For Wall Street, 2015 Was a Mixed Bag

2017-09-30 18:44:58 | 日記

 


NEW YORK (Reuters) - Stock and bond markets in major economies closed 2015 with a mixed performance, while oil prices and emerging markets cemented big losses during a year that provided few safe places for investors.

While equity markets in Japan and Western Europe gained strongly amid ongoing ultra-easy monetary policy, concerns about global growth and a robust U.S. dollar crushed petroleum prices and took down emerging markets, copper and other metals.

Fixed-income posted a middling performance, as riskier high-yield securities fell, largely due to exposure to weakened energy credits. Short-dated U.S. Treasury yields rose.

The MSCI All-World Index was down 0.7 percent, and closed the year with a loss of 4.2 percent.

For Wall Street's most widely followed average, the Standard & Poor's 500 Index, it was down to the last day of trading to determine whether the year would end negative or not. The benchmark index lost nearly 1 percent for the day, giving its price a 0.7 percent loss for 2015. Including dividends, it posted a positive total return for a seventh straight year.

The market's ups and downs this year were triggered by worries about oil, global growth and the Federal Reserve. The uncertainty surrounding the U.S. central bank's plans dominated the last several months of trading, and some were glad to see it finally begin raising rates.

"I think that now that the Fed finally did something it will calm the intraday jitters a bit at least for the first six months, and hopefully see investors more committed to positions rather than nervous to hold anything," said J.J. Kinahan, chief strategist at TD Ameritrade.

The Dow Jones industrial average fell 1 percent to 17,425.03, the S&P 500 lost 0.94 percent to 2,043.92 and the Nasdaq Composite fell 1.15 percent to 5,007.41.

Brent crude gained 3.1 percent to $37.60 on Thursday, after a 3.5 percent drop in the previous session. For the year, Brent slid 34 percent after shedding 48 percent the previous year, and a global supply glut shows no sign of abating. U.S. crude lost 30 percent in 2015, after falling 47 percent in 2014. [O/R]

Some analysts like Goldman Sachs say prices as low as $20 per barrel might be necessary to push enough production out of business and allow the market to rebalance.

Europe's Eurostoxx 50 index ended the year with gains of 3.5 percent, after losing a bit of ground Thursday.

In Asia, Tokyo's Nikkei index, which was closed on Thursday, finished the year up around 9 percent. Other Asian markets have been hit by worries about China, the world's second largest economy, and by oil prices near 11-year lows.

MSCI's broadest index of Asia-Pacific shares outside Japan was up slightly on Thursday but shed nearly 12 percent this year. Broader emerging market stocks lost 17 percent in 2015.

The outperformance in European and Japanese equities has a lot to do with a strengthening dollar, which has weakened their currencies over the last few years and made their exports more competitive.

The euro was down 0.6 percent on Thursday, and fell 10 percent against the dollar in 2015. Against a basket of major currencies in 2016, the greenback gained 9 percent, with a rebounding jobs market convincing the Federal Reserve to 'lift off' on interest rates earlier this month.

"The Fed could come back with a second hike in March, which is not fully priced in, and the dollar should draw fresh support from that," said Richard Franulovich, senior currency strategist at Westpac in New York.

Currency strategists predict the dollar will add another 4 percent next year.

The dollar was particularly strong in 2015 against commodity currencies: It hit a more than one-year high against Russia's rouble on Thursday, and its highest in at least 13 years against the Norwegian crown the previous day.

In debt markets, the U.S. 10-year Treasury yield was at 2.275 percent; it rose modestly in 2015 from 2.17 percent at the beginning of the year.

Much of the year's rise in yields was in short-dated securities on expectations of higher rates from the U.S. Federal Reserve. The two-year yield rose to 1.05 percent, compared with 0.68 percent at the beginning of the year.

German bonds ended their most volatile year since 2011 with yields higher than they were at the end of 2014, showing the limitations of ultra-easy monetary policy with global disinflationary forces at work.

Ten-year yields closed at 0.63 percent on Wednesday, up 9 bps on the year and far from record lows of 0.05 percent touched in mid-April.

High yield debt was the worst performer among fixed income in 2015. The Bank of America-Merrill Lynch U.S. High Yield index fell more than 4.6 percent for the year; its U.S. Treasury index gained about 0.65 percent.

Metals were broadly weaker in 2015. Copper futures lost 25 percent on the year, while spot gold fell 10.5 percent.

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Gauging the Stimulus in One Neighborhood

2017-09-30 18:42:51 | 日記

 


While politicians spent the first anniversary of the stimulus bill debating its merits, I spent the day traipsing around Brooklyn to figure out how the federal dollars flowed through my neighborhood: from the residential streets of Carroll Gardens to the downtown office buildings to the border of the Gowanus Canal.

Back in Washington, Democrats and Republicans argued about the effectiveness of the American Recovery and Reinvestment Act. The White House sent officials into 35 different communities to tout what it saw as the bill's main benefits: job creation, tax cuts, extension of unemployment insurance, aid to local governments, and infrastructure projects. Republicans questioned the number of jobs the bill created, and most economists said that the stimulus bill staved off a massive economic collapse. While the national debate continues, my neighborhood stimulus tour showed that small businesses are still struggling; stimulus money largely went to established institutions and agencies for short-term gains; and few people, even those who benefited from the money, really understand how the stimulus has worked.

That's true for Peter Byrnes, the owner of Lúgh Studio Inc.—a graphic-design firm that is sandwiched between a coffee shop and my favorite spot for takeout tacos. In March 2009, Byrnes's seven-person firm received a stimulus-backed loan of $150,000 that enabled him to pay an outstanding American Express bill and payroll taxes, and provided a much-needed cash cushion. But it did not help him hire new workers, restore his company's health insurance, or reinstate the employees' 20 percent pay cut. In fact, since he received the loan, he has laid off three workers. "Oh, my gosh, it wasn't a stimulus," he says. "It was a stopgap."

With the help of Recovery.gov, I turned up five businesses—large and small—that have received about $1 million in the last year, along with nonprofits, real-estate companies, city agencies, and universities that received another $11.3 million. Among them: the Polytechnic Institute of New York University, which garnered $4.2 million in grants and subcontracts to study protein engineering, renewable energy, and cybersecurity. The New York City Fire Department got $2.7 million to buy equipment to better patrol Brooklyn's ports. A real-estate owner named Jacob Frankel, with offices at 32 Court Street, received roughly $750,000 to maintain and repair low-income housing units, according to the federal government's Web site, and another real-estate company named Greenwich Street Equities took out a $1.5 million government-backed loan to build a boutique hotel in an up-and-coming industrial neighborhood.

Most of the resulting jobs appear to be temporary. The $1.5 million loan for the boutique hotel will employ 50 to 60 subcontractors and construction workers until the property is completed, says real-estate developer Alec Shtromandel. The Polytechnic Institute is using pockets of the money to temporarily hire Ph.D. students and postdoctoral fellows to do the extra research, says Kurt Becker, associate provost of research and technology initiatives, but these will not become administrative jobs. The North Brooklyn Business Outreach Center in Ft. Greene is using its grant of $600,000 to hand out microloans to very small business owners: from livery cabdrivers to child-care providers to fashion designers looking to expand their businesses.

Byrnes says his chief complaint is that the stimulus package did not give small business owners like him more access to credit. Lúgh Studio has seen its credit slashed in the past year from roughly $106,000 to $14,000, with a 22 percent interest rate. "I have printing bills higher than $14,000," Byrnes says. "It's outrageous that the banks received enormous bailouts, and now that they are showing a profit, they are charging higher fees on credit cards for people like myself."

A policy fellow at the Brookings Institution levels another criticism at the stimulus projects in cities: namely that the federal government did not apply the money to innovative or new programs. Rather than use the leverage of $787 billion to rethink and reshape the economy, the government funneled the money through well-established agencies, says Mark Muro, policy director of the Metropolitan Policy Program at the Brookings Institution. In my Brooklyn neighborhood, the most "innovative" money went to the Polytechnic Institute to do research on renewable energy. Other big pots went to city agencies such as the N.Y.F.D.; social programs such as Brooklyn Child and Family Services; and federal government agencies such as the Department of Housing and Urban Development and the Small Business Administration. "It's a lot of business as usual," Muro says. "A lot of the money was channeled through separate silo programs. The ultimate impact was that money was distributed across lots of small-bore items."

Funding small-scale projects like hotel construction and equipment purchases for fire departments may also leave people unaware of the stimulus's footprint. Lúgh Studio workers did not know that the $150,000 loan they suddenly received in March came from the stimulus. It took the New York office of the Department of Housing and Urban Development three days to track down the addresses of the low-income apartments supported by the $750,000 grants. Block-to-block in Brooklyn, residents do not understand the ways in which the stimulus has burrowed down into the fabric of its smaller neighborhoods. What people do understand is the project's enormous price tag.

This is not to say that stimulus has not worked. The package was meant to quickly give the economy a jolt and prevent another Great Depression. Independent economists from the Congressional Budget Office to Moody's agree that it accomplished these tasks, in addition to already adding 1.6 million to 1.8 million jobs to the economy. For Brooklyn business owners such as real-estate developer Shtromandel, the stimulus gave him leeway to do a project that otherwise would not have been possible. "We would not have purchased the land. It just would not have materialized," he says.

NEWSWEEK's Daniel Gross points out that it's too early to write the stimulus's postmortem. Another $515 billion in tax cuts, contracts, loans, and money for entitlement programs still needs to work its way through towns, cities, and neighborhoods over the next two years. But my own little neighborhood stimulus tour shows that so far the average person has little idea how it's working. That can't be good news for defenders of the package.

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Charter Agrees to Buy Time Warner Cable for $56 Billion

2017-09-28 08:57:07 | 日記

 

(Reuters) - John Malone's Charter Communications Inc struck a $56 billion deal to buy Time WarnerCable Inc, seeking to combine the third and second largest U.S. cable operators to better compete against market leader Comcast Corp.

The Federal Communications Commission immediately served notice that it would closely scrutinize the deal, focusing not only on absence of harm but benefits to the public.

Charter, in which Malone-chaired Liberty Broadband Corp owns about 26 percent, is offering about $195.71 in cash-and-stock for each Time Warner Cable share, based on Charter's closing price on May 20.

Including debt, the deal values Time Warner Cable at $78.7 billion.

A key area of regulatory concern would be competition in broadband Internet.

A merger of Charter and Time Warner Cable, with other related deals, would create a company that controls more than 20 percent of the U.S. broadband market, according to research firm MoffettNathanson.

"Regulatory approval is no longer a given but we expect this is highly probable and greater than Comcast-Time Warner," Macquarie Research analyst Amy Yong wrote in a note.

Comcast walked away last month from a deal to buy Time Warner Cable for $45 billion, citing regulatory concerns.

The FCC was unusually quick to comment on the latest deal.

"The Commission will look to see how American consumers would benefit if the deal were to be approved," Chairman Tom Wheeler said in a statement. "In applying the public interest test, an absence of harm is not sufficient."

Time Warner Cable's shares were up 7.8 percent at $184.59 in premarket trading on Tuesday, well below Charter's offer, suggesting concerns about regulatory hurdles.

Charter's stock was up about 4 percent at $182.14.

Charter's current bid is much higher than its first offer of $37 billion, which Time Warner Cable rejected last year.

Pay TV companies such as Time Warner Cable and Charter have been experiencing slowing growth in recent years as customers access TV shows and movies over the Internet through services provided by companies such as Netflix Inc and Hulu.

Among other strategies, cable companies are beefing up their higher-margin Internet businesses through consolidation and partnerships.

NEW CHARTER

Charter said that on completion of the deal it would form a new public company, initially known as New Charter.

Time Warner Cable shareholders, other than Liberty Broadband, would receive $115 in cash and New Charter shares equivalent to 0.4562 Charter shares.

Malone's Liberty Broadband would buy $5 billion of New Charter shares.

Charter said it would also form a partnership with Advance/Newhouse, the parent of cable operator Bright House Networks, that would result in New Charter owning 86-87 percent of the partnership.

Charter would pay Advance/Newhouse $2 billion in cash and units in the partnership. Charter had earlier agreed to buy Bright House for $10.4 billion.

Time Warner Cable shareholders, excluding Liberty Broadband, are expected to own about 40-44 percent of New Charter. Liberty Broadband would own about 19-20 percent.


KFC Launch Edible Chicken Flavor Nail Polish

2017-09-28 08:57:07 | 日記
 

 

KFC have made edible nail polish that tastes like chicken.

The polishes come in two finger lickin’ good flavors—a bright orange (the Hot and Spicy flavor) and a glittery Thousand Islands Dressing shade (the Original flavor), sold only in Hong Kong.

They work, the brand said in a statement published by Adweek, much the same way as bad-tasting nail polish is designed to make you stop biting your nails. But in this case, they make you want to lick them.

The polishes are part of a Hong Kong campaign to build excitement around KFC, Adweek reports.

“The recipe for our edible nail polish is unique and was specifically designed to hold the flavor, but to also dry with a glossy coat similar to normal nail polish,” says creative director John Koay. “This campaign is designed to be intriguing and fun to increase excitement around the KFC brand in Hong Kong.”

The polishes are not being produced for retail yet, but KFC is asking Hong Kong fans to choose the flavor they would like to purchase in the future. The rollout includes posters, a social media campaign, and one very special music video.

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Neil Buchanan: Will the Divided Republicans Try to Halt Trump?

2017-09-28 08:55:32 | 日記

 

This article first appeared on the Verdict site.

The Trump transition has been much like the Trump campaign. It is never quite clear what is going on within the chaotic blur, mostly because it is never clear what Trump himself is really thinking.

Such uncertainty, however, should come at least with a sliver of hope. After all, given that Trump has not committed to anything, and given that he continues to change his stated views on an almost daily basis, he could ultimately (maybe even quite accidentally) find his way toward a good policy or two. Yet there has never been any doubt that he is always choosing between bad and worse policies.

Making all of this even more difficult to follow is the daily drama that Republicans are living. The party is still largely represented in Congress by people who either opposed Trump openly or merely offered “I support my party’s candidate, no matter who it is” evasions during the general election. Republican factions are now fighting it out to determine who is really in charge.

Related: Neil Buchanan: American Democracy Is on Life Support

More importantly, various groups of Republicans are all trying to see which of their policies Trump will support. Gut the ethics laws? Trump is not actually against it, but he is willing to humiliate Republicans by saying that they should have higher priorities. This increases the risk level for Republicans who might have the temerity to do something without clearing it with their leader.

The Return of Debt-Ceiling Insanity?

Despite all of this, the one thing that I was absolutely sure I would never have to write about again is the debt ceiling. When Hillary Clinton lost the Electoral College vote, I assumed that our long national debt-ceiling nightmare was over, because Republicans would not want to put their president in the position of facing a global-debt crisis. But perhaps I was being too optimistic.

In a way, I should not complain. The debt ceiling has been very good to me professionally. I published a book of essays on the topic in 2013, and Michael Dorf and I coauthored a series of law-review articles in which we explored the ramifications of congressional Republicans’ hostage-taking actions regarding the debt ceiling since 2011.

Even so, the debt ceiling should never have been a big deal in the first place. As I have explained multiple times, that statute is unconstitutional for several reasons. More to the point, however, brinkmanship regarding the debt ceiling is economically reckless and potentially catastrophic. It should never have been used as a political bargaining chip.

And why would Republicans make Trump’s life more difficult by not raising the debt ceiling? After all, their strategy was created entirely to make Barack Obama’s life miserable. They wanted to force him to agree to further spending cuts, outside of the normal budget process. Putting him in a constitutional bind was an added bonus.

Similarly, it was entirely predictable that Republicans would have continued to use the debt ceiling as a cudgel against President Hillary Clinton. They would have gladly tormented her by creating a political crisis that could have destroyed the global economy.

Again, why would they do the same thing to Trump? The short answer is that Republicans will probably figure out a way to avoid the kind of disaster that I am going to describe below.

In part, this is a matter of being afraid of Trump’s Twitter wrath. It might also be that the slightly more sane voices in the party could finally convince the congressional extremists not to strap on the fiscal explosives once again.

But the simple fact is that there are still a lot of true believers in the Republican caucus, people who are political animals but who see the whole notion of compromising their principles as an abject moral failure. And as incoherent as it is, Republicans’ hatred of government spending and borrowing is a bedrock element of their policy views.

Under such circumstances, and given the economic realities that the country faces, it is still possible that a group of Republican hyper-extremists will use the debt ceiling in a way that would force Trump to make some fateful choices.

The Ugly Politics of Blind Ideology and Payback

During the Obama years, Republicans were united in their opposition to everything the administration proposed. Once Republicans took over the majority in the House after the 2010 midterm elections, they used various parliamentary maneuvers to make sure that even popular and necessary legislation would not pass.

The debt-ceiling law is inherently flawed in a number of ways, but one of its worst aspects is that it requires Congress to vote to increase the debt ceiling even when debt is rising for perfectly understandable reasons (such as a global crisis like the Great Recession). The process of voting to increase the debt ceiling is unpredictable, and in practice it has resulted in the need to increase the debt ceiling every year or so. This necessity creates leverage for a determined group of ideologues.

Because Democrats in the House were willing to vote to increase the debt ceiling in order to avoid a disaster, it has only been necessary to find two- or three-dozen Republicans at various times to pass a debt-ceiling increase.

Even that proved to be difficult, however, because so many Republicans were on the record as saying they would never vote to increase the debt ceiling. Those Republicans who had not vowed to do so were still reluctant to overtly express their opinion, because they feared losing their seats to primary challengers.

Even so, the more responsible members of the House leadership only had to “top up” the Democrats’ votes with just enough Republican votes to pass the necessary legislation. A bit of arm-twisting (as well as the help of a few retiring congressmen) was ultimately enough to avoid disaster each time the issue arose.

What now? The debt ceiling is going to be reached early this year. (For technical reasons, the drop-dead date cannot be known with certainty, but it will be sometime after March 15 and probably before June 1.) The spending and taxing bills that Congress has already enacted guarantee that we will need to borrow more money in order to meet our obligations.

A vote to increase the debt ceiling will therefore be necessary quite soon. How will that vote work?

The Democrats certainly have every reason to enjoy the payback of karma. Why should they support Trump as he tries to avoid the fate that the Republicans had threatened to inflict on Obama? They will surely want to force Republicans to finally show they can be grown-ups and take responsibility by taking votes that are easy to demagogue. (“He voted to increase the debt ceiling. He hates our children and grandchildren!”)

In a column last month, I briefly mentioned the possibility that Democrats could use a debt-ceiling fight to extract some concessions from Trump. But it is possible they will conclude that they cannot trust Trump’s promises, and that they would opt out of negotiations and leave the problem to be dealt with by Republicans.

If the Democrats refuse to play ball, the numbers become stark for Republicans. In a 435-seat House, a bill needs 218 votes to pass. Currently, there are 241 Republicans and 194 Democrats in the House. The Senate is split 52-48, but because of various differences in the cultures and rules of the two chambers, I will focus here on the House.

If as few as 24 House Republicans joined all of the Democrats to oppose a debt-ceiling increase, the bill would fail. With more than two-dozen House members committed to the arch-conservative Freedom Caucus, this becomes a very real possibility.

Again, it is possible that the Republicans could find a way to line up 218 votes to avoid a disaster. Trump chose as his budget director a congressman with a record of opposing increases in the debt ceiling. Maybe he will convince enough of his extremist brethren to go along.

This game might become even easier if Republicans amp up the imaginary accounting that allows them to hide the consequences of their actions. Off-budget spending, “magic asterisks” and all the rest are now staples of budget gimmickry. Perhaps there is a way to borrow in excess of the debt ceiling, but to do so in a way that Republicans can deny they are making it happen.

If no deal can be reached, however, Trump will have to make a decision. It’s possible that he will bring back his ideas from the primary campaign and repudiate the U.S. debt, which caused more than a bit of a stir. But with Wall Street now so well represented in Trump’s incipient administration (no draining the swamp there!), the financiers might talk him out of such craziness.

Decisive Action During a Debt-Ceiling Crisis

As I noted above, the debt-ceiling statute is unconstitutional for a variety of reasons. This means that any president who is faced with a Congress that refuses to increase the debt ceiling can, and should, simply say something like this:

It is not the president’s responsibility to obey unconstitutional laws. Therefore, no matterwhether or not Congress increases the debtceiling, I will obey my oath of office and paythe nation’s bills in full and on time.

Despite entreaties from people like Professor Michael Dorf and myself, the Obama Administration convinced itself that it could not risk taking such an action. Ever cautious, Obama simply refused to say what he would do if Republicans were so irresponsible as to block an increase in the debt ceiling. While they fulminated, he would wait them out.

No one has ever used the word “cautious” in describing Donald Trump. If someone tells him that Congress is trying to put him in a bind, forcing him to either take the heat of defaulting on the nation’s bills, or ignore a law that is being held hostage by ideologues, it seems safe to bet that Trump will tell the debt-ceiling absolutists to take a hike.

And this is where I could actually see myself agreeing with Donald Trump. As the president, he will have the same responsibilities that President Obama did, which in this case means making the tough decision to tell the country that the debt-ceiling law is null and void.

What would happen next? This is another area where Trump’s impetuousness could actually be an asset. Trump could simply announce, as soon as the issue arises, that the debt ceiling is a dead letter and therefore instruct his Treasury Department to move forward with standard operating procedures to finance the nation’s expenditures as they come due.

By contrast, President Obama’s stare-down strategy all but guaranteed that negotiations would go down to the wire. Republicans would posture, waiting to see if Obama would blink (as he had in 2011), and only at the last second would they come up with the votes necessary to save the world.

As I wrote many times during these crises, the better strategy for Obama would have been to tell people (including those in the financial markets) as far in advance as possible that the debt ceiling is not part of the story anymore. When bills come due, they will be paid, even if that requires borrowing above the arbitrary limit imposed by that ill-considered law.

This advance notice would give everyone the opportunity to engage in a low-stakes freak-out, working through the various stages of grief until they reach acceptance. It would soon become clear that Trump would not be impeached over this issue and that he simply did not care about the criticism.

Once everyone realized that Republicans would have no choice but to increase the debt ceiling—or, even better, to repeal it or make necessary increases an automatic part of every spending bill—there would be no drop-dead date and no crisis.

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