The Big Picture |
- Macro Strategy Review November 2013
- 10 Monday PM Reads
- Beware of Falling Gas Prices
- Three Dynamics
- 10 Monday AM Reads
- The Fed Wants Too End To Big to Fail (Treasury, not so much)
- 40 Under 40: Most Innovative People
- Ending Too Big to Fail
- About Our “Spending Problem” (Revisited)
- Personal Finance for Engineers (Twitter, 2013)
- 10 Sunday Reads
- 2015 Mercedes S-Class Coupe Concept
| Macro Strategy Review November 2013 Posted: 12 Nov 2013 02:00 AM PST November 2013 Forward Markets: Macro Strategy Review Macro Factors and Their Impact on Monetary Policy, Global Economy – Better, But Not Good One of the investment themes gaining traction in recent months is the global synchronized growth story. Those who are bullish on equity markets for the remainder of 2013 and 2014 note that for the first time in a long time gross domestic product (GDP) growth is expected to pick up in the United States, European Union, China and even in Japan. The rising tide of economic activity is forecast to lift equity markets globally, with the primary challenge being to identify which countries are likely to perform best. Once these countries have been identified, some institutional investors will be quick to exploit newly embraced investment themes, which is why markets tend to get ahead of reality now and again. By early next year (if not sooner), we believe equity markets will have been overbid relative to the actual improvement likely to be realized in 2014. Yes, things are better, but probably won't be as good as anticipated. Emerging economies have provided most of the sizzle to global growth, especially since the financial crisis in 2008. However, as discussed below, China, Brazil, India and Indonesia may not have the growth they have experienced over the last five years. We believe growth in developed countries will improve modestly in 2014, but will remain below their historical averages. An analysis of industrial production since 2007 illuminates the bifurcation in growth experienced between emerging economies and the lack of growth in developed countries. The table titled "Industrial Production Stalling in the Developed World" shows the net change in industry production from the average monthly figures in 2007 through August 2013 for developed countries (except for Russia and Canada). Industrial production in the U.S., all the major countries in the European Union, Britain and Japan is still below the 2007 average. In contrast, the growth in emerging economies has been solid compared to the 10.4% average increase of all countries, with China, South Korea and India leading the pack. Based on data from the International Monetary Fund, global GDP totaled $72.22 trillion in 2012. The combined total GDP for the United States, European Union, Japan and Britain was $41.35 trillion in 2012, or 57.3% of total global GDP. The combined total GDP for China, Brazil, India, South Korea and Indonesia was $14.32 trillion, or 19.8% of global GDP. Emerging Economies A review of the largest emerging economies suggests that China, Brazil, India and Indonesia each face challenges that may limit improvement in GDP growth in 2014 and beyond. China's GDP grew 7.7% in the first quarter and 7.5% in the second quarter, according to the National Bureau of Statistics of China. Its annual growth target for 2013 was 7.5%, which is likely to be met since growth has averaged 7.7% through September. China hasn't failed to top its annual growth target since 1998. In addition, China's "total social financing" liquidity measurement tool, a broad measure of credit, is up 19% through September. As we have noted in previous commentaries, Fitch Ratings estimates that bank assets have soared 126.5% in the last four years. However, economic growth from each dollar of new credit has diminished significantly since 2007. According to analysis by Bloomberg, GDP grew by $.83 for each $1.00 increase in credit in 2007. In 2012, a $1.00 increase in credit only contributed $.17 to GDP. Chinese banks are thinly capitalized with equity representing only 6.5% of total assets. In contrast, the equity capital ratio of U.S. banks is 11.5% of assets. According to research provider ChinaScope Financial, Chinese banks may have to raise $50-$100 billion though equity sales in the next two years just to maintain their current equity capital ratios. This estimate may prove low since Chinese banks have a nonperforming loan ratio of less than 1%, despite the huge increase in bank assets. In coming years, China has indicated it wants to rebalance its economy away from Brazil was one of the countries that most benefited from the commodity boom driven by China's almost insatiable demand for raw materials since it is a large exporter of raw materials. In recent years, China has consumed almost half of the world's iron ore, cement, steel, coal and lead. Brazil's economy averaged 3.6% annual growth over the past decade, and grew 7.5% in 2010 on the back of China's growth. In terms of global GDP, Brazil is the seventh largest, just behind Britain. In an effort to close the wide gap between rich and poor, Brazil hired tens of thousands of government employees, expanded its welfare system, subsidized the costs of gasoline and electricity, and directed government banks to lend aggressively. Between 2004 and 2010, banks made auto loans without the requirement of a down payment. According to the Bank of Brazil, this led to an almost tripling in auto loans to $70 billion a year. In the four years after the 2008 financial crisis, consumer lending rose at an annual rate of 25%. As a result, more than 20% of household income in Brazil goes to service consumer debt that has an average interest rate of 37%. Hardly surprising, nonperforming loans rose to 5.6% of all loans made to individuals in 2012. Although the increase in debt-induced consumption boosted GDP growth, especially over the past four years, the dearth of government spending on new roads, trains, irrigation canals and port facilities did not keep up with the size of Brazil's economy. This lack of spending will lead to higher transportation costs and lower Brazil's productivity and growth over the long term.
Brazilian GDP growth is not likely to rebound significantly in 2014 in the wake of recent rate increases and how over-indebted the average consumer is after five years of binge buying. These factors are likely to hold Brazil's growth rate well under the 10-year average of 3.6% in 2014, and potentially in 2015 as well. Over the past 30 years, India averaged a 6.4% increase in annual GDP, and 7.7% from 2002 through 2011, according to the World Bank. India has the tenth largest economy in the world. Over the past year, GDP growth has slowed to 4.4%. Since mid-2011, the rupee, India's currency, has lost almost half of its value versus the dollar. Although India's current account deficit has dipped from 5.1% in 2012 to 4.8%, it is still quite large. In July, the Reserve Bank of India tightened monetary policy by increasing its bank borrowing rate to over 10%. This has caused lending to be curtailed, which has contributed to the country's economic slowdown. On September 20, the Reserve Bank increased its repo rate from 7.25% to 7.50%. Over the past decade, India has relied on a limited pool of skilled labor, rather than an abundance of cheap labor to boost manufacturing exports. India specialized in call centers, software development and back office services, instead of increasing its manufacturing capacity. In 1995, manufacturers accounted for 17% of GDP, but dropped to 14% in 2013, according to the Ministry of Statistics. Over the last five years, India has built 200,000 miles of highways but no high-speed rail routes. During the same period, China built 400,000 miles of highways and 5,800 miles of high-speed rail routes. India has struggled with an ongoing energy crisis and in 2007 said it would add 78.7 gigawatts of electricity capacity to provide electricity to 400 million rural residents. India has only achieved 80% of its planned increase in electricity generation, and still suffers from outages. Since 2007, China has added 450 gigawatts of power to its grid, according to the National Bureau of Statistics of China. A gigwatt is 1 billion watts, and would provide power to 750,000 to 1,000,000 homes in the U.S.
We believe India's lack of infrastructure investment in roads, rail lines and electricity generation will suppress productivity and future economic growth. India must also improve accessibility to its education programs for its 400 million rural residents, so future generations possess the basic skills of reading and writing. The myriad of problems confronting India suggest growth in 2014 and beyond is not likely to return to the 7.7% annual growth rate of the past decade.
Investors in emerging markets will need to be nimble in coming months and should favor those emerging economies with a current account surplus until the Federal Reserve moves to taper its QE3 program. Developed Economies
Labor laws in many EU countries make it very difficult for companies to lay off workers. These laws may provide a buffer during a short recession, but it makes companies reluctant to hire, which mutes any recovery. During a prolonged period of economic stagnation, revenues fall and losses mount if companies are unable to lower labor costs to match their weaker revenue. Labor inflexibility has proven especially troublesome for European automakers, which are experiencing the lowest vehicle sales volume in 20 years. A recent study by consulting firm AlixPartners found that more than half the auto factories in Europe, most of which are located in Italy, France and Spain, are functioning at less than 75% of capacity and operating at a loss. Because of the labor laws it is extremely difficult and expensive to lay off workers and close unprofitable plants. Automakers in Europe are losing billions in revenue each year by holding on to workers and factories they no longer need. Germany represents 30% of eurozone GDP and is the engine of growth. According to the Federal Statistics Office of Germany, total spending on machinery and equipment rose 0.9% in the second quarter, after six consecutive quarters of decline. A recent survey by the Wall Street Journal suggests that investment spending, which has dropped to historic lows as a percent of GDP, is not likely to pick up significantly in Germany. Lack of expected sales growth in Germany and Europe is leading most of the 19 blue-chip corporations surveyed to invest more in emerging economies and the U.S. than in Germany or Europe. Just 15% of respondents said they would invest in Germany, only 5% in Europe, 11% in the U.S. and 43% in emerging markets, with 26% providing no guidance. If companies like BMW, Siemens, Adidas and Henkel are looking outside of Germany and Europe for growth, eurozone GDP may struggle to exceed 1% in 2014.
Japan is on a roll, but to keep the ball rolling, Prime Minister Abe must address the amount of government debt and the inflexibility of Japan's labor laws. Much like many countries in Europe, Japan's culture of lifetime employment makes it very difficult to dismiss workers. It may seem counterintuitive, but making it easier to lay off workers also makes employers more willing to hire even when the economic outlook is uncertain. Current law forces many Japanese companies to keep investing in unprofitable business lines, which undermines the efficient allocation of capital. In the long run, laws intended to protect workers in Japan and Europe have unintended consequences of causing more harm to workers and hurting economic growth. Prime Minister Abe has yet to detail how this impediment to growth will be modified. Without significant labor market changes, the long-term success of "Abenomics" may be undermined. To address Japan's mountain of debt, Japan is planning to raise its sales tax in April 2014 from 5% to 8%. It is estimated the sales tax increase will raise $88 billion in the first year, or almost 1.5% of GDP. As another example of unintended consequences, demand will likely be pulled forward into the first quarter, as consumers rush to buy before April in order to save 3% on their purchases. We believe first quarter GDP will be lifted by the surge in consumer demand, only to weaken significantly in the second quarter. This will be the first real test of the durability of Abenomics. Longer term we remain skeptical. Japan must generate enough economic growth to overcome its mountain of debt and the fact that its population is shrinking about 1% per year, which is a huge headwind to economic growth. GDP growth in the United States hovered around 2% in 2011, 2012 and 2013 even though housing and vehicle sales improved significantly. As we discussed in detail in our July commentary, gains in housing and vehicle sales are poised to moderate in the second half of 2013. Although these sales will add to GDP, they are unlikely to contribute more to GDP in coming quarters. Job and income growth are not likely to accelerate much, so a marked pickup in consumer spending seems a stretch. Back-to-school sales were punk, and are often a precursor of holiday sales. There are many adjectives to describe Washington D.C., but in our opinion, competent isn't among them. According to a recent Gallup poll, the approval rating for Congress is the lowest ever, but in the 2014 election, it is likely more than 85% of the incumbents will be re-elected, due to the gerrymandering of districts by both parties. When all the pieces are put together, it's hard to see how growth is going to pick up to 3% or better in 2014 as forecast by the Federal Reserve and many private economists. The Clues to a Future Crisis Are Usually Hiding in Plain Sight In coming months we're going to highlight a number of crises that may emerge in coming years. If and when they make the evening news, the reaction will be one of surprise even though the clues to each crisis were likely hiding in plain sight well before the event. Inspiration for this series comes from the housing crisis, which led to the 2008 financial crisis. Although most investors were surprised by the housing crisis, the clues to the potential problem were hiding in plain sight in 2006 and 2007. For instance, according to the National Association of Realtors, the ratio of median home prices to median income held near 3.2-to-1 between 1965 and 2000, as mortgage lenders restricted mortgage payments to one-third of a homebuyer's income. Low interest rates and lending standards for liar's loans pushed homes prices higher so that the ratio of median home prices to median income rose to 4.6-to-1 by 2006. A simple regression-toward-the-mean analysis suggested that median home prices had the potential to fall 30% (4.6 times median income down to 3.2 times median income). The risk models used by Moody's, Standard & Poor's and Fitch Ratings assumed home prices would not decline because they hadn't since the Depression. This valuable information was widely available long before housing prices began to fall in 2007 and the financial crisis made headlines in 2008. Despite this simple analysis, most investors were caught off guard. Similar to the housing crisis, there is a problem with our nation's infrastructure. According to the Federal Highway Administration (FHWA), there are 607,000 bridges in the United States. Bridges are an important part of our transportation system, since they make it possible to travel in a straight line, rather than circumventing rivers, canyons and other natural obstructions. Bridges help lower the cost of shipping goods anywhere in the country, and save valuable time for millions of commuters every day. Many bridges were built as a result of the Federal Aid Highway Act of 1956, which established the Interstate Highway System. As of 2010, its network of roads comprised a total of 47,182 miles, making it the world’s second longest system after China. The initial cost estimate for the system was $25 billion over 12 years. It actually wasn't finished for 35 years and at a cost of $114 billion (or $425 billion in 2006 dollars, adjusted for inflation). Many of the bridges built as part of the Interstate Highway System are now 30, 40 and 50 years old. When they were built, the engineers didn't know that decades later the bridges would be supporting much larger and heavier trucks. This has caused a much higher level of wear and tear and many bridges have degraded. Since 1989 there have been more than 600 bridge failures in the United States. The money needed to maintain our roads and bridges comes from the federal government via gasoline taxes of $.183 per gallon of unleaded fuel and $.244 for diesel fuel. In 2010 these taxes totaled $28 billion, according to the Congressional Research Service. Roughly 60% of this revenue is spent on new roads and bridges, with the balance spent through congressional earmarks (read pork-barrel projects). This tax has not been raised since 1993, and has lost about 35% of its purchasing power if it were adjusted for inflation. According to the University of Michigan Transportation Research Institute, the average fuel economy on the window stickers of cars and trucks sold in August was 24.9 miles per gallon. That was up 23.8% from October 2007 when it was 20.1 miles per gallon. Increased fuel economy is a good thing for our country and environment, but it means less fuel tax revenue is generated for road and bridge repairs. The FHWA estimates that the national annual cost of bridge and road repair is $20.5 billion. The longer Congress fails to address this problem the more likely it is that the costs are going to rise since it is more expensive to replace or rebuild a bridge than repair it. Interestingly, over the last decade Congress authorized $89 billion on road and bridge construction in Afghanistan and $69 billion in Iraq. According to the American Society of Civil Engineers, inadequate surface transportation is projected to cost U.S. businesses $430 billion in operating expenses by 2020 and cause $1.7 trillion in lost sales opportunities. In Pennsylvania, 24% of bridges are structurally deficient. In an effort to reduce wear on bridges, the Pennsylvania Department of Transportation lowered weight limits to extend the life of 1,000 bridges. Trucks transport the bulk of goods in the United States, and the weight limit reduction will force some truckers to change driving routes to avoid the 1,000 bridges no longer available. The decreased number of available bridges could add 100 miles to a 600-mile trip between Pittsburg and Boston, increasing the cost of a shipment from $1,000 to $1,100, or by 10%. According to the Federal Highway Administration, there are 67,300 bridges in the U.S. that are deemed "structurally deficient" or "fracture critical." While not inherently unsafe, structurally deficient bridges require significant maintenance, rehabilitation or replacement. About 18,000 bridges are considered to be fracture critical, which means if a portion of the tension steel cable supporting a bridge breaks there is no redundancy to prevent a portion of the entire bridge from collapsing. In 2007, a bridge over the Mississippi River that is part of I-35 highway in Minnesota collapsed, killing 13 car passengers. There are 7,980 bridges that are both structurally deficient and fracture critical across the country. To find out what bridges may be deficient, go to www.saveourbridges.com, and follow the instructions near the bottom of the page. Every day thousands of trucks and millions of drivers and their passengers use these bridges. As time passes there will likely be more bridge failures. The clues to this coming crisis are hiding in plain sight. Stocks
The Q Ratio was developed by Nobel Laureate James Tobin as a method to estimate the market's fair value. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The chart titled "Q Ratio Since 1900" was updated through June 30 by Doug Short at dshort.com. Since the S&P 500 has risen 9.2% since June 30, (from 1,606 to 1,754 as this is being written), the Q Ratio has climbed from 0.98 on June 30 to near 1.07 on October 25. The chart illustrates that the Q Ratio is near one of the most expensive levels of the past 113 years. The Q Ratio peaked at 1.08 in 1906, 1.06 in 1929, 1.08 in 1937 and 0.98 in 1968. With the exception of the tech dot-com bubble in 1999-2000, the market is near one of the most expensive levels of the past 113 years. A similar valuation assessment is revealed from Nobel Laureate Robert Shiller's cyclically adjusted price-earnings ratio, also known as CAPE. The 142-year average is 16.5, and as of October 25 it measures 24.65, and is almost 50% above its long-term average. The only instances when it was more expensive were in 1929 and 1999-2000. Investor sentiment has become more bullish with the resolution of the debt ceiling, appointment of Janet Yellen, embracement of the synchronized global growth story and new all time highs in the S&P 500. However, markets don't go down because there is too much bullishness or overvaluation. Markets decline when investors are confronted with new information that doesn't align with their positive outlook, thus providing them a reason to sell. Until a reason to sell appears, the market can continue to grind higher, with a possibility that a "melt up" occurs prior to a top. The higher the market climbs in coming months, the more vulnerable it could be to a significant decline once a reason to sell materializes. As discussed, investor's expectations for global growth seem too optimistic as statistics indicate that a number of countries will face hurdles in 2014. In this environment, technical analysis can be helpful. At some point, the S&P 500 will fall below a prior low, which will provide investors the first warning that trouble may be brewing. For now, the level to watch is 1627-1646. Bonds
Jim Welsh, David Martin, Jim O'Donnell Definition of Terms 10-Year Treasury is a debt obligation issued by the U.S. Treasury that has a term of more than one year, but not more than 10 years. Abenomics refers to the economic policies advocated by Shinzō Abe, the current Prime Minister of Japan. Basis point is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument. Blue chip refers to a nationally-recognized, well-established and financially-sound company. Gross domestic product (GDP) is the total market value of all final goods and services produced in a country in a given year. Liar loans are a category of mortgages known as low-documentation or no-documentation mortgages that have been abused to the point where the loans are sometimes referred to as liar loans. Long-term refinancing operation (LTRO) refers to the European Central Bank's refinancing program which lends money at a very low interest rate to eurozone banks. NYSE Advance/Decline Line (A/D Line) is a technical indicator that plots changes in the value of the advance-decline index over a certain time period. Price-to-earnings (P/E) ratio of a stock is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. Q Ratio is a ratio devised by Nobel Laureate James Tobin which suggests that the combined market value of all the companies on the stock market should be about equal to their replacement costs. Quantitative easing (QE) refers to a form of monetary policy used to stimulate an economy where interest rates are either at, or close to, zero. Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. The repo rate is used by monetary authorities to control inflation. S&P 500 Index is an unmanaged index of 500 common stocks chosen to reflect the industries in the U.S. economy. Total social financing (TSF) is a liquidity measurement tool invented by China in 2011 that serves as an indicator of monetary policy. Valuation is the process of determining the value of an asset or company based on earnings and the market value of assets. RISKS Investing involves risk, including possible loss of principal. The value of any financial instruments or markets mentioned herein can fall as well as rise. Past performance does not guarantee future results. This material is distributed for informational purposes only and should not be considered as investment advice, a recommendation of any particular security, strategy or investment product, or as an offer or solicitation with respect to the purchase or sale of any investment. Statistics, prices, estimates, forward-looking statements, and other information contained herein have been obtained from sources believed to be reliable, but no guarantee is given as to their accuracy or completeness. All expressions of opinion are subject to change without notice. Jim Welsh is a registered representative of ALPS Distributors, Inc. Forward Funds are distributed by Forward Securities, LLC. ©2013 Forward Management, LLC. All rights reserved.
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| Posted: 11 Nov 2013 01:30 PM PST My afternoon train reading:
What are you reading?
Worry Over Inequality Occupies Wall St: Gulf Between Haves + Have-Nots May Hurt Economy |
| Posted: 11 Nov 2013 10:30 AM PST
The American Automobile Association reports that the average price of a gallon of regular gas is $3.19. (The U.S. Energy Information Administration has regular gas at about $3.26). Since peaking at the end of July 2008 at $4.11, then collapsing to $1.65 that December, Gasoline prices have been on a wild ride. Since rallying back to almost $4 in May of 2011, gas prices have been range-bound, gradually drifting lower. There are a few factors driving this . . . Continues here |
| Posted: 11 Nov 2013 08:30 AM PST Three Dynamics
To start, we praise the women and men of the armed forces of the United States as we remember them today. The freedom of our nation depends on them. Now to markets. Three dynamics are at work this week. They may cause market volatility. And they may lead to a revised assessment about the Fed's (Federal Reserve) tapering policies. First is the surprise action of the ECB (European Central Bank) to lower interest rates. There is evidence that the vote was mixed and that the dissenting votes originated with the country that holds the largest ECB weight, Germany. The Germans are known to lean in a more hard-money direction than many of their Eurozone colleagues when it comes to central bank policy. Their acknowledgement of low inflation notwithstanding, they resist monetary easing as a vehicle for stimulus. There is division in the ECB; however, the Draghi-led majority now clearly leans towards more central bank QE-type activity. An action like this one from the ECB may produce dramatic effects in the currency markets. We have seen such effects result from adjustments in foreign exchange rates involving the euro. We have seen them in expectations regarding Japan and the yen. And we have seen them with the dollar in response to the on-again, off-again Fed tapering discussions. Simply put, when all interest rates are near zero, the major transmission mechanism of policy among diverse global agents becomes foreign exchange rates and currency transactions. Secondly and very importantly for serious readers, there is a superb new Fed staff paper to delve into: “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy” (November 1, 2013), by Dave Reifschneider, William Wascher, and David Wilcox. Dave Reifschneider is the deputy director (retired), William Wascher is the deputy director, and David Wilcox is the director of the Division of Research and Statistics at the Federal Reserve Board. The authors’ skill set and internal positioning within the Board of Governors and the Fed gives them standing for this paper, which they have published as their own research. Here is the link:, The paper discusses certain impacts and effects (hysteresis) in the evolution of the US labor market. The paper raises serious questions about the nature of prolonged unemployment, how it changes the characteristics of the labor force, and how it may ultimately result in people's dropping out of the labor force entirely. Thus, extended unemployment leads to a decline in the labor participation rate. The importance of this paper and its conclusions grows with the recognition that the incoming Fed chair, Janet Yellen, is very sensitive to these labor-related issues. She has strong skills as a labor economist, and she has spoken on the subject over the years. We would expect to see her professional history reflected in how she will lead the Fed as it evolves its policy. Readers should note that the decline in the labor participation rate, not substantive growth in employment, is driving the unemployment rate lower. Robert Brusca, PhD, of Fact and Opinion Economics created and updates a series in which he holds the labor participation rate constant and then calculates what the unemployment rate would be under that regime. The reason that counterfactual series is important is that it reflects how wide the gap is between what is and what might be. It suggests that there are other indicators needing evaluation besides the headline unemployment rate. Readers may recall that the Bernanke Fed stated it has a 6.5% unemployment rate target. There is now evidence that further discussion within the Fed may lead to some lower target number. Will the Yellen Fed think that 5.5%-6% is a better target, given other changes in the labor force? We shall soon find out. Brusca’s work suggests that a constant, rather than a falling, labor participation rate applied today would yield an unemployment rate somewhere close to 12%. So his work implies that the declining labor participation rate accounts for about 4.5 points of the drop in the unemployment rate. This does not bode well for robust economic recovery in the US. The extraordinary November 1 Fed staff paper includes a serious technical discussion of chronic unemployment and where it leads. The paper is thought-provoking. It was not specifically commissioned as a policy paper by the Board of Governors, but clearly the writers that performed the research are involved in the Fed’s internal dialogue with respect to the role of labor data and the formulation of monetary policy. The paper is a must-read for any serious, thoughtful investor or research agent with an interest in this policy area. We thank Torsten Slok of Deutsche Bank for his notes and for forwarding Peter Hooper’s notes regarding this particular paper. The third factor at work this week is that the political game is about to commence all over again in Washington. There will be confirmation hearings for Janet Yellen. We do not expect those to result in anything but growing support for Yellen and likely embarrassment for the few senators whose misbehavior and misguided policies led to objections about her. We make no bones about it: we are fans of Janet Yellen. She has all the credentials and skills one could ask for. She is the current vice chair of the Fed and the former president of the Federal Reserve Bank of San Francisco. She is an accomplished economist and public servant. We also believe that if inflation were to rear its head and inflation expectations were to become a serious threat to the US economy, Yellen would act quickly to adjust her policy views. Readers should note that the current level of inflation in the US is far below the Fed's target and seems to be falling. Add to that the prospect of a falling oil price, and inflation in the US could trend under 1% per year. The other big show in Washington, DC, is the enormous committee that is going to attempt to meet and resolve something regarding the budget, debt limit, and sequester. That committee is unwieldy in size, and its political composition nearly assures us that nothing is going to happen. Tax-policy targeting that would increase certain taxes could lead to an interim or “mini” deal. A trade-off involving some increase in taxation with a specific target could also be part of a deal that would cap or alter spending. Do we think that is likely? No. Do we think that is possible? Yes. The risks of such outcomes add to market uncertainty. Meanwhile, markets continue to deal with the worldwide phenomenon of extremely low short-term interest rates. There is nothing on the horizon to suggest that will change in 2014. There is growing evidence that the current trend may persist well into 2015 and perhaps even 2016. Under these circumstances, very low interest rates anchor the bond markets in high-grade credits worldwide. Cumberland tends to favor longer-duration holdings in its municipal bond portfolios, with some hedging in certain types of accounts. Cumberland’s stock market accounts remain fully invested – somewhat nervously, because part of the driving force for equities investment is the calculation of value based upon very low interest rates. We know low interest rates cannot be sustained forever. We know that the G-4 central banks collectively have tripled the size of their balance sheets since the financial crisis broke out after Lehman-AIG. We know that something must give. What we do not know is how gradually the alteration of central bank policy making will unfold. We do not know the timing or size of the changes that will occur as the world’s central banks reach for policy neutrality and stability. The best information available to us today suggests that we will not see full stabilization until 2018 or 2020. We do expect the trend toward stabilization to be gradual. Central bankers do not want to trigger another recession or crash by acting abruptly. Collectively, they still favor stimulus wherever one looks around the world. ~~~ David R. Kotok, Chairman and Chief Investment Officer |
| Posted: 11 Nov 2013 06:45 AM PST Happy Veterans Day, and list of thanks from a grateful nation:
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| The Fed Wants Too End To Big to Fail (Treasury, not so much) Posted: 11 Nov 2013 05:15 AM PST Quite a few people are discussing the speech given by Federal Reserve Chairman Ben Bernanke last week, titled The Crisis as a Classic Financial Panic. (See this, this and this). But while everyone is looking at the big dog, the rest of the pack has been out making very interesting noises. Indeed, if you pay attention to Federal Reserve speeches, you might notice a pattern: Specific themes seem to run throughout the commentary of different Federal Open Market Committee members. This is not an accident; there is broad institutional agreement at the Fed about specific ideas. The one that I have been watching over the years has been the theme of ending "Too Big To Fail" (TBTF). What reminded me of this was a speech last week by New York Federal Reserve President William C. Dudley, titled Ending Too Big to Fail.
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| 40 Under 40: Most Innovative People Posted: 11 Nov 2013 04:30 AM PST Congrats to my partner and colleague, Josh Brown, for making this list of 40 Under 40 — The Most Innovative People (Business Insider). It is a pretty awesome list, with the likes of Nate Silver (FiveThirtyEight) Banksy (graffiti artist), David Karp (Tumblr founder), Jonah Peretti (BuzzFeed founder) Marissa Mayer (CEO Yahoo), Kevin Systrom (Founder of Instagram), and Mark Zuckerberg (CEO of Facebook). It is mostly tech and arts, but Josh is one of the only financial innovators noted. Super job!
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| Posted: 11 Nov 2013 02:00 AM PST Ending Too Big to Fail
It is a great pleasure to have the opportunity to speak here today. My remarks are going to focus on what is called the "too big to fail" problem. As you are aware, this problem arises when the failure of a large, complex financial institution threatens to cause such significant disruption to the financial system and the economy that these potential costs are judged as too severe to bear, leading to government intervention to prevent the failure. As a result, the firm, by being too big to fail, gains an implicit guarantee at the taxpayers' expense that it does not have to pay for. I think there is broad agreement that such a regime is unacceptable in several respects. The first problem is that it creates an uneven playing field between large and small financial firms, with larger financial firms gaining a funding advantage from the perception that they may be too big to fail. The second problem is that this funding advantage creates incentives for financial firms to become bigger and more complex. The third problem is that there is a positive feedback loop. As the banking system becomes more concentrated and complex, that just increases the financial stability risks, making the too big to fail problem even more acute. So what should we do about it? Today, I will evaluate three broad sets of choices: 1) Building a credible resolution regime and more resiliency in the financial system that together reduce the systemic costs of failure sufficiently so that large, complex firms can be allowed to fail; 2) taking steps, such as tougher prudential standards, that further reduce the probability of failure of such firms; and 3) breaking up the too big to fail firms so that no firm is so large that its failure would threaten financial stability in the first place. To summarize, I conclude that building a credible resolution regime is necessary but not sufficient. Even if the single-point of entry resolution framework proposed by the Federal Deposit Insurance Corporation (FDIC), which I very much endorse, is fully perfected, the costs of resolution for the largest systemically important financial institutions (SIFIs) will still be significant. I will argue that at least as much effort should be made to lower the risk of failure of such large, complex firms. Not only does this include higher capital and liquidity requirements, which we are implementing, but also building incentives into the system so that firm managements will act more forcefully and much earlier to put their firms on more solid ground before they encounter greater difficulties. Finally, I am not yet convinced that breaking up large, complex firms is the right approach. In particular, these firms presumably exist, in large part, because there are scale or network effects that allow these firms to offer certain types of services that have value to their global clients. These benefits might be lost or diminished if such firms were broken up. In addition, the costs incurred in breaking up such firms need to be considered. Finally, the breakup of such firms would not necessarily result in a significant reduction in overall systemic risk if the resulting component firms were still, collectively, systemic. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System. Defining the Too Big to Fail Problem The root cause of the too big to fail problem is the fact that the failure of a large, complex financial firm is likely to generate significant, undesirable externalities. These include disruption to the ability of the financial system to provide credit and other essential financial services to households and businesses. When this happens, not only is the financial sector adversely affected, but its troubles spill over and harm the real economy. Although there are negative externalities associated with the failure of any financial firm, these externalities are disproportionately more damaging in the case of large, complex and interconnected firms. However, despite the label, too big to fail, the magnitude of these externalities does not depend simply on size. The extent of the externalities also depends on the particular mix of business activities and the degree of interconnectedness with the rest of the financial industry. One significant element is the importance of the services the firm provides to the broader financial system and the economy, as well as the ease with which its customers can move their business to other providers. Another element is the extent to which the firm's structure and activities create the potential for contagion—that is, the potential that a problem at one firm could spread more broadly through the financial system. Contagion might occur along several different pathways, including the direct losses imposed by failure on the firm's counterparties, the impact of the failure on the asset prices held by other leveraged financial institutions, or a loss of confidence spreading to other firms with similar business models. The presence of large negative externalities creates a dilemma for policymakers when such firms are in danger of failing, particularly at a time when the wider financial system is also under stress. At that point in time, the expected costs to society of failure are very large compared to the short-run costs from providing the extraordinary liquidity support, capital, or other emergency assistance necessary to prevent catastrophic failure. The market’s belief that a too big to fail firm is more likely to be rescued in the event of distress than other firms weakens the degree of market discipline exerted by capital providers and counterparties. Since the government does not charge for this implicit guarantee, this reduces the firm’s cost of funds and incents the firm to take more risk than would be the case if there were no prospect of rescue and funding costs were higher. The fact that firms deemed by the market to be too big to fail enjoy an artificial subsidy in the form of lower funding costs distorts competition to the detriment of smaller, less complex firms. This advantage, in turn, creates an unfortunate incentive for firms to get even larger and more complex. As a result, the funding benefit of being seen to be too big to fail causes the financial system to become skewed toward larger and more complex firms in ways that are unrelated to true economies of scale and scope. Thus, the too big to fail problem consists of two intertwined issues. The first is that the negative consequences to the financial system and to the economy from failure for a given set of firms are unacceptably high. This is the financial stability risk. The second is that anticipated interventions to prevent catastrophic failure create an uneven playing field. Not only is this outcome unacceptable from an equity or fairness perspective, but it is also undesirable because it can increase the incentives for firms to become even bigger and more complex. Over time, this may lead to a greater number of systemically important firms and expose the financial system to greater systemic risk. This suggests that we need to maintain our focus on two goals: (1) Making the financial system more stable by reducing the degree of disruption when failures occur—that is, shrinking the size of the externalities—and by lowering the risk of failure in the first place, and (2) eliminating the artificial advantages that large, complex firms might have that create incentives for them to become bigger and more complex. One more point deserves emphasis. Only eliminating the competitive advantage of large, complex firms from the too big to fail subsidy will not necessarily make the financial system more stable. For example, consider a regime in which interventions to prevent the failure of large, systemically important firms were impossible. In that case, the funding advantage that comes from being perceived as too big to fail would be eliminated because such firms could fail putting the firm's equity and debt holders at risk. But, this would not be a good outcome from a financial stability perspective because the failure of such firms could still be catastrophic for the financial system and the economy. Thus, we need to solve the "fairness/subsidy" issue, but do so in a way that ensures that the resulting regime is more stable, resilient and robust. The Fairness/Subsidy Issue There is considerable debate about the size of the funding advantage of large banks that is due to too big to fail and how much this funding advantage creates incentives to become larger and more complex. One reason is that it is difficult to measure the size of these effects. For example, consider funding costs. We can document that larger banks' unsecured debt funding costs tend to be lower than those for smaller banks. But the funding costs for larger firms across a broad range of industries also tend to be lower than for smaller firms in the same industries. This reflects, in part, the fact that the debt issues of larger firms tend to be more sizeable and more liquid. In addition, larger firms may be more diversified on average and thus less prone to failure, everything else equal. The measurement challenge, then, is to identify what portion of the lower funding costs at the largest financial firms, after accounting for these other factors, is due to a perception among investors that such firms are too big to fail. Despite these measurement difficulties, most of the evidence is consistent with a too big to fail funding advantage in banking. First, during the financial crisis, we observed that the funding cost advantage of the larger banks grew substantially relative to the smaller banks as the crisis became more acute. This is noteworthy because if the funding cost advantage is due to a too big to fail premium, then that premium should rise when the economic environment worsens and the potential risk of failure increases. Of course, the Dodd-Frank Act has changed the landscape. Second, ongoing research by Federal Reserve Bank of New York staff shows that the funding advantage of large versus small banks is higher than the funding advantage for large versus small non-bank financial firms and non-financial firms when other factors are held constant. Third, the major rating agencies add an uplift to their credit ratings for the largest banks due to the prospect of government support. While it is possible that the rating agencies are wrong in their assessment, what matters is perception. If investors share this view or simply follow the ratings, then this should create a too big to fail funding advantage. With respect to the second consequence of the subsidy—the incentive for management to make their firms larger and more complex so as to be perceived as too big to fail and thus able to take advantage of any funding subsidy—this is harder to evaluate. On one hand, this is not the only incentive management may have to get bigger. For example, the fact that chief executive officer compensation and prestige are related to size may be just as important. On the other, this still is a problem because it works to distort the structure of the financial system and makes—by encouraging the proliferation of large, complex firms—the too big to fail problem worse. I conclude that while the funding advantage issue is very relevant to the debate on too big to fail, it may not be the most important issue. To me, the unacceptable risk posed to financial stability from the failure of large, systemic firms is at least as important. Solving Too Big to Fail As I see it, there are two broad ways of solving the too big to fail problem. The first is to create a more robust financial system so that the failure of a large, systemically important financial firm does not threaten to take down the rest of the financial system. In this case, the authorities can let the troubled firm fail. Because failure is now credible, this should also eliminate the funding advantage from being perceived as too big to fail. The second is to take steps to prevent the failure of such large, complex firms in the first place. This also reduces any funding advantage for firms perceived as being too big to fail, but without some of the negative financial stability consequences associated with failure. I view these two strands as complements rather than substitutes, with more work necessary on both. Turning first to the issue of reducing the consequences of failure, there are numerous elements of this effort underway. Some are focused on making the financial market infrastructure more robust so that when a failure occurs the shock is dampened, not amplified and propagated throughout the financial system. For example, considerable effort has been made to create incentives for firms to standardize over-the-counter derivative trades and to clear those trades through central counterparties. Similarly, extensive work has been undertaken by the Federal Reserve and the major clearing banks to make the tri-party repo system more stable. Money market mutual fund reform is also part of this ongoing effort. Other initiatives are focused on reducing the financial stability consequences from the failure of a systemically important financial firm. The major initiative here is the single point of entry framework for resolution proposed by the Federal Deposit Insurance Corporation. Under this framework, if a financial firm is to be resolved under Title II of the Dodd-Frank Act, the FDIC will place the top tier bank holding company into receivership and its assets will be transferred to a bridge holding company. The equity holders will be wiped out and sufficient long-term unsecured debt will be converted into equity in the new bridge company to cover any remaining losses and to ensure that the new entity is well capitalized and deemed creditworthy. Subsidiaries would continue to operate, which should limit the incentives for customers to run. By assigning losses to shareholders and unsecured creditors of the holding company and transferring sound operating subsidiaries to a new solvent entity, such a “top-down” resolution strategy should ensure continuity with respect to any critical services performed by the firm's subsidiaries and this should help limit the magnitude of any negative externalities. I very much endorse the FDIC's single point of entry framework for resolution. I think it is the best plan for implementing Title II given the complexity and scope of large, global financial institutions, and I also think it is well suited to the U.S. bank holding company framework. For this regime to work properly there needs to be a sufficient amount of debt outstanding at the parent company that can be converted by the FDIC into equity to ensure that the new bridge company will be demonstrably well-capitalized. We don't yet have a long-term debt requirement—this is an area where we are still working out the details. My own view is that a holding company needs a substantial amount of long-term debt to ensure that the newly created bridge company will be considered fully viable by its counterparties. While the Title II single-point-of-entry strategy holds tremendous promise, there are important implementation issues that still need to be worked out. Implementing the resolution regime on a cross-border basis remains one of the most significant challenges. In this regard, I am worried about two current shortcomings:
Unless market participants make the appropriate contractual changes that will ensure that the placement of the parent company into Title II will not trigger the close-out provisions of over-the-counter derivatives and other qualified financial contracts that are outside the reach of Title II's U.S. application, foreign counterparties to a SIFI will tend to exercise this right whenever it is in their individual economic interest to do so. This would create significant difficulties. Such actions could greatly complicate the operations of the firm during a time when it is already under considerable stress and could propagate stress more broadly in financial markets. There are two main courses of action for addressing this concern, and they are not mutually exclusive. First, existing derivative contracts need to be amended and future contracts need to provide that the parent's entry into the Title II proceeding does not trigger the close out option. Second, legal changes need to be implemented abroad so that the one-day stay that applies to qualified financial contracts governed by U.S. law is enforceable against those contracts governed by foreign law. Only by making these changes can we avoid the potential for disruptive close outs. I strongly encourage the ongoing efforts to address this critical issue. A second issue with respect to Title II resolution on a cross-border basis is that we cannot be certain how foreign authorities will react when the parent holding company is put into the Title II proceeding. While the U.S. authorities have been in discussion with our colleagues abroad to enable the coordination needed for a smooth cross-border resolution process, uncertainties remain regarding the circumstances under which host authorities may either choose to take or be required to take actions such as unilateral “ring-fencing” that might disrupt the implementation of the single point of entry approach. Thus, we need to continue to work with foreign regulators to iron out any issues ahead of time to remove these uncertainties so that the resolution regime will work well for global, systemically important firms. Another issue with respect to the Title II resolution regime is the residual uncertainty about whether a particular firm in fact would go through a Title II resolution. Recall that under the Dodd-Frank Act, Title II is not the default approach for dealing with the failure of a large complex firm. For a firm to go through Title II, a determination must first be made that the failure of the firm and its resolution would have serious adverse effects on U.S. financial stability under the insolvency law that would otherwise apply. This means that market participants will not know for certain which path U.S. authorities will ultimately take until this determination is made—allowing resolution under ordinary insolvency law, as contemplated under Title I, versus initiating a Title II resolution. Faced with this uncertainty, investors in the short-term obligations that would likely be protected only under the Title II regime could decide to run. Reducing the Likelihood of Failure Even with an appropriate resolution process in place that ends too big to fail, the consequences of failure will still be messy. Also, market discipline is only effective to the extent that those investors with their funds at risk perform the appropriate due diligence on an ongoing basis. This suggests that a resolution regime by itself is not sufficient. Further efforts should also be made to reduce the probability of a default. A number of steps have already been taken along these lines that further reduce default risk. The Basel III framework significantly raises both the quantity and quality of capital required of internationally active bank holding companies. This risk-weighted capital standard is also being augmented by a higher leverage ratio requirement. The Basel framework will also require SIFIs to hold additional capital due to their complexity (more commonly referred to as the SIFI surcharge). As a result, the capital buffer for the more systemic firms should be higher based on size, complexity, interconnectedness, global exposure and substitutability, so that their expected probability of failure will be lower than for less systemic firms.1 The SIFI surcharge acts as a penalty for size and complexity, leaning against any remaining funding cost advantage that might remain for a large complex firm even after a viable resolution regime is in place. This should further level the playing field for smaller firms and reduce the incentive to become systemically important in the first place. However, I expect that it will take considerable time for the surcharge to have a meaningful impact on size and complexity. We also need to create new mechanisms and incentives for bank management to act early, well before resolution becomes necessary. Early intervention is likely to be much more successful in preventing failure as compared to last-ditch efforts. These actions can take many forms—cutting capital distributions earlier, raising new capital faster, restructuring businesses sooner, and reorganizing senior management and boards of directors more radically when the firm is not performing well. In this regard, the Comprehensive Capital Analysis and Review (CCAR) should bolster the incentives for early action. The CCAR is a significant supervisory innovation intended to ensure that large, complex bank holding companies have robust internal capital planning processes and sufficient capital to withstand stressed economic conditions and to continue to be viable financial intermediaries. Importantly, the CCAR takes a forward-looking perspective in assessing a bank's capital adequacy, including ensuring that its internal stress testing processes address its unique vulnerabilities and exposures. The CCAR should push banks to proactively manage their capital so as to be well prepared for the type of market stresses that could cause significant declines in income and capital. Other steps could be taken to complement the CCAR. One approach would be to implement a long-term debt requirement in a way that further enhances market discipline and provides incentives for regulators to promptly intervene if necessary. Another might be to structure compensation practices to strengthen senior bank managers' incentives to proactively manage risk. For example, imagine how incentives would change if a significant portion of senior bank management's compensation each year were deferred to be available to cover future capital losses. I suspect that over time this would meaningfully alter management's risk tolerance. Also, in addition to the quantity of the deferred compensation, the form it takes could also affect incentives. If most of the deferred compensation were in the form of debt rather than equity, I suspect this would also affect management's risk tolerance and the appetite to cut dividend payments, reduce share repurchases or raise more capital more promptly when the firm began to become stressed. The terms and the form of deferred compensation are an important tool that could be further developed to generate a better set of incentives consistent with our financial stability objectives. We must also ensure that firms can respond to financial or operational weakness of any type by having robust recovery plans that get triggered long before resolution becomes necessary. They should develop and track metrics that not only identify when they are on the verge of insolvency or default, but that trigger appropriate remediation actions whenever the firm begins to become stressed. These plans should identify actionable options that the firm can take in response to financial weakness that will restore the confidence of the firm's counterparties without the need for extraordinary official sector support. They must also have disciplined processes that analyze the root causes of their problems and identify longer-term strategies that will need to be employed as other recovery options to restore capital and liquidity are being executed. And firms must support the viability of their contingency and recovery plans by implementing the internal governance necessary to develop, test, update and implement them credibly. Some argue that what I have proposed—higher capital requirements and better incentives that reduce the probability of failure combined with a resolution regime that makes the prospect of failure fully credible—are insufficient. Perhaps, this is correct. After all, collectively these enhancements to our current regime may not solve another important problem evident within some large financial institutions—the apparent lack of respect for law, regulation and the public trust. There is evidence of deep-seated cultural and ethical failures at many large financial institutions. Whether this is due to size and complexity, bad incentives or some other issues is difficult to judge, but it is another critical problem that needs to be addressed. Tough enforcement and high penalties will certainly help focus management's attention on this issue. But I am also hopeful that ending too big to fail and shifting the emphasis to longer-term sustainability will encourage the needed cultural shift necessary to restore public trust in the industry. One alternative strategy for dealing with too big to fail is to reduce the size of large banks by imposing size limits. While I understand the motivation, it is important to recognize that imposing size limitations might not be a very efficient means of making the financial system more stable. First, it could sacrifice some socially beneficial economies of scale and scope, especially to the global clients of large financial institutions, depending on how the size limits were implemented. Second, the resulting benefits in terms of reducing systemic risk might be quite small. As demonstrated by the thrift crisis, if many firms are all vulnerable to the same shock, ensuring that these firms are small and numerous won't necessarily reduce the systemic risk they collectively pose to the financial system. Third, the costs incurred in breaking up such firms also need to be considered. Others have argued in favor of separating commercial and investment banking activities of the large banks. In my opinion, there are shortcomings to re-imposing Glass-Steagall-type activity restrictions. It is not obvious to me that the pairing of securities and banking businesses was an important causal element behind the financial crisis. In fact, independent investment banks were much more vulnerable during 2008 than the universal banking firms which conducted both banking and securities activities. More important is to address the well-known sources of instability in wholesale funding markets and to give careful consideration to whether there should be a more robust lender of last resort regime for securities activities. Evaluating the socially optimal size, scope and organizational structure of financial firms is a complicated exercise, and so is establishing a viable transition path to a system of much smaller banks. It would be helpful in this regard if advocates of the break-up solutions would develop detailed proposals that address the essential questions of how such downsizing or functional separation would be accomplished, and what the expected benefits and costs could be from such a restructuring. The recent financial crisis underscores the importance of financial stability as a necessary condition for a vibrant economy. An important element in improving financial stability is to reduce the expected loss associated with the failure of any financial firm to the point where default does not imperil the financial system and the real economy. A holistic approach is needed that both provides a credible resolution process for large, complex and interconnected banks, uses enhanced prudential standards and initiatives to further reduce the probability of default and the social losses associated with a default, and that incents management to intervene early to address incipient problems before they threaten the viability of the firm. Relying solely on resolution is not sufficient. Until the Title II resolution process is used, there will remain uncertainties regarding how well this approach will work in practice—especially in a time of market stress. For this reason it is also important to continue to pursue a number of alternative approaches. Thank you for your kind attention. I would be happy to answer a few questions. 1 New liquidity requirements such as the liquidity coverage ratio also work to reduce the risk of failure by giving firm management more time to address problems before a funding squeeze becomes acute. |
| About Our “Spending Problem” (Revisited) Posted: 10 Nov 2013 03:00 PM PST @TBPInvictus here It’s a well established fact that the Obama administration has been spending like a drunken sailor since the day he was inaugurated. I first wrote about his spendthrift ways here, toward the end of 2010 (has it already been three years?). Some time has now passed, so how’s it going? Let’s take another look at Federal government spending – including and excluding defense – for the last five administrations, indexed to 100 in the first quarter of each administration. First the overall picture:
Now, let’s strip out the defense portion:
Please think of these two charts the next time you hear someone say, “We don’t have a revenue problem, we have a spending problem.” Present these charts and ask precisely where that spending problem is. What goes on at the state and local level also obviously impacts the trajectory of our economy, including GDP and our employment picture. While the Federal government does not have direct control of state and local economics, it is certainly a meaningful indirect influence, as Federal policies ripple through state capitals and subsequently through local town halls. Here’s what that picture looks like over the past five administrations:
[NOTE: Gotta say, the degree of state and local austerity surprised even me.] Put it all together, and this is what government at all levels has added to (or subtracted from) GDP for the past five years:
Finally, and sadly, the NY Times ran an article last week about the deleterious effects already being felt by the recent cut in the Supplemental Nutritional Assistance Program (SNAP, otherwise known as food stamps). The damage being done to those who can least afford it cannot be overstated. Beyond the pain it is inflicting on the poor, the adverse “trickle up” effect is already taking hold:
For some perspective on the SNAP program, here’s how it stacks up versus our spending on defense:
Source: BEA Table 3.12 Government Social Benefits and BEA Table 3.11.5. National Defense Consumption Expenditures and Gross Investment by Type |
| Personal Finance for Engineers (Twitter, 2013) Posted: 10 Nov 2013 12:00 PM PST This is an updated version of my talk “Personal Finance for Engineers” given at Twitter HQ in San Francisco on October 9, 2013.
Oct 09, 2013 |
| Posted: 10 Nov 2013 04:30 AM PST Some reads to accompany your coffee this Sunday morning:
Whats up for brunch?
DXJ is the Poster Child for Why Firms Don’t Close ETFs |
| 2015 Mercedes S-Class Coupe Concept Posted: 10 Nov 2013 03:00 AM PST
Key Highlights
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More photos after the jump
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Source: Mercedes Benz |
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