Tag: finance

Authored by Shashi Tharoor (India’s Minister of State for Human Resource Development), originally posted at Project Syndicate,

Nearly a month after American authorities arrested India’s deputy consul general in New York, Devyani Khobragade, outside her children’s school and charged her with paying her Indian domestic worker a salary below the minimum wage, bilateral relations remain tense. India’s government has reacted with fury to the mistreatment of an official enjoying diplomatic immunity, and public indignation has been widespread and nearly unanimous. So, has an era of steadily improving ties between the two countries come to an end?

Judging from Indian leaders’ statements, it would certainly seem so. India’s mild-mannered Prime Minister Manmohan Singh declared that Khobragade’s treatment was “deplorable.” National Security Adviser Shivshankar Menon called her arrest “despicable” and “barbaric,” and Foreign Minister Salman Khurshid refused to take a conciliatory phone call from US Secretary of State John Kerry.

Emotions have run high in India’s Parliament and on television talk shows as well. Writing to her diplomatic colleagues after her arrest, Khobragade, who has denied the charges against her, noted that she “broke down many times,” owing to “the indignities of repeated handcuffing, stripping, and cavity searches, swabbing,” and to being held “with common criminals and drug addicts.” A former Indian foreign minister, Yashwant Sinha, has publicly called for retaliation against gay American diplomats in India, whose sexual orientation and domestic arrangements are now illegal after a recent Supreme Court ruling. The government has not taken him seriously, but his suggestion indicates how inflamed passions have become.

Some retaliation has occurred. The initial American rationale (that foreign consuls in the US enjoy a lower level of immunity than other diplomats) led India’s government to re-examine privileges enjoyed by US consular officials that are unavailable to their Indian counterparts in the US. These privileges – including full-fledged diplomatic ID cards, access to the restricted customs areas of airports, tax-free shipments of items for personal consumption, and no questions asked about the terms of their employment of local domestic staff – were swiftly withdrawn. The cardinal principle of diplomatic relations is reciprocity, and India realized that it had been naïve in extending courtesies to the US that it was not receiving in return.

Likewise, the police have removed bollards and barriers that the US Embassy had unilaterally placed on the street in front of its complex in New Delhi, creating an obstacle to free circulation on a public road that India had tolerated in a spirit of friendship. (The government has, however, reiterated its commitment to the US Embassy’s security, even reinforcing the police presence outside.)

Tempers remain inflamed, with US Ambassador Nancy Powell, in a New Year’s message to Indians, ruefully acknowledging that ties have been “jolted by very different reactions to issues involving one of your consular officers and her domestic worker.” Kerry has also expressed “regret” over the incident. But the US has shown no signs of moving to drop the charges to defuse the crisis.

Indians remain bewildered that the US State Department would so willfully jeopardize a relationship that American officials had been describing as “strategic” over a practice routinely followed by foreign diplomats for decades. Most developing-country diplomats take domestic staff with them on overseas assignments, paying them a good salary by their national standards, plus a cost differential for working aboard. In Khobragade’s case, perquisites included a fully furnished room in a pricey Manhattan apartment, a television set, a mobile phone, medical insurance, and tickets home.

The cash part of the salary may be low by US standards – Khobragade herself, as a mid-ranking Indian diplomat, earns less than what the US considers a fair wage – but, with the other benefits, the compensation is attractive for a domestic helper. More to the point, Khobragade did not find her maid in the US labor market and “exploit” her; she brought her from India to help her in her representational duties, on an official passport, with a US visa given for that purpose. In almost no other country are local labor laws applied in such a manner to a foreign diplomat’s personal staff.

Privately, US diplomats express frustration at their helplessness in the face of theatrical grandstanding by the ambitious federal prosecutor, Preet Bharara, an Indian-American who has launched a series of high-profile cases against Indians in America. For once, however, the zealous Bharara seems to have slipped up, because Khobragade was arrested at a time when she enjoyed full diplomatic (not just consular) immunity as an adviser to India’s United Nations mission during the General Assembly. The State Department’s handling of the matter – which included approval of Khobragade’s arrest – has been, to say the least, inept.

Worse, just before the arrest, the maid’s family was spirited out of India on US visas for victims of human trafficking. The implication that an Indian diplomat in a wage dispute with her maid is guilty of human trafficking understandably riles Indian diplomats as much as the treatment of Khobragade after she was detained. The American habit of imposing its worldview self-righteously on others is deeply unwelcome. To most Indians, common discourtesy cannot be repackaged as moral virtue.

Indian-American relations had been strengthening, owing to both sides’ shared commitment to democracy, common concerns about China, and increasing trade and investment. The Khobragade affair suggests, however, that all of this is not enough: sustaining a strategic partnership requires, above all, mutual respect.

India had handled American diplomats with a generosity of spirit that it felt the bilateral relationship deserved. Now, with the same spirit shown to be lacking from the other side, the friendship has suffered. Until the US displays appropriate deference to the sensitivities, pride, and honor of other peoples and cultures, it will continue to be resented around the world.

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With record high unemployment at 12.3%, a banking system on life support, and a teetering-on-the-brink-of-recession GDP print; it only makes sense that on the heels of this morning’s trip to the capital markets by Ireland, the other peripheral bond markets in Europe are well bid. But in context, at 99.6bps, Italian 2Y yields are now at all-time record lows – is everyone in the world front-running an ECB QE? EURUSD is back under 1.3600 and even Turkish 2Y notes tumble to a mere 10.02%.

 

 

Charts: Bloomberg

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The latest example of French labor relations has ended after two days with police rescuing the two executives from Goodyear Tire from the French factory…

• *GOODYEAR MANAGERS FREED UNDER FRENCH POLICE PROTECTION: AP
• *GOODYEAR MANAGERS FREED AFTER 2 DAYS CAPTIVITY BY WORKERS:AP
• *GOODYEAR MANAGERS HAD BEEN HELD HOSTAGE BY UNION
• *GOODYEAR MANAGERS’ LIBERATION CONFIRMED BY LOCAL OFFICIALS

We are sure management will be much more open-minded and flexible after this fracas. We await Maurice Taylor’s next exortation on the “stupidity” of hiring in France.

 

Via AP,

Two Goodyear managers held captive for two days by angry French workers have been freed after police intervened.

 

The director and human resources chief at the plant in Amiens in northern France walked out of the factory Tuesday afternoon. Minutes earlier, two police officers had entered the facility while a dozen others waited outside.

 

The plant in Amiens, which Goodyear has tried to sell or shutter for five years, has become an emblem of France’s labor tensions. The seizure Monday morning of the two managers appeared to resurrect the once-common practice of “boss-napping.”

 

The Goodyear plant’s workers, having failed to get guarantees to keep the factory open, are demanding larger severance payments.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AdnVDaSW4ls/story01.htm Tyler Durden

The latest example of French labor relations has ended after two days with police rescuing the two executives from Goodyear Tire from the French factory…

• *GOODYEAR MANAGERS FREED UNDER FRENCH POLICE PROTECTION: AP
• *GOODYEAR MANAGERS FREED AFTER 2 DAYS CAPTIVITY BY WORKERS:AP
• *GOODYEAR MANAGERS HAD BEEN HELD HOSTAGE BY UNION
• *GOODYEAR MANAGERS’ LIBERATION CONFIRMED BY LOCAL OFFICIALS

We are sure management will be much more open-minded and flexible after this fracas. We await Maurice Taylor’s next exortation on the “stupidity” of hiring in France.

 

Via AP,

Two Goodyear managers held captive for two days by angry French workers have been freed after police intervened.

 

The director and human resources chief at the plant in Amiens in northern France walked out of the factory Tuesday afternoon. Minutes earlier, two police officers had entered the facility while a dozen others waited outside.

 

The plant in Amiens, which Goodyear has tried to sell or shutter for five years, has become an emblem of France’s labor tensions. The seizure Monday morning of the two managers appeared to resurrect the once-common practice of “boss-napping.”

 

The Goodyear plant’s workers, having failed to get guarantees to keep the factory open, are demanding larger severance payments.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AdnVDaSW4ls/story01.htm Tyler Durden

Commentary from Scotiabank’s Guy Haselmann

How Did the Story of Goldilocks and the Three Bears End? – She Ran Away

• Janet Yellen is inheriting a policy framework precisely at the time when the FOMC is in the midst of pivoting policy.  History suggests that financial crises usually arise when central banks pull back from periods of over-accommodation or when Atlas-complex policy-making tries to do too much. 
• The FOMC has a tricky balance as accommodation needs to be removed quickly enough so that investors do not become too worried about asset bubbles or inflation, but not too quickly so that investors jump well-ahead of the Fed. (Not too hot, but not too cold – just right)
• The FOMC’s hope is that its decision to initiate ‘the taper’ has been timed appropriately-enough to allow artificially-boosted risk asset valuations to be validated by the fundamentals, thus navigating a soft landing.  The intent is to anchor the front end of the yield curve, so that markets can adjust to the new policy direction in an orderly manner and with muted volatility. 
• After ‘pedal to the metal’ policy, Bernanke has indicated that the new plan is to ease the foot off the accelerator at a steady rate of decline.  The Fed is swapping asset purchases with forward promises; however the switch may not result in the expected off-set anticipated by officials.  Using the QE “dimmer switch” approach – as Rosengren called it – to recalibrate during the unwind process may not be a strong enough tool to prevent the Fed from losing control of the process.
• Unintended consequences may have developed from QE policies that are not fully understood.  They may materialize more clearly during the withdrawal process.  Any of a number of obstacles could push the Fed ‘off course’ from the smooth landing that its baseline scenario suggests: 
  • Certainly, expanding the balance sheet by over $3 trillion has had a significant impact on valuations, market functioning, and asset allocation, so those effects could cause some market turbulence as they revert back to normal.
  • Emerging markets, which benefited heavily in the early years of QE, have recently shown some disruptions, such as, slowing economic growth, weakening currencies, and capital outflows.
  • Political and social concerns about income and wealth inequalities have grown due to the use of asset prices as a policy tool.
  • Structural unemployment from long-term joblessness and technological advancement cannot be addressed through easy money.
  • Politics is still polarizing, which in turn creates on-going economic headwinds.
• Vast uncertainties remain; yet, financial markets appear priced closer to perfection with expectations that sustainable private sector-led growth will propel equity markets ever-higher.
• “Help” – Goldilocks 

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Despite the surge in prices for NatGas (and record time-of-year prices for gasoline),  WTI crude oil prices are stumbling back to $93.50 this morning. Copper is also sliding but the real action – once again – is in Gold and Silver. Following yesterday’s flash crash in gold, silver is having a conniption this morning as the 8amET period once again brings volatility. The selling coincided with the smaller-than-expected trade deficit – perhaps indicating indirectly less room for Fed QE? But in this new normal market, do they really need a reason to smack them down. Stocks are not moving as this occurs but bonds and the USD are modestly bid.

 

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It’s Winter, so it’s cold; but even relative to the worst year in recent records, this is extreme. Demand for heat is seemingly surging as the price for delivery of Natural Gas in New York City and New Jersey has soared to a record high. Uber would be proud of the surge as prices for Northeast Transco Zone 6 gas reached almost 9 times its seasonal average and other East Coast hubs reached 10-year highs.

Nat Gas prices for delivery in NYC and NJ…

 

more than 8 times the seasonal average…

 

Via Bloomberg,

Spot gas prices for New York City surged to a record for today while other East Coast hubs climbed to 10-year highs. Transco Zone 6, which includes deliveries to New York City, reached $90 per million British thermal units in IntercontinentalExchange Group Inc. trading before ending at $55.49, an all-time high based on data going back to 2001. Gas at the Algonquin City Gates in New England more than doubled to $34.10 after reaching $50, the most since January 2004.

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Following October’s disappointing bounce in the US trade deficit, it was only expected that the November data would come leaps and bounds ahead of the expected $40 billion print, instead sliding 12.9% to $34.3 billion from October’s revised $39.3 billion – this was the lowest monthly trade deficit since October 2009. The delta was the result of a modest boost in exports, up $1.7 billion, to a record high of $194.9 billion, compounded by a more pronounced slide in imports, which were $3.4 billion less than October’s $232.5 billion. Some other highlights: exports to China climbed to a record high (we certainly expect “matching” Chinese exports to the US to also rise to a record when reported next), while the US petroleum deficit was the lowest since May 2009 thanks to shale.

Charting US Trade:

And just with China:

Key increaseas and decreases of exports and imports:

Trade with some key trading partners:

• The goods deficit with China decreased from $28.9 billion in October to $26.9 billion in November. Exports increased $0.1 billion (primarily soybeans and corn) to $13.2 billion, while imports decreased $1.8 billion (primarily toys, games, and sporting goods and apparel) to $40.1 billion.
• The goods deficit with the European Union decreased from $14.3 billion in October to $10.1 billion in November. Exports decreased $0.2 billion (primarily artwork, antiques, stamps, etc. and organic chemicals) to $22.9 billion, while imports decreased $4.4 billion (primarily pharmaceutical preparations) to $33.0 billion.
• The goods deficit with Canada decreased from $2.8 billion in October to $1.5 billion in November. Exports decreased $1.3 billion (primarily petroleum products and automobiles) to $25.7 billion, while imports decreased $2.7 billion (primarily crude oil) to $27.1 billion.

A visual summary from Bloomberg:

Breaking down the goods trade by category:

• The October to November increase in exports of goods reflected increases in industrial supplies and materials ($0.7 billion); other goods ($0.5 billion); capital goods ($0.3 billion); and automotive vehicles, parts, and engines ($0.1 billion). Decreases occurred in consumer goods ($0.5 billion) and foods, feeds, and beverages ($0.1 billion).
• The October to November decrease in imports of goods reflected decreases in industrial supplies and materials ($4.3 billion); other goods ($0.8 billion); foods, feeds, and beverages ($0.3 billion); and consumer goods ($0.1 billion). Increases occurred in automotive vehicles, parts, and engines ($1.1 billion) and capital goods ($0.9 billion).
• The November 2012 to November 2013 increase in exports of goods reflected increases in industrial supplies and materials ($3.1 billion); capital goods ($1.2 billion); foods, feeds, and beverages ($1.1 billion); automotive vehicles, parts, and engines ($0.8 billion); other goods ($0.6 billion); and consumer goods ($0.5 billion).
• The November 2012 to November 2013 decrease in imports of goods reflected decreases in industrial supplies and materials ($6.9 billion); other goods ($0.3 billion); and consumer goods ($0.3 billion). Increases occurred in capital goods ($2.2 billion); automotive vehicles, parts, and engines ($1.6 billion); and foods, feeds, and beverages ($0.2 billion)

And since the net impact of the plunge in the deficit means a higher Q4 GDP estimate by about 0.3% (and an offset of weaker Q1 GDP when the drop in imports will come back to haunt the US), it also means that the Fed will likely extract another $10 billion from the monthly QE flow at its next opportunity.

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In yet another indication that the US consumer is tapped out and rolling over, a report from the “Vice Index” reporting firm SouthBay Research which tracks spending on gambling, liquor sales and prostitution, says that “spending on vices wasn’t very strong in December, a sign that overall consumer spending was weak, according to the latest reading of the Vice Index from SouthBay Research’s Andrew Zatlin” as the WSJ reports. “The Vice Index for December points to stable but subdued consumer spending,” according to SouthBay’s head Andrew Zatlin further predicting that retail sales slipped 0.1% in December from November.

For those unfamiliar, “The vice index is a proprietary creation of Mr. Zatlin’s, who has developed his own – very accurate – methods of measuring the economy, and who we’ve written about a few times. He culls spending data on gambling, liquor sales and prostitution (he doesn’t disclose exactly how he tracks these) and plugs them into a program that he says allows him to predict overall retail spending with a lead time of several months. The vice index fell to 101 in December from 105 in November, a range it’s been in all fall and most of the year. What the index is really illustrating, though, is the split in the economy between the haves and have nots, Mr. Zatlin told MoneyBeat. That may not sound like an usual state of affairs, but it’s the lack of spending among lower income levels that’s keeping the economy from taking off, he said.”

And while the split between “the 1%” and “everyone else” was evident in the faster decline in beer sales compared to wine sales, as well as gambling where the low-end contracted while the high end expanded, nothing says a recovery for the 1% like the following sentence: “High-end escorts successfully raised prices,” Zatlin wrote in the report. “Lower-end escorts did not.”

Ironically, some still refuse to admit that the US economy is now running on a fast (1%) and slow (everyone else) track: the same people who blamed the plunge in alcohol sales on, you guessed it, the cold weather. From the FT:

New figures from GuestMetrics show that advertising initiatives from beer and spirits companies have struggled to lure drinkers to imbibe more alcohol at bars, clubs and restaurants in the US. Beer sales fell 4 per cent from 2012 to 2013, spirits sales were down 2.5 per cent and wine sales slipped 1 per cent.

 

Bill Pecoriello, of GuestMetrics, attributed the declines to weak traffic at bars, clubs and casual dining restaurants. Bad weather and a shorter holiday shopping cycle was responsible for the declines accelerating towards the end of the year, he said.

 

Moreover, in spite of signs that the economy is picking up, unemployment remains elevated. Mr Pecoriello said traffic declines at clubs and bars was “likely symptomatic of young adult consumers in the United States remaining under significant economic pressure”.

Because nobody frequents bars when it’s cold outside, like during the winter…

Finally, for those who aren’t still stuck in denial, here is once again, Zatlin’s accurate assessment of the farce that the US economy has become: “If you don’t [havemoney] you’re pulling back and pulling back even faster, ” Mr. Zatlin said. He noted that gambling revenue (remember, we’re talking about vices here) continues to contract, especially in places like Detroit and Atlantic City, which cater to more working class patrons. “People who are at the lower end are screaming now.”

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Four pictures are worth four thousand words:

The St. Joseph Lighthouse on North Pier, Lake Michigan, on Jan. 6, 2014; Photographer: HotSpot/Landov

 

Ice builds up along Lake Michigan at North Avenue Beach as temperatures dipped well below zero in Chicago on Jan. 6, 2014; Photographer: Scott Olson/Getty Images

 

A pedestrian covers her face to keep warm in New York; Photographer: Jin Lee/Bloomberg

 

A man uses a snow blower to clear snow in New York on Jan. 3, 2014, Photographer: Jin Lee/Bloomberg

* * *

And now, some stories, via Bloomberg:

Yesterday’s low in Chicago reached a record for the date of minus 16 degrees Fahrenheit (minus 27 Celsius), beating the mark of minus 14 set in 1884 and 1988, according to the National Weather Service. Today, New York’s high will struggle to reach 10 degrees, a day after Central Park reached 50. As of 7 a.m., it was 5 degrees in New York and 13 in Boston.

“It is a pretty ferocious air mass coming down,” said Tom Kines, a meteorologist with AccuWeather Inc. in State College, Pennsylvania. “Across the upper Midwest it stayed below zero and will stay below zero and that air is coming eastward.”

The frigid weather strangled transportation routes around the country including interstate highways, airlines and rails. It also led to a surge in energy demand that pushed power in Texas to more than $5,000 a megawatt-hour for the first time and caused disruptions at oil refineries in Tennessee and Illinois.

The natural gas-weighted heating degree days value is expected to be 46.5 today, according to Commodity Weather Group LLC in Bethesda, Maryland, beating the century’s previous high of 45.1 set on Jan. 16, 2009. Natural gas-weighted heating degrees subtract the daily average temperatures in cities nationwide from 65, then weight the totals based on population and use of the fuel for heating.

* * *

The cold air blowing across the Great Lakes may bring 24 inches of snow to parts of western New York by tonight, according to the weather service. The region is expected to be whipped by wind chills of minus 30.

“The lake snow belts are going to get walloped,” said James Aman, a senior meteorologist with Earth Networks, Inc. in Germantown, Maryland.

* * *

Valero Corp.’s Memphis refinery in Tennessee had a system shutdown because of low temperatures in the area, according to a filing with the U.S. National Response Center. Exxon Mobil Corp. had some “problems” with unidentified process units at its Joliet, Illinois, refinery because of extreme cold weather, according to a separate filing. U.S. companies must notify the center if they release hazardous substances. Bloomberg couldn’t immediately verify the information.

Record lows for the date were set or tied across the northern tier of the country. The low of minus 13 in Fort Wayne, Indiana, beat the old mark of minus 12 set in 1970, according to the weather service. In Burlington, Iowa, the mercury fell to minus 14, which was also recorded in 1970.

The lowest temperature of the day was minus 40 in Brimson, Minnesota, according to the U.S. Weather Prediction Center in College Park, Maryland.

Among today’s forecast highs are 5 in Chicago, 17 in Washington and 26 in Atlanta.

* * *

While the heart of the cold is shifting east, it will still maintain its grip on the central U.S., Aman said. He said the weather will start to warm in a couple of days.

“By Wednesday morning a lot of your big cities will be in single digits and during the day Wednesday we start to come out of it,” Aman said. “Things will be much more tolerable by Wednesday afternoon and we see some continued warming by Thursday.”

Temperatures in New York are expected to bounce back to 39 by the end of the week, according to the weather service. On Jan. 13 it may reach 53, according to MDA Weather Services in Gaithersburg, Maryland. Chicago’s high may reach 39 by Jan. 12 and Washington 57 by Jan. 13, according to MDA.

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