Nat. Realtors: Pending home sales highest in two years

WASHINGTON (AP) — The number of Americans who signed contracts to buy homes rose in January to the highest level in nearly two years, supporting the view that the housing market is gradually coming back.

The National Association of Realtors said Monday that its index of sales agreements rose 2 percent last month to a reading of 97. That’s the highest reading since April 2010, the last month that buyers could qualify for a federal home-buying tax credit and the last time the reading was above 100.

A reading of 100 is considered healthy.

The Realtors’ group also released revised data for 2011. That lowered November’s initial 19-month high of 100.1 to 96.9. But contracts have been markedly up since the summer when some feared a second recession loomed.

(Reuters) – Warren Buffett resisted pressure on Monday to identify his successor as chief executive officer of Berkshire Hathaway, saying the person who has been chosen does not even know it himself.

In his annual investor letter on Saturday, Buffett said Berkshire’s board had identified someone who will replace him as CEO when the 81-year-old investor eventually leaves the post.

But he did not identify that person in the letter, and in a CNBC interview on Monday, he rejected suggestions that he should. The public does not know who will be the next CEO of other major corporations, he said, and there is a disadvantage to having a “crown prince” in place.

“Well, we have four stocks that we have $45 billion invested in: American Express, Coca-Cola, Wells Fargo and IBM. Every one of those four companies … has changed management since we bought our shares. I didn’t have the faintest idea who the successor of management would be in any of those four, but we’ve put billions and billions of billions of dollars in there,” Buffett said in an interview from the printing plant of the Omaha World-Herald, the hometown newspaper he bought late last year.

Buffett would say very little about the successor, other than that he is someone the board has had in mind for years and that the person does not know. He also said the heir apparent was likely to come from the ranks of dozens of chief executive officers at Berkshire operating companies.

One person not on the list, though, is David Sokol. Once one of Buffett’s top lieutenants, and often assumed to be his heir apparent, Sokol left Berkshire last year amid a scandal over his stock trading while at the company.

The Sokol matter largely dropped from public attention in recent months, but Buffett said Monday that he assumed there is an ongoing investigation, as Berkshire has already paid more than $1.4 million in legal bills for Sokol.

Buffett added that securities regulators had not contacted him about the matter since last summer.

(CNN) — As John Avlon has recently calculated, there is a real possibility that the Republican primary process could fail to yield a majority winner.

What would happen then?

Journalists like to speculate about “brokered conventions”: the kind of conventions we had 50 and 100 years ago, where party bosses chose presidential nominees in smoke-filled rooms. But you can’t have a “brokered convention” in a system where there are no “brokers.”

Here’s an example of how the old system worked:

In 1952, most rank-and-file Republicans wanted to nominate Sen. Robert Taft of Ohio, the leader of the party’s conservative wing.

But about three-quarters of the states had neither primaries nor caucuses. Their delegates were chosen at state party conventions, and those delegates answered to powerful state officeholders, typically the state governor.

So when the GOP convened in Chicago in 1952, those powerful state officeholders could negotiate among themselves, confident that they controlled the delegate count from their state.

That’s how Eisenhower won in 1952. The two most powerful Republican governors in the country — Thomas Dewey of New York and Earl Warren of California — preferred Eisenhower, and so Eisenhower it was.

That’s not how it would happen today.

Modern governors do not control their state parties the way governors did in the 1950s. And today’s delegates won’t do as they are told.

What would happen today?

Tehran, Iran (CNN) — Officials with the U.N. nuclear watchdog agency begin a second round of talks Monday with Iranian officials over the country’s nuclear program, a day after Tehran cut off crude exports to British and French companies in retaliation for a new round of sanctions imposed on the regime.

The two days of talks come amid heightened tensions in the region, with Israel making clear it is pondering an attack on Tehran’s nuclear infrastructure, while Iran warned it could cut off the narrow strait through which oil tankers sail in and out of the Persian Gulf.

The scheduled talks between the International Atomic Energy Agency and Iranian officials are billed as an opportunity for the watchdog agency to get more clarity about the “possible military dimensions to Iran’s nuclear program,” the group said.

Iran’s official Islamic Republic News Agency cited the head of the IAEA mission as saying it would take time to resolve Iran’s nuclear issue because it is complicated.

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President Obama’s re-elect team defended White House energy policy on Sunday as gas prices shoot toward the $4 mark and beyond, a level that could devastate voters’ pocketbooks as well as Obama’s chances for a second term.

Nationally, gas prices are $3.53 a gallon, up 25 cents since Jan. 1, and likely headed to $4.25 a gallon by late April. Republicans have demanded more oil production at home, as well as building the Keystone XL pipeline across the middle of the U.S. to allow oil from Canada to reach Texas refineries.

Obama rejected the plan, but one of his spokesmen, Robert Gibbs, said the president is looking to increase domestic energy production.

“Just on Friday, the Department of Interior issued permits that will expand our exploration in the Arctic. The president has increased our fuel efficiency and energy efficiency standards so we do use less energy, which will help drive down the price,” Gibbs said. “Our domestic oil production is at an eight-year high, and our use of foreign oil is at a 16-year low. So we’re making progress.”

But John Hofmeister, former CEO of Shell Oil and founder of Citizens for Affordable Energy, told Fox News that oil production today is only 7 million barrels per day when it used to be 10 million per day.

Hofmeister warned that the global economy is in “the crosshairs” of a precarious situation in which China is growing its demand for oil each year by millions of barrels per day and turmoil in the Middle East is creating “some of the most unpredictable, volatile, geopolitical situations” in the world.

Global oil demand, meanwhile, is expected to increase by another 1.5 percent to 89.25 million barrels a day in 2012, according to the Energy Information Administration.

TOKYO (AP) — Japan posted a record high trade deficit in January after its nuclear crisis shut down nearly all the nation’s reactors for tougher checks, sending fuel imports surging. Exports were hurt by a strong yen and weak demand.

The 1.48 trillion yen ($18.7 billion) deficit reported Monday highlights Japan’s increased dependence on imported fuel after the March 11 earthquake and tsunami sent the Fukushima Dai-ichi nuclear plant into multiple meltdowns.

As public worries grew, nearly all the 54 nuclear reactors in Japan were stopped for inspections. The government wants to restart at least some of the reactors, after checking for better tsunami and quake protection.

Resource-poor Japan imports almost all its oil. Until the Fukushima disaster, the country had trumpeted nuclear technology as a safe and cheap answer to its energy needs.

Now, Japan is importing more natural gas and oil as utilities boost non-nuclear power generation. Imports of natural gas in January vaulted 74 percent from a year earlier and imports of petroleum jumped nearly 13 percent.

Increased energy imports contributed to Japan last year recording its first annual trade deficit since 1980. Analysts have said Japan may return to a trade surplus in 2013.

There was bad news for Japan’s manufacturing powerhouses, with a strong yen and sluggish global economy contributing to slowing exports.

Exports declined 9.3 percent in January from a year earlier, particularly in computer chips and electronic parts. Imports in January grew 9.8 percent.

BEIJING (AP) — Ms. Zhang, a schoolteacher in the central city of Anyang, lent $43,000 last year to entrepreneurs who couldn’t get loans from state banks. Now as growth cools and Beijing cracks down on informal credit, Zhang and thousands of other small lenders are unpaid and angry.

Underground lending by ordinary Chinese like Zhang flourished over the past decade, providing trillions of yuan (hundreds of billions of dollars) needed by private companies that create China’s new jobs and wealth.

Its popularity reflects public desperation for an alternative to China’s banks, which pay low deposit rates that fail to keep up with inflation and channel savings to government companies.

But the high cost of underground credit — interest rates of 70 percent a year or higher — and a slump in global demand caused a wave of business failures last year, prompting owners in cities such as Wenzhou in the southeast to flee.

The shockwave is now hitting the Chinese savers who put up money for those loans. Protests erupted in Anyang and other areas as lenders demanded officials get back their money.

“We have no other investment options and bank interest rates are too low,” said Zhang, who asked not to be identified further. Hopes of getting back the 270,000 yuan ($43,000) she lent are pinned on the courts so long as the government is willing to let a case proceed.

Rising defaults threaten to aggravate social tensions as the Communist Party tries to enforce calm ahead of a once-a-decade handover of power to a younger generation of leaders due late this year. The public already is fuming over inflation, corruption, product safety scandals and pollution.

Leaders including Premier Wen Jiabao, the top economic official, have repeatedly promised more credit for small companies. But most loans still go to state enterprises that have close ties with banks and form the power base of officials. Experts say there have been slight improvements but the situation hasn’t changed fundamentally.

“It always has been hard for small Chinese companies to borrow money from banks,” said Guo Tianyong, director of the Banking Research Center at Beijing’s Central University of Finance and Economics. He said the situation has worsened in the past year.

Entrepreneurs were struggling with slumping global demand when Beijing clamped down on a credit boom to cool its overheated economy. State banks cut the small amount of private sector lending they were doing while continuing support to state industry. Private companies failed and the survivors cut payrolls.

Only 19 percent of bank lending last year went to small businesses, while total loans fell 6 percent from 2010 to 7.5 trillion yuan ($1.2 trillion), according to the official Xinhua News Agency.

SHANGHAI (AP) — Apple’s dispute over the iPad trademark deepened Monday after the Chinese company that claims ownership of the name said it won a court ruling against sales of the popular tablet computer in China.

Xie Xianghui, a lawyer for Shenzhen Proview Technology, said the Intermediate People’s Court in Huizhou, a city in southern China’s Guangdong province, had ruled on Friday that distributors should stop selling iPads in China.

The ruling, which was also reported widely in China’s state media, may not have a far-reaching effect. In its battle with Apple, Proview is utilizing lawsuits in several places and also requesting commercial authorities in 40 cities to block iPad sales.

Apple Inc. said in a statement Monday that its case is still pending in mainland China. The company has appealed to Guangdong’s High Court against an earlier ruling in Proview’s favor.

BAGHDAD (AP) — Iraq’s oil ministry says oil exports have declined slightly in January compared to the previous month.

Monday’s statement says last month oil exports averaged 2.107 million barrels per day, down from 2.145 million barrels per day in December.

The sales grossed $7.123 billion based on an average price of $109.081 per barrel. December’s revenues stood at $7.061 billion with an average price of $106.18 per barrel.

The oil was sold to 29 international oil companies.

Iraq relies on oil exports for 95 percent of its revenues, and the uncertainty in the market stemming from the conflict between the West and Iran over its controversial nuclear program has helped support global crude prices.

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Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country’s nuclear program.

By early afternoon in Europe, benchmark March crude was up $1.91 to $105.15 per barrel in electronic trading on the New York Mercantile Exchange. Earlier in the day, it rose to $105.21, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday.

Markets in the United States are closed Monday for the Presidents Day holiday.

Iran’s oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran’s crucial fuel exports. They include a freeze of the country’s central bank assets and an oil embargo set to begin in July.

Iran’s Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to “hostile” European nations. The 27-nation EU accounts for about 18 percent of Iran’s oil exports.

The EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to derail Iran’s disputed nuclear program, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its program is for peaceful purposes.

Analysts said Iran’s announcement would likely have minimal impact on supplies, because only about 3 percent of France’s oil consumption is from Iranian sources, while Britain had not imported oil from the Islamic republic in six months.

“The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West,” said commodity analyst Caroline Bain of the Economist Intelligence Unit. “Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran — indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage.”

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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.

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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.

FRANKFURT — Few would begrudge Mario Draghi his boast last week that he and the European Central Bank had prevented a disastrous credit crisis by showering banks with cheap loans in December.

But beneath the gratitude toward Mr. Draghi, the president of the central bank, lurks a fear that the easy money could simply be creating the conditions for another banking crisis several years from now.

Because of the central bank’s cheap financing, some economists warn, sick banks now face less pressure to confront their problems — to clean out bad loans and other impaired assets, or even wind down operations if there is no hope of a turnaround. The European Central Bank, they say, could inadvertently spawn a cohort of “zombie banks,” burdened by nonperforming loans and assets that remain on the books, like the ones that helped make the 1990s a lost decade for Japan.

“It’s a huge bet,” said Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva. “If the crisis ends up well, the E.C.B. will have pulled off a miracle. If things go wrong, then commercial banks will be in a much worse situation than they were before.”

Professor Wyplosz said the central bank might be making the banking system more fragile by encouraging institutions to load up on risky assets, especially government bonds from troubled euro zone countries like Spain or Italy. Banks can use those assets as collateral for more loans from the central bank.

In December, the European Central Bank invited banks to borrow money at the benchmark interest rate of 1 percent for three years, compared with a previous maximum maturity of one year. Banks could borrow as much as they wanted provided they posted collateral. They jumped at the opportunity: 523 banks borrowed 489 billion euros, or $647 billion.

The central bank will offer another round of three-year loans at the end of this month, and last Thursday it loosened its collateral rules to encourage smaller banks to join in. According to some predictions, banks may draw on the cheap credit even more enthusiastically than they did in December.

Last Thursday, Mr. Draghi urged banks to take the money, and even ridiculed top bankers who have bragged they did not need the central bank’s charity. “I would describe some of the statements made as ‘statements of virility,’ ” Mr. Draghi said at a news conference in Frankfurt. “The three-year facilities are there to be used.”

The cascade of cash has lifted sentiment in the euro zone, and may even help the region avoid a serious economic downturn. But it is not yet clear how banks are using the money, and whether they will spend it wisely. Some banks — no one knows how many — are bound to use it to cover up past mismanagement and books full of bad assets.

“It’s like taking medicine, it sometimes has side effects,” said João Soares, a partner at Bain & Company, the management consulting firm, who specializes in financial services. “One side effect that is not good,” he said of the central bank’s lending, “is that it removes pressure to clean up balance sheets.”

PARIS (Reuters) – Europe’s left is torn between outrage and anxiety over drastic cuts in living standards and working conditions being imposed on Greeks by the European Union and the International Monetary Fund.

Indignation at sweeping pay and pension reductions and public sector job cuts dictated by official creditors in return for a second bailout of the debt-ridden euro zone state is strongest in south European countries that fear a similar rod.

Yet there is scant sympathy from centre-left politicians and labor leaders in northern Europe, where voters are more worried at the potential cost of bailouts, nor in former communist central Europe, where people are more inured to hardship.

“What if we all became Greeks?” left-wing French daily Liberation asked on Monday. “Is what is being imposed today on this pressured and humiliated country a foretaste of what will one day be prescribed for Italy, Portugal, and why not France?”

A planned 22 percent cut in the Greek minimum wage, with a 32 percent cut for workers under age 25, is among the most radical steps backwards inflicted in peacetime in modern Europe. Only Latvia has endured a similar EU/IMF-mandated “internal devaluation” cutting living standards.

Public sector pay in Ireland has fallen on average by 15.9 percent since 2009 due to wage cuts and a pension levy, but a 12 percent cut in the minimum wage agreed with lenders was reversed after the government found savings elsewhere.

The leader of Portugal’s largest trade union, Armenio Carlos of the CGTP, praised Greek workers’ “heroic resistance” against austerity measures and warned that his own country could face a similar social explosion.

“If the results in Greece were disastrous, without a doubt they will be no different here,” Carlos said last week.

French Socialist politician Segolene Royal, the defeated presidential candidate in 2007, voiced outrage at the way austerity was targeting the poorest Greeks while the rich were still able to evade taxes with impunity.

Accusing European leaders of “cowardice,” she singled out European Commission President Jose Manuel Barroso for criticism.

“Athens is burning … Where is Mr Barroso? – the ultra-liberal politician chosen to head the Commission – that was a very grave error. Where is the Council of Ministers? What is the European parliament doing?” Royal asked in a radio interview.

SAN FRANCISCO (Reuters) – Apple Inc said on Monday that a U.S. non-profit labor group has begun an “unprecedented” inspection of working conditions at its main contract manufacturers, including Foxconn’s plants in southern China, as the maker of the IPhone continues to grapple with persistent image problems there.

“The inspections now underway are unprecedented in the electronics industry, both in scale and scope,” Apple Chief Executive Tim Cook said in a statement.

The world’s most valuable technology corporation had agreed to let the D.C.-based Fair Labor Association monitor conditions at the factories of its suppliers, hoping to counter criticism that it was glossing over problems at these facilities.

The group began on Monday to interview thousands of employees, inspect manufacturing areas, dormitories and do an extensive review of documents relating to employment, Apple said.

Critics say the biggest blemish on Apple in recent years has been signs of harsh working conditions at its manufacturing partners, particularly in China.

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Last week the stock of San Francisco walnut company Diamond Foods (DMND) dropped nearly 40% after the company’s CEO and CFO were dismissed after an internal review discovered accounting irregularities.

In a statement released after the close of trading on Wednesday the company said it had exposed some $80 million in unusual payments to walnut farmers; payments not accounted for correctly in prior financial statements. The revelation will require a restatement of the company’s 2010 and 2011 earnings results.

In the attached clip Trademonster.com co-founder Jon Najarian and I discuss what happened and why last week’s news may be only mark the beginning of Diamond’s troubles. The company fired it’s top two executives on Tuesday evening yet allowed Diamond’s stock to trade all day Wednesday. Bad idea.

“The board seems to have had really bad legal advice,” understates Najarian. “Anything you know that’s material and non-public you’re supposed to disperse that information in as wide an area as possible.” Such a practice is called Fair Disclosure one of the few securities laws with a straight forward definition.

Last Wednesday as DMND’s board crafted a statement for after the bell, the stock traded 6.9 million shares, more than all the other days of February combined and the highest volume the stock had seen since last December 12th.

Najarian says his service, which triggers alerts when unusually high levels of puts or calls are traded on a security, also flagged curiously aggressive put buying in Diamond during Wednesday’s trading session. The following day Diamond’s stock fell nearly 40%. There are those who may think the high volume of trading in puts and stocks ahead of DMND’s announcement was coincidental.

“This is the definition of insider information,” says Najarian. Such trading is illegal, even for members of Congress.

It’s within the realm of the possible that the trading on Wednesday was organic. Perhaps there was a downgrade, a walnut weather problem, or one lucky fund dumping shares in one day immediately prior to disastrous news.

Regardless the trading in Diamond last week is exactly what illegal trading looks like.

If you held Diamond last week you were at a disadvantage. If you actually bought last Wednesday it’s extremely likely you were flat-out robbed.

Diamond Foods is yet another opportunity for the regulatory agencies to help restore American’s confidence in markets by enforcing the rules we have rather than harrumphing about the need for new securities laws. It’s a lot to ask in an election year but maybe, just maybe, this can be one time when protecting shareholders is the government’s top priority.

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We’ve heard a lot of talk about the one percent and the 99 percent. With the release of his proposed budget for fiscal 2013, President Obama has opened a new front in the class war. He’s pitting yuppies against the overclass, the struggling well-off against the very rich.

This declaration of class warfare can be found on page 39 of the section on cutting waste and reducing the deficit. President Obama’s deficit-cutting proposals rest in part on making life more expensive for the very rich. He wants to let the Bush-era marginal tax cuts for those making $250,000 or more (about 3 percent of American households) expire, and limit the amount of deductions they can take. He proposes to end the loophole through which “carried interest” —the money private equity magnates are paid for managing other people’s money — is taxed at a low, long-term capital gains rate. And he’s proposing to codify what’s come to be known as the Buffett Rule, the notion that “those making over X million $ should pay no less than 30 percent of their income in taxes.” That’s a proposal that would really impact the tiniest minority of American households. As Jonathan Karl of ABC News notes, “There were 236,883 taxpayers who earned more than $1 million in 2009. That’s less than two-tenths of one percent of all filers.”

The funds raised from soaking the ultra-rich won’t all be used for deficit reduction. No, a good chunk of the money raised will be used to help keep the merely rich a little more dry. As the budget message notes, Obama is “proposing that the Buffett rule should replace the Alternative Minimum Tax, which now burdens middle-class Americans rather than stopping the richest Americans from paying too little as was originally intended.” In other words, Obama is proposing to stick it to a few hundred thousand extremely rich people for the sake of making life somewhat easier for tens of millions of people who may make $100,000 or more.

A bit of background is in order. (Here’s a good primer from SmartMoney) The Alternative Minimum Tax was created in the 1970s to try to prevent really rich people from taking massive deductions to avoid paying taxes. The thinking was relatively simple: Above a certain amount, people should pay a 28 percent marginal rate on income, regardless of the amount or number of deductions they’ve taken. So taxpayers must calculate how much they owe under the regular tax regime, and then calculate how much they owe under the AMT scenario, which limits the ability to deduct items like state, local and property taxes from taxable income. They have to pay whichever is higher.

Over time, as frequently happens, the tax aimed squarely at plutocrats caught up more and more people. The AMT wasn’t indexed for inflation, and didn’t account for rising tax rates and levels. As time went on, people who lived in certain areas — high-income districts in states with income taxes — and who have high property values and property taxes have come to expect that they’ll get hit by the AMT. Since many of the AMT hot zones are on the coasts — places like New Jersey, New York, Connecticut, Massachusetts, California — the AMT may be considered a tax on yuppies or, as I dubbed several years ago, a Tax on Democrats. Those screams you hear while driving through Fairfield County, Connecticut, in early April are thousands of members of the top five percent confronting the AMT yet again.

The AMT, which ensures that people pay a 28 percent rate on marginal income above $175,000, falls heavily on people who are wealthy by any standard — i.e. they earn a multiple of the national and state and even local median income. But these folks don’t feel by wealthy because they’ve chosen to live in zip codes where housing prices are high and lots of other rich people live. The AMT thus contributes to one of the big ironies in American politics. It’s been a great mystery to many on the political right that so many people who live in high income areas aren’t more enthusiastic about voting for candidates that aim to preserve the Bush-era tax levels. (President Obama won a majority of the votes in 2008 in Greenwich, Connecticut.) Attitudes toward social policy have a lot to do with it. But the reality is that many people who live in high-income areas and who derive their income predominantly from wages never really felt the full benefit of the Bush tax cuts thanks to the AMT.

With each passing year, more and more people fall into this category. (Here’s some background data from Tax Policy Center.) But because their income tends to come more from wages than from lightly taxed capital gains or dividends, the merely rich are more likely to get sucker-punched by the AMT than the very rich. As the Tax Policy Center notes, “In 2011, 42 percent of tax filers with cash income greater than $1 million were affected by the AMT, compared with nearly 52 percent of those with cash income between $200,000 and $500,000.”

Almost every year, Congress passes a “patch” that prevents the AMT from ensnaring vastly more people. Had Congress not acted, as the Tax Policy Center points out, in 2012, “45 percent of all tax filers with cash income between $75,000 and $100,000 will pay the AMT, up from 0.4 percent in 2011, when the temporary AMT fix or ‘patch’ is in place.”

For politicians, the AMT has become a double-edged sword. With each passing year, it gets more annoying to constituents and more expensive to fix. On the other hand, with each passing year the AMT brings in more revenues, which means it would be difficult to replace. So it’s not surprising that the AMT hasn’t been permanently “fixed.”

So, here’s the deal Obama is proposing in this budget: Better and simpler tax treatment for millions of people in exchange for ensuring that a few hundred thousand others aren’t able to use their resources and ingenuity to avoid paying a significant chunk of their annual earnings in taxes. It sounds like a winner.

What could go wrong? Well, this budget proposal, like every other presidential budget proposal in recent memory, has been pronounced dead upon its arrival in Congress. What’s more, this is precisely how the AMT got started in the first place. Note that Obama isn’t proposing indexing the AMT to inflation. Twenty years from now, there will likely be many more people making $1 million than there are today, and they’ll begin to argue that they, too, are simply middle-class.

What do you think? Do you favor swapping the Buffett Rule for the AMT fix? Give us your thoughts in the comment section below.

BBC is covering the story.

Update: You know, maybe assassinated. Or not. There are also reports that China is marching into the country. Or not.