points;
  • Revenue of $29.3 billion, down 1 percent, flat adjusting for currency:
    • Up 1 percent excluding divested RSS business adjusting for currency;
  • Free cash flow of $9.5 billion, up $0.6 billion;
  • Software revenue up 3 percent, up 4 percent adjusting for currency;
  • Services revenue down 2 percent, down 1 percent adjusting for currency;
  • Services backlog of $140 billion, flat, up $1 billion adjusting for currency;
  • Systems and Technology revenue down 1 percent, up 4 percent excluding RSS:
    • System z mainframe up 56 percent.

Full-Year 2012:

  • Diluted EPS, up double-digits for 10thconsecutive year:
    • GAAP: $14.37, up 10 percent;
    • Operating (non-GAAP): $15.25, up 13 percent;
  • Net income:
    • GAAP: $16.6 billion, up 5 percent;
    • Operating (non-GAAP): $17.6 billion, up 8 percent;
  • Revenue of $104.5 billion, down 2 percent, flat adjusting for currency;
  • Free cash flow of $18.2 billion, up $1.6 billion;
  • Growth markets revenue up 4 percent, up 7 percent adjusting for currency:
    • BRIC countries up 7 percent, up 12 percent adjusting for currency;
  • Business analytics revenue up 13 percent;
  • Smarter Planet revenue up more than 25 percent;
  • Cloud revenue up 80 percent.

Full-Year 2013 Expectation:

  • GAAP EPS of at least $15.53 and operating (non-GAAP) EPS of at least $16.70.

IBM (IBM) today announced fourth-quarter 2012 diluted earnings of $5.13 per share, compared with diluted earnings of $4.62 per share in the fourth quarter of 2011, an increase of 11 percent. Operating (non-GAAP) diluted earnings were $5.39 per share, compared with operating diluted earnings of $4.71 per share in the fourth quarter of 2011, an increase of 14 percent.

Fourth-quarter net income was $5.8 billion compared with $5.5 billion in the fourth quarter of 2011, an increase of 6 percent. Operating (non-GAAP) net income was $6.1 billion compared with $5.6 billion in the fourth quarter of 2011, an increase of 10 percent.

Total revenues for the fourth quarter of 2012 of $29.3 billion decreased 1 percent (flat adjusting for currency) from the fourth quarter of 2011. Without the impact of the divested Retail Store Solutions (RSS) business, revenue increased 1 percent, adjusting for currency….”

Full report

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The Bulls Grind Out a Small Rally

Lackluster housing data and not so exciting earnings had U.S. equities going into the red this morning. By lunch the markets began to pare losses and into the closing bell the bulls managed to eek out a small rally.

DOW up 62


S&P up 6

Gold up $3.6

WTI up $0.68

[youtube://http:///w.youtube.com/watch?v=HNY8eYmzdH4 450 300]


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A Moment of Clarity

[youtube://http://www.youtube.com/watch?v=8l7KgorYl7I 450 300]

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Washington, D.C., Jan. 22, 2013 — The Securities and Exchange Commission today announced that Egan-Jones Ratings Company (EJR) and its president Sean Egan have agreed to settle charges that they made willful and material misstatements and omissions when registering with the SEC to become a Nationally Recognized Statistical Rating Organization (NRSRO) for asset-backed securities and government securities.

Additional Materials

EJR and Egan consented to an SEC order that found EJR falsely stated in its registration application that the firm had been rating issuers of asset-backed and government securities since 1995 — when in truth the firm had not issued such ratings prior to filing its application. The SEC’s order also found that EJR violated conflict-of-interest provisions, and that Egan caused EJR’s violations.

EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken.

“Accuracy and transparency in the registration process are essential to the Commission’s oversight of credit rating agencies,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “EJR and Egan’s misrepresentation of the firm’s actual experience rating issuers of asset-backed and government securities is a serious violation that undercuts the integrity of the SEC’s NRSRO registration process.”

Antonia Chion, Associate Director of the SEC’s Division of Enforcement, added, “Provisions requiring NRSROs to retain certain records and address conflicts of interest are central to the SEC’s oversight of credit rating agencies. EJR’s violations of these provisions were significant and recurring.”

Egan and his firm were charged last year for falsely stating on EJR’s July 2008 application to the SEC that it had 150 outstanding asset-backed securities (ABS) issuer ratings and 50 outstanding government issuer ratings, and had been issuing credit ratings in these categories on a continuous basis since 1995. Egan signed and certified the application as accurate. According to the SEC’s order, EJR had not issued any ABS or government issuer ratings that were made available through the Internet or any other readily accessible means. Therefore, EJR did not meet the requirements for registration as a NRSRO in these classes. The Commission found that EJR continued to make material misrepresentations about its experience in subsequent annual certifications. EJR also made other misstatements in submissions to the SEC, and violated recordkeeping and conflict-of-interest provisions governing NRSROs — which are intended to safeguard the integrity of credit ratings.

EJR and Egan agreed to certain undertakings in the SEC’s order, including that they must conduct a comprehensive self-review and implement policies, procedures, practices, and internal controls that correct issues identified in the SEC’s order and in the 2012 examination of EJR conducted by the SEC’s Office of Credit Ratings. EJR and Egan consented to the entry of the order without admitting or denying the findings. The order requires them to cease and desist from committing or causing future violations.

The SEC’s investigation was conducted by Stacy Bogert, Pamela Nolan, Alec Koch, and Yuri Zelinsky. The SEC’s litigation was led by James Kidney with assistance from Alfred Day and Ms. Nolan. The related examinations of EJR were conducted by staff from the SEC’s Office of Credit Ratings, Office of Compliance Inspections and Examinations, and Division of Trading and Markets. Examiners included Michele Wilham, Jon Hertzke, Mark Donohue, Kristin Costello, Scott Davey, Alan Dunetz, Nicole Billick, David Nicolardi, Natasha Kaden, and Abe Losice.

Source: SEC

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In the Name of the People

“It is, perhaps, a fact provocative of sour mirth that the Bill of Rights was designed trustfully to prohibit forever two of the favorite crimes of all known governments: the seizure of private property without adequate compensation and the invasion of the citizen’s liberty without justifiable cause…It is a fact provocative of mirth yet more sour that the execution of these prohibitions was put into the hands of courts, which is to say, into the hands of lawyers, which is to say, into the hands of men specifically educated to discover legal excuses for dishonest, dishonorable and anti-social acts.

______ H. L. Mencken, Prejudices: A Selection, pp. 180-82

The American experiment in liberty has failed.  It is only a matter of time before people realize it. Official dogma exulting over the U.S. Constitution, which for so long was propagated through public schools, churches and government mouthpieces, will not forever withstand the exposure of the truth about American democracy now readily available on the Internet.

The greatest fear of America’s Founding Fathers has been realized: The U.S. Constitution has been unable to thwart the corrosive dynamics of majority-rule democracy, which in turn has mangled the Constitution beyond recognition. The real conclusion of the American Experiment is that democracy ultimately undermines liberty and leads to tyranny and oppression by elected leaders and judges, their cronies and unelected bureaucrats.  All of this is done in the name of “the people” and the “general welfare,” of course.  But in fact, democracy oppresses the very demos in whose name it operates, benefiting string-pullers within the Establishment and rewarding the political constituencies they manage by paying off special interests with everyone else’s money forcibly extracted through taxation….”

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House GOP Moves to Suspend the Debt Limit

“In legislation filed yesterday, the House GOP Leadership made an important twist in their plan to pass a short-term increase in the debt ceiling. Rather than increase the debt ceiling by a few hundred billion dollars, buying them time for further talks on the budget, they have opted to “suspend” the debt ceiling. Its a blatant abdication of their constitutional authority. It’s an ominous sign of the talks to come.

Article 1 of the US Constitution gives Congress the exclusive authority to borrow money to fund the government. Up until World War 1, Congress would approve every bond issuance. The borrowing demands of the war made this impractical, so Congress authorized a “debt ceiling,” where the government could freely borrow up to a statutory limit and then go back to Congress to approve additional borrowing. Think of it as giving your teenager a pre-paid debit card.

With this measure, the government had more flexibility to manage its affairs while preserving the Constitutional principle that Congress controlled the purse strings.

“Suspending” the debt ceiling until May upends this principle. Upon enactment, the government’s borrowing authority would be unlimited until May. Presumably, the government could borrow trillions in this window, providing either the markets or the Fed would meet the new supply of debt.

Worse, however, is that the GOP move establishes a very slippery precedent. The left has been agitating to simply eliminate the idea of a debt ceiling entirely. For all its flaws, the ceiling at least guarantees we will have some debate about government spending. The left finds this annoying. Unfortunately, the GOP plan to “suspend” the ceiling provides at least partial support to this argument. If we can “suspend” it for three months, why not a year? Once you’ve surrendered the constitutional principle behind the ceiling where and how can you draw a line? …”

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Gallup Pole: Only 39% Have a Favorable View of America

“When people say that Barack Obama is the worst president since Jimmy Carter, they’re not kidding; a new Gallup Poll takenbetween January 7-10 shows that when Americans were asked whether they had a positive view of the country, only 39% agreed. This is the lowest percentage since August 1979, when Carter was president, inflation was out of control and the economy was hurtling toward the abyss. The percentage of those who believe that things will be better in five years is only 48%, the lowest since that same time period under Carter. Another 40% said things will be worse.

When they were asked whether the United States stood five years ago, 55% said things were better, indicating their belief that the more they have seen of Barack Obama, the worse they have felt. But even that figure is revealing in other ways; the 55% number is the most negative number since 1991….”

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Bad and Getting Worse: Violent Far Right Groups on the Rise

“The heirs of Timothy McVeigh are busy. Violence perpetrated by individuals and groups affiliated with far-right groups is bad and getting worse, according a report released last week by the Combating Terrorism Center at West Point, a privately-funded, independent institution located at the Army academy.

Not only is right-wing violence claiming more victims every year, the main ideological strands within it—white supremacy, anti-federalism, and Christian fundamentalism—which are united by a common American nationalism, link violent conduct to their underlying ideology and “reinforce one other in the organizational frameworks of the American violent far right.”

To understand the American violent far right, the report analyzes 4,420 violent incidents that occurred between 1990 and 2012 in the United States, and which caused 670 deaths and 3,053 injuries. All the incidents were perpetrated by groups or individuals affiliated with far-right associations or were intended to promote ideas compatible with far-right ideology.

The report found a “very clear” overall trend of increasing attacks from the early 1990s onward, with the average number of attacks rising from 70.1 in the 1990s to 307.5 in the 2000s, a jump of more than 400%. Fourteen of the 21 years covered saw an increase in attacks over the previous year. Other findings include the following…”

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