The news of the pending shutdown resulted in small declines in markets
Why small? Because it was expected
Why a decline at all? Because the matter is closer to a negative resolution than it was on Friday. So it is still news.
What may happen if there is no shutdown? Hard to say.
Monday, 30 September 2013
2013-30 Shutdown!
It looks like the US will not come up with a budget by midnight. As a result the so-called shutdown will start. It is for the 17th time in 37 years. Out of recent presidents, only George W. Bush did not experience a government shutdown.
What you shoud know: the Globe article mentions a few things.
What you shoud know: the Globe article mentions a few things.
- What it is about? The Republican party wants to derail the Affordable Health Act, or Obamacare. They need to agree on a budget but they put forward conditions that the Democratic party rejects
- What will happen? Non-essential government personnel will not work or be paid. The rules change but if you are planning to visit Yosemite, forget it (National parks do close). There can be lineups on the border.
- Debt default is not now, only on October 17, if they do not come to an agreement. That would be a disaster.
Thursday, 26 September 2013
2013-29 Economic discrimination against women
A report was just published by the World Bank. They looked at laws that make a distinction between men and women: "in almost 90 percent of the 143 countries surveyed in the World Bank
study, at least one law remains on the books to bar women from certain
jobs, opening a bank account, accessing capital or making independent
decisions."
So despite progress, women have equal rights only in a minority of countries. The biggest offenders are in the Middle East and in Africa. Some of these countries have oil; others are poor. No wonder.
So despite progress, women have equal rights only in a minority of countries. The biggest offenders are in the Middle East and in Africa. Some of these countries have oil; others are poor. No wonder.
2013-28 $11 billion
is the today's estimate of the fine on JP Morgan related to mortgage-based securities.
The bank is in negotiations with regulatory agencies in the U.S.; $11 billion is the rumored amount. Yesterday the talk was about $3 billion - see post 2013-23
So what happens with shares of a bank that may be paying a record - breaking penalty? They go up.
There are two interpretations:
1. Wall Street Journal's (the view from Wall Street)
the fine puts the legal problems behind, and the bank will be able to concentrate on what it does best (i.e. money)
2. My suggestion: there was talk of $20 billion. So if they end up with $11 billion, it is not so bad.
Here is the Wall Street Journal article, in case you cannot read it online
J.P. Morgan Chase JPM +2.74% appears to be nearing a settlement with federal and state regulators over mortgage-backed bonds. The possible price could be a cool $11 billion or even more.
Only a portion, possibly $7 billion, would be cash, with the remainder coming through relief to consumers. Even so, that is still a big hit, equal to nearly a third of the bank's forecast 2013 net income. Yet J.P. Morgan's stock rose nearly 3% Wednesday.
One possible reason: A deal would show the bank is getting some of its numerous legal issues sorted. A week ago, it settled for nearly $1 billion charges related to its "London whale" trading debacle. And even a big number at least allows investors to quantify the damage.
Consider Bank of America. In recent years, it entered into settlements worth many billions of dollars related to mortgage securities, including an $8.5 billion agreement still subject to legal challenge. Yet BofA's stock rebounded as it showed it was whittling down its mountain of legal woe and could handle the cost.
Granted, J.P. Morgan's settlement, if reached, could cause larger-than-expected legal expenses for the current quarter. While the bank had signaled those would likely be more than $1.5 billion, the charge could now end up even higher. And the bank still faces other regulatory and legal issues.
For investors, though, just being able to put a figure on such hits is half the battle.
The bank is in negotiations with regulatory agencies in the U.S.; $11 billion is the rumored amount. Yesterday the talk was about $3 billion - see post 2013-23
So what happens with shares of a bank that may be paying a record - breaking penalty? They go up.
There are two interpretations:
1. Wall Street Journal's (the view from Wall Street)
the fine puts the legal problems behind, and the bank will be able to concentrate on what it does best (i.e. money)
2. My suggestion: there was talk of $20 billion. So if they end up with $11 billion, it is not so bad.
Here is the Wall Street Journal article, in case you cannot read it online
Knowledge Is Power at J.P. Morgan
Investors May Be Seeing Some Light at the End of the Firm's Legal Tunnel
Eleven-figure legal settlements are scary for any company, even big banks. But for investors, there is also something to be said for certainty.J.P. Morgan Chase JPM +2.74% appears to be nearing a settlement with federal and state regulators over mortgage-backed bonds. The possible price could be a cool $11 billion or even more.
Only a portion, possibly $7 billion, would be cash, with the remainder coming through relief to consumers. Even so, that is still a big hit, equal to nearly a third of the bank's forecast 2013 net income. Yet J.P. Morgan's stock rose nearly 3% Wednesday.
One possible reason: A deal would show the bank is getting some of its numerous legal issues sorted. A week ago, it settled for nearly $1 billion charges related to its "London whale" trading debacle. And even a big number at least allows investors to quantify the damage.
Consider Bank of America. In recent years, it entered into settlements worth many billions of dollars related to mortgage securities, including an $8.5 billion agreement still subject to legal challenge. Yet BofA's stock rebounded as it showed it was whittling down its mountain of legal woe and could handle the cost.
Granted, J.P. Morgan's settlement, if reached, could cause larger-than-expected legal expenses for the current quarter. While the bank had signaled those would likely be more than $1.5 billion, the charge could now end up even higher. And the bank still faces other regulatory and legal issues.
For investors, though, just being able to put a figure on such hits is half the battle.
Wednesday, 25 September 2013
2013-27 Banks still need more capital
According to an estimate, banks have insufficient capital.
The good news: the shortfall fell by almost a half in the first half ot 2013; the bad news is that European banks are behind.
The good news: the shortfall fell by almost a half in the first half ot 2013; the bad news is that European banks are behind.
2013-26 Robin Hood in reverse
Here is an article from the Forbes that addresses one of the biggest economic problems: the growing inequality. Income inequality has been growing in most developed countries in recent years. It gave rise to the Occupy movement in many countries. We do know that the bigger income inequality, the less happy people say they are. The effects of income inequality on economic performance are debatable.
Income redistribution is not really an economic question: it is a social question and different societies approach it differently. In Scandinavian countries income taxes are very progressive, income inequality is low, people are happy and quite wealthy. There are other societal arrangements as well.
Here is a voice from the other side. Mr. Binswanger argues that the rich should pay no taxes and that the 99% should give to the 1%.
Well, he is obviously .... , let us say politely Hobin Rood, or Robin Hood in reverse
But why is this argument wrong from the economic point of view?
Income redistribution is not really an economic question: it is a social question and different societies approach it differently. In Scandinavian countries income taxes are very progressive, income inequality is low, people are happy and quite wealthy. There are other societal arrangements as well.
Here is a voice from the other side. Mr. Binswanger argues that the rich should pay no taxes and that the 99% should give to the 1%.
Well, he is obviously .... , let us say politely Hobin Rood, or Robin Hood in reverse
But why is this argument wrong from the economic point of view?
2013-25 US to run out of money
US will run out of money by October 17
So by then the borrowing limit needs to be raised (see posting 2013-22)
So by then the borrowing limit needs to be raised (see posting 2013-22)
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