Tag: finance

As European countries deal with the current refugee crisis, each is taking a slightly different approach in response to the escalating situation. In Norway, which has been shocked by the unfolding events in neighboring Sweden which has seen a mass revulsion at the ongoing refugee onslaught (and which recently announced it won’t accept any more refugees from the EU) the answer appears to be the simplest possible one: offer asylum seekers money to leave.

Asylum seekers at the Bjørnebekk asylum centre in Ås

Currently, refugees who decide to return to their home country instead of seeking asylum in Norway are given 20,000 kroner (~$3,000) for travel expenses by the Norwegian government (up to 80,000 kroner for a family with two children). Now, as RT reports, Norway will sweeten the deal, and provide an additional 10,000 kroner to the first 500 asylum seekers who apply for voluntary return to their home countries.

Integration Minister Sylvi Listhaug had the following to say about the bonus program: “We need to entice more [people] to voluntarily travel back by giving them a bit more money on their way out. This will save us a lot of money because it is expensive to have people in the asylum centers. There are also many who are not entitled to protection and, by all means, are going to be rejected. It’s better for us to stimulate their travel back.”

A total of 35,358 asylum seekers arrived in Norway in 2015, up from 11,480 the prior year. Given the influx of refugees primarily fleeing a war torn Syria, it’s understandable to want to have a protocl in which the asylum seekers are processed within the system.

What may be disturbing to some, ostensibly those who initially urged Europe to accept as many refugees as possible only to realize after the fact that “cultural integration” is far different than presented in glossy pamphlets and occasionally leads to mass violence, a surge in rapes and lots of screaming, is the cheapening of human life to the point where the idea of throwing a few thousand USD at people will completely erase the fact that the migrants “home” is no longer a home, and going back would presumably mean putting one’s self and/or family back in harm’s way.

To most others, this will be a great outcome, especially since the incremental cost of booting the new asylum seekers is relatively low.

To qualify for the additional 10,000 kroner to cover travel costs, asylum seekers must have arrived in Norway prior to April 1st and must not have overstayed their legal length of stay.
 
The Norwegian Directorate of Immigration said the goal of the bonus was to stimulate a faster voluntary return of those asylum seekers who do not have a legitimate protection claim in Norway. It remans to be seen how this program will be gamed and abused.

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Submitted by Michael McDonald via OilPrice.com,

$240,000. More than British Prime Minister David Cameron earns per year.

Back in 2013, Oilprice.com published an article about a cook on an Australian offshore platform earning this kind of salary during the heydays in the oil sector. But things have changed in the oil patch.

For many years one of the most lucrative jobs in the already lucrative field of engineering was as a petroleum engineer. While industrial, mechanical, and chemical engineering grads all commanded respectable salaries, usually ranging from $55,000 to $75,000, in recent years petroleum engineering salaries often top $100,000 or more.

The days of that prosperity are ending or at least on hold for now though. Jobs for petroleum engineers are becoming increasingly scarce even for grads from traditionally good universities. Part of the problem is that as U.S. shale oil boomed, so did the number of petroleum engineering grads. There are more than three times as many students graduating today with petroleum engineering degrees as there were in 2008.

In that sense, the petroleum engineering glut is even worse than the oil glut. While the oil markets will rebalance over a period of a couple of years, many petroleum engineers will likely leave or never enter the industry in the first place. Now to be fair, engineering is an extremely useful field and there is considerable overlap between many of the engineering disciplines. My undergrad training and initial work experience is in industrial engineering, which has significant commonalities with mechanical engineering. In the same way, petroleum engineers will be able to get jobs in other technical fields – mathematical and scientific skills are always in demand.

Still, for many students who went to school and took on student loans under the expectation of getting a six figure petroleum engineering job, a rude awakening is likely ahead. Petroleum engineering became a much more attractive field thanks to the shale boom, which meant that these engineers were no longer likely to have to take a job abroad or on an offshore platform. If shale is dead or partially dead, that changes the calculus for many petroleum engineers. To employ a meaningful number of the current stock of engineers, oil prices would likely have to get back to around $70 a barrel which would make shale at least reasonably profitable in many geographies.

Petroleum engineers who do want to work in the oil field need to be looking at older technology rather than new tech for opportunities. While the economics of many shale fields are looking very questionable, many oil companies are now looking at their existing conventional fields and seeking ways to extract as much production as possible from these fields. That means higher demand for traditional petroleum engineering work, and less demand for new specialties like hydraulic fracking. The influx of private equity money into the space is also trending in the same direction – for savvy petroleum engineers, it’s a case of back to basics rather than newer and more expensive techniques.

Layoffs are likely to continue in the oil patch in 2016, and that also means that firms will be looking to hire less fresh faces to the mix. The petroleum engineers who do find jobs in the field are going to be the ones with useful skills (like knowledge of older technology), and those with either good networking connections or stellar academic performance. In the current environment, every big oil company out there has their pick of multiple qualified petroleum engineering candidates. That means that only the best applicants will make it through.

In the end, many different occupations go through surges of graduates and eventually the markets adjust. For instance, there has been frequent concern in recent years about law schools producing too many lawyers leading to difficulty for many grads in getting law jobs. Eventually though, people adjust and industries with a need for smart people take up the slack. Not every petroleum engineer will get a job in the oil patch – many won’t – but that doesn’t mean they won’t get jobs at all.

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We’re gonna need more money-printing. Consumer Confidence dropped in April to 94.2, missing expectations of 95.8 and hovering at its lowest in 2 years. In fact, the current level is relatively unchanged since the end of QE3, despite all the recent surges in stocks as the post-2009 94% correlation between the S&P 500 and confidence is breaking down rapidly and ruining The Fed’s animal spirits’ party. Most crucially, income growth expectations are tumbling as The Conference Board suggests American consumers “do not foresee any pickup in momentum.”

h/t @GreekFire

“Consumer confidence continued on its sideways path, posting a slight decline in April, following a modest gain in March,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved, suggesting no slowing in economic growth. However, their expectations regarding the short-term have moderated, suggesting they do not foresee any pickup in momentum.”

Consumers’ appraisal of current conditions improved somewhat in April. Those saying business conditions are “good” decreased from 24.9 percent to 23.2 percent. However, those saying business conditions are “bad” also declined, from 19.2 percent to 18.1 percent. Consumers’ appraisal of the labor market was also mixed. Those claiming jobs are “plentiful” decreased from 25.4 percent to 24.1 percent, however those claiming jobs are “hard to get” also declined from 25.2 percent to 22.7 percent.

 

Consumers were less optimistic about the short-term outlook in April than last month. The percentage of consumers expecting business conditions to improve over the next six months decreased from 14.7 percent to 13.4 percent, while those expecting business conditions to worsen rose to 11.0 percent from 9.5 percent.

 

Consumers’ outlook for the labor market was also less favorable. Those anticipating more jobs in the months ahead decreased slightly from 13.0 percent to 12.2 percent, while those anticipating fewer jobs edged up from 16.3 percent to 17.2 percent. The proportion of consumers expecting their incomes to increase declined from 16.9 percent to 15.9 percent; however, the proportion expecting a reduction in income also declined, from 12.3 percent to 11.2 percent.

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Following the weakness in Philly and Dallas Fed regional – fading off Feb/Mar dead cat bounces – Richmond Fed's epic 9-standard-deviation biggest spike ever to 7 year highs in March appears to have been a one of as it fell back from 22 (3rd highest ever) to 14 (still above expectations) – the biggest drop since August. Of course how one can take this seriously is anyone's guess as shipments , new orders, wages, and workweek all crashed from March's embarrassing spike as did inventory levels for finished and raw materials (not good for Q2 GDP). Worse still outlook for six months ahead saw wages, workweek and new orders collapse further.

As a reminder, here is March…

And so April tumbles most since August…

Charts: Bloomberg

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With Manufacturing PMI at multi-year lows and trending lower, why would anyone be surprised that, amid plunging profits in retailers and weakness in restaurant performance indices, Markit’s preliminary Services PMI for April would bounce for the 2nd month in a row to  52.1. However, as Markit notes, despite th emodest pickup, “growth is clearly far more fragile than this time last year.”

Dead cat bounce?

As Markit details,

“The upturn in the rate of growth of business activity and increased inflows of new orders suggest the economy should see GDP rise at an increased rate in the second quarter, but growth is clearly far more fragile than this time last year.

 

“Viewed alongside the recent poor performance of the manufacturing sector, which reported its worst month since October 2009, the survey suggests the economy grew at an annualized rate of just 0.8% at the start of the second quarter, only marginally above the pace signalled for the first quarter.

 Survey responses indicate that persistent weak demand from domestic and overseas customers, the struggling energy sector, the strong dollar and election worries are all eating into business optimism.

“The current pace of growth is also only being supported by price reductions, as an increasing number of firms offer discounts to win sales.

 

“Job creation has also slowed as a result of costcutting pressures and uncertainty over the outlook, but remains solid. The surveys point to another 150,000 non-farm payroll increase in April, as robust service sector hiring continues to offset factory job losses.” 

Additionally, growth momentum remained much weaker than that seen on average since the survey began in late-2009.

Survey respondents suggested that subdued client demand and less favourable underlying economic conditions had weighed on business activity at their units in April. Reflecting this, latest data signalled only a marginal rebound in new business growth from the survey-record low recorded in March.

A relatively weak upturn in new work contributed to slower job creation across the service economy in April. Payroll numbers have expanded continuously for just over six years, but the latest increase was the softest since October 2015 and weaker than the post-crisis trend. At the same time, service providers indicated another modest drop in backlogs of work in April, suggesting a lack of pressure on operating capacity.

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Moments ago, in its latest update, Case Shiller pointed out that for another month “Home prices continue to rise twice as fast as inflation.” Actually that is an understatement: in two-third of the tracked metro areas, the pace of home appreciation over the past year was 6% or higher, or equivalent to three times as fast as inflation. And with rents continuing to soar across the country, in many cases at a double digit clip, not to mention exploding healthcare costs, one wonders just what the BLS “measures” with its monthly CPI update.

In any case, for those lucky Americans who can afford to own a house instead of being stuck renting the New Normal American dream where they are prohibited from peddling fiction as their annual rent increases by 10% or more each year, here is the breakdown of the best and worst cities for housing in the U.S.

At the top, with annual price increases over 9% and as high as 11.9% in the case of Portland, we also find Seattle Denver and – of course – San Francisco. On the other end are Washington, Chicago and oddly enough, New York. We wonder if Case Shiller used the UMich “random” telephone directory to calculate that NYC home prices rose at precisely the rate of core inflation in the past 12 months while ignoring the dramatic moves in the ultra luxury high end segment.

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Submitted by Claire Bernish via TheAntiMedia.org,

As it turns out, Hillary Clinton and Donald Trump share something pertinent in common, after all — a tax haven cozily nested inside the United States.

This brick-and-mortar, nondescript two-story building in Wilmington, Delaware would be awfully crowded if its registered occupants — 285,000 companies — actually resided there. What’s come to be known as the “Delaware loophole” — the unassuming building at 1209 North Orange Street — has become, as the Guardian described, “famous for helping tens of thousands of companies avoid hundreds of millions of dollars in tax.” 

Reportedly dozens of Fortune 500 companies — Coca-Cola, Walmart, American Airlines, and Apple, to name a few — use Delaware’s strict corporate secrecy laws and legal tax loopholes by registering the North Orange Street address for official business.

“Big corporations, small-time businesses, rogues, scoundrels, and worse — all have turned up at the Delaware address in hopes of minimizing taxes, skirting regulations, plying friendly courts or, when needed, covering their tracks,” the New York Times’ Leslie Wayne described in 2012. “It’s easy to set up shell companies here, no questions asked.”

While the legitimacy of taxes as a concept may be up to personal interpretation, what matters in Clinton’s use of the so-called Delaware loophole, in particular, is her constant harping on the need for corporations and elite individuals to pay their fair share. In other words, Clinton’s employment of North Orange Street amounts to a telling, Do As I Say, Not As I Do. And, as the Guardian notes, both of “the leading candidates for president – Hillary Clinton and Donald Trump – have companies registered at 1209 North Orange, and have refused to explain why.”

As Rupert Neate explained for the Guardian, being registered in the tiny state allows “companies to legally shift earnings from other states to Delaware, where they are not taxed on non-physical incomes generated outside of state.”

In fact, some have claimed — all revelations of Panamanian documents aside — the use of tax-friendly locations inside the U.S. makes it the biggest tax haven in the world, with Delaware, alone, costing other states some $9 billion in lost taxes over the past decade. Clinton has repeatedly touted the needs for tax transparency and to shut down foreign havens with similar loopholes.

“Some of you may have just heard about these disclosures about outrageous tax havens and loopholes and superrich people across the world are exploiting in Panama and elsewhere,” Clinton told the Pennsylvania AFL-CIO annual Constitutional Convention earlier this month. “We are going after all these scams and make sure everyone pays their fair share here in America.”

Oh, the irony.

According to Neate, a Clinton spokesman explained, “ZFS [Holdings, LLC] was set up when Secretary Clinton left the State Department as an entity to manage her book and speaking income. No federal, state, or local taxes were saved by the Clintons as a result of this structure.”

Why, if what the spokesman claims to be true, would Clinton bother using an address in Delaware?

Of the 515 companies Trump officially registered with the Federal Election Commission, “We have 378 entities registered in the state of Delaware,” the billionaire told the Guardian, “meaning I pay you a lot of money, folks. I don’t feel guilty at all, OK?”

Delaware’s incredibly business-friendly structure that allows for such a crowded address is completely legal, though the ability to create shell corporations lends to shady dealings and is “a magnet … which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes,” as a report by the Institute on Taxation and Foreign Policy has described.

Still, Clinton’s constant moralizing on tax transparency — and her spokesperson’s claims she hasn’t benefited from the North Orange Street address — proves, yet again, her stances offer little in the way of a solid foundation.

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For the 5th month in a row (and 10th of last 11), S&P Case-Shiller Home Price growth YoY missed expectations. February saw prices rise 5.38% (below 5.5% exp) which is the weakest annual growth since September 2015. Seattle and San Francisco rose the most MoM as Cleveland and New York saw the biggest drops MoM.

Weakest home prices appreciation since September 2015 and the misses continue…

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.

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One of the more important companies reporting today was commodity king Freeport McMoRan which in 2016 has seen its stock plunge then surge on hopes the Chinese bubble reflation will push commodities higher. So far it has worked, but far more important was what FCX’ own assessment of the future was: was it preparing for a strong rebound, or instead, was it slashing costs and firing employees in another confirmation that the recent rally has been, as Bank of America’s “smart money” clients admit for 13 consecutive weeks, nothing but fumes. It was the latter, because in addition to reporting poor earnings numbers that were largely in line with expectations, the company also announced that it would fire 25% of its oil and gas employees, hardly a ringing endorsement for the future prospects of the energy space.

From the report:

During first-quarter 2016, FCX conducted a formal process involving multiple third-party oil and gas industry and financial participants to evaluate alternatives for the oil and gas business. Further weakening in oil and gas prices and negative credit and financing market conditions during first-quarter 2016 had a significant unfavorable impact on the process. While the process did not identify a buyer for the entire oil and gas business, a number of parties have interest in select assets, and FCX continues to engage in discussions with parties interested in potential asset or joint venture transactions.

 

In the interim, FCX is taking immediate steps to reduce oil and gas costs further. In April 2016, FCX announced a new management structure and is instituting an approximate 25 percent oil and gas workforce reduction. The newly structured oil and gas management team is actively engaged in managing costs and developing plans to preserve and enhance asset values. FCX expects to record a charge of approximately $40 million in second-quarter 2016 associated with workforce reductions and other restructuring costs.

We fully expect these newly designated “waiters and bartenders” to be touted by the US Labor Secretary as yet another confirmation of Obama’s great economic recovery.

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Following February's dismal drops across the board in Durable Goods, expectations were high for a March rebound. However, the mean-reverters were greatly disappointed as Orders rose just 0.8% MoM (missing expectations of a 1.9% surge) off a revised lower print, pushing the YoY change back into the red. Core Durables Goods Orders fell YoY for the 14th consecutive month – a streak never seen in 60 years outside of a broad US recession. Capital Goods Orders (0.0% vs +0.6% exp) and Shipments (+0.3% vs +0.9% exp) both missed and were both revised lower. Not a pretty picture…

The headline Durable Goods Orders printed back in the red YoY…

But a 14th consecutive monthly drop in YoY Core Durable Goods Orders has never happened outside of a recession…

It really is different this time.

Charts: Bloomberg

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