Economy
Related: About this forumSTOCK MARKET WATCH -- Wednesday, 8 February 2012
[font size=3]STOCK MARKET WATCH, Wednesday, 8 February 2012[/font]
SMW for 7 February 2012
AT THE CLOSING BELL ON 7 February 2012
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Dow Jones 12,878.20 +33.07 (0.26%)
S&P 500 1,347.05 +2.72 (0.20%)
Nasdaq 2,904.08 +2.09 (0.07%)
[font color=red]10 Year 1.97% +0.04 (2.07%)
30 Year 3.15% +0.03 (0.96%) [font color=black]
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[font size=2]Market Conditions During Trading Hours[/font]
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]
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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
Marketwatch Data
Bloomberg Economic News
Yahoo Finance
Google Finance
Bank Tracker
Credit Union Tracker
Daily Job Cuts
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
Financial Sense
Calculated Risk
Naked Capitalism
Credit Writedowns
Brad DeLong
Bonddad
Atrios
goldmansachs666
The Stand-Up Economist
The Automatic Earth
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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
Open Government
Earmark Database
USA spending.gov
[/center][font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
Charlie Rose talks with Krugman
William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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Financial Sector Officials Convicted since 1/20/09 = [/font][font color=red]12[/font]
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red]
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TalkingDog
(9,001 posts)Yay!!!
Fuddnik
(8,846 posts)You might get more!
TalkingDog
(9,001 posts)Wouldn't miss SMW, it's a daily pool of sanity.
Demeter
(85,373 posts)Other people's insanity.
DemReadingDU
(16,000 posts)
Demeter
(85,373 posts)POSTING IN TWO PARTS: PART ONE; PUTS AND CALLS IN OPTIONS
let's start with a simple example of how options work. If this is new to you, please stay with me, your head will not explode.... at least for awhile. An option is a financial instrument which grants you the right to buy X number of shares of a company at Y price (the strike price). One option controls 100 shares. An option is either a put (a bet the price will decline in the future) or a call (a bet the price will rise in the future).
An option is "in the money" when the stock price is above the call strike price or below the put strike price. For example, if you own one call option on Netflix (NFLX) at a strike price of $100, then your option is worth $2,900 ($29 per share) as of today because Netflix is trading for $129 per share. (There is also a time value in options, but let's leave that aside in this example.) So if you bought 10,000 options on Netflix (NFLX), whomever sold you the options is obligated to deliver 1,000,000 shares of Netflix to you (at the strike price of the option) upon expiration of the option.
If your option is "in the money" as in the above example, the specialist who sold you the options will hedge his position so he can meet the obligation. If your options are just barely in the money, he might buy 250,000 shares of Netflix to cover his future obligation. As your option becomes ever more valuable, i.e. becomes deeper in the money, the specialist has to increase his hedge up to the full 1,000,000 shares that he is obligated to deliver to you upon expiration. That purchase of 750,000 shares to cover his bet will drive the price of Netflix up.
Here is an important point about options and derivatives. In theory, the number of options should equal the number of outstanding shares. If there are 1,000,000 shares of a stock outstanding, then there shouldn't be more than 10,000 options contracts written and sold. In the parlance of options, these puts and calls are "covered," meaning there are enough shares available to "cover" the options, i.e. when the option expires, there are enough shares to meet the delivery obligations of actual shares. If a specialist sells options without holding the requisite number of actual shares to cover the options, then he will have to buy those shares as the delivery date looms. If the number of option contracts exceeds the number of available shares, then the rush to acquire those shares for delivery will spark a massive rally. This is somewhat akin to the infamous "short-covering rallies" triggered when those who sold shares short have to buy shares to close their short positions.
Options and futures contracts are all marked to market at the close of every trading day. The price is thus transparent for all to see....TO BE CONTINUED
Demeter
(85,373 posts)Consider the debt of a sovereign state--for example, Greece. Just to keep things simple, let's say there are $100 billion of outstanding Greek bonds. Back in the good old days around 2009, the risk of Geece defaulting on that debt was considered low. Nonetheless, prudent owners of the debt bought insurance against default. The insurance is a derivative called a credit default swap (CDS). The contract works somewhat like an option, in the sense that if a default occurs, the seller of the CDS must cover their contract by delivering the value promised in the CDS to its owner. If no default ever occurs, the financial institution that originated and sold the CDS gets to keep the hefty premium. Nice. Since there are no limits on how many CDs I can write on Greek debt, why not sell more CDS? In fact, why not sell more CDS than there are Greek bonds? As in our options example, in the normal course of things the number of CDS equals the outstanding bonds. In other words, the owners of the $100 billion in bonds would buy $100 billion in notional CDS insurance against default.
If Greece defaulted and the value of the bonds fell in half to $50 billion, the sellers of the CDS would owe the owners of the CDS $50 billion. (This is simplified, but you get the picture.) That was, after all, the bet: in exchange for this hefty premium, if Greece defaults then we will make good your horrendous losses.
But a funny thing happened on the way to the derivatives market: wise guys realized they weren't limited to selling CDS to the owners of Greek bonds--anyone could buy a CDS on Greek debt. So why not sell $1 trillion in CDS against Greek bonds? That's ten times the premium. Some issuers hedged their bet by buying CDS issued by other institutions. These other institutions are the "counterparty", that is, the party who pays off the CDS I bought from them so I can pay off the owner of my CDS. Thus the derivatives market for Greek debt is a daisy-chain of counterparties, all planning to use the proceeds from the CDS they own to pay off the CDS they sold.
It was a license to print money--until Greece defaults. Yikes, now what? Just as in the classic film The Producers, where 100% of the proceeds of the Broadway play were promised to ten different investors, the CDS schemers reckoned the odds of a Greek default were effectively zero--"the E.U. will never let a member state default." Ahem. Until they do. In The Producers, the schemers devised a play so odious, so bad and so repellent that they felt extremely confident it would close after one night for a tremendous loss--and they would get to keep the 10X oversubscribed investors' money. This was the same bet made by sellers of CDS on Greek debt--and on Italian, Portuguese, Spanish, Irish et al. debt as well. Now that leaves the canny financiers in a pickle, as they owe various parties $1 trillion when $100 billion in Greek debt goes up in smoke.
Demeter
(85,373 posts)Now we get to the deleveraging part. As I understand it, some of these CDS are written against various swaps or stock indices, meaning that the asset to be delivered upon default is ultimately a claim against stock indices, currencies, etc. That means that those holding the CDS obligations have to acquire these assets so they can pay off their obligation when Greece defaults. WHICH EXPLAINS WHY THE STOCK MARKETS RISE FOR NO APPARENT OR SUSTAINABLE REASON, AND WHY THE SWISS FRANC KEEPS SOARING, ETC. ETC.
There is one more wrinkle. Many sellers of CDS protected themselves against any potential loss by buying a CDS originated by someone else. As noted in When Greece Defaults, the Credit Default Swap Dominoes Fall (February 4, 2012), this "can be likened to a pool of $100 bets leveraged off $5 in cash. If every bet is covered perfectly, then it's somewhat like $95 in bets being paid by passing $5 around--much like the famous email that depicts all debts in a small town being paid by the same $5." But some players have issued more CDS than they bought as insurance, meaning that they will be unable to meet all their obligations. Everyone is depending on a host of counterparties to deliver, and now there is a growing fear that some counterparties will be unable to make good on their obligations.
That's how the dominoes topple. Prudent institutions aren't waiting around until the dominoes fall--they're buying the underlying assets so they can meet their CDS obligations. That's the only way not to topple into insolvency when the default causes CDS to be recognized as due and payable. In this light, it's no wonder stocks have been rising. If even a modest percentage of CDS are tied to stock indices, then those deleveraging their derivatives positions must acquire the underlying assets. They can no longer count on all counterparties paying off as promised, and so they are raising cash and buying the underlying assets needed to make good their obligations. AND THEY ARE RAISING CASH BY LOOTING NATIONAL TREASURIES, PENSIONS FUNDS, ETC.
The whole thing is a farce, just like The Producers. The moment the default is recognized, then all the CDS become due and payable, and it will only take handful of failed counterparties to bring the entire system down.
Demeter
(85,373 posts)No wonder the Eurocrats and central bankers are twisting everyone's arms to accept a 70% loss--the alternative is a Greek default and the collapse of the banking cartel's profitable scheme. It is beyond absurd--what is a 70% loss but default? When banana republics default, their bondholders don't necessarily absorb a 70% loss. yet now, to "save" the despicably parastic shadow banking system and the "too big to fail" financial institutions, a default cannot be called a default: it is a "voluntary haircut."
Greece, please do the world a favor and openly default--right now, today. Declare a default and pay nothing. Force the shadow banking system to recognize a default and bring down the entire rotten heap of worm-eaten corruption.
At that point, there will be no reason to buy equities.
Warpy
(111,270 posts)with it, massive deflation happening almost overnight as the high flyers scramble to dump what they have to try to survive.
Derivatives trading is what has the potential to take us back to 1929. However, like the artificially pumped stock market floating on an ocean of bad debt, the whole scam has got to go before we can get back to a rational economy.
Some very surprising plutocrats and institutions will fail when it happens. If we are very lucky, the banks themselves will be nationalized and deposits up to the limit honored. If we are very unlucky, a GOP will be in office and they will be allowed to fail, all deposits going with them forever.
We are living in not only interesting but fascinating times.
Demeter
(85,373 posts)...The sad truth is that America is in the middle of a long-term economic decline because our economy is not built on a solid foundation. The false prosperity that we are enjoying now is being fueled by the biggest debt bubble in the history of the world. We consume far more wealth than we produce, and we pay for it by constantly going into more debt. At some point the merry-go-round is going to stop and when it does it is going to be incredibly painful.
An increasing number of Americans are waking up to this reality. One recent survey found that 61 percent of all Americans believe that there will be "a major catastrophic event" in the United States within the next 20 years. A significant portion of them believe that the "catastrophic event" will be economic in nature. That same survey found that only 15 percent of all Americans feel as though they are completely prepared for the coming catastrophic event. Remember what happened back in 2008. When the financial crisis struck, millions of Americans lost their jobs very rapidly. Since many of them did not have any money stored up, a lot of them lost their homes as well.
Since it is "halftime in America", now is the time to get prepared for the next great financial crisis.
- Now is the time to reduce your expenses.
- Now is the time to get out of debt.
- Now is the time to set aside some money so that you will have something to live on if you do happen to lose your job. I typically recommend that you have at least 6 months of living expenses stored up.
- Now is the time to start a side business. Even if you are broke, there are some businesses out there that you can start up for no money. It isn't easy to start a business with no money, but it can be done.
- Now is the time to grow a garden. Fruits and vegetables are often some of the most expensive items at the grocery store, and by growing them yourself you become less dependent on the system.
And that is the key. We all want to try to become less dependent on the system.
- There is no guarantee that your job will always be there.
- There is no guarantee that your insurance company or the financial institutions that you are working with today will always be there.
- There is no guarantee that the government will be there "to save you" when you really need it.
Yes, it is halftime in America. So get ready for the second half, because it is going to be a real nightmare.
AnneD
(15,774 posts)
and lurkers.
Economic Armegeddon To Do List:
1. Reduce Debt...almost done
2. Reduce Expenses...done
3. A. Set Money aside...in progress, but have a retirement option
B. Have full years food storage as reserve
4. Start a side business. Hubby has one. I have skill sets to burn if I desire a second job.
5. Grow a garden... Looking for suitable land to retire on but have container garden now.
I will add this additional note. While we have a pension provided by the state of Texas, I put very little faith in the political system or corperations to safeguard our pension. At this point I do not trust fiat currency or investments such as the Stock Market. I put my wealth in tangiable things at this point.
I shifted gears in my thinking as a 'consumer' in 20003. We were so in the hole in debt it was a tragedy. We had a teaspoon to dig our way out. We started small but got control of our debt by 2008. We saw the winds shifting and redoubled our efforts to save. I always use the example of the pantry. Yes, we were spending money but we saved more by purchasing at lower prices. We can be more selective and wait to get good bargins. This year, we will be taking courses at our Leisure Learning facility to learn about sustainable farming, livestock, and water and energy so that we will be ready for our relocation. We have a kitty to look at property this Spring Break.
This did not happen overnight, but I do believe we all still have some time left to prepare for what ever blowback happens. We are still in the halftime show. You may not get to prepare as much as you want, but any preparation is better than no preperation (which is what I fear will happen to most).
Happy hunting and watch out for the bears.
DemReadingDU
(16,000 posts)My plan is very similar, spouse has no plan. While he sees the economy continue to devolve, he does not feel any need for 'preparations'. Oh, a depression will come, but not in his lifetime. Besides, he tells me, there is nothing to do about it anyway, and everyone will be just like everyone else.
AnneD
(15,774 posts)because hubby was on board. At first it was hard for him to visualize it. Going out to my brother's place and letting him see it really helped him. He just needed a focus.
And your spouse is very wrong. The only folks that will be like everyone else will be those that did not plan. I guess it helps to live in a hurricane prone region. It doesn't take but a few times of fighting over bread and bottled water that you finally start making a plan and working it. I guess you don't have that problem in your part of the country but I am sure you have tornadoes, ice storms of prower outages. Surly he would prepare for that?
Again, what ever you can do is better than nothing. You just have to do what you can.
DemReadingDU
(16,000 posts)He was a 20 year old Marine who served in Vietnam during the 1968 TET offensive. During that time, he often was faced with bleak circumstances, little food, people dying, as well as he had to be innovative and creative. His attitude is that he survived that, he can survive anything. But he forgets he is now Medicare age.
And definitely I agree with you, better to have some extra preparations, than nothing. Because there are times that we have lost electricity for a day or 2, and it's been good that I planned ahead.
AnneD
(15,774 posts)that subscribe to the bottle of water theory of preparedness. As long as you have a gun, bottle of water and a thousand dollars, you can survive just about anything. Most guys are like that.
I also think that if it were up to most men we would still be living in caves and wearing loin cloths. 
Demeter
(85,373 posts)Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.
Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company....As lenders shift their focus to sales, they are finding that some borrowers would rather risk repossession while they wait for a loan modification, according to Guy Cecala, publisher of Inside Mortgage Finance, a trade journal. In a loan modification, the monthly payment, and sometimes principal, is reduced to help prevent seizure. Homeowners facing foreclosure may live rent-free for years before they are forced out. “That’s why the banks have got to pay the big bucks,” Cecala said. “The real question is why is the bribe so big? Is that what it takes to get somebody out of their home?” Banks also pay a few thousand dollars to the owners of second liens, whose loans can be wiped out by a short sale, to encourage them not to block the deals.
While JPMorgan is giving the largest incentive payments, other banks and mortgage investors are also offering them, according to interviews with 12 real estate agents in Arizona, California, Florida, New York and Washington. Lenders also provide incentives on loans they service and don’t own when the mortgage investor, such as a hedge fund, requests it. JPMorgan, the biggest U.S. bank, approves about 5,000 short sales a month. It generally offers $10,000 to $35,000 in cash payments at settlement, real estate agents said. Not all of the sales include incentives. Borrowers also can receive payments from the federal government’s Home Affordable Foreclosure Alternatives program, which in 2010 began offering as much as $1,500 to servicers, $2,000 to investors and $3,000 to homeowners who complete short sales...
...For banks, approving a sale for less than is owed on the home can cut a year or more off the time it takes to unload a property. From listing to sale, the transactions took about 123 days on average at the end of last year, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Lenders spend an average of 348 days to foreclose in the U.S. and an additional 175 days to sell the property, according to RealtyTrac. In New York, a state that requires court approval for repossessions, it takes about four years to foreclose on a home and then resell it, the company said. Lenders can often afford to forgive debt, offer the incentive and still make a profit because they purchased the loan from another bank at a discount, said Trent Chapman, a Realtor who trains brokers and attorneys to negotiate with banks for short sales....
YOU HAVE TO READ THE CONCLUSION, THOUGH....IT'S IRONICALLY FUNNY...IN A DOG IN THE MANGER KIND OF WAY
Demeter
(85,373 posts)Attorney General Koster announces 136-count criminal indictments related to robo-signing in mortgage industry--Boone County grand jury indicts Georgia corporation and its president for practices highlighted in 60 Minutes report --Jefferson City, Mo. – Attorney General Chris Koster today announced that a Boone County grand jury has handed down 136-count indictments against DOCX, LLC and its founder and former president, Lorraine Brown, for forgery and making a false declaration related to mortgage documents processed by DOCX.
“Today’s indictment reflects our firm conviction that when you sign your name to a legal document, it matters,” Koster said. “Mass-producing fraudulent signatures on millions of real estate documents across America constitutes forgery. When you file those documents in our state, you are committing a crime under Missouri law.
The forgery and false declaration counts each allege that the person whose name appears on 68 notarized deeds of release on behalf of the lender is not the person who actually signed the paperwork. The documents were then submitted to the Boone County Recorder of Deeds as though they were genuine. Koster’s office, working in coordination with Boone County Prosecuting Attorney Dan Knight, requested the indictment, and the Attorney General’s Office will prosecute the case. The indictments are the culmination of months of investigation by the Attorney General’s Office into the robo-signing scandal that injected thousands of questionable mortgage documents into the market. When the practice began to come to light, several major lenders temporarily suspended foreclosures in 2010. DOCX’s role in the robo-signing process came to national attention when 60 Minutes reported that Linda Green, an employee of DOCX, purportedly signed thousands of mortgage-related documents on behalf of several different banks and in multiple handwritings. The 68 documents on which the indictments are based were purportedly signed by Linda Green, but were in fact allegedly signed by someone else.
Forgery is a Class C felony and False Declaration is a Class B misdemeanor. If convicted on the most serious count, Brown could face up to seven years in prison for each count. DOCX could be fined up to $10,000 for each forgery conviction and $2,000 for each false declaration conviction....The charges against DOCX and Lorraine Brown are merely accusations and, as in all criminal cases, the defendant is innocent until or unless proved guilty in a court of law.
FOR A FULLER REPORT: http://www.nytimes.com/2012/02/07/business/docx-faces-foreclosure-fraud-charges-in-missouri.html?_r=2
FOR THE FULL INDICTMENT, SEE ORIGINAL LINK
The Attorney General’s investigation into this practice continues.
Demeter
(85,373 posts)In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time. Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries. But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son's student loans and throwing the whole family into foreclosure. All, they say, even though they didn't miss a single mortgage payment. The Bowers are not alone. More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure. "It's the most egregious manifestation of an industry that's seriously broken," said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.
Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. "The record-keeping on the part of the mortgage servicers is not to be trusted." The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures.
Now it's becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was....Depositions from "affidavit slaves" depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 an hour, to pose as bank vice presidents, assistant secretaries and corporate attorneys. These "robosigners" became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties. They passed around notary stamps as if they were salt. They did all of this, they testified, without verifying a single word in any of the documents - as is required by law.
And it was all done, they say, to foreclose on as many homeowners as fast as possible. No one collects statistics on wrongful foreclosures, or how many people are facing the phantom mortgage debts. But as the industry enters its fifth year of unwinding its mortgage morass, consumer groups, homeowner attorneys and foreclosure-fraud investigators say they are seeing more cases where people who don't owe the banks a dime are getting ensnared in the same hell as those who have missed payments. They add that such problems are likely to intensify. Former industry employees have testified that they knowingly pushed through foreclosures on the wrong people...
Demeter
(85,373 posts)Aries
The universe, in all its wisdom, has a plan for everyone. Strangely, you're supposed to be the nun who holds up a distributor cap and winks while the Nazis try to start their car. THIS IS A SCENE FROM "SOUND OF MUSIC", IN CASE YOU ARE WONDERING...I'VE LONG SUSPECTED I MISSED MY CALLING...
Taurus
That person you've been seeing will finally introduce you to her friends, so it's a good thing you have an appreciation for taxidermy.
Gemini
You might not always appreciate the story God is using you to tell, but you have to admit He isn't afraid to kill off major characters. YIKES!
Cancer
This would be a good time to start a new dietary regimen, seeing as you haven't eaten in three days.
Leo
Sometimes the people in your life are holding you back, despite the best of intentions. Try to be patient as you inexorably drag your struggling co-workers toward the edge of the roof.
Virgo
You'll become a household name when society is suddenly in need of a term for "someone who gets hit by a bus once a week."
Libra
They say if you teach a man to fish he'll eat for a lifetime, but they also say that to become a master you must defeat your teacher, so ask yourself if you want that hanging over your head before giving any fishing lessons.
Scorpio
You must grasp that actions have consequences. Start by not throwing broken glass over your head and forgetting all about it.
Sagittarius
Take heart—old solutions can still work for old problems, especially if getting drunk is your solution to everything.
Capricorn
You'll soon move to a faraway city where nobody knows who you are, which makes it kind of odd that they're all trying to kill you too.
Aquarius
People can say whatever you want, but you'll remain firm in your belief that Archie is actually the greatest Manning of all.
Pisces
A semi truck full of dimes will hurtle down your street and crash into your house, leaving you with no dreams left to achieve in life.
Demeter
(85,373 posts)THIS SOUNDS LIKE THE FINANCIAL EQUIVALENT OF PROSECUTING A "THOUGHT CRIME"
http://www.nytimes.com/2012/02/08/opinion/the-zuckerberg-tax.html
WHEN Facebook goes public later this year, Mark Zuckerberg plans to exercise stock options worth $5 billion of the $28 billion that his ownership stake will be worth. The $5 billion he will receive upon exercising those options will be treated as salary, and Mr. Zuckerberg will have a tax bill of more than $2 billion, quite possibly making him the largest taxpayer in history. He is expected to sell enough stock to pay his tax. But how much income tax will Mr. Zuckerberg pay on the rest of his stock that he won’t immediately sell? He need not pay any. Instead, he can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax. That’s what Lawrence J. Ellison, the chief executive of Oracle, did. He reportedly borrowed more than a billion dollars against his Oracle shares and bought one of the most expensive yachts in the world. If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.
Consider the case of Steven P. Jobs. After rejoining Apple in 1997, Mr. Jobs never sold a single Apple share for the rest of his life, and therefore never paid a penny of tax on the over $2 billion of Apple stock he held at his death. Now his widow can sell those shares without paying any income tax on the appreciation before his death. She would have to pay taxes only on the increase in value from the time of his death to the time of the sale.
Now compare Mr. Zuckerberg with Lady Gaga. Last year she told Ellen DeGeneres that she had to get “completely wasted” to sign her tax returns because she owed so much. Lady Gaga reportedly earned $90 million in 2010. Because she earns fees and royalties, she’s subject to the highest income-tax rate. So, assuming she’s just as successful this year, she will certainly pay more than $30 million in taxes and probably more than $45 million, which is infinitely more tax than Mr. Zuckerberg will pay on the $23 billion of Facebook stock he now holds.
...Our tax system is based on the concept of “realization.” Individuals are not taxed until they actually sell property and realize their gains. But this system makes less sense for the publicly traded stocks of the superwealthy. A drastic change is necessary to fix this fundamental flaw in our tax system and finally require people like Warren E. Buffett, Mr. Ellison and others to pay at least a little income tax on their unsold shares. The fix is called mark-to-market taxation. For individuals and married couples who earn, say, more than $2.2 million in income, or own $5.7 million or more in publicly traded securities (representing the top 0.1 percent of families), the appreciation in their publicly traded stock and securities would be “marked to market” and taxed annually as if they had sold their positions at year’s end, regardless of whether the securities were actually sold. The tax could be imposed at long-term capital gains rates so tax rates would stay as they were. We could call this tax the “Zuckerberg tax.” Under it, Mr. Zuckerberg would owe an additional $3.45 billion when Facebook went public (that’s 15 percent of the value of the roughly $23 billion of stock he owns). He could sell some shares to pay the tax (and would be left with over $20 billion of Facebook stock after tax), or borrow to pay the tax.
If his Facebook shares decline in value next year, he’d get a refund...
I THINK THE IDEA IS NUTS, AND THERE ARE MUCH BETTER WAYS TO REACH THE GOAL...READ THE REST AND TELL ME WHAT YOU THINK!
tclambert
(11,087 posts)Those who work with extraordinary skill pay the most, whereas owners of large portfolios can do nothing and pay a much lower rate on their increases.
Demeter
(85,373 posts)Artists and athletes have none...unless....
rfranklin
(13,200 posts)might make the original stock holder think twice about clinging to those shares until death do us part. No more free ride.
tclambert
(11,087 posts)And they claim it destroys family farms.
rfranklin
(13,200 posts)but I think you knew that.
Demeter
(85,373 posts)It has been rumored before, but allegedly the potential for the ECB to transfer bonds to EFSF is back on the table. The ECB would transfer the bonds at cost to the EFSF (net of interest earned?) and the EFSF would participate in the PSI.
There are some positives in this. Greece would get additional savings. With holdings of over €50 billion, a 50% principal write down would be helpful to the overall situation. It would also make it more clear that the bonds held by the ECB aren’t effectively subordinating other debtholders. Those are positives.
There are also some definitive negatives. Let’s say they transfer bonds at a price of 80% of par. Then the EFSF would lose about 50% of par immediately (assuming a post restructuring price of 60% for the new bonds). That would be a loss of over €25 billion. It is just taking money from the EFSF. That is bad on a couple of fronts. The obvious thing is that the ability to leverage EFSF at all (and yes, some politicians continue to talk about that) is basically gone. If the Troika will just use the EFSF as a way to bury losses they don’t want to take directly, no one will lend to EFSF on a leveraged basis. Since most people doubt EFSF would be leveraged, it doesn’t have a huge impact, but is important.
The other negatives are slightly more subtle, though they could come out loud and clear. The ECB could have taken the loss directly and just printed money for that loss. So this demonstrates an unwillingness to print money. The ECB could take the loss and get capital from the member states. By using the EFSF rather than new capital calls, it is a sign that countries are at the limit of what they will contribute. Hoping for new money is unrealistic – since this was the perfect opportunity to put up new money and tell the world that Europe is truly united and willing to contribute. This just uses up money that was already allocated....
Demeter
(85,373 posts)Stephen Fidler reports that the ECB is kindasorta going to tender its bonds into the Greek debt exchange, thereby helping the country achieve some €11 billion in extra savings.
The details are sketchy, but to a first approximation, it seems to work like this: the ECB has €50 billion of Greek bonds, which it bought for €39 billion. It will sell those bonds to the EFSF for €39 billion, which in turn will “return the bonds to Greece”, whatever that means. Greece, in turn, “will then agree to repay the EFSF” — which may or may not mean issuing new bonds to be held by the EFSF. Since Greece will now have €39 billion of debt rather than €50 billion, that’s an €11 billion savings.
The ECB, under this plan, ends up breaking even, without monetizing any debt....the problem here is that the EFSF, which was created to lend new money to countries in distress, is instead being used to retire debt that Greece issued years ago. That, in turn, hurts the EFSF’s ability to fund Greece — and all the other countries in Europe, for that matter — going forwards....
Demeter
(85,373 posts)Delay over agreeing €3bn of extra spending cuts fuels fears that Athens may be forced into a messy default next month
Read more >>
http://link.ft.com/r/8P1R88/IIHHC8/204L2/7AXG5J/R32T54/JY/t?a1=2012&a2=2&a3=8
Roland99
(53,342 posts)Demeter
(85,373 posts)In which case, why say so?
They are trying to figure out which way to skin the carcass. For maximum profit (and probably maximum pain for the victims).
When what they SHOULD be figuring out is where to hide from the masses of rioting villagers....and the armed forces that will follow.
Demeter
(85,373 posts)The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.
Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp., the world’s biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.
The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy. That would be the highest level since 1992.
“For 40 years, only politicians and the occasional author in Popular Mechanics magazine talked about achieving energy independence,” said Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration. “Now it doesn’t seem such an outlandish idea.” ...The last time the U.S. achieved energy independence was in 1952. While it still imported some petroleum, the country’s exports, including of coal, more than offset its imports....
AnneD
(15,774 posts)are multinational and have no allegience to this country. They will end up selling it to make a bonus.
Demeter
(85,373 posts)Yahoo chairman Roy Bostock and three other directors are to step down as part of a boardroom clear-out
Read more >>
http://link.ft.com/r/R5WAEE/DWP3TO/B49CK/QNHKO1/97RX14/50/t?a1=2012&a2=2&a3=8
Demeter
(85,373 posts)UK pharmaceutical group conducts ‘daily sweep’ to remove all cash from most eurozone countries
Read more >>
http://link.ft.com/r/R5WAEE/DWP3TO/B49CK/QNHKO1/97RXUI/50/t?a1=2012&a2=2&a3=8
HMM....A TEMPORARY SOLUTION, AT BEST, AND ONLY UNTIL EVERYBODY ELSE DOES IT, TOO.
Demeter
(85,373 posts)The bank has agreed to buy Dwight Asset Management, which specialises in so-called “stable value” money management, from Old Mutual
Read more >>
http://link.ft.com/r/R5WAEE/DWP3TO/B49CK/QNHKO1/NJOP2Q/50/t?a1=2012&a2=2&a3=8
FRESH MEAT....OR SUCKERS
Demeter
(85,373 posts)Downbeat forecast for Swiss group which warns of more structural changes as fourth quarter net profits drop sharply
Read more >>
http://link.ft.com/r/R5WAEE/DWP3TO/B49CK/QNHKO1/OR0UAA/50/t?a1=2012&a2=2&a3=8
THAT'S WHAT HAPPENS WHEN YOU LOSE YOUR PATENTED SECRECY LAWS
Demeter
(85,373 posts)Microcredit websites are helping businesses long neglected by banks by connecting potential investors with those looking to borrow small amounts
Read more >>
http://link.ft.com/r/R5WAEE/DWP3TO/B49CK/QNHKO1/2OYAS1/50/t?a1=2012&a2=2&a3=8
xchrom
(108,903 posts) 
Tansy_Gold
(17,861 posts)But the news was so "new" when I opened the thread yesterday that I couldn't find a current one.
And really, I had to chuckle, because Krugman (who I still think is living in an ivory tower in the clouds) wrote just a few days ago about the need for creating new "families." Well, duh, hasn't that always been the joke? The way to resuscitate the economy is to legalize gay marriage? Just think of how much money all those weddings would pump into the economy!
Personally, given that "marriage" has really only ever been a legal contract regarding property rights, and the churches stepped in when it became clear they could make money off the deal, I think the only thing that should be legal is civil unions for all, and let the churches do their little ceremonial things if they wish. Religious gorups should have no say in how contracts are negotiated and legalized, just how they're celebrated. I'm glad to see some judges are, regardless of their wording, making decisions along those lines.
Tansy Gold, married once and NEVER AGAIN!
xchrom
(108,903 posts)marriage isn't MY thing -- but equality makes me buoyant!
Tansy_Gold
(17,861 posts)Demeter
(85,373 posts)But I can't make it transfer, so I found this instead:
xchrom
(108,903 posts)Japan used so-called stealth intervention in November as the government sought to stem yen gains that hammered earnings at makers of exports ranging from cars to electronics.
Finance Ministry data released Tuesday showed Japan conducted ¥1.02 trillion worth of unannounced intervention during the first four days of November, after selling a record ¥8.07 trillion on Oct. 31, when the yen climbed to a postwar high of 75.35 against the dollar.
The currency's strength has eroded profits at exporters such as Sharp Corp. and Honda Motor Co., just as faltering global growth is undermining demand.
"Japan has clearly shown its intention to stop a further appreciation of the yen, and there is a high chance" for more yen selling, said Hideki Shibata, a senior strategist for rates and foreign exchange at Tokai Tokyo Research Center Co. "Caution against intervention has increased in markets."
xchrom
(108,903 posts)WASHINGTON — "The past is a foreign country: they do things differently there." — L.P. Hartley, English novelist
It must now be obvious that, economically speaking, we're in another country. Things we once took for granted no longer apply; things we never imagined occur all the time. We've entered a zone of ignorance where familiar experience and ideas count for less. "Thirty years ago, if you'd said that the United States and Europe were going to be the centers of financial crises, people would have thought you were crazy," says economist Fred Bergsten. The unforeseen is now routine.
Profound changes to the global economy contributed to today's crisis and make it harder to resolve. Bergsten — director of the influential Peterson Institute for International Economics — cites three:
First is the rise of "emerging market" countries, led by China, India and Brazil. In 1981, when the Peterson Institute was founded, these nations were laggards. "Now, they're more than half the world economy and are growing three times faster than high-income countries (the United States, Japan and European nations)," Bergsten said in an interview. "They drive the world economy."
Second, the U.S. has moved from the largest-creditor to the largest-debtor nation. Through the 1970s, the U.S. generally ran trade surpluses, and U.S. multinational investment abroad overshadowed foreign investment here. But since 1980, U.S. current account deficits exceed $8.5 trillion. (The current account is a broad measure of trade.) And foreigners have invested trillions in U.S. stocks, bonds, factories and real estate.
***uncharted? the global elites have committed everyone to extreme cycles of boom and bust.
it's time to stop saying 'uncarted', 'unexpected', etc.
it's done w/ forethought -- this extraction, this extreme gambling, the mess.
Tansy_Gold
(17,861 posts)I'd say with malice aforethought. This is economic murder.
xchrom
(108,903 posts)Demeter
(85,373 posts)Thinking too hard about the discontinuity can lead to madness...and who has the time, anyway?
It takes all the energy, intelligence and luck one can muster to keep a couple of lives going, nowadays. We are all reduced to refugee status, in our own country, state, city and homes.
SMW is not just talk therapy, it's heads-up and clues for survival in these perilous times.
xchrom
(108,903 posts)While many industries in California were buckling under the weight of the recession, so-called green businesses were struggling too -- just not as much, according to a new report.
From January 2009 through January 2010, the overall state economy lost 7% of its jobs, according to nonprofit research group Next 10’s Many Shades of Green report. During the same period, the core green economy -- composed of businesses involved in renewable energy, clean-fuel cars, water conservation, emissions trading and more -- suffered a 3% job loss.
That left 169,800 green jobs in the state at the start of 2010. Regions such as San Diego, the Bay Area and Sacramento remained resilient with less than a 2% green employment decline. Los Angeles, which has more than 20% of all green jobs in the state, saw its positions slip 4% to 26,600.
The report suggests that amid volatile prices and tight markets, green entrepreneurs and their products and services will become increasingly competitive. California’s strong foundation of environmentally focused innovation and research, as well as its early-adopter culture, will also help.
bread_and_roses
(6,335 posts)very kind of you
xchrom
(108,903 posts)It has become one of the rare things that binds the two men, the controversial automotive bailout that was begun by former President George W. Bush and completed by his successor, President Barack Obama.
The latter defended his actions during the recent state-of-the-union address, during which he declared “The U.S. auto industry is back.” His predecessor used a meeting of the nation’s auto dealers to defend his own actions, insisting he had no other choice but to completely sink the American economy.
“I’d do it again,” proclaimed Bush, speaking to the annual convention of the National Automobile Dealers Association.
The bailout, which ultimately totaled $85 billion, was originally begun during the waning days of the Bush administration. With a specific rescue effort rejected by Congress, the former Commander-in-Chief decided to tap into a separate, $700 billion fund Capitol Hill did approve for the bailout of Wall Street and the banking industry.
xchrom
(108,903 posts)Disparaging comments went to press practically before the Greek government spokesman had even reached the end of his declaration that the country’s ancient monuments would be used in future for commercial purposes. The Acropolis is thus to become a stage for advertisements and action movies; the Athens’ Agora, birthplace of parliamentary democracy, a playground for fashion shows and 007 stunts; and the Kerameikos, the nearly three-thousand-year-old cemetery, will become the backdrop for commercials featured perfumed sex maniacs touching themselves in their sleep. That’s more or less the future for Greece’s ancient cultural heritage in the looming shadow of the European financial crisis, as cultural pessimists paint it.
One could believe that almost overnight the impending bankruptcy of Greece has turned the country from the cradle of European culture and democracy into a whore ready for anything. But Greece’s negligence towards its ancient world heritage is not a new phenomenon. During the preparations for the Olympic Games in 2004 famous ancient sites such as Marathon were crudely worked up into competition venues and prettified with questionable reproductions of vanished monuments from antiquity. Even the decades-long reconstruction of the Parthenon, which not only wishes to rebuild damaged parts but also missing ones as well, has been grounded as deeply in tourism’s taste for pristine intact sites as in a taste archaeological knowledge.
If one were to look for an event that may have sparked this, then the discovery of the tomb of Philip II of Macedonia in 1977 – in Vergina (Aigai in antiquity) in northern Greece – might spring to mind. It was a sensational discovery: the very tomb of the father of Alexander the Great, with untold wealth in gold and silver treasure, and the ashes of the ruler wrapped in a gold-embroidered purple cloth.
Delphi and the Palace of Knossos – open-air studios
Everyone involved grasped that tourists woul queue all night to see the exhibit and got busy straight away preparing a spectacular exhibition. Inquiries to specialists in antique fabrics, however, revealed that unfolding and preserving the purple fabric would take years. One restorer, though, spoke of months – on condition that only one part of the cloth would be saved. The offer was accepted, and the exhibit opened on schedule in Thessaloniki. Record crowds streamed through.
xchrom
(108,903 posts)Tax incentives aimed at luring senior multinational executives to Ireland and increased mortgage relief for struggling homeowners are among the provisions included in the Finance Bill, which was published today.
Many of the measures included in the Bill were announced by Minister for Finance Michael Noonan when unveiling Budget 2012 in December. It is expected that the Bill will go through the Oireachtas in the coming weeks.
Among the provisions included in the Bill is an increase to 30 per cent in mortgage interest relief for first-time buyers who took out their mortgage in the years 2004 to 2008.
The Bill also makes provision for the Budget announcement that mortgage interest relief will be available at 25 per cent for first-time buyers who purchase property this year and at 15 per cent for non-first-time buyers who purchase a home next year.
xchrom
(108,903 posts)Greek parties will try today to agree a reform deal in return for a new EU/IMF rescue to avoid a chaotic default, after repeated delays which have prompted warnings that the euro can live without Athens.
With the future of Greece and the wider euro zone at stake, Prime Minister Lucas Papademos' efforts to get the three parties in his government to accept the tough reforms demanded by the European Union and International Monetary Fund seem to have been thwarted by arguments over little more than procedural matters.
One deadline after another has passed without the leaders making up their minds on terms for the new €130 billion rescue which Athens must receive to avoid going bankrupt next month when big debt repayments are due.
What was supposed to have been a crunch meeting yesterday was postponed because of missing paperwork, according to one party official, delaying discussion of a deal which is likely to prove unpopular with an angry Greek electorate.
xchrom
(108,903 posts)France's central government slashed its budget deficit last year by a third thanks to the end of one-off spending measures, the budget ministry said today, but state auditors said much tougher austerity measures were needed to hit EU targets.
The central government's 2011 shortfall came in at €90.8 billion, €4.5 billion better than forecast in last year's budget, meaning France should comfortably beat its overall state deficit target for last year of 5.7 per cent of GDP.
President Nicolas Sarkozy said recently the overall public deficit - which includes social security and local authority spending - could have dipped as low as 5.3 per cent of gross domestic product last year, putting France well on track to meet this year's target of 4.5 per cent.
Today's figures showed that, while revenues were flat last year, the central government was able to slash its deficit as spending tumbled by 14 per cent to €365.4 billion.
Demeter
(85,373 posts)The Bank of England meets on Thursday with expectations running high that a further large dose of quantitative easing will be announced by the MPC. Even if they pass this month, which seems possible, this is likely to be only a temporary postponement. Whenever it comes, the next move will be another bout of “plain vanilla” QE, involving the purchase of £50bn-£75bn of government bonds, and taking the overall Bank of England holdings to over one third of the total stock of gilts in issue.
Read more >>
http://link.ft.com/r/IOCBMM/IIHGQH/K91WR/PFTYUQ/ZGX7JR/JY/t?a1=2012&a2=2&a3=8
WELL, ARE THE STOCK MARKETS DROPPING? ARE BANKS FAILING RIGHT AND LEFT, AT HOME AND ABROAD?
IF NOT, THEN QE IS STILL WORKING AND STILL HAPPENING, TOO.
Demeter
(85,373 posts)Capitalism itself is not in crisis, but western capitalism is.
This is a result of three strategic mistakes.
The first error was to regard capitalism as an ideological good, not as a pragmatic instrument to improve human welfare.
Alan Greenspan was probably the greatest victim of this ideological conviction that markets always knew best. The former chairman of the Federal Reserve fully agreed with the Reagan-Thatcher thesis that governments should step aside and let the markets roll, writes Kishore Mahbubani dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, and author of ‘The New Asian Hemisphere’.
Read more >>
http://link.ft.com/r/A1TNOO/OR0851/WH2F8/TU8Q3T/QNV1SA/T3/t?a1=2012&a2=2&a3=7
hamerfan
(1,404 posts)I just like to see my new heart!
hamerfan
