Tag Archives: Coverage
by Liz Hester
Stanley Fischer is the choice for the vice chairman role at the Federal Reserve Board, bringing an outsider to the No. 2 spot. The initial stories about his nomination were definitely positive with few organizations citing anything wrong with his record.
Bloomberg had this to say about the choice:
The former Bank of Israel governor, though a newcomer to the Fed, also brings continuity and strong academic credentials: as a professor of economics at Massachusetts Institute of Technology, he taught Fed Chairman Ben S. Bernanke, whose term ends in January, and European Central Bank chief Mario Draghi.
Fischer, 70, is President Barack Obama’s top choice to succeed Fed Vice Chairman Janet Yellen, who has been nominated to replace Bernanke, according to people familiar with the selection process. Obama has already offered the job to Fischer, who accepted it, said one of the people. The decision was made jointly by the president and Yellen, who is awaiting Senate confirmation as Fed chairman, the person said.
“It’s almost like a central bank hall of fame,” said Robert Hall, professor of economics at Stanford University, and chairman of the National Bureau of Economic Research’s committee that decides when expansions begin and end. “They have a huge track record as central bankers.”
The New York Times talked about Fischer’s ties to Wall Street and how they could be a liability as well as helpful in his new job:
Mr. Fischer is at once a surprising choice and a popular pick among economists and investors. He is a highly regarded economist with significant policy-making experience, yet many had considered his selection improbable because of his recent service in a foreign government. News about Mr. Fischer’s possible nomination was reported on Israeli television.
That experience could become a concern if he is nominated, as could his experience at Citigroup, where he was vice chairman between 2002 and 2005. The company’s expansion during that period eventually ended in a federal bailout.
As the Fed’s vice chairman, Mr. Fischer would most likely exert a moderating influence on Ms. Yellen, echoing, in a way, her intellectual partnership with Mr. Bernanke. Ms. Yellen is a forceful advocate for the Fed’s efforts to stimulate the economy and reduce unemployment. Mr. Fischer has been generally supportive of those efforts, but has raised questions about the particulars.
He offered measured support at a conference last month for the Fed’s bond-buying campaign, describing it as “dangerous” but “necessary.” At the same time, he has expressed greater skepticism about the companion effort to hold down borrowing costs by declaring that short-term interest rates will remain low, describing such forward guidance as potentially confusing.
“You can’t expect the Fed to spell out what it’s going to do. Why? Because it doesn’t know,” he said at a conference in September, according to The Wall Street Journal. “It’s a mistake to try and get too precise.”
Mr. Fischer’s experience on Wall Street, while potentially a political liability, could prove valuable for the Fed, which lacks officials with experience in the financial markets that it must manage and regulate.
The Washington Post story listed four reasons that Fischer was a good choice for the job. Below is one:
A crisis-management veteran. Fischer has faced trial by fire, most dramatically as the deputy managing director at the IMF from 1994 to 2001. He was on the front lines dealing with of a series of emerging market crises, including in Mexico, East Asia and Russia.
In other words, if there were to be a crisis in one or more of the emerging powers like China, India or Brazil, it would be the sort of thing that Fischer has spent his career preparing for. That is doubly important right now, as money has been gushing out of emerging economies in the past few months, driving their currencies down and their borrowing costs up. That has become all the more clear in the past few of months, as the threat of a wind-down of the Fed’s easy-money policies has prompted volatility in emerging markets and shown how unstable the world financial system can be.
The Wall Street Journal story quoted Bernanke praising Fischer and then another former student with a differing opinion:
“Stan was my teacher in graduate school, and he has been both a role model and a frequent adviser ever since,” Mr. Bernanke said at a conference at the IMF honoring Mr. Fischer last month. “An expert on financial crises, Stan has written prolifically on the subject and has also served on the front lines.”
Not all Mr. Fischer’s former students were as effusive. One of them, Simon Johnson, a former chief economist at the IMF, raised questions about Mr. Fischer’s stance on financial regulation. “I don’t know what Fischer stands for on regulation. It’s a black box to me,” said Mr. Johnson, who has been critical about U.S. bank bailouts since the financial crisis. “What’s the rationale for this candidacy? I don’t get it.”
Mr. Fischer is generally seen among economists as a pragmatist who has been supportive of the Fed’s efforts to boost the economy after the crisis.
The vice chair role will be critical in upcoming policy decisions, especially around when to start pulling back from the Fed’s bond buying program. While Fischer may have tied to Wall Street and there may be questions surrounding his stance on regulation, he definitely has a variety of experience and deep financial knowledge.
by Chris Roush
Judy Ancel of LaborNotes.org writes about how labor leaders and the business media that cover them in Kansas City have met every month for breakfast since 1988.
Ancel writes,At first, getting union officers to attend an open forum with media was a tough sell. Most didn’t trust the media and hadn’t thought about how to use media to build union power. Their standard response when called by reporters was ‘No comment.’
“The media, of course, commonly called them ‘union bosses’ and only came around if there were conflict or scandal. ‘We were seen as the bad guys,’ said Herb Johnson, later secretary-treasurer of the Missouri AFL-CIO. Labor leaders thought media should report about peaceful negotiations that ended in a good contract, not just strikes.
“On the other side, the media accused labor leaders of being unresponsive and having unrealistic expectations, always wanting good news. They said labor often viewed balanced coverage as betrayal and couldn’t distinguish between the news and editorials, or understand the differing needs of print and electronic media.
“The Kansas City Star’s Diane Stafford said, ‘We used to call labor leaders and get the phone slammed down in our ears.’”
Read more here.
- See more at: http://labornotes.org/2013/12/unions-and-media-break-bread-and-stereotypes#sthash.xY7fZ0oh.dpuf
by Liz Hester
Several years after being introduced, five regulatory agencies approved the so-called Volcker Rule on Tuesday bringing in a new era of oversight for Wall Street traders. Banks and others affected will now begin the process of implementing and journalists scrambled to cover all the angles.
Bloomberg’s story began with the idea that Wall Street would now face stricter rules now that agencies had approved the provisions:
Wall Street faces more intensive government scrutiny of trading after U.S. regulators issued what they billed as a strict Volcker rule today, imposing new curbs designed to prevent financial blowups while leaving many details to be worked out later.
The Federal Reserve, Federal Deposit Insurance Corp. and three other agencies formally adopted the proprietary trading ban. The rule has been contested by JPMorgan Chase & Co., Goldman Sachs Group Inc. and their industry allies for more than three years.
Wall Street’s lobbying efforts paid off in easing some provisions of the rule. Regulators granted a broader exemption for banks’ market-making desks, on the condition that traders aren’t paid in a way that rewards proprietary trading. The regulation also exempts some securities tied to foreign sovereign debt.
At the same time, regulators said the final version imposed stricter restrictions on hedging, providing banks less leeway for classifying bets as broad hedges for other risks. To pursue a hedge, banks would need to provide detailed and updated information for review by on-site bank supervisors.
“This provision of the Dodd-Frank Act has the important objective of limiting excessive risk-taking by depository institutions and their affiliates,” Fed Chairman Ben S. Bernanke said in a statement. “The ultimate effectiveness of the rule will depend importantly on supervisors, who will need to find the appropriate balance while providing feedback to the board on how the rule works in practice.”
The New York Times story pointed out that banks will have a tougher time justifying hedging, but they did get more time to comply with the new provisions:
In some crucial areas, regulators adopted a harder line than Wall Street had hoped. Under the rule, which bars banks from trading for their own gain and limits their ability to invest in hedge funds, the regulation includes new wording aimed at the sort of risk-taking responsible for a $6 billion trading loss at JPMorgan Chase last year. The rule also requires banks to shape compensation packages so that they do not reward “prohibited proprietary trading.”
In addition, it requires chief executives to attest to regulators every year that the bank “has in place processes to establish, maintain, enforce, review, test and modify the compliance program,” a provision that did not appear in an October 2011 draft of the rule.
But the rule, which aims to draw a line between everyday banking and risky Wall Street activities, has its limits. For example, the regulation leaves it largely up to the banks to monitor their own trading. Some critics of Wall Street also wanted chief executives to attest that their bank was actually in compliance with the rule, not just that it was taking steps to comply.
And in another concession to Wall Street, regulators will delay the effective date of the rule to July 2015. Until then, bank lawyers are expected to scour the rule for loopholes and to consider bringing lawsuits against the regulators.
The Wall Street Journal pointed out that the rules wouldn’t apply to banks with less than $10 billion in assets. Stock investors seemed to shrug off the news:
The Fed now will move to apply the rule to the large bank holding companies it oversees, but not “community banks” with less than $10 billion in assets, which will be exempt from the rule if they don’t engage in most of the activities covered by it.
Some banks affected by the rule said they believed they are already in compliance with the regulation, while others said they were still studying the nearly 1,000-page document to assess its impact.
Bank of America Corp. Chief Executive Brian Moynihan said Tuesday the rule won’t dramatically change how the nation’s second-largest bank does business and that the company ended proprietary trading—making bets with the bank’s own money—two years ago. He said the bank has been selling its hedge-fund and private-equity holdings over the past four years.
“That’s not a big part our company,” he said to investors at a Goldman Sachs Group Inc. conference in New York. “We’ll have to work through it, but in the end if we serve our customers, there’s a business there.”
U.S. financial stocks, meanwhile, appeared to be taking the Volcker rule in stride, with many financial stocks rising. Goldman Sachs was higher even though Goldman was touted by analysts as the firm most likely to be affected by the new rule.
Some top financial regulators, who have spent 2 ½ years trying to finalize the Volcker rule, expressed support for the final version but noted its effectiveness will depend on its enforcement by banking and market regulators.
And that’s ultimately the main point for any new regulation. It all comes down to enforcement and how regulators will oversee and interpret any perceived violations. Now banks’ compliance departments will get all the fun as they start to digest the final version of the rule.
by Liz Hester
The U.S. Treasury Secretary Jacob Lew announced Monday the government had sold the last of its bailout investment in General Motors for a $10.5 billion loss. While many taxpayers might be angry about the deficit, the real cost of allowing the auto industry to fail would have been much higher.
Here’s the Wall Street Journal story:
The U.S. government sold its last shares in General Motors Co. on Monday, booking a $10.5 billion loss but clearing the way for the auto maker to return cash to shareholders and begin wooing consumers alienated by the bailout.
The Treasury Department’s final sale of GM shares came as the auto maker’s stock hit $40.90, a new high, in 4 p.m. trading and gained 30 cents in late trading following the announcement.
Taxpayers recouped $39 billion of the $49.5 billion spent rescuing the Detroit auto maker. That loss is sure to fuel the debate over whether taxpayer money should have been used to put GM and Chrysler Group LLC through government-led bankruptcies in 2009.
Bailout opponents say the government had no right to orchestrate bankruptcies that resulted in losses for bondholders while protecting pensions for union workers and retirees. Proponents say the auto industry and the nation’s Midwest manufacturing heartland would have been devastated by a collapse of auto and auto-parts makers.
The New York Times story talked about the total bailout investment and the gains taxpayers saw when taken all together. They pointed out that the sale helped lift a stigma from GM and that bailing out the two car companies saves money by preserving jobs and corporate taxes:
All in all, taxpayers have ended up in the black on the crisis-related bailouts, Treasury said: It has recovered $433 billion from the Troubled Asset Relief Program after initially investing about $422 billion.
The Obama administration has argued that it could not have let the Detroit automakers fail during the worst downturn since the Great Depression and that the costs of the public investment outweighed the risks of letting them collapse.
Of the three Detroit automakers, two of them — GM and Chrysler — received federal aid. The Treasury said that all three, which includes Ford, were now “profitable, competitive and growing” and that American carmakers had created 370,000 jobs.
“When I took office, the American auto industry – the heartbeat of American manufacturing – was on the verge of collapse,” President Obama said in a statement. “In exchange for rescuing and retooling GM and Chrysler with taxpayer dollars, we demanded responsibility and results.”
Some economists have argued that the bailouts have saved the taxpayer money by keeping tens of thousands of workers on the job — and thus paying taxes and off of government support. A recent report by the Center for Automotive Research found that the bailouts “saved or avoided the loss of $105.3 billion in transfer payments and the loss of personal and social insurance tax collections.”
The Financial Times added comment from the GM CEO that the company was close to paying dividends:
Dan Ammann, General Motors’ chief financial officer, last week told the Financial Times that the carmaker was “getting closer” to resuming dividend payments.
“I would say we’re certainly getting closer to that point,” Mr Ammann said when asked about dividends. “We’ve had obviously continued good progress in the business.”
Moody’s, the rating agency, had upgraded the company’s credit rating to investment grade in September, Mr Ammann pointed out, while profitability had improved.
The Treasury initially held 60.8 per cent of GM following the company’s exit from bankruptcy. It disposed of more than half its stake during the 2010 IPO.
Steven Rattner, who headed the Treasury auto industry task force that oversaw the restructuring, last week told the FT there was “no question” that GM had performed better than the team had expected.
The Detroit News pointed out that now GM can pay its executives whatever it wants, giving them the ability to attract a new CEO when the time comes:
GM North America President Mark Reuss tweeted after the announcement: “Free at Last, Free at Last — thanks to all of the hard work and those who gave us a chance.”
GM spokesman Selim Bingol declined to comment when asked when GM might increase pay for executives, saying in an email that the automaker would not comment on the government’s stock exit beyond its statement. But an ease in restrictions will give GM’s board more flexibility to attract a new CEO when Akerson, 65, decides to step down.
The Treasury ended its ownership stake in Chrysler Group LLC in July 2011, incurring a $1.3 billion loss on a $12.5 billion bailout.
After the sale of remaining GM shares, the U.S. government’s only asset remaining from the overall $85 billion auto industry bailout is a 64 percent stake in Ally Financial Inc., the auto lender once known as GMAC. The government has recovered about two-thirds of its $17.2 billion bailout and hopes to close that chapter next year.
The Treasury had said this month that higher-than-expected trading in GM stock was speeding its exit and that it planned to wrap it up by Dec. 31.
While the initial headline of losses doesn’t look good at first, it’s definitely good that the government is out of the auto bailout business. Here’s hoping the car companies continue to improve and add jobs, making the whole experiment worth it.
by Liz Hester
After Friday’s jobs gains, the speculation about the Federal Reserve Board ending the $85 billion a month bond-buying program picked up. Coverage began Friday and continued through the weekend about one of the economy’s most important stimulus plans.
Here’s the story from the Wall Street Journal:
Fed Chairman Ben Bernanke will have to build consensus among officials about how soon to pull back on a program that has been the center of market attention for months and whose effectiveness isn’t wholly clear. Many are getting more comfortable with starting a delicate process of winding the program down, though disagreements about timing and strategy could emerge, according to public comments and interviews with officials.
The Fed’s next policy meeting is Dec. 17-18 and a pullback, or tapering, is on the table, though some might want to wait until January or even later to see signs the recent strength in economic growth and hiring will be sustained. On Tuesday, officials go into a “blackout” period in which they stop speaking publicly and begin behind-the-scenes negotiations about what to do at the policy gathering.
One important consideration: Are investors prepared for a move? Talk of pulling back earlier this year jarred stock and credit markets. On Friday they seemed to take the prospect of a pullback in stride.
The Dow Jones Industrial Average leapt 198.69 points, or 1.3%, to 16020.20, the largest rise in seven weeks. Friday’s gain snapped a five-day losing streak and put stocks within striking distance of all-time highs. The yield on the 10-year Treasury note barely rose, another sign that financial markets weren’t rattled.
Bloomberg reported Saturday that after the jobs report the number of economists predicting the Fed would decrease purchases increased, indicating that many believe the economy is recovering:
The FOMC has pledged to keep buying bonds until the “outlook for the labor market has improved substantially.” The central bank’s so-called quantitative easing has pushed the Fed’s balance sheet close to $4 trillion this year with purchases of Treasury and mortgage-backed securities.
The payroll and unemployment numbers “are impressive in terms of a stronger economy and the need to exit QE,” Pacific Investment Management Co.’s Bill Gross said yesterday on Bloomberg Radio. He said the odds of a December taper are “at least 50-50 now.”
Other reports yesterday showed an improving labor market is boosting consumer confidence along with the spending that accounts for 70 percent of gross domestic product.
Household purchases climbed 0.3 percent in October after a 0.2 percent increase the prior month, according to Commerce Department figures. The median estimate in a Bloomberg survey of 73 economists called for a 0.2 percent rise.
The Thomson Reuters/University of Michigan preliminary December consumer sentiment index rose to 82.5, the highest in five months, from 75.1 in November. Economists forecast an increase to 76, according to the median estimate in a Bloomberg survey.
The Labor Department’s household survey showed more people were entering the labor force. The so-called participation rate rose to 63 percent in November, the first gain since June. A month earlier it fell to 62.8 percent, the lowest level since March 1978.
Reuters covered comments made by the head of the Federal Reserve Bank of Chicago saying tapering was on the table, but he would like to see more positive moves in the economy:
A top Federal Reserve official, who has been one of the most ardent supporters of the U.S. central bank’s bond-buying stimulus program, said he was open to curtailing the purchases this month, although he would prefer to wait.
The comments from Charles Evans, the president of the Federal Reserve Bank of Chicago, suggest a strong report on November jobs growth on Friday has brought the Fed closer to reducing its third round of quantitative easing, known as QE3.
U.S. nonfarm payrolls expanded by a greater-than-expected 203,000 jobs in November, with the unemployment rate dropping to a five-year low of 7 percent.
“I’ll be open-minded,” Evans said in an interview with Reuters Insider, when asked whether he would support trimming the Fed’s stimulus at its policy meeting on December 17-18.
“Everything else (being) equal, I would like to see a couple of months of good numbers. But this was improvement.”
The jobs data cheered Wall Street. The Standard & Poor’s 500 Index broke a five-day losing streak and ended Friday’s session with a gain of 1.12 percent gain. U.S. government bond prices were little changed.
MarketWatch took the contrary position, writing about the reasons the Fed may wait to stop tapering:
The Federal Reserve is likely to hold off on scaling back its bond-buying program in December, using the meeting to prepare the markets for a move early next year, economists said Friday in the wake of the strong November unemployment report.
“The odds are that they basically almost pre-announce at the December meeting and say if numbers continue to be strong a tapering will start very soon,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. Tapering refers to scaling back bond purchases.
John Lonski, chief capital markets economist at Moody’s Analytics, agreed. “At a minimum, they will strongly hint that a taper will be announced at the January 2014 meeting,” Lonski said.
There will be some internal pressure at the U.S. central bank to move in December, noted Joel Naroff, president of Naroff Economic Advisors in Philadelphia. “The pro-tapering crew [at the Fed] will start yelling at the top of their lungs to start yesterday,” he said in a note to clients.
“But I suspect the [Federal Open Market Committee] will only indicate that if the solid data continue, the conditions will be in place to start taking the pedal off the metal,” Naroff added.
Naroff said he still expects the Fed to start to taper in March, “though a robust December report could provide the cover needed to start in January.”
While Fed officials go into lock-down before their meeting, investors will just have to wait to see what they decide and how others will react. It is likely going to be the most important decision they’ll make this year.
by Chris Roush
Peter Lauria of BuzzFeed writes about how Time Warner Cable used the financial press last week to open the negotiations to sell the company.
Lauria writes, “While the WSJ story provided the floor, the Bloomberg story offers up the ceiling. The article is essentially an open invitation to negotiations disguised as an interview with Time Warner Cable’s incoming CEO Rob Marcus, who is due to replace longtime Chief Executive Glenn Britt at the start of the new year. It describes Marcus’ lengthy experience as a finance and mergers specialist and quotes him talking about his interest in creating value for shareholders even if it means he’d be out of a job. (Don’t feel too bad for Marcus, his contract calls for him to get a $50 million payout if the company is sold.)
“But here’s the key line in the story, and it comes not from Marcus, despite his being quoted at length in the piece — but from someone speaking off the record, with an attribution that does not identify, or rule out, Marcus as the speaker: ‘Time Warner Cable, the second-largest U.S. cable provider, would probably accept a bid of $150 to $160 a share, according to a person familiar with the matter, who asked not to be named because the deliberations are private.’
“Later on Friday, Reuters followed Bloomberg with its own exclusive story about how Comcast has hired JPMorgan to advise it on a potential bid. Sixteen paragraphs down in that piece, there’s this auspice line: ‘Any suitor would likely need to bid at least $150 per share to be considered seriously by Time Warner Cable’s board, one person familiar with the matter said.’
“The astute reader will note that both stories attributed to $150 price tag to a single source. Even if it isn’t the same source speaking to both outlets (though it probably is), the figure is more likely deliberate than coincidental. Put bluntly, the signal being sent to potential buyers is that if they offer $150 or more per share, Time Warner Cable is theirs.”
Read more here.
by Liz Hester
The U.S. gross domestic product grew more than expected in the third quarter. But some of the coverage wasn’t positive as reporters actually dug into the causes for the increase.
Here’s the beginning of the Wall Street Journal story:
The U.S. economy expanded significantly faster than initially estimated in the third quarter as businesses fattened their inventories, a factor that is likely to weigh on growth in the year’s final quarter.
Gross domestic product, the broadest measure of goods and services produced in the economy, grew at a seasonally adjusted annual rate of 3.6% from July through September, the Commerce Department said Thursday. The measure was revised up from an earlier 2.8% estimate and marks the strongest growth pace since the first quarter of 2012.
The upgrade was nearly entirely the result of businesses boosting their stockpiles. The change in private inventories, as measured in dollars, was the largest in 15 years after adjusting for inflation.
As a result, inventories are likely to build more slowly or decline in the current quarter, slowing overall economic growth. The forecasting firm Macroeconomic Advisers expects the economy to advance at a 1.4% rate in the fourth quarter. Other economists say the pace could fall below 1%.
“The meat and potatoes of the economy are still trending pretty low,” said Scott Brown, chief economist at Raymond James & Associates.
The New York Times added the caveat that the growth was based on less-than-desirable factors:
Inventory changes are notoriously volatile, so while the healthier signals would be welcomed by economists, inventory gains can essentially pull growth forward into the third quarter, causing fourth-quarter gains to slacken.
Indeed, Wall Street was already estimating that the fourth quarter of 2013 would be much weaker than the third quarter, with growth estimated to run at just below 2 percent, according to Bloomberg News.
The anemic pace of fourth-quarter growth also stems from the fallout of the government shutdown in October, as well as the continuing fiscal drag from spending cuts and tax hikes imposed by Congress earlier in 2013.
Still, if the better data on growth from the Commerce Department on Thursday is followed by more robust numbers Friday for the nation’s November job creation and unemployment, it increases the odds the Federal Reserve will soon ease back on stimulus efforts. The jobs data is scheduled to be released by the Labor Department at 8:30 a.m. Friday.
The Reuters story did a good job of breaking down the numbers and explaining why they weren’t as robust as first seemed:
Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011. The contribution from inventories had previously been estimated at 0.8 percentage point. Stripping out inventories, the economy grew at a 1.9 percent rate rather than the 2.0 percent pace estimated last month.
A gauge of domestic demand rose at just a 1.8 percent rate. The strong inventory accumulation in the face of a slowdown in domestic demand means businesses will need to draw down on stocks, which will weigh on GDP growth this quarter.
Fourth quarter growth estimates are already on the low side, with a 16-day shutdown of the government in October expected to shave off as much as half a percentage point from GDP.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down to a 1.4 percent rate, the lowest since the fourth quarter of 2009. Spending had previously been estimated to have increased at 1.5 percent pace.
The Washington Post blog’s headline said it most clearly – ”put away the champagne”:
But there’s a bigger story here than the weird blips to GDP being driven by inventories. It’s that we keep getting mixed signals on how robust the U.S. economy really is as 2014 approaches. Some recent data have been good. The Institute for Supply Management survey of manufacturers for November indicated the strongest growth in output since the spring of 2011. The number of people filing new claims for jobless benefits has been hitting rock-bottom levels (including only 298,000 last week, the Labor Department said Thursday, though that was dragged downward by seasonal adjustment quirks tied to the late Thanksgiving).
At the same time, overall growth has remained tame once inventory effects are taken out, and we’ve seen enough false starts and moments of unjustified optimism during this long, slow recovery that policymakers, particularly those at the Federal Reserve, may want more overwhelming evidence that things are picking up before taking it for granted that above-trend growth has finally arrived.
Which brings us to the November jobs report, due out Friday morning at 8:30. Yes, it’s worth mentioning all the usual caveats about not putting too much faith in any one data point, the large margin of error in the survey, the revisions that could ultimately make the initial reading meaningless.
All that’s true, but you go to battle (or in this case, set monetary policy) based on the data you have, not on the data you might wish to have. So the Friday jobs numbers, which analysts expect will show 185,000 net jobs added in November, are the single most important data point in determining whether the Fed begins slowing its monthly bond purchases at its Dec. 17-18 policy meeting. And for the rest of us, it will be the best indicator of whether this recovery is starting to take off, or whether the long slog continues apace.
Despite the numbers, it looks like the economy isn’t doing as well as it might appear on the surface. The numbers don’t lie.
by Chris Roush
Toronto Star reporter Morgan Campbell talked with Jason Clinkscales of The Sports Fan Journal about his new sports business show, called “Sportonomics.”
Here is an excerpt:
TSFJ: At least Stateside, there have been at least several sports business shows that struggled to find their traction on television. What stands out about Sportonomics that will allow the show to become the destination those programs wanted to be?
Campbell: We try to keep it dynamic. If you followed my writing, I take that same attitude to Sportonomics. What we don’t want is, week after week, boring people reading annual reports and giving us really dry numbers. What we want to do is tell stories creatively, get dynamic people on camera. The reason why we started telling sports-industry stories in the business section is to give people something a little more exciting and a little more engaging than most of what you read in a lot of business sections. A story where this aspect of sports industry is a starting point, but is exciting and engaging, it photographs well and videos well.
It’s different from the television shows because they’re locked in to time slots, but they’re not appointment television the way a game is. The beauty of the Web is that we publish every Monday morning, but if that’s not a convenient time for you, you can go whenever you want because we have a page with all of these episodes archived. The appetite for sports business journalism is only growing; it’s just a matter of tapping in to it.
Read more here.
by Liz Hester
The European Union is getting into the bank-fining act, imposing record penalties on six financial firms for their roles in the Libor case. It’s just the latest round of payments for many of these firms and ultimately their shareholders.
Here’s the Wall Street Journal story:
Six financial institutions were fined €1.71 billion ($2.32 billion) by European Union regulators Wednesday for colluding in an attempt to manipulate key benchmark interest rates, the EU’s largest-ever penalty in a cartel case.
The settlements involved penalties against some of the world’s biggest banks, including Deutsche Bank AG, Société Générale SA, Royal Bank of Scotland Group PLC and J.P. Morgan Chase & Co. The action brings to roughly €6 billion the total penalties levied by regulators against financial institutions in connection with probes into manipulation of the London interbank offered rate, or Libor, and other widely used financial benchmarks.
Further penalties are possible. The EU’s competition commissioner, Joaquín Almunia, said Wednesday at a news conference in Brussels that his office is pursuing cartel proceedings against several other large financial institutions, including the U.K.’s HSBC Holdings PLC and ICAP PLC and France’s Crédit Agricole SA, for their alleged roles in colluding to rig one or more rates. Regulators are also pursuing J.P. Morgan in connection with allegations other than those for which it was fined on Wednesday.
CNN Money’s story added this background and some context to the fines:
The scandal broke in the middle of 2012 when Barclays admitted trying to manipulate Libor, which together with related rates is used to price trillions of dollars of financial products around the world.
Wednesday’s announcement takes the global total of Libor-related penalties to almost $6 billion. A handful of traders have been charged with criminal offenses.
The EU fine is the latest blow to an industry trying to rebuild its reputation and finances in the wake of a series of legal battles over foreclosure abuses, misleading clients over mortgages, payment protection insurance and other products.
Some of the biggest banks are also facing a global probe into allegations that they manipulated foreign exchange benchmarks to profit at the expense of clients.
And the Libor story is not over yet. The European Commission is still going after HSBC, Credit Agricole and JP Morgan on related charges, and broker ICAP, who opted out of the settlement on yen Libor.
“We intend to defend ourselves vigorously,” an HSBC spokesman said.
The Telegraph led with fines on the Royal Bank of Scotland and then added in Barclays, focusing on the United Kingdom banks having to pay up:
Royal Bank of Scotland has been fined €391m (£324m) following a European Commission investigation into Libor-rigging that has seen eight major financial institutions hit with penalties totalling €1.7bn.
The taxpayer-backed lender settled with the European authorities over its attempts to manipulated European and Japanese interest rates, the second time this year it has been fined for its involvement in the scandal.
Barclays was found to have attempted to rig European rates, but avoided a fine of €690m because it had blown the whistle on the practice to the authorities.
In total, RBS and Barclays avoided more than €821m in fines from the EC because of their cooperation with the investigation.
Philip Hampton, the chairman of RBS, said in a statement: “We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue, but also in the integrity of a very small number of our employees.
The New York Times piece brought up criticism of the European system by pointing out that they have limited abilities to enforce laws:
Unlike its American and British counterparts, the European Union has limited enforcement powers over financial firms, which are primarily regulated in their home markets or where they conduct the bulk of their business.
As a result, European Union antitrust authorities had to build a case based collusive conduct among a group of financial firms, rather than improper behavior by a single entity or group of traders at one bank.
To set the Libor and Euribor rates, banks submit the rates at which they would be prepared to lend money to one another, on an unsecured basis, in various currencies and varying maturities. Those rates are averaged, after the highest and lowest ones are eliminated, and that becomes that day’s rate.
The settlement was seen as a demonstration by European authorities that despite a reputation for excessive deference to banks, they, too, can come down hard on offenders.
“By European standards, it’s a large fine,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “It signals that the time when only the U.S. can impose big fines is probably over.”
But the settlement also highlighted Europe’s lack of a financial markets enforcer with powers similar to the Securities and Exchange Commission in the United States, including authority to pursue criminal charges.
What we haven’t really seen is a broad sell-off of financial stocks despite the fines they’re paying and will likely have to pay in the near future. For some of the largest banks, regulators are looking into everything from mortgage-back securities to credit cards. That’s a lot of uncertainty about when it will all be resolved and what the ultimate price tag will be. I’d like to see a story about why investors seem unconcerned about the continued legal issues.
by Liz Hester
Despite retailers’ best efforts, holiday spending dropped this year even as more people went to stores. It’s not a great sign for the season if people are watching their budgets instead of taking advantage of the discounts.
Here’s the Wall Street Journal story:
Aggressive discounts on clothes and toys lured slightly more consumers into stores on Thanksgiving and Black Friday this year, but budget-conscious shoppers spent less.
Total spending from Thursday through Sunday fell 3% from a year earlier to $57.4 billion, with shoppers spending an average $407.02, down 4% from $423.55 a year earlier, according to the National Retail Federation.
The retail trade group said the number of people who went shopping over the four-day weekend that kicked off with Thanksgiving rose slightly to 141 million, up from 139 million last year.
As retailers offered some of their biggest promotions a day earlier, store traffic on Thanksgiving Day jumped 27% to 45 million shoppers. As a result, traffic on Black Friday rose just 3.4% to 92 million shoppers.
More consumers decided to bypass stores altogether. Online shopping continued its steady rise over the Black Friday weekend, accounting for 42% of sales racked up over the four-day period, up from 40% last year and 26% in 2006, the trade group said.
The results suggest that the crowds that piled into stores across the country were careful in their spending and the weekend’s added hours didn’t lead to a surge in buying. Retailers have warned that intense promotions this holiday season could hurt margins as they battle for sales in a barely growing market.
The Reuters story had a similar lead as the WSJ story, and went on to note that the week is often a predictor for how much money people will end up spending:
The Thanksgiving weekend is an early gauge of consumer mood and intentions in a season that generates about 30 percent of sales and nearly 40 percent of profit for retailers.
But many have given modest forecasts for the quarter. Wal-Mart Stores Inc said it expects no growth in its U.S. comparable sales, and Macy’s Inc didn’t raise its full-year sales forecast despite strong numbers last quarter.
The shorter holiday period this year – there are six fewer days between Thanksgiving and Christmas compared with 2012 – prompted retailers to begin offering bargains on Monday, earlier than usual, something Shay said likely pulled some sales forward to the first part of the week.
The NRF stuck to its forecast for retail sales to rise 3.9 percent for the whole season.
One problem for some retailers is that if customers expect deep discounts the entire season, it cuts into profit. The Associated Press story had a quote from National Retail Federation CEO highlighting the problem:
Matthew Shay, president and CEO of The National Retail Federation, said that the survey results only represent one extended weekend in what is typically the biggest shopping period of the year. The combined months of November and December can account for up to 40 percent of retailers’ revenue.
Overall, Shay said the trade group still expects sales for the combined two months to increase 3.9 percent to $602.1 billion. That’s higher than the 3.5 percent pace in the previous year.
But to achieve that growth, retailers will likely have to offer big sales events. In a stronger economy, people who shopped early would continue to do so throughout the season. But analysts say that’s not likely to be the case in this still tough economic climate.
“It’s pretty clear that in the current environment, customers expect promotions,” Shay said. “Absent promotions, they’re not really spending.”
Interestingly, Bloomberg chose to use statistics from a different organization that reported sales were up for the season. Lower in the story they used the NRF numbers every other outlet used in the lead:
U.S. retailers eked out a 2.3 percent sales gain on Thanksgiving and Black Friday, in line with a prediction for the weakest holiday results since 2009.
Sales at brick-and-mortar stores on Thanksgiving and Black Friday rose to $12.3 billion, according to a report yesterday from ShopperTrak. The Chicago-based researcher reiterated its prediction that sales for the entire holiday season will gain 2.4 percent, the smallest increase since the last recession.
Retailers offered more and steeper deals on merchandise from flat-screen televisions to crockpots that, while luring shoppers, may ultimately hurt fourth-quarter earnings. Many consumers showed up prepared to zero in on their favored items while shunning the impulse buys that help retailers’ profits.
“You could get the same deals online as you could get in the store, and yet there were still a ton of people out there,” Charles O’Shea, a senior analyst at Moody’s Investors Service in New York, said in an interview. Going out to stores, “is part of the experience,” he said.
While the story might seem mundane, sales during the Thanksgiving weekend are an important indicator of how the year will end for retailers and if they’ll hit their predictions. Analysts, investors and the media, who are likely hoping that customers will open their wallets a bit more this holiday season, are closely watching the numbers.