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Sea Levels Rising and Falling with Sunspot Activity

via WattsUpWithThat

Guest post by David Archibald

The background to this is that, in 2009, evil environmentalists in the New South Wales Government made a regulation that councils in that state would have to base their building permits on an expected sea level rise of 900 mm by 2100. This had the effect of wiping billions of dollars off the value of coastal properties, as well as ruining peoples’ lives etc. By comparison, sea level rose 200 mm in the 20th Century.

The NSW Govt. regulation was gleefully enforced by Lake Macquarie Council to the detriment of its residents. Lake Macquarie is 140 km north of Sydney. In response, a local property developer, Mr Jeff McCloy, organised a public meeting at which Professor Ian Plimer, Professor Bob Carter and myself spoke. 400 people attended on four days’ notice. The subject of the public meeting was sea level rise.

Before we go on to the oceans, let’s start with a smaller body of water first – Lake Victoria in East Africa. It was known back in the 1920s that the level of Lake Victoria went up and down with the solar cycle. This is the data on the level of Lake Victoria from 1896 to 2005:

image

The relationship with solar activity broke down in the 1930’s and resumed in the 1970’s. There was also a very rapid rise in the 1960’s. Taking out the period of the solar relationship breakdown and detrending the data from 1968, this is what the relationship looks like (data courtesy of Dr Peter Mason):

image

Read the rest here.

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Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30 Year Low

Submitted by Tyler Durden

A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million. No, that’s not a typo: 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million. Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation. As for the quality of jobs, as withholding taxes roll over Year over year, it can only mean that the US is replacing high paying FIRE jobs with low paying construction and manufacturing. So much for the improvement.

Chart below shows it all – that jump is not a fat finger!

Read the rest here.

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ISM Non-Manufacturing Index Indicates Faster Expansion in January

by CalculatedRisk

Catching up: The January ISM Non-manufacturing index was at 56.8%, up sharply from 53.0% in December. The employment index increased in January to 57.4%, up from 49.8% in December. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: December 2011 Non-Manufacturing ISM Report On Business®

Read the rest here.

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ETF Trading Volumes Fall to Historic Lows

By Ajay Makan in New York

Trading in the most popular US exchange-traded funds fell to multiyear lows in January, threatening to increase transactions costs for retail investors.

ETFs, which track the performance of a basket of securities such as an equity or bond index, have surged in popularity in recent years, reaching $1tn in assets by the end of 2011, according to BlackRock.

A key part of the ETF appeal has been liquidity. High trading volumes have made it cheap and easy to trade in and out of the funds. But, according to data from FactSet, daily volume in the 50 most traded US ETFs in January was at its lowest, excluding the last month of the year, since the end of 2007, when the industry was much smaller.

That has increased trading costs in some smaller funds. For example, the average daily spread – the commission market makers charge investors to trade securities – for the US Natural Gas Fund on NYSE’s Arca exchange, was 0.17 per cent in January. That compared to an average spread of 0.11 per cent in the preceding six months.

“Volumes have to be one of the key considerations for any ETF investor: if liquidity dries up, trading costs could increase,” said Bryce James, chief investment officer at Smart Portfolios, a Seattle-based money manager, which invests exclusively in ETFs. “It’s important to be selective about what products you use.”

The fall in ETF trading volumes has coincided with a decline in volatility and correlations in January, compared to their elevated levels in the second half of 2011. That appears to have made index-based investing strategies, which can benefit if an entire asset class moves in the same direction, less popular.

“As correlations and volatility have come in, some investors are tending towards stockpicking strategies instead [of ETFs],” according to BJ Prager, head of Americas exchange-traded product trading at Barclays Capital.

However, the fall in ETF volumes also appears to be a result of reduced trading by hedge funds, which are among the largest users of ETFs. According to JPMorgan analysts, macro hedge funds in particular have retreated from the market in January.

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U.N. Leaders Consider World Financial Tax to Fund Social Protection, Services

By Susan Roylance

NEW YORK — Outside the United Nations headquarters, hundreds of people were shouting and waving banners Tuesday that read “China and Russia – No Veto.” These people wanted support from the Security Council of the U.N. to oust the President of Syria, Bashar al-Assad.

Inside the U.N., another group of civil society leaders demanded a basic level of social security as they promoted a “social protection floor” at a preparatory forum for the Commission on Social Development, which began Feb. 1.

The focus of the forum was “universal access to basic social protection and social services.”

“No one should live below a certain income level,” stated Milos Koterec, President of the Economic and Social Council of the United Nations. “Everyone should be able to access at least basic health services, primary education, housing, water, sanitation and other essential services.”

These services were presented at the forum as basic human rights equal to the rights of “life, liberty and the pursuit of happiness.”

The money to fund these services may come from a new world tax.

“We will need a modest but long-term way to finance this transformation,” stated Jens Wandel, Deputy Director of the United Nations Development Program. “One idea which we could consider is a minimal financial transaction tax (of .005 percent). This will create $40 billion in revenue.”

“It is absolutely essential to establish controls on capital movements and financial speculation,” said Ambassador Jorge Valero, the current Chairman of the Commission on Social Development. He called for “progressive policies of taxation” that would require “those who earn more to pay more taxes.”

Valero’s speech to the forum focused on capitalism as the source of the world financial problems.

Read the rest here.

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The Effect of 2:1 Debt to GDP Ratio on the Male Sex Drive

A startling number of Japanese youths have turned their backs on sex and relationships, a new survey has found.

The survey, conducted by the Japan Family Planning Association, found that 36% of males aged 16 to 19 said that they had “no interest” in or even “despised” sex. That’s almost a 19% increase since the survey was last conducted in 2008.

If that’s not bad enough, The Wall Street Journal reports that a whopping 59% of female respondents aged 16 to 19 said they were uninterested in or averse to sex, a near 12% increase since 2008.

The survey paints a bleak picture for Japan’s aging population. The Associated Press reports that the national population of 128 million will have shrunk by one-third by 2060 and seniors will account for 40 percent of people, placing a greater burden on the work force population to support the country’s social security and tax systems.

Many commentators in the Japanese and international media have laid the problem squarely at the feet of soshoku danshi — “herbivore men” — a term coined by pop culture columnist Maki Fukasawa in 2006. It refers to Japanese young men who have rejected their culture’s traditional definition of masculinity, and seemingly eschew relationships with the opposite sex as part.

CNN spoke to a Midori Saida, a 24-year-old Japanese woman who described “herbivore men” as “flaky and weak.”

“We like manly men,” she said. “We are not interested in those boys — at all.”

Read the rest here.

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Climate Change Controversy in the Wall Street Journal

by Patrick J. Michaels

This article appeared in Cato.org on February 2, 2012.

The Current Wisdom is a monthly Cato feature written by Senior Fellow Patrick J. Michaels on global climate change. These articles usually feature new and interesting items in the scientific literature with important implications for climate change regulations.

This edition departs from our usual routine because of the very vitriolic fight that has broken as the result of publication of a January 27 op-ed titled “No Need to Panic about Global Warming” in The Wall Street Journal. Authored by 16 high-profile scientists, it made common-sense climate arguments that readers of this Wisdom and other Cato publications on climate science and policy are certainly familiar with.

The January 27 piece can be summarized as follows:

Patrick J. Michaels is a Senior Fellow in Environmental Studies at the Cato Institute.

More by Patrick J. Michaels

• There has been no net warming for “well over ten years;”

• Global warming forecasts confidently made by the UN in 1990 were clearly exaggerations;

• Carbon dioxide, the main “greenhouse” emission, stimulates plant growth;

• Climate scientists on the federal dole have a track record of punishing those who do not express alarmist views;

• Climate alarmism, public funding, and the growth of government and taxation create self-feeding mutual incentives; and

• Doing “nothing” about climate change in the next 50 years has little effect on climate mitigation compared to initiating taxation now.

None of the above are earthshaking propositions to any serious student of climate change. Monthly temperature departures from average show no significant trend going back to 1996. If one is concerned about biasing from the warm El Nino year of 1998, beginning post-2000 yields the same result. The UN was forecasting that global temperatures would be rising around twice the mean rate actually observed in surface temperatures. Greenhouse owners jack up the carbon dioxide concentration of their air several fold to stimulate plant growth. Alarmism breeds funding and new agencies that require more tax dollars, and funding begets tenure. The futility of politically feasible emissions reductions policies has been demonstrated for decades.

By January 30, the New York Times, whose editorial stance on global warming is (to put it mildly) different than that of the Journal, brought in their high-profile environmental blogger, Andrew Revkin, to carp principally about the last bullet item.

His post, “Scientists Challenging Climate Science Appear to Flunk Climate Economics,” claimed that the Journal scientists had misrepresented the work of Yale economist William Nordhaus, quoting the latter’s “wise policy” (no bias there) of slowly introducing a carbon tax.

Nordhaus responded that the Journal piece “completely misrepresented my work.”

At that point, Revkin opened up the controversy to commentary. Readers can decide for themselves.

Here is Nordhaus’s complete comment on the Journal op-ed:

The piece completely misrepresented my work. My work has long taken the view that policies to slow global warming would have net economic benefits, in the trillion of dollars of present value. This is true going back to work in the early 1990s (MIT Press, Yale Press, Science, PNAS, among others). I have advocated a carbon tax for many years as the best way to attack the issue. I can only assume they either completely ignorant of the economics on the issue or are willfully misstating my findings.

And here is the response of the Journal article authors:

We have accurately represented Professor Nordhaus’s findings in our Wall Street Journal editorial of 01-27-12, while making and intending no statement regarding his policy beliefs and advocacy. In his 2008 book, A Question of Balance, Weighing the Options on Global Warming Policies, Professor Nordhaus provided the computed discounted costs and benefits for a variety of policies, assuming the IPCC central value for warming due to increased atmospheric CO2 (3 degrees C for doubling of CO2).

He finds (Table 5.3 of the book) that a policy of delaying greenhouse gas controls for 50 years gives a benefit-to-cost ratio just slightly less than his “optimum” policy. The optimum policy is a universal harmonized carbon tax, which Professor Nordhaus advocates. It starts small and is increased gradually over decades. In terms of net benefits, the 50-year-delay policy is far better than more aggressive policies that would severely limit atmospheric concentrations of CO2 or model-calculated global temperature rises.

Both the 50-year-delay policy and the optimum policy allow world economies to continue to develop with relatively little disruption. Aggressive policies considered in the book do not have this characteristic and display sharply higher abatement costs and lower benefit-to-cost ratios.

As we note in the Wall Street Journal editorial, several more aggressive policies are negative return propositions.

Furthermore, in Chapters I and VI, Professor Nordhaus takes pains to explain that the requirement of universality of policy application is critical; regional, national, or group participation differences can be expected to lower policy effectiveness, perhaps substantially: “… there are substantial excess costs if the preponderance of sectors and countries are not fully included. We preliminarily estimate that a participation rate of 50 percent, as compared with 100 percent, will impose an abatement-cost penalty of 250 percent.” (Chapter 1, p.19). Therefore the optimum policy should be considered an ideal upper limit that may not be achieved in real world application.

We wish to emphasize once again that the above assumes that the IPCC climate results are correct and that significant environmental damage would result, both of which we strongly dispute. The statements made in the Wall Street Journal editorial report Professor Nordhaus’s findings accurately and do not bear on his policy advocacy.

Here is Table 5.3:

Of course, that wasn’t the end.

It seems that if one ever needs to start a fire in the woods, simply rub two climatologists together. So, in the wee hours of February 1, a response to the Journal article, signed now by 38 scientists, was published.

For clarity, let’s call this one “Trenberth et al.”, for its senior author, Kevin Trenberth of the U.S. National Center for Atmospheric Research.

Summarizing Trenberth et al.:

• The authors of the original Journal article were largely not climate scientists, and those that were, held “extreme views.”

• Warming has not “abated” in the last decade.

• Scientific societies worldwide concur that “the earth is heating up and humans are primarily responsible”. More than 97% of all actively publishing climate scientists “agree that climate change is real and human caused”.

• ”… The transition to a low-carbon economy will not only allow the world to avoid the worst risks of climate change, but could also drive decades of economic growth.”

Trenberth et al. is surprisingly weak and incomplete. The 16 original authors are all individuals that are highly competent in their fields, most are physicists of one stripe or another, and all can read and summarize a scientific literature. In fact, most would hold that climate science is nothing more than applied physics.

“Extreme views” lie in the eye of the beholder, and science only grudgingly backs away from established paradigms. For example, despite the obvious jigsaw-puzzle fit of the earth’s continents, it took 100 years of bickering before continental drift was accepted over geological stasis. And, in this case, the “extreme view” of the most prominent climate scientist of the 16, MIT’s Richard Lindzen, is hardly an outrage.

Lindzen holds that the “sensitivity” of surface temperature to changes in atmospheric carbon dioxide has been overestimated because of an inaccuracy in the way that computer models magnify warming. In and of itself, it is mainstream, not extreme, to entertain the hypothesis that doubling carbon dioxide on its own would only cause a bit more than 1 degree (C) of global surface warming. Computer models arrive at much higher values, around 3.5°C, by amplifying the carbon dioxide effect because a slightly warmer atmosphere contains more water vapor, which itself is a potent greenhouse gas. Clouds are also changed in a way that enhances warming. There is evidence from the outgoing radiation signal of the earth that the effects of water vapor and clouds have been overestimated.

The 38 must somehow disagree with Susan Solomon, whose 2010 article in Science attributing the lack of recent warming—that the 39 deny—to unanticipated changes in stratospheric water vapor with no known cause.

The 38 must somehow disagree with the global temperature sensing from satellites, which also shows no net warming for the last 14 years. Now, one could argue that the satellites are measuring temperatures above the surface in the lower atmosphere, but the computer models that the 38 find so accurate, predict that the lower atmosphere should be warming faster than the surface over most of the planet.

Finally “more than 97% of all actively publishing* climate scientists agree that climate change is real and human caused” is probably an underestimate, as virtually everyone acknowledges that the surface temperature is warmer than it was, and that multifarious human activities have some influence on climate. Rather, he misses the point well-made by the original Journal article, which is that the rise in surface temperature is clearly below the values first forecast by the UN in 1990. The core—unsettled—issue in climate science is the “sensitivity” of temperature to carbon dioxide, and there are several independent lines of evidence, including the surface temperature history and the water vapor problems, that argue that it has been substantially overestimated.

In global warming, it’s not the heat, it’s the sensitivity. But don’t expect much sensitivity and expect a lot of heat when climatologists voice their opinions.

* The part about “actively publishing” is saved for another day. The climategate emails—and there are plenty by, to, or about these 39 scientists, detail how difficult it is to publish anything they disagree with, thanks to intimidation and manipulation of editors, blackballing of those who disagree with them, and other blood sports.

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Senate Passes STOCK Act, Applies It to Executive Branch

By Alexander Bolton and Josiah Ryan

The Senate voted 96 to 3 Thursday to prohibit members of Congress from using non-public information for personal financial gain but beat back a slew of amendments to further limit congressional perks.

The Senate action puts pressure on House Republicans to pass similar legislation to quell allegations of congressional self-dealing at a time when Congress’s approval rating is at an all-time low.

House Majority Leader Eric Cantor (R-Va.) on Tuesday criticized the Senate legislation as weak. His staff said he would move a strengthened version of the bill to the House floor at the end of the month.

Senators voted for an amendment Thursday to expand the legislation’s reporting requirements to members of the executive branch.

The legislation would mandate that lawmakers report all major transactions within 30 days and file financial disclosure reports electronically.

But lawmakers defeated several proposals to significantly reform the perks and powers critics charge have a corrupting influence on Capitol Hill.

Senators voted down a bipartisan proposal to permanently ban earmarks as well as an amendment to require lawmakers and senior staff to divest of stocks or put their stock holdings in blind trusts.

The amendment sponsored by Sens. Claire McCaskill (D-Mo.) and Pat Toomey (R-Pa.) to permanently ban earmarks failed by a vote of 40-59.

A solid block of Republicans, including Sens. Lamar Alexander (Tenn.), Roy Blunt (Mo.), Thad Cochran (Miss.), Susan Collins (Maine), John Hoeven (N.D.), Kay Bailey Hutchison (Texas), James Inhofe (Okla.), Dick Lugar (Ind.), Lisa Murkowski (Alaska), Pat Roberts (Kan.), Jeff Sessions (Ala.), Richard Shelby (Ala.) and Roger Wicker (Miss.), voted to preserve Congress’s future power to earmark federal funds.

The amendment sponsored by Sens. Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.) requiring lawmakers and senior staff to divest of stocks lost 26 to 73.

Senate leaders denied Sen. Rand Paul (R-Ky.) a vote on an amendment to deny federal pensions to lawmakers who become lobbyists.

The anti-lobbying amendment raised the hackles of some senior lawmakers, including those planning to retire at the end of this year.

Sen. Jon Kyl (R-Ariz.), who will leave the Senate at the end of the 112th Congress, called the proposal “foolish.”

“Why should someone who has worked and accumulated some equity and is investing that in American businesses no longer be able to do that when they’re elected to public office?” he said Wednesday.

Leaders also denied a vote on an amendment sponsored by Sens. Michael Bennet (D-Colo.) and Jon Tester (D-Mo.) to permanently bar lawmakers from becoming lobbyists and restrict former staff from lobbying their old bosses in Congress for a period of six years.

Senators defeated another amendment sponsored by Paul to prohibit executive branch appointees and staff from having oversight, rule-making, and loan- or grant-making authority over companies in which they or their spouses have significant financial interest.

The amendment was designed to guard against the alleged improprieties stemming from the bankruptcy of Solyndra, a solar-panel manufacturer that received more than $500 million in federal loan guarantees.

A senior Senate Republican aide said GOP candidates would attack Democratic incumbents who voted against the so-called Solyndra amendment.

“Any Democrats who vote against this will face a bomb in the fall,” said the aide.

Brown, Tester and Sen. Joe Manchin (D-W.Va.) voted against the amendment.

The Senate also rejected a resolution sponsored by Sen. Jim DeMint (R-S.C.) calling for a constitutional amendment to impose term limits on members of Congress.

But the underlying proposal to ban lawmakers from using private information they learn in the course of their duties to profit from stock trades or other transactions received broad bipartisan support.

“We tried to focus at the specific task at hand, closing loopholes to ensure that members of Congress play by the exact same rules as everyone else,” said Sen. Kirsten Gillibrand (D-N.Y.), a sponsor of the legislation.

“This sorely-needed bill will establish for the first time a clear fiduciary responsibility to the people we serve, removing any doubt that the [Securities and Exchange Commission] and [Commodities Futures Trading Commission] are empowered to investigate and prosecute cases involving insider trading of non-public information that we have access to through our jobs,” she said.

Only three senators voted against final passage: Sens. Tom Coburn (R-Okla.), Richard Burr (R-N.C.) and Jeff Bingaman (D-N.M.).

Source

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Signs of Split among Volcker Rule’s Foes

By Alexandra Alper

WASHINGTON (Reuters) – As pro-business groups clamor to convince regulators to overhaul their draft of the controversial Volcker rule, fault lines are emerging within the opposition over just what a revamped draft should look like.

The Volcker rule — named for former Federal Reserve Chairman Paul Volcker — was mandated by the 2010 Dodd-Frank financial oversight law to prevent banks that receive government backstops like deposit insurance from making risky trades with their own funds.

Heralded by the left as a means to rein in the risk-taking that nearly toppled the financial system in 2007-2009, the Volcker rule has been excoriated by the right, who warn it could take liquidity out of the market and make it hard for firms to raise capital.

The rule — whose first draft was proposed by regulators in October — would have the biggest impact on large banks such as Goldman Sachs and Morgan Stanley .

But as business groups, banks and others rush to complete comment letters before the February 13 deadline, a split has emerged Aabout the best approach to make sure the ban on proprietary trades doesn’t also capture trades that banks make for their customers’ benefit, known as “market making”, or firms’ own portfolio hedging.

Read the rest here.

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BOMBSHELL: Why Obama Should Be Worried

To hear Democrats (and much of the media) tell it, President Barack Obama is a man on the rebound. The president turned in a strong State of the Union speech, picked a smart political fight over taxing the rich and authorized another heroic Navy SEAL mission in terrorist territory. Sounds like a recipe for reelection, they say.

There is a big problem with this Pollyanna punditry: There are a bunch of real-time numbers coming in that tell a much different tale.

In short, there’s a new Congressional Budget Office report that shows unemployment likely to climb to nearly 9 percent by the election, there’s polling data showing Obama tied or trailing Mitt Romney in the most important swing states (and doing only marginally better against Ron Paul), and there is mounting evidence that the assumption of a decisive Obama fundraising advantage for the fall might be flat wrong. All of this is happening while Republicans are at their worst, with Mitt Romney and Newt Gingrich spending millions of dollars and using all of their air time explaining why the other is untrustworthy, deeply flawed and eminently beatable by Obama.

Let’s look at each:

Read the rest here.

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Israel ‘Could Strike This Spring’

By

Defense Secretary Leon Panetta has a lot on his mind these days, from cutting the defense budget to managing the drawdown of U.S. forces in Afghanistan. But his biggest worry is the growing possibility that Israel will attack Iran over the next few months.

Panetta believes there is a strong likelihood that Israel will strike Iran in April, May or June — before Iran enters what Israelis described as a “zone of immunity” to commence building a nuclear bomb. Very soon, the Israelis fear, the Iranians will have stored enough enriched uranium in deep underground facilities to make a weapon — and only the United States could then stop them militarily.

Read the rest here.

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Why Is Facebook’s Growth Slowing So Much?

Eric Jackson, Contributor

The hyper-ventilating over Facebook’s (FB) IPO filing yesterday is remarkable.  Now I know what Google‘s IPO would have been like if Twitter had existed.

I think Facebook is a great business.  It’s just not a great investment at $100 billion.

If it’s true that it achieves a $100 billion valuation, you will be buying a company that trades at 27x last year’s revenues.  If it goes up to $130 billion in the first 3 days after the IPO (which I think it will), it will be trading at 35x last year’s earnings.

By way of comparison, when Google (GOOG) IPO’ed in 2004, its $85/share price was 15x its prior year’s revenues.

So, the Facebook bulls come back is that this is a “platform company,” with 845 million users, a big “moat,” and can come up with a whole bunch of ways to monetize that base in the future.

OK. I grant you that there are many ways Facebook can make money in the future.  They could charge the New York Times (NYT) and other media companies desperate for traffic through the nose to have a “Facebook Connect” feature on their pages.

However, for Facebook to deserve (loaded word, I know) a $100 billion valuation, I would expect rocket ship growth.  The trouble is that we don’t see that in the actual numbers.

Read the rest here.

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Brian Williams’ Coffee Has Poop in It: A Guide to Manhattan’s Filthiest Starbuckses

The New York City Health Department recently inspected 30 Rock’s Starbucks and discovered it to be teeming with “live mice.” Consequently, the Starbucks serving the stars of NBC received a ‘C.’ Which other Manhattan Starbucks stores are among the impressively filthy elite?

Answer: The Starbucks stores serving Zucotti Park, Park Avenue, and Penn Station. All four currently have either a “C” or “Grade Pending,” the latter of which is code for “crappy grade, but they’re trying to shape up and/or are contesting it at a Health Tribunal.” The only rating worse than “C” and “Grade Pending” is “Closed.”

Here are the filthiest Starbuckses’ report cards, with notes:

Read the rest here.

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Bond ETFs for Every Objective

Via ETFdb, by Michael Johnston

As the lineup of exchange-traded products has expanded dramatically in recent years, financial advisors have found themselves with more tools at their disposal than ever before. The extreme granularity of many of the equity products out there allows for cheap, low maintenance targeting of specific corners of the investable universe, while the development of some increasingly complex products has opened up strategies that were previously inaccessible.

But perhaps the most impressive innovation in recent years has come on the bond side of the market, where the arsenal has expanded considerably over the past two years. Whatever your objective for the fixed income side of client portfolios, odds are there is an ETF that can be used to help you out. Below, we highlight ten common objectives when it comes to managing a bond portfolio–as well as the ETFs that can be used to achieve those goals [for more ETF insights, sign up for the free ETFdb newsletter]:

Read the rest here.

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Combining Trend Following and Option Selling Strategies

From the guys over at Condor Options:

Thu, Feb 2, 2012 | Jared Woodard

Historically, two of the most successful approaches to trading have been trend following and option selling. Trend following and momentum investing are strategies known to just about everybody, and option selling (i.e. collecting the volatility risk premium), while not quite as famous, is hardly a closely-held secret.

Usually, these two approaches are treated as strangers. Momentum/trend traders are conceptually long volatility in that they are willing to accept small, frequent losses from choppy markets in order to reap gains from large price swings in one direction; a stock or futures position with a trend-based rule set in place will have a similar return profile over time to a portfolio that buys straddles. Traders who are net sellers of options, in contrast, are usually looking for mean reversion to dominate, especially if they are doing so from a market-neutral standpoint. Both our iron condor and calendar spread strategies have fit this profile in the past.

In 2010, I developed a strategy designed to exhibit the best features of both approaches.

Read the rest here.

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The Problem with the Profit Motive in Finance

Justin Fox is editorial director of the Harvard Business Review Group

The Financial Services Roundtable, the lobbying group for the biggest financial companies in the U.S., has a new “white paper” out with the rah rah title, “Financial Services: Safer & Stronger in 2012.” A few of the bullet points:

Banks insured by the Federal Deposit Insurance Corporation have $1.5 trillion in capital — the highest capital levels in the history of American banking. The largest U.S. banks have increased Tier 1 capital — the core measure of a bank’s financial strength from a regulator’s point of view — by nearly 50 percent over the last four years.
Executive compensation has been reformed significantly to align with long-term performance.
Banks have developed fortress balance sheets, improving credit quality by 54 percent, increasing net income and, restoring aggregate lending to pre-crisis levels of nearly $7 trillion.

Why you’re very welcome, Financial Services Roundtable! You see, almost all of the positive indicators above were enabled by or forced on banks by people working for us the taxpayers (by which I mean Congress, the Federal Reserve, and financial regulators). Most of them — increased capital, executive compensation changes, higher credit quality, fortress balance sheets — would have been fought tooth and nail by the Financial Services Roundtable before the financial crisis. (Because Jamie Dimon always gets bent out of shape when people tar all bankers with the same brush, it should be noted that JP Morgan Chase and a few other institutions were improving credit quality and building up capital before 2007. But the industry as a whole was not. If it had been, there wouldn’t have been a financial crisis.)

There’s a lesson here. If you let the financial services industry do exactly what it wants, the financial services industry will eventually get itself — and by extension the economy — into staggering amounts of trouble. If you force it to behave, it might just thrive.

Read the rest here.

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BREAKING: JUSTICE DEPARTMENT OFFICIALS ACCEPT CASH BRIBES FROM CORRUPT FINANCE EXECS

By Matthew Boyle

A U.S. Justice Department source has told The Daily Caller that at least two DOJ prosecutors accepted cash bribes from allegedly corrupt finance executives who were indicted under court seal within the past 13 months, but never arrested or prosecuted.

The sitting governor of the U.S. Virgin Islands, his attorney general and an unspecified number of Virgin Islands legislators also accepted bribes, the source said, adding that U.S. Attorney General Eric Holder is aware prosecutors and elected officials were bribed and otherwise compromised, but has not held anyone accountable.

The bribed officials, an attorney with knowledge of the investigation told TheDC, remain on the taxpayers’ payroll at the Justice Department without any accountability. The DOJ source said Holder does not want to admit public officials accepted bribes while under his leadership.

Read the rest here.

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Why I Believe the S&Ps Will go to 1517

by

The analog with the 2010/2011 advance continues

Few trading situations are ever cut and dry, technically or fundamentally. Most markets are a mixed bag at any given time — there are some factors arguing in favor of a sustained advance, arguments in favor of a sustained decline and arguments in favor of the continuation of a trading range. This is currently true for the U.S. stock indexes.

The dominant technical factors, as I see them, include:

  • Extremely light volume — bearish by the standards of conventional technical analysis
  • Overbought readings using most acceptable overbought/oversold indicators. This fact, on the surface, argues at least for a major correction
  • Strong uptrend on a daily basis — the market seems to shrug off all market sell offs. This is a constructive sign
  • Most major stock indexes are range bound, except for the tech-heavy (and Apple laden) Nasdaq. This argues for a continuation of the range

Read the rest here.

 

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GALLUP STATE NUMBERS PREDICT HUGE OBAMA LOSS

Gallup released their annual state-by-state presidential approval numbers yesterday, and the results should have 1600 Pennsylvania Avenue very worried. If President Obama carries only those states where he had a net positive approval rating in 2011 (e.g. Michigan where he is up 48 percent to 44 percent), Obama would lose the 2012 election to the Republican nominee 323 electoral votes to 215.

Gallup adds:

Overall, Obama averaged 44% job approval in his third year in office, down from 47% in his second year. His approval rating declined from 2010 to 2011 in most states, with Wyoming, Connecticut, and Maine showing a marginal increase, and Massachusetts, Wisconsin, Minnesota, New Jersey, Arizona, West Virginia, Michigan, and Georgia showing declines of less than a full percentage point. The greatest declines were in Hawaii, South Dakota, Nebraska, and New Mexico.

Source

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