Tag: news

“J.C. Penney has a lot of levers they can pull to get the customers back," Bill Miller gleefully told a Schwab conference in November as he bought JCP bonds. Spreads on those bonds have risen over 200bps since then. However, it was the embattled Legg Mason guru's appearance on CNBC in mid-December that sparked re-exuberance as everyone jumped on his "undervalued" bandwagon and lifted the stock into year-end. Today, back under $6, JCPenney is once again at fresh 33 year lows. Those that followed Miller are down over 25% on their 'investment'.

 

Via CNBC,

The famed stock-picker is also looking at J.C. Penney, which he thinks might be undervalued. After all, he said, there's "no reason" the retailer can't get its gross margins back to about 38 percent.

Yeah – that's not working out so great for the value-investor… knife-catcher

 

and today's tumble back under $6 for the first time in 33 years…

 

Chart: Bloomberg

via Zero Hedge http://ift.tt/1kf9XCO Tyler Durden

Submitted by Gary Galles via The Circle Bastiat Mises Economic blog,

With President Obama’s State of the Union Address and its associated campaign prominently featuring increased minimum wage, tired arguments for raising the minimum wage are being once again retreaded. Unfortunately, they compound failures of logic, measurement and evidence.

It would stimulate the economy. If I pay $1 more than necessary to hire a worker, I get $1 less in services for my money. The increase in the workers’ consumption enabled by that $1 is a transfer from me to them, not a net gain.

It would increase others’ wages as well. Unfortunately, higher minimum wages reduce available jobs, and fewer alternatives don’t create higher wages. Unions and other competitors would see wage hikes, because alternatives become more costly, but other workers get fewer goods and services in exchange for their labor —i.e., decreased real wages.

It would make work more attractive, reducing government dependence. That would require additional jobs became available at a higher wage. However, fewer jobs will be available, so fewer people would be able to work their way out of dependence.

The minimum wage hasn’t “kept up” with inflation since the 1960s. This presumes without justification that the 1960’s minimum wage was economically justified. However, it was a Great Society aberration that coincided with a virtual stop in progress against poverty.

It also ignores that much of employers’ compensation goes to Social Security, Medicare, workmen’s compensation, new Obamacare mandates, etc., rather than as wages. As government- mandated employment costs ballon, the minimum wage substantially understates compensation.

The claim uses the CPI, widely known to overstate inflation, to calculate “real” wages. And the bias was even larger in the past. So going back to the 1960s for comparison mainly introduces a half century of compounded overstatements of inflation to dramatically understate real wage growth.

It would decrease the number of families in poverty. Unfortunately, as labor economist Mark Wilson put it, “evidence from a large number of academic studies suggests that minimum wage increases don’t reduce poverty levels.” One reason is that most minimum wage workers are secondary workers in non-poor households, while very few are heads of households.

Even important businesses endorse raising the minimum wage. Unionized businesses and those who already pay more than the federal minimum gain from raising it, by increasing rivals’ costs. That those employers who would gain at others’ expense endorse a higher minimum wage says nothing about the validity of arguments against it.

A higher minimum wage will pay for itself in higher productivity, lower turnover, employee morale, etc. Every employer who believed that to be true in their circumstances would pay more without needing any mandate. Are those businesses always accused of being too greedy not greedy enough? Further, why do those states with the highest state minimum wages have higher unemployment rates and lower economic growth rates?

Even if some lose their jobs, most low-wage workers will gain from a higher minimum wage. This assumes that other terms of work will remain unchanged, which is false. For those who keep their jobs, fringe benefits, on-the-job training, etc., will fall to offset additional mandated wages. And the increased wages may well be less valuable (as well as taxable) than what is given up, especially on-the-job training that helps people learn their way out of poverty. That is why labor force participation rates fall and quit rates rise when the minimum wage rises, in contrast to what would happen if those workers were made better off.

Supporters of a higher minimum wage claim altruism to help working families as their motive. But it actually harms most of those supposedly be helped, while benefitting supporters by raising costs facing competitors. They may claim, as did the Chairman of Ben & Jerry’s Board, “I support a living wage economically, morally and with deep conviction,” but it is really a self-interested infringement on freedom that is economically stupid and morally abusive.

via Zero Hedge http://ift.tt/1kf9WPj Tyler Durden

When your manufacturing industry unions kidnap their business leaders, taxes reach extremes of duress, industrial production limps lower and unemployment hits record highs; it is hardly surprising that the world is a little nervous of piling its hard-printed cash into your country. But in the case of France, data reported by the UN shows the biggest collapse in foreign direct investment ever. Figaro reports that FDI fell to EUR 5.7 billion – a drop of over 75% year-over-year – and the lowest since 1987. Ironically, Spain's FDI rose 37% and Germany's quadrupled… Is France an Emerging Market now?

 

 

Data: Bloomberg and Figaro

via Zero Hedge http://ift.tt/1dR2Jio Tyler Durden

While everyone focuses on the turmoiling in Emerging Markets, a good, old standby is back – the periodic “debt ceiling” IMAX tragicomedy.

Recall that the debt limit, which has been suspended since October 17, is scheduled to be reinstated on February 8. At that time, the nation will be operating right at the debt limit, and the Treasury Department will use extraordinary measures to temporarily issue additional public debt to meet federal financial obligations as it always does during episodes of political posturing that without fail take place until the 11th hour, 59th minute, and 59th second. However, unlike last year when there was a 5 month interval between hitting the debt ceiling, and the day the Treasury’s funds fully ran out – the infamous X Date – this time the emergency measures will only last a limited time.

As the Bipartisan Policy Center calculates, approximately $198 billion of extraordinary measures will be available this time.

What this means when looking at a calendar, is that the Treasury may not have sufficient cash-on-hand to cover all obligations due as soon as February 28. Because February historically has a high cash deficit, due to the start of tax-filing season and the payment of income tax refunds, extraordinary measures will be exhausted quickly. The delay in the tax filing season, resulting from the government shutdown, has exacerbated this situation.

After that point, Treasury would no longer have any borrowing authority and all obligations would have to be paid out of cash-on-hand and incoming revenues. Extraordinary measures could well be exhausted before February 28. The risk of serious, negative financial market and economic consequences would rise significantly in an environment where Treasury has no capacity to borrow additional funds to meet unforeseen challenges.

In other words, the debt ceiling drama is back on. What it also means is that like every other time, the only question is just how creatively will John Boehner fold once more to every demand by an administration whose approval rating is on part with that of Dubya, all the while pretending to be fiscally conserative.

This is what the X-Date projection looks like depending on the best and worst cash in/out scenarios:

 

February 28 as a first potential X-Date also explains the Bill yield cliff between February 23 maturies which are yielding negative, and bills on February 27 and subsequent, whose yield jump due to fear of potential debt ceiling negotiation complications.

Some more observations from the BPC”

BPC now projects that the X Date will likely occur between February 28 and March 25. However, even under a very optimistic scenario, the government would be less than $5 billion away from the X Date on March 14. To put this in perspective, one day’s spending in March would typically be more than $10 billion. As such, there is a high probability that the X Date could occur on or in the days before March 14. If Treasury is able to get past Friday, March 14 without exhausting cash-on-hand, receipt of corporate income taxes due on Monday, March 17 could buy another week or so. But a scenario in which the X-Date occurs after March is extremely unlikely.

 

BPC’s estimated range can be thought of as a confidence interval. Although unlikely, there is a small chance that the X Date could fall outside of this range – either earlier or later. At this time, it is not possible to provide a more precise estimate. This is because the amount and timing of cash flows are especially volatile in February and March due to the payment of income tax refunds, which can range each day from as low as $2 billion to higher than $13 billion.

 

Significant financial transactions are scheduled to occur in the February 28 – March 25 period and beyond. On February 28, both a $17 billion payment to Medicare plans and a $5 billion interest payment on the public debt are scheduled, along with smaller payments for military pay and veterans benefits. On March 3, a $26 billion Social Security payment is due, and $12 billion Social Security payments are due on March 12 and March 19. Absent an increase or suspension of the debt limit, Treasury’s ability to make those payments in-full and on-time would not be guaranteed.

 

As of late January, Treasury is scheduled to roll-over about $250 billion of maturing securities in the month of March, and this amount will increase as Treasury schedules additional short-term auctions in the days ahead. As the X Date approaches without action on the debt limit, one risk is that buyers of government debt will be less likely to participate in Treasury auctions and, for those that continue to participate, more likely to demand higher interest rates, increasing the cost of servicing the existing debt. Past analysis from BPC and the Government Accountability Office shows that the debt ceiling confrontation in 2011 cost American taxpayers $1.3 billion in Fiscal Year 2011 and $18.9 billion over a decade. At least a similar, if not greater, cost could occur in this standoff simply because the total level of debt outstanding and subject to risk is 20 percent greater today than it was in 2011.

Once again it is nearly popcorn time, even if everyone knows how this soap opera ends.

via Zero Hedge http://ift.tt/1jOSe7F Tyler Durden

While everyone focuses on the turmoiling in Emerging Markets, a good, old standby is back – the periodic “debt ceiling” IMAX tragicomedy.

Recall that the debt limit, which has been suspended since October 17, is scheduled to be reinstated on February 8. At that time, the nation will be operating right at the debt limit, and the Treasury Department will use extraordinary measures to temporarily issue additional public debt to meet federal financial obligations as it always does during episodes of political posturing that without fail take place until the 11th hour, 59th minute, and 59th second. However, unlike last year when there was a 5 month interval between hitting the debt ceiling, and the day the Treasury’s funds fully ran out – the infamous X Date – this time the emergency measures will only last a limited time.

As the Bipartisan Policy Center calculates, approximately $198 billion of extraordinary measures will be available this time.

What this means when looking at a calendar, is that the Treasury may not have sufficient cash-on-hand to cover all obligations due as soon as February 28. Because February historically has a high cash deficit, due to the start of tax-filing season and the payment of income tax refunds, extraordinary measures will be exhausted quickly. The delay in the tax filing season, resulting from the government shutdown, has exacerbated this situation.

After that point, Treasury would no longer have any borrowing authority and all obligations would have to be paid out of cash-on-hand and incoming revenues. Extraordinary measures could well be exhausted before February 28. The risk of serious, negative financial market and economic consequences would rise significantly in an environment where Treasury has no capacity to borrow additional funds to meet unforeseen challenges.

In other words, the debt ceiling drama is back on. What it also means is that like every other time, the only question is just how creatively will John Boehner fold once more to every demand by an administration whose approval rating is on part with that of Dubya, all the while pretending to be fiscally conserative.

This is what the X-Date projection looks like depending on the best and worst cash in/out scenarios:

 

February 28 as a first potential X-Date also explains the Bill yield cliff between February 23 maturies which are yielding negative, and bills on February 27 and subsequent, whose yield jump due to fear of potential debt ceiling negotiation complications.

Some more observations from the BPC”

BPC now projects that the X Date will likely occur between February 28 and March 25. However, even under a very optimistic scenario, the government would be less than $5 billion away from the X Date on March 14. To put this in perspective, one day’s spending in March would typically be more than $10 billion. As such, there is a high probability that the X Date could occur on or in the days before March 14. If Treasury is able to get past Friday, March 14 without exhausting cash-on-hand, receipt of corporate income taxes due on Monday, March 17 could buy another week or so. But a scenario in which the X-Date occurs after March is extremely unlikely.

 

BPC’s estimated range can be thought of as a confidence interval. Although unlikely, there is a small chance that the X Date could fall outside of this range – either earlier or later. At this time, it is not possible to provide a more precise estimate. This is because the amount and timing of cash flows are especially volatile in February and March due to the payment of income tax refunds, which can range each day from as low as $2 billion to higher than $13 billion.

 

Significant financial transactions are scheduled to occur in the February 28 – March 25 period and beyond. On February 28, both a $17 billion payment to Medicare plans and a $5 billion interest payment on the public debt are scheduled, along with smaller payments for military pay and veterans benefits. On March 3, a $26 billion Social Security payment is due, and $12 billion Social Security payments are due on March 12 and March 19. Absent an increase or suspension of the debt limit, Treasury’s ability to make those payments in-full and on-time would not be guaranteed.

 

As of late January, Treasury is scheduled to roll-over about $250 billion of maturing securities in the month of March, and this amount will increase as Treasury schedules additional short-term auctions in the days ahead. As the X Date approaches without action on the debt limit, one risk is that buyers of government debt will be less likely to participate in Treasury auctions and, for those that continue to participate, more likely to demand higher interest rates, increasing the cost of servicing the existing debt. Past analysis from BPC and the Government Accountability Office shows that the debt ceiling confrontation in 2011 cost American taxpayers $1.3 billion in Fiscal Year 2011 and $18.9 billion over a decade. At least a similar, if not greater, cost could occur in this standoff simply because the total level of debt outstanding and subject to risk is 20 percent greater today than it was in 2011.

Once again it is nearly popcorn time, even if everyone knows how this soap opera ends.

via Zero Hedge http://ift.tt/1jOSe7F Tyler Durden