Tag: news

Following Darrell Issa's subpoena of Lois Lerner's hard drive, the rather stunning (and ripped from the pages of a badly written inside-Washington TV mini-series) news is that the IRS reports that the hard drive in question has been destroyed (just as we hinted last night). "We've been informed that the hard drive has been thrown away," Sen. Orrin Hatch of Utah, the top Republican on the Finance Committee, said in a brief hallway interview and as Politico reports, Ex-IRS official Lois Lerner’s crashed hard drive has been recycled, making it likely the lost emails of the lightening rod in the tea party targeting controversy will never be found, according to multiple sources. Issa is pissed… blasting in a statement that the 'lost emails' meme was "just one more attempted deception… e-mails of a prominent official, don’t just disappear without a trace unless that was the intention." His response… requesting the White House attorney's testimony on Lerner's emails.

As Politico reports,

Ex-IRS official Lois Lerner’s crashed hard drive has been recycled, making it likely the lost emails of the lightening rod in the tea party targeting controversy will never be found, according to multiple sources.

 

“We’ve been informed that the hard drive has been thrown away,” Sen. Orrin Hatch of Utah, the top Republican on the Finance Committee, said in a brief hallway interview.

 

…

 

“IT experts have weighed in and said yes — we can get those” emails, said Rep. Charles Boustany (R-La.) earlier Wednesday.

 

The latest news suggests such professionals may never get the chance to try again — and the IRS has even said its criminal investigators who specialize in rebuilding hard drives to recover hidden information from criminals were unable to restore the data back in 2011.

 

“We believe the standard IRS protocol was followed in 2011 for disposing of the broken hard drive. A bad hard drive, like other broken Information Technology equipment, is sent to a recycler as part of our regular process,” an IRS spokesman said in response to a query from POLITICO.

So the standard IRS protocol is to wipe away all the evidence? Can US taxpayers then use the same protocol to "wipe away" their W2s?

As for this latest fiasco, who could have possibly seen that coming?  Well, everyone.

As for the hard disk, we have a suspicion it will not only have passed through a massive magnetic field first, but ultimately Issa will receive something that looks like this:

 

 

At that point it will be up to America's army of White Hat hackers to attempt salvaging whatever data is on it. Because only in the US government – the same government that demands businesses retain electronic data for years at at ime – is there no requirement to back up one's communications and files.

Upon learning about the latest lie from the IRS he issued this statement.

House Oversight and Government Reform Committee Chairman Darrell Issa, issued the following statement on news that the IRS destroyed Lois Lerner’s hard drive containing e-mails from the time period of IRS targeting:

 

“If the IRS truly got rid of evidence in a way that violated the Federal Records Act and ensured the FBI never got a crack at recovering files from an official claiming a Fifth amendment protection against self-incrimination , this is proof their whole line about ‘losing’ e-mails in the targeting scandal was just one more attempted deception. Old and useless binders of information are still stored and maintained on federal agency shelves; official records, like the e-mails of a prominent official, don’t just disappear without a trace unless that was the intention.”

And finally his latest request:

House Oversight and Government Reform Committee Chairman Darrell Issa requests testimony on Tuesday from Jennifer O’Connor of the White House Counsel’s office, according to statement from Issa’s office

 

Committee seeks answers from current White House attorney who supervised IRS’s response to congressional inquiry

 

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., today requested that Ms. Jennifer O’Connor of the White House Counsel’s office testify on Tuesday, following Internal Revenue Service (IRS) Commissioner John Koskinen’s testimony on Monday.

 

“From May 2013 until November 2013, you served in a career position at the IRS as the Counselor to the Commissioner, with the primary task of ‘navigat[ing] the scandal over [the IRS’s] reviews of conservative organizations,’” said Issa in the letter. “In this position, you had a direct and substantial role in the IRS’s response to congressional requests for documents, including documents sent or received by Ms. Lerner.  In fact, IRS Chief Counsel William Wilkins, when asked who was supervising the collection of, ‘documents relating to the committee’s requests for material,’ responded ‘Tom Kane and Jennifer [O’Connor] are the two I would identify as the key supervisors.’ Given your prominent role in supervising the IRS’s document review and production processes, you likely knew or should have known that the IRS was missing a portion of e-mails sent or received by Ms. Lerner responsive to the Committee’s subpoena.”

 

Ms. O’Connor earned a promotion to the White House earlier this year. The Oversight Committee had previously subpoenaed Koskinen for testimony which comes as a result of the agency’s recent statement that the IRS lost an unknown number of emails pertaining to the activities of former IRS official Lois Lerner from January 2009 to April 2011. It also comes on the heels of the IRS’s repeated empty promises of compliance with oversight.

One wonders how long before her hard drive fails? and also how long until Americans finally realize they too have had enough, and proceed to inform the IRS they have systematically "lost" all tax forms documenting income sent to them in the last several years as well?

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Having spent a week in surprisingly bright and sunny London, ConvergEx’s Nick Colas reports that the consensus opinion in this global financial hub is that equities are where the sun shines the brightest. Public companies are intent on tapping those better days with more aggressive global investor outreach, and asset managers/brokers of all stripes feel that the developed economy bull market has a few more years to run. At the same time, everyone agrees that the near term feels a bit damp and acknowledges that the low levels of actual volatility are worrisome for their artificial “Keep calm and carry on” sentiment. Other heard/seen observations: London is no longer a British city, the surge in foreign buyers is creating a world-class property bubble. His conclusion, as long as humans are humans there will always be financial bubbles, either due to groupthink over real estate prices or financial assets. Just as surely as there will always be an England.

Via ConvergEx’s Nick Colas,
 
Walk around London these days, and you’ll quickly see the immense amount of wealth the city enjoys. Landmark double decker busses are now modern and sleek, even if the aero-package seems lost on a vehicle that never goes past 30 miles an hour.  Ferraris jostle with McLarens, Rolls Royces with Range Rovers. The streets in central London are clean, building cranes regularly dot the landscape, and most of the older structures look like they are exceptionally well maintained.  London probably hasn’t looked this good since it was the center of the empire upon which the sun never set.
 
Ask the locals what’s going on, and the answer is quite uniform: the whole world, it seems, wants to live in London. Wealthy Russians – not just oligarchs, but those with just a extra few million in their pockets – are one example. Middle Eastern oil sheiks, French business people, eastern Europeans… Come one, come all. By some accounts, London property prices are already up 10% in 2014, with further gains on tap for the back half of the year. And by other measures, only 30-40% of Londoners now hold a British passport. It has become a modern day Casablanca, only the residents are happy to stay on and drink at Rick’s and listen to Sam play until well into the night.
 
I’ve been here since Monday, speaking at events, meeting with clients and prospects and hearing what our local staff and managers have to say about the global investment scene. The commentary was actually pretty uniform, and not just about worries over a local property bubble. Most Londoners I met are actually cheering that one higher, which is fair enough. Even if a 20-something City professional probably shouldn’t carry a half million pound mortgage…
 
The following is my summary of the items of interest I heard in my travels. They follow the same “Postcard” format of brief descriptions I have used in other travelogue notes.

Postcard #1: Equities are the place to be. Coming from the skeptical, market neutral world of the New York investment scene, I was surprised to hear many times that equities are the consensus trade in many circles here. That’s not to say that everyone necessarily agrees, but the baseline assumptions is that equities will outperform bonds by a handy margin over the next few years. Everyone agrees that the recent lack of volatility is a bit eerie, but that’s not a strong enough reason to avoid putting money to work. 

 

This confidence extends to public companies from the UK and the rest of Europe, who are interested in tapping international investors to expand their shareholder rolls. Money managers echo the sentiment, and both constituents believe that money flows globally support this bullishness. They are surprised to hear, for example,  that U.S. pension funds are actually selling equities since they are now fully funded and bonds provide the guaranteed returns they seek to offset their liabilities.

 

Postcard #2: Hedge funds set the price of stocks over the near term. I heard this both from the investor relations professionals at public European companies as well as brokers and investment managers in the City. Market structure is different across much of Europe from the U.S., so you don’t hear much griping about high frequency trading here.  Instead, the popular perception is that marginal price is set by fast money hedge funds. A recent selloff in European small caps, for example, stemmed from chatter of a liquidation/team dismissal at one London based hedgie. 

 

This narrative is especially popular among public companies. While they look for stable long-only money to comprise their core shareholder base, they also recognize that hedge funds will set the near-term price action in their stock. They aren’t entirely comfortable with that paradigm, to say the least. They fear that a meeting with a hedge fund will lead to a short position or, worse yet, a bear raid by several funds. At the same time, they recognize that hedge funds often know a lot about their business and are quick to find positive catalysts to justify an aggressive (and market moving) buildup of a new long position.

 

Postcard #3: No one pays for management access. There are some fresh new rules in the London market, courtesy of the Financial Conduct Authority, about the allowable uses of trading commissions. The most notable one for many public companies, brokers, and money managers is the prohibition on money managers paying brokers for management meetings. This is a common practice in the U.S., of course. By some estimates it accounts for +50% of all discretionary commissions. So this is kind of a big deal…

 

This topic came up both at a client/prospect dinner and at a large Investor Relations conference the next day. The bottom line is that no one in the business really knows how this change will alter the very popular research practice of money managers speaking to the companies in which they invest, in person and in their office. Some very large managers already have their own in-house facilitators to arrange for such meetings directly with public companies. Others are sufficiently large that their commission flow will continue to engender interest from the broker community, even if they no longer allocate commission for management meetings. And large public companies tend to have large enough IR staffs to perform critical investor outreach functions.

 

Where things get a bit more nebulous is in the small-mid cap arena. These are companies than often pay for something called “Corporate broking” in the UK, a service which resembles what U.S. investment bankers do for free: provide advice about positioning, investor targeting and the like. Except in the UK companies pay the investment bank for this service, and investment managers pay the same broker for the convenience of seeing the company in their offices. With that second revenue stream now off the table, money managers may see fewer small to mid cap companies unless those enterprises now pay more to cover the logistics costs previously borne by the buy-side.  These are all guesses at the moment – the change is too new for even the most seasoned hands – several of whom I spoke to on this trip – to opine about how things will change. 

In short, I learned two things during my trip to London. One, if you are involved in a traffic accident as a pedestrian the offending party will either be on a bicycle or a in an Italian/British/German supercar. Those two forms of transit seem to have similarly inattentive operators, and are about equally common on the streets of London. Second: as long as humans are humans there will always be financial bubbles, either due to groupthink over real estate prices or financial assets. Just as surely as there will always be an England.

via Zero Hedge http://ift.tt/UjFJXD Tyler Durden

While Janet Yellen yesterday explained that low levels of realized and expected volatility in financials were not a signal of complacency; we suspect, like The Fed’s Bill Dudley, some are concerned she is talking out of her academic ass… As JPMorgan warned, volatility currently is entirely dislocated from fundamentals, and the day of realization is approaching…

 

 

h/t @Not_Jim_Cramer

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By EconMatters  

 

 

Hot Philadelphia Fed Survey

 

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Submitted by Martin Tillier of OilPrice.com,

I would hazard a guess that most people in the developed world are now aware of what hydraulic fracturing, or “fracking,” is. For those who aren’t, it is a technique used to extract oil and gas from previously inaccessible underground shale (rock) formations.

Fracking has had profound effects on the energy industry, so far mostly in the U.S., where it has created oil and gas booms in non-traditional places, moved the country closer to energy independence, and resulted in a huge reduction in the cost of energy, particularly natural gas.

It is, however, not without controversy. Environmental groups worry that we don’t know the possible effects of chemicals used in the process, and that contamination of the water supply could cause major environmental problems at some point in the future. Breaking up subterranean rock formations just sounds like a harmful thing to do and many believe that earthquakes have been or will be caused.

I have no interest in taking sides in the debate, but any debate benefits from knowledge, so here are 5 things that you may not know about fracking.

It isn’t new.

Hydraulic fracturing has risen to prominence over the last five or six years, but the technique itself has been around a lot longer. The first hydraulic fracturing experiment was conducted in Kansas in 1947. It was not successful, but a patent on the process was granted in 1949 and the licensed user of the technique, Halliburton Oil Well Cementing Company, began commercial operations later that year. Since then about 90 percent of U.S. wells have been fracked.

It mainly uses sand and water.

Environmental concerns about fracking center on the possibility of contamination by chemicals used in the process. This leads many people to believe that it is just a chemical cocktail that is being pumped into the ground. In fact, over 99 percent of what is pumped typically consists of sand and water. That doesn’t mean that contamination and environmental damage isn’t possible, but it may not be what you envisage.

It makes your ice cream more expensive.

One component of the small percentage of fracking fluid that is not sand or water is guar gum. This natural product of the seeds of the guar plant is also used to improve the texture of ice cream. A chart of guar gum prices since 2000 looks like this:

Ice cream and other foods that utilize the product have seen significant increases in cost. For those of us with a sweet tooth, this alone may be reason enough to be wary of any more rapid expansion of fracking.

The biggest environmental threat could be from the amount of water used, not chemical contamination.

If the benign nature of guar gum and the small percentage of chemicals used in fracking fluid has you believing that the environmental concerns have been massively exaggerated, think again. Fracking just one well uses somewhere in the region of 3 to 8 million gallons of water. Using 2011 data, this article by Jesse Jenkins calculates that to mean that the amount of freshwater consumed by all the shale wells in the U.S. was about 0.3 percent of total U.S. freshwater consumption. That doesn’t sound like a lot, but in a world where water scarcity is becoming more of an issue it has to be considered as fracking use spreads.

It has uses beyond oil and gas.

Hydraulic fracturing of rock formations is not just used to extract oil and gas. It is also used to stimulate production from water wells, to enhance geothermal production of electricity and, most surprisingly of all, used by the EPA to clean up superfund sites.

Proponents and opponents of fracking will no doubt cherry pick from these lesser-known facts about the process to support their arguments. As I said, I have no interest in taking sides here. My only hope is that everybody who reads this will learn something that they didn’t know before. The debate will continue to rage, but the more informed that debate is, the better for all of us.

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It feels like it was only yesterday when we wrote about the plight of what was once supposed to be the ultramodern east-coast competitor to the glitzy kitsch of Las Vegas: Atlantic City’s Revel casino which back in February 2013 “filed for bankruptcy ten months after opening.” Well, a short 16 months later it is time for an update because Revel, which was supposed to have a viable balance sheet upon emergence from its first Chapter 11 filing, just filed for bankruptcy for a second, and most likely final time: the dreaded “Chapter 22.” And not only did the company admit its business model is not viable not due to its overlevered balance sheet, but because of the sad state of the economy and the AC gambling market, it also warned it may shut down permanently if it can’t find a buyer in bankruptcy court (its odds of selling may be higher if it includes the cast from the original Revel ad shown below, in the transaction).

As a reminder, and as we reported last year, as part of the first debt for equity bankruptcy exchange, Revel wiped out $1.5 billion or the bulk of its debt. Apparently, not enough, because the casino is again on the verge of liquidation a year later. 

Back in February 2013 when explaining why more bad money was being thrown after good, we said that…

…the continuation of the abandoned investment was the brainchild, and pride and glory of one Chris Christie who then said “the $2.4 billion Revel is one of the most spectacular resorts he’s ever seen and expects it will motivate other Atlantic City casinos to revitalize their properties. “I think that one of the things that Revel will be is a catalyst for additional modernization and investment by the other casinos to say, listen, if we grow more people here coming to the region and we’re offering something that looks nice further down the boardwalk, maybe people will want to look there as well.” As it now stands, the Revel will only be a catalyst for further bankruptcies as industry after industry finds out what a tapped out consumer with no access to $1.8 trillion in excess reserves truly means.

We were right.

From AP:

In warning letters given to employees and obtained by The Associated Press, Revel said it is seeking a buyer for the struggling $2.4 billion casino, but can’t guarantee one will be found. If not, employees could be terminated as soon as Aug. 18, Revel said in the letter.

 

“If Revel is unable to complete such a sale promptly, Revel expects to close its entire facility,” the letters read. The company also said it plans to stay open while it searches for a buyer, operating as usual, honoring player comps and paying employees and vendors.

 

Shortly after distributing the letters, Revel filed a Chapter 11 petition with the federal bankruptcy court, its second in as many years.

Will Revel find buyers in a liquidation sale? Maybe, if the price is right. As in far, far lower than its original valuation, which as a reminder was just shy of $1 billion in equity investment by its original investor Morgan Stanley. And that of course excludes the billions in debt that has now been impaired not once but twice.

 It could not be determined how much Revel might sell for in a bankruptcy auction, but it is sure to be a steep discount. Wall Street analysts and some casino executives said last month that $300 million was too high a price for the casino. A union that has been at odds with Revel since before it opened pegged its value in April at $25 million to $73 million, based on public filings.

 

For much of the past year, Revel has sought a buyer for the property, which has remained eighth out of Atlantic City’s 11 casinos in terms of the amount of money won from gamblers. But it also kept the option of a second bankruptcy filing as potential buyers expressed interest but failed to pursue a deal.

In other words, the twice bankrupt casino, that in 2007 was worth billions, and saw a $932 million investment by Morgan Stanley, is now worth between $25 and $73 million. Sounds about right for the “recovery.”

Then again who could have possibly foreseen it: Revel has never been profitable since it opened in 2012. It posted a gross operating loss of $21.7 million in the first quarter this year. For all of 2013, it lost $130 million, up from the $110 million it lost during the nine months it was open in 2012.

But perhaps the biggest irony, as we pointed out over a year ago, was that in the press release surrounding the first bankruptcy, the new, now wiped out, investors were proud to point out that:

No tax payer funds will be used to finance the restructuring.

What about the second restructuring? And perhaps in retrospect, taxpayer funds should have been used: maybe only then the casino would have survived a few extra months. Or perhaps unlike the GM bailout, where it cost taxpayers only a few billions to make sure Obama would get the benefit of a few hundred thousands teamsters votes, the hospitality-worker union in Atlantic City just didn’t offer enough vote for sale.

Joking aside, it is increasingly becoming the case that insolvent projects can sustain their money-losing existence only when they have taxpayer-funded generosity breathing new life into them again, and again, and again.

In conclusion, below is an artist’s rendering of what Revel could have looked like in an economy that actually was recovering:

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With all eyes firmly focused on what really matters (the oil refineries), The Telegraph reports that ISIS has over-run a Saddam Hussein-era chemical weapons (CW) complex. The al-Muhanna ‘mega-facility‘, about 60 miles south of Baghdad, gives the jihadists access to disused stores of hundreds of tonnes of potentially deadly poisons including mustard gas and sarin. The US state department is ‘concerned’ but “do not believe that the complex contains CW materials of military value.” However, as a former commander of Britain’s chemical weapons regiment warned, “we have seen that ISIS has used chemicals in explosions in Iraq before and has carried out experiments in Syria.” This is likely great for ISIS 2014 Annual Report; but, of course, the other awkward question is: does this mean Saddam did have WMDs (and ISIS found them) after all?

As The Telegraph reports, the jihadist group bringing terror to Iraq overran a Saddam Hussein chemical weapons complex on Thursday…

Isis invaded the al-Muthanna mega-facility 60 miles north of Baghdad in a rapid takeover that the US government said was a matter of concern.

 

The facility was notorious in the 1980s and 1990s as the locus of Saddam’s industrial scale efforts to develop a chemical weapons development programme.

 

During its peak in the late 1980s to early 1990s, Iraq produced bunkers full of chemical munitions.

 

A CIA report on the facility said that 150 tons of mustard were produced each year at the peak from 1983 and pilot-scale production of Sarin began in 1984.

 

Its most recent description of al-Muthanna in 2007 paints a disturbing picture of chemicals strewn throughout the area.

 

“Two wars, sanctions and UN oversight reduced Iraqi’s premier production facility to a stockpile of old damaged and contaminated chemical munitions (sealed in bunkers), a wasteland full of destroyed chemical munitions, razed structures, and unusable war-ravaged facilities,” it said.

 

“Some of the bunkers contained large quantities of unfilled chemical munitions, conventional munitions, one-ton shipping containers, old disabled production equipment and other hazardous industrial chemicals.”

 

Britain has previously acknowledgeded that the nature of the material contained in the two bunkers would make the destruction process difficult and technically challenging.

Should we be worried?

US officials revealed that the group had occupied the sprawling site which has two bunkers encased in a concrete seal. Much of the sarin is believed to be redundant.
“We remain concerned about the seizure of any military site by the [Isis],” Jen Psaki, the State Department spokeswoman, said. “We do not believe that the complex contains CW materials of military value and it would be very difficult, if not impossible, to safely move the materials.”

…

Hamish de Bretton-Gordon, a former commander of Britain’s chemical weapons regiment, said that al-Muthanna has large stores of weaponized and bulk mustard gas and sarin, most of which has been put beyond ready use in concrete stores.

“It is doubtful that Isis have the expertise to use a fully functioning chemical munition but there are materials on site that could be used in an improvised explosive device,” he told the Telegraph.

 

“We have seen that Isis has used chemicals in explosions in Iraq before and has carried out experiments in Syria.”

One US official told the Wall Street Journal yesterday that Isis fighters could be contaminated by the chemicals at the site.

“The only people who would likely be harmed by these chemical materials would be the people who tried to use or move them,” the military officer said.

This asset growth is likely great for ISIS 2014 Annual Report…

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We already know that Wall Street manipulates everything (not conspiracy theory, but now open conspiracy fact), but Reuters' Jamie McGeever exposes the ugly chatroom realities of just how FX traders shared orders, split trades, front-ran clients in million of electronic messages providing fresh evidence of collusion among top currency traders. Traders pooled order details and discussed the 'spread' they would offer, "I don't like this guy…I'd show 6 to good guys but guys like that I'm going to show 7 in future," the trader added. Unrigged?

 

As Reuters explains, British investigators are examining millions of electronic messages which include fresh evidence of possible collusion by a small group of top currency traders, sources say.

The investigators have been handed chatroom transcripts showing senior dealers at the big banks that dominate the largely unregulated foreign exchange market routinely sharing intelligence on orders they were about to place for clients.

 

The traders pooled order details from hedge funds and discussed the prices they should be offered, said the sources, who have seen some of the messages at the centre of an international probe into alleged collusion in world foreign exchange markets.

 

In a chatroom transcript from April 2012, two traders discussed the "spread" that should be given to a certain hedge fund. The fund wanted a spread of five basis points on its foreign exchange order, but the first trader offered a spread of six.

A wider spread is effectively a less advantageous price to the customer, in this case the hedge fund, and a more attractive price to the market-making bank.

"I don't like this guy, as he's asking two or three banks at the same time," said the second trader in the chat, according to a person familiar with the contents of the transcript.

 

"I'd show 6 to good guys but guys like that I'm going to show 7 in future," the trader added.

 

The first trader then decided to quote a spread of 7 basis points, said the person familiar with the transcript.   

Of course, a swarm of senior FX traders have stepped down over the last few months…

Some 40 FX employees at many of the world's biggest banks have been placed on leave, suspended or fired as part of the global investigation – including one employee at the Bank of England – although no individual or institution has been accused of any wrongdoing.

…but regulators decline to comment on the ongoing investigation (which appears 100% cut and dried)…

Any evidence of collusion would be another blow to some of the world's largest banks, already hit by big fines and new regulations in the wake of world financial meltdown five years ago. The latest estimates by banking sector analysts of likely fines for such anti-competitive practices in the currency market now far exceed the $6 billion levied to date in the Libor interest rate rigging scandal – some by up to six times.

 

The chatroom transcripts from 2011 and 2012, which are in the hands of the FCA, are between three senior traders at three of the world's largest FX banks. All three traders have since been sanctioned to one extent or another by their banks, sources have told Reuters.

 

Between them the three banks account for around 30 percent of the $5.3 trillion global daily average turnover, according to Euromoney magazine.

So they represent at least 30% of the market – which given the momentum in FX means all of the market when they want to move it…

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